Shareholders' Equity

12 Months Ended

Dec. 31, 2011

Shareholders' Equity

Shareholders' Equity

Note 7. Shareholders' Equity

Share Awards:

        We have common shares available for issuance under the terms of our award plan adopted in 2003, or the 2003 Plan. We awarded common shares to our officers and certain employees of RMR in 2011, 2010 and 2009. We also awarded each of our Trustees 2,000 common shares in 2011 with an aggregate market value of $266 ($53 per Trustee) on the date of the grant, 1,250 common shares in 2010 with an aggregate market value of $203 ($41 per Trustee) on the date of the grant, and 1,250 common shares in 2009 with an aggregate market value of $101 ($20 per Trustee) on the date of grant as part of their annual compensation. The common shares awarded to our Trustees vested immediately. The common shares awarded to our officers and certain employees of RMR vest in five equal annual installments beginning on the date of grant. We include the value of awarded shares in general and administrative expenses at the time the awards vest.

        A summary of shares granted and vested under the terms of our 2003 Plan for the years ended December 31, 2011, 2010 and 2009, is as follows:

	Number of Shares			Weighted Average Grant Date Fair Value
Unvested shares at December 31, 2008		32,495		$	27.20
Granted in 2009		44,250			28.11
Vested in 2009		(23,180	)		26.72
Unvested shares at December 31, 2009		53,565			28.76
Granted in 2010		48,625			27.96
Vested in 2010		(31,670	)		28.29
Unvested shares at December 31, 2010		70,520			27.96
Granted in 2011		83,050			20.76
Vested in 2011		(49,955	)		20.79
Unvested shares at December 31, 2011		103,615			23.32

        The 103,615 unvested shares as of December 31, 2011 are scheduled to vest as follows: 35,760 shares in 2012, 30,285 shares in 2013, 22,960 shares in 2014 and 14,610 in 2015. As of December 31, 2011, the estimated future compensation expense for the unvested shares was $1,724 based on the closing share price of our common shares on December 31, 2011 of $16.64. The weighted average period over which the compensation expense will be recorded is approximately 23 months. During the years ended December 31, 2011, 2010 and 2009, we recorded $1,139, $1,034 and $1,092, respectively, of compensation expense related to our 2003 Plan.

        At December 31, 2011, 1,335,960 common shares remain available for issuance under the 2003 Plan.

Distributions:

        In January 2012, we declared a distribution of $0.50 per common share, or $41,861, which we paid on February 21, 2012 to shareholders of record on January 20, 2012. Cash distributions per common share paid or accrued by us in 2011, 2010 and 2009, were $2.00, $1.48 and $2.40, respectively. The characterization of our distributions paid or accrued in 2011, 2010 and 2009 was 65.90%, 82.82% and 96.75% ordinary income, respectively, 23.54%, 17.18% and 0% return of capital, respectively, 7.34%, 0% and 3.25% Internal Revenue Code section 1250 gain, respectively, and 3.22%, 0% and 0% capital gain, respectively. In December 2009, we declared and accrued a distribution of $0.48 per common share which was paid on January 29, 2010, to shareholders of record on December 21, 2009; this distribution was effective for the tax year 2009. Our credit facility and term loan agreement contain a number of financial and other covenants, including a covenant which restricts our ability to make distributions under certain circumstances.

Preferred Shares:

        Our 6,000,000 series C cumulative redeemable preferred shares carry dividends of $1.78125, 7¹/8%, per annum, payable in equal quarterly payments. Each series C preferred share has a liquidation preference of $25.00 and is redeemable, at our option, for $25.00 each plus accrued and unpaid dividends at any time.

        Our 15,180,000 series D cumulative convertible preferred shares carry dividends of $1.625, 6¹/2%, per annum, payable in equal quarterly payments. Our series D preferred shares are convertible, at the holder's option, into our common shares at an initial conversion rate of 0.480775 common shares per series D preferred share, which is equivalent to an initial conversion price of $52.00 per common share, or 7,298,165 additional common shares at December 31, 2011. On or after November 20, 2011, if our common shares trade at or above the then applicable conversion price, we may, at our option, convert some or all of the series D preferred shares into common shares at the then applicable conversion rate. If a fundamental change occurs, which generally will be deemed to occur upon a change in control or a termination of trading of our common shares (or other equity securities into which our series D preferred shares are then convertible), holders of our series D preferred shares will have a special right to convert their series D preferred shares into a number of our common shares per $25.00 liquidation preference, plus accrued and unpaid distributions, divided by 98% of the market price, as defined, of our common shares, unless we exercise our right to repurchase these series D preferred shares for cash, at a purchase price equal to 100% of their liquidation preference, plus accrued and unpaid distributions.

        In June 2011, we issued 11,000,000 series E cumulative redeemable preferred shares in a public offering, raising net proceeds of $265,391. Each series E preferred share has a liquidation preference of $25.00 and requires dividends of $1.8125, 7¹/4% of the liquidation preference per annum, payable in equal quarterly payments. The series E preferred shares are redeemable at our option for $25.00 each plus accrued and unpaid distributions at any time on or after May 15, 2016 or if a change of control occurs which results in our common shares (or the common securities of an acquiring or surviving entity) not being listed or quoted on the New York Stock Exchange, or the NYSE, or certain other exchanges or quotation systems. Also, upon the occurrence of such a change of control, holders of series E preferred shares that we do not elect to redeem may at their option convert those series E preferred shares into our common shares (or certain alternative consideration) at a conversion rate generally based on their $25.00 liquidation preference and the market price of our common shares at the time of conversion, subject to a cap.

        We have adopted a Shareholders Rights Plan pursuant to which a right to purchase securities is distributable to shareholders in certain circumstances. Each right entitles the holder to purchase or to receive securities or other assets of ours upon the occurrence of certain events. The rights expire on October 17, 2014, and are redeemable at our option.