SHARE BASED COMPENSATION, 401(k) PLAN AND DEFERRED COMPENSATION

Stock Options

At December 31, 2011, the Company had 3,599,672 options outstanding under its shareholder approved equity incentive plan. There were 1,311,943 options unvested as of December 31, 2011 and $2.4 million of unrecognized compensation expense associated with these options to be recognized over a weighted average period of 1.5 years. During the years ended December 31, 2011, 2010, and 2009, the Company recognized $1.4 million, $1.0 million, and $0.6 million, respectively, of compensation expense included in general and administrative expense related to unvested options. During the year ended December 31, 2011, the Company has also capitalized $0.4 million of compensation expense as part of the Company's review of employee salaries eligible for capitalization. During the years ended December 31, 2010 and 2009, the Company has capitalized nominal amounts of compensation expense.

Option activity as of December 31, 2011 and changes during the year ended December 31, 2011 were as follows:



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2011	3,116,611		$	14.56	7.81	$	(9,080,625	)
Granted	603,241		11.89		9.18	(1,441,746		)
Exercised	(120,180	)	2.91
Outstanding at December 31, 2011	3,599,672		$	14.50	7.20	$	(18,015,060	)
Vested/Exercisable at December 31, 2011	2,287,729		$	17.01	6.59	$	(16,912,225	)

The fair value of share option awards is estimated on the date of the grant using the Black-Scholes option valuation model. The following weighted-average assumptions were utilized in calculating the fair value of options granted during the years ended December 31, 2011 and 2010:



Grant Date	March 2, 2011		March 4, 2010
Risk-free interest rate	2.86%		3.03%
Dividend yield	5.01%		6.53%
Volatility factor	48.02%		46.89%
Weighted-average expected life	7	yrs	7	yrs



	Years ended December 31,
	2010					2009
	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)
Outstanding at beginning of year	2,404,567		$	15.48	8.38	1,754,648		$	20.41	8.77
Granted	724,805		11.31		9.18	676,491		2.91		9.25
Forfeited/Expired	(12,761	)	2.91		—	(26,572	)	20.61		—
Outstanding at end of year	3,116,611		$	14.56	7.81	2,404,567		$	15.48	8.38
Vested/Exercisable at end of year	1,384,728		$	17.63	7.14	616,119		$	20.03	7.54

On March 2, 2011, the Compensation Committee of the Company's Board of Trustees awarded 603,241 options to the Company's executives. The options vest ratably over three years and have a ten year term. The vesting of the options is also subject to acceleration upon a change in control or if the recipient of the award were to die, become disabled, be terminated without cause or retire in a qualifying retirement prior to the vesting date. Qualifying retirement for options granted on March 2, 2011 means the recipient's voluntary termination of employment after reaching age 57 and accumulating at least 15 years of service with the Company. On May 24, 2011, the Compensation Committee modified these options in respect of 101,437 shares awarded to one of the Company's executives. The modification, with the said executive's approval, provided additional vesting conditions linked to the Company's total shareholder return, which the Company will determine every year during the vesting period. The implementation of these market conditions did not materially impact total compensation expense expected to be recognized. The modified portion of the options will vest in whole or in part only if the Company's total shareholder return achieves specified targets, subject to vesting upon death, disability, qualifying retirement or a change of control. As of December 31, 2011, none of the Company's executives had met conditions to elect a qualifying retirement.

401(k) Plan

The Company sponsors a 401(k) defined contribution plan for its employees. Each employee may contribute up to 100% of annual compensation, subject to specific limitations under the Internal Revenue Code. At its discretion, the Company can make matching contributions equal to a percentage of the employee’s elective contribution and profit sharing contributions. Effective October 1, 2011, employees automatically vest in employer contributions. The Company contributions were $0.4 million in 2011, $0.3 million in 2010 and $0.2 million in 2009.

Restricted Share Awards

As of December 31, 2011, 807,291 restricted shares were outstanding under the 1997 Plan and vest over three to seven years from the initial grant date. The remaining compensation expense to be recognized at December 31, 2011 was approximately $3.7 million. That expense is expected to be recognized over a weighted average remaining vesting period of 1.1 years. The Company recognized compensation expense related to outstanding restricted shares of $3.2 million during the year ended December 31, 2011, of which $0.7 million was capitalized as part of the Company’s review of employee salaries eligible for capitalization. For the years ended December 31, 2010 and 2009, the Company recognized $4.0 million (of which $0.9 million was capitalized) and $3.2 million (of which $0.8 million was capitalized), respectively, of compensation expense included in general and administrative expense in the respective periods related to outstanding restricted shares.

The following table summarizes the Company’s restricted share activity during the year ended December 31, 2011:



	Shares		Weighted Average Grant Date Fair value
Non-vested at January 1, 2011	851,278		$	10.75
Granted	197,035		11.92
Vested	(237,541	)	19.76
Forfeited	(3,481	)	11.47
Non-vested at December 31, 2011	807,291		$	9.46

On March 2, 2011, the Compensation Committee of the Company's Board of Trustees awarded 174,012 restricted shares to the Company's executives. The restricted shares will cliff vest after three years from the grant date. The vesting of the restricted shares is also subject to acceleration upon a change in control or if the recipient of the award were to die, become disabled, be terminated without cause or retire in a qualifying retirement prior to the vesting date. Qualifying retirement for restricted shares granted on March 2, 2011 as provided in the award agreements Plan means the recipient's voluntary termination of employment after reaching age 57 and accumulating at least 15 years of service with the Company. As of December 31, 2011, none of the Company's executives had met conditions to elect a qualifying retirement.

Restricted Performance Share Units Plan

On March 2, 2011, March 4, 2010 and April 1, 2009, the Compensation Committee of the Parent Company’s Board of Trustees awarded an aggregate of 124,293, 120,955 and 488,292 share-based awards, respectively, to its executives. These awards are referred to as Restricted Performance Share Units, or RPSUs. The RPSUs represent the right to earn common shares. The number of common shares, if any, deliverable to award recipients depends on the Company's performance based on its total return to shareholders during the three year measurement period that commenced on January 1, 2011 (in the case of the March 2, 2011 awards), January 1, 2010 (in the case of the March 4, 2010 awards) and January 1, 2009 (in the case of the April 1, 2009 awards) and that ends on the earlier of December 31, 2013, December 31, 2012 or December 31, 2011 (as applicable) or the date of a change of control, compared to the total shareholder return of REITs within an index over such respective periods. The awards are also contingent upon the continued employment of the participants through the performance periods (with exceptions for death, disability and qualifying retirement). Dividends are deemed credited to the performance units accounts and are applied to “acquire” more performance units for the account of the unit holder at the price per common share ending on the dividend payment date. If earned, awards will be settled in common shares in an amount that reflects both the number of performance units in the holder’s account at the end of the applicable measurement period and the Company’s total return to shareholders during the applicable three year measurement period relative to the total shareholder return of the REIT within the index.

If, based on an industry-based index at the end of the measurement period, the total shareholder return during the measurement period places the Company at or above a certain percentile as compared to its peers then the number of shares that will be delivered shall equal a certain percentage (not to exceed 200%) of the participant's base units. In the case of the April 1, 2009 award, a total of 372,101 shares were determined to be deliverable to award recipients on March 1, 2012. These shares, which all vested on December 31, 2011 (the end of its three year-year measurement period), were also paid cash dividends on January 19, 2012.

On the date of each grant, the awards were valued using a Monte Carlo simulation. The fair values of the 2011 and 2010 awards on the grant dates were $2.0 million, respectively, while the 2009 award was $1.1 million. The fair values of each award are being amortized over the three year cliff vesting period. In the case of the 2011 awards, the vesting of the RPSUs is also subject to acceleration upon a change in control or if the recipient of the award were to die, become disabled, terminated without cause or retire in a qualifying retirement prior to the vesting date. Qualifying retirement for restricted shares granted on March 2, 2011 as provided under the 1997 Plan means the recipient's voluntary termination of employment after reaching age 57 and accumulating at least 15 years of service with the Company. As of December 31, 2011, none of the Company's executives has met conditions to elect a qualifying retirement.

During the year ended December 31, 2011, the Company recognized total compensation expense for the 2011, 2010 and 2009 awards of $1.7 million related to this plan, of which $0.5 million was capitalized as part of the Company’s review of employee salaries eligible for capitalization. During the year ended December 31, 2010, the Company recognized total compensation expense for both the 2010 and 2009 awards of $1.0 million related to this plan, of which nominal amounts were capitalized.

Outperformance Program

On August 28, 2006, the Compensation Committee of the Parent Company’s Board of Trustees adopted a long-term incentive compensation program (the “outperformance program”) under the 1997 Plan. The outperformance program provided for share-based awards, with share issuances (if any), to take the form of both vested and restricted common shares and with any share issuances contingent upon the Company’s total shareholder return during a three year measurement period exceeding specified performance hurdles. These hurdles were not met and, accordingly, no shares were delivered under the outperformance program and the outperformance program, has terminated in accordance with its terms. The awards under the outperformance program were accounted for in accordance with the accounting standard for stock-based compensation. The aggregate grant date fair values of the awards under the outperformance program, as adjusted for estimated forfeitures, were approximately $5.9 million (with the values determined through a Monte Carlo simulation) and are being amortized into expense over the five-year vesting period beginning on the grant dates using a graded vesting attribution model. For the years ended December 31, 2011, 2010 and 2009, the Company recognized $0.1 million, $0.4 million and $0.9 million, respectively, of compensation expense related to the outperformance program. The grant date fair value is fully amortized as of December 31, 2011.

Employee Share Purchase Plan

On May 9, 2007, the Parent Company’s shareholders approved the 2007 Non-Qualified Employee Share Purchase Plan (the “ESPP”). The ESPP is intended to provide eligible employees with a convenient means to purchase common shares of the Parent Company through payroll deductions and voluntary cash purchases at an amount equal to 85% of the average closing price per share for a specified period. Under the plan document, the maximum participant contribution for the 2011 plan year is limited to the lesser of 20% of compensation or $50,000. The number of shares reserved for issuance under the ESPP is 1.25 million. During the year ended December 31, 2011, employees made purchases of $0.4 million under the ESPP and the Company recognized $0.1 million of compensation expense related to the ESPP. During the year ended December 31, 2010, employees made purchases of $0.5 million under the ESPP and the Company recognized $0.2 million of compensation expense related to the ESPP. During the year ended December 31, 2009, employees made purchases of $0.4 million under the ESPP and the Company recognized $0.3 million of compensation expense related to the ESPP. The Board of Trustees of the Parent Company may terminate the ESPP at its sole discretion at anytime.

Deferred Compensation

In January 2005, the Parent Company adopted a Deferred Compensation Plan (the “Plan”) that allows trustees and certain key employees to voluntarily defer compensation. Compensation expense is recorded for the deferred compensation and a related liability is recognized. Participants may elect designated benchmark investment options for the notional investment of their deferred compensation. The deferred compensation obligation is adjusted for deemed income or loss related to the investments selected. At the time the participants defer compensation, the Company records a liability, which is included in the Company’s consolidated balance sheet. The liability is adjusted for changes in the market value of the participants’ selected investments at the end of each accounting period, and the impact of adjusting the liability is recorded as an increase or decrease to compensation cost. For the year ended December 31, 2011, the Company recorded a nominal net decrease in compensation costs in connection with the Plan due to the change in market value of the participant investments in the Plan. For the years ended December 31, 2010 and 2009, the Company recorded a net increase in compensation costs of $1.0 million and $1.5 million, respectively, in connection with the Plan due to the change in market value of the participant investments in the Plan.

The deferred compensation obligations are unfunded, but the Company has purchased company-owned life insurance policies and mutual funds, which can be utilized as a future funding source for the Company’s obligations under the Plan. Participants in the Plan have no interest in any assets set aside by the Company to meet its obligations under the Plan. For the year ended December 31, 2011, the Company recorded a net increase in compensation costs of $0.1 million. For the years ended December 31, 2010 and 2009, the Company recorded a net reduction in compensation costs of $1.0 million and $1.8 million, respectively , in connection with the investments in the Company-owned policies and mutual funds.

Participants in the Plan may elect to have all or a portion of their deferred compensation invested in the Company’s common shares. The Company holds these shares in a rabbi trust, which is subject to the claims of the Company’s creditors in the event of the Company’s bankruptcy or insolvency. The Plan does not provide for diversification of a participant’s deferral allocated to the Company common share and deferrals allocated to Company common share can only be settled with a fixed number of shares. In accordance with the accounting standard for deferred compensation arrangements where amounts earned are held in a rabbi trust and invested, the deferred compensation obligation associated with Company’s common shares is classified as a component of shareholder’s equity and the related shares are treated as shares to be issued and are included in total shares outstanding. At December 31, 2011 and 2010, 0.3 million of such shares, respectively, were included in total shares outstanding. Subsequent changes in the fair value of the common shares are not reflected in operations or shareholders’ equity of the Company.