Predecessor Equity

3 Months Ended

Mar. 31, 2014

Equity

14. Equity

Noncontrolling Interests

Noncontrolling interests in our Operating Partnership relate to interests in the partnership that are not owned by us. Noncontrolling interests consisted of 3,009,259 Operating Partnership units and represented approximately 10.6% of our Operating Partnership as of March 31, 2014. Operating Partnership units and shares of our common stock have essentially the same economic characteristics, as they share equally in the total net income or loss distributions of our Operating Partnership. Investors who own units in our Operating Partnership have the right to cause our Operating Partnership to redeem any or all of their units in our Operating Partnership for an amount of cash per unit equal to the then current market value of one share of common stock, or, at our election, shares of our common stock on a one-for-one basis.

2013 Incentive Award Plan

In July 2013, we established the Rexford Industrial Realty, Inc. and Rexford Industrial Realty, L.P. 2013 Incentive Award Plan (the “Plan”), pursuant to which the compensation committee of the board of directors may make grants of stock options, restricted stock, long term incentive plan units (“LTIP units”) in our Operating Partnership and other stock based and cash awards to our non-employee directors, employees and consultants. The maximum number of shares of our common stock that may be issued or transferred pursuant to the Plan is 2,272,689 shares (of which 2,140,903 shares of common stock remain available for issuance as of March 31, 2014).

Shares of our restricted common stock generally may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution or, subject to the consent or the administrator of the Plan, a domestic relations order, unless and until all restrictions applicable to such shares have lapsed. Such restrictions expire upon vesting. Shares of our restricted common stock have full voting rights and rights to dividends. During the three months ended March 31, 2014, we recognized net equity compensation expense of $172,000 related to the restricted common stock grants, ultimately expected to vest. Equity compensation expense is included in general and administrative and property expenses in the accompanying consolidated statements of operations. Certain amounts of equity compensation expense are capitalized for employees who provide leasing and construction services. During the three months ended March 31, 2014, we capitalized $29,000 related to these employees.

The following is a table summarizing our unvested restricted stock activity for the three months ended March 31, 2014:

	Number of Unvested Shares of Restricted Common Stock
Balance at January 1, 2014		140,468
Granted		963
Forfeited		(9,645	)
Vested		-
Balance at March 31, 2014		131,786

The following is a vesting schedule of the total unvested shares of restricted stock outstanding as of March 31, 2014:

	Shares
April 1, 2014 - December 31, 2014		34,377
2015		33,414
2016		33,411
2017		30,584
		131,786

ASC Topic 718:Compensation - Stock Compensation, requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We have estimated a forfeiture rate of 7.3% for unvested restricted stock as of March 31, 2014.  As of March 31, 2014, there was $1.1 million of total unrecognized compensation expense related to the unvested shares of our restricted common stock assuming the forfeiture rate noted above, of which $0.1 million will be capitalized for employees who provide leasing and construction services. As of March 31, 2014, this expense is expected to be recognized over a weighted average remaining period of 24 months.

Changes in Accumulated Other Comprehensive Income

The following table summarizes the changes in Accumulated Other Comprehensive Income for the three months ended March 31, 2014, which consists solely of adjustments related to our cash flow hedges:

	Accumulated OtherComprehensive Income
Balance at January 1, 2014	$	-
Other comprehensive income before reclassifications		300,000
Amounts reclassified from accumulated other comprehensive income to interest expense		-
Net current period other comprehensive income		300,000
Less other comprehensive income attributable to noncontrolling interests		(31,000	)
Other comprehensive income attributable to common stockholders		269,000
Balance at March 31, 2014	$	269,000

Predecessor

Equity

16. Predecessor Equity

Controlling interests in our Predecessor include the interests owned by partners of RILLC, and Rexford Sponsor V LLC, and any interests held by their spouses and children (“RILLC and Affiliates”). Noncontrolling interests relate to all other interests not held by RILLC and Affiliates. Noncontrolling interests also includes the 27.76% interest of 10 investors in RIF I—Walnut, LLC, and the 3.23% interest of one investor in RIF IV—Burbank, LLC, both consolidated subsidiaries in our Predecessor’s financial statements during the three months ended March 31, 2013.

Equity distributions by our Predecessor Funds are allocated between the general partner and limited partners (collectively “Partners”) in accordance with each fund’s operating agreements. Generally this provides for distributions to be allocated to Partners, pari passu, in accordance with their respective percentage interests. After Partners have exceeded certain cash distribution thresholds, as defined in each Predecessor Fund’s operating agreement, then the general partner may receive incentive promote cash distributions commensurate with the cash return performance hurdles also detailed in the Predecessor Fund’s operating agreement. Each fund’s operating agreement generally provides for income, expenses, gains and losses to be allocated in a manner consistent with cash distributions described above.

During November and December 2012, our predecessor granted to its employees a 9.0% equity interest in Rexford Fund V Manager, LLC’s (“Fund V Manager”) profits interest in RIF V. An additional 2.0% equity interest was granted in January 2013. Fund V Manager is the controlling member of RIF V and is a wholly-owned subsidiary of Sponsor. The fair value of these interests was estimated to be approximately $1.0 million at the time they were granted. The equity interests are considered performance-based equity interests and are subject to graded vesting over the shorter of a 7-year period or the dissolution date of Fund V Manager. On July 24, 2013, the day we consummated our IPO, Fund V Manager was dissolved.

We expensed $66,000 during the three months ended March 31, 2013 related to these equity awards.