Annual report pursuant to Section 13 and 15(d)

Share-Based Compensation and Employee Benefit Plans

v2.4.0.6
Share-Based Compensation and Employee Benefit Plans
 12 Months Ended
Dec. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Compensation and Employee Benefit Plans
Share-Based Compensation and Employee Benefit Plans
 
Share-Based Compensation Plans
 
In May 2010, we adopted the Amended and Restated 2008 Omnibus Equity and Incentive Plan. We may issue equity-based awards under this plan to officers, employees, non-employee trustees and any other key persons of us and our subsidiaries, as defined in the plan. The plan provides for a maximum of 5,900,000 common shares of beneficial interest to be issued in the form of options, share appreciation rights, deferred share awards, restricted share awards, unrestricted share awards, performance shares, dividend equivalent rights and other equity-based awards and for the granting of cash-based awards. The plan expires on May 13, 2020.

In March 1998, we adopted a long-term incentive plan for our Trustees and employees. This plan, which expired in March 2008, provided for the award of options, restricted shares and dividend equivalents.

Grants of restricted shares and options under these plans to nonemployee Trustees generally vest on the first anniversary of the grant date provided that the Trustee remains in his or her position. Restricted shares and options granted to employees vest based on increments and over periods of time set forth under the terms of the respective awards provided that the employees remain employed by us. Options expire ten years after the date of grant. Shares for each of our share-based compensation plans are issued under registration statements on Form S-8 that became effective upon filing with the Securities and Exchange Commission.

The following table summarizes restricted share transactions under our share-based compensation plans for 2010, 2011 and 2012:
 
 
 Shares
 
Weighted Average Grant Date Fair Value
Unvested at December 31, 2009
 
668,990

 
$
30.43

Granted
 
290,956

 
37.74

Forfeited
 
(13,986
)
 
34.38

Vested
 
(276,102
)
 
32.24

Unvested at December 31, 2010
 
669,858

 
32.77

Granted
 
320,284

 
33.68

Forfeited
 
(18,058
)
 
34.23

Vested
 
(323,706
)
 
32.86

Unvested at December 31, 2011
 
648,378

 
33.13

Granted
 
177,662

 
23.64

Forfeited
 
(17,019
)
 
31.43

Vested
 
(374,378
)
 
32.72

Unvested at December 31, 2012
 
434,643

 
$
29.67

Restricted shares expected to vest
 
419,014

 
$
29.73



The aggregate intrinsic value of restricted shares that vested was $9.0 million in 2012, $11.2 million in 2011 and $10.3 million in 2010.

Our Board of Trustees made the following grants of Performance Share Units (“PSUs”) to executives:

•
100,645 PSUs on March 4, 2010 (the “2010 PSU Grants”) with an aggregate grant date fair value of $5.4 million. Certain executives voluntarily cancelled 58,105 of these PSUs in 2011; we recognized a non-cash compensation charge of $1.2 million in 2011 in connection with these PSU cancellations. The remaining PSUs at December 31, 2011 were held by Mr. Randall M. Griffin, our former Chief Executive Officer, and were terminated upon his retirement on March 31, 2012; based on the Company’s total shareholder return relative to its peer group of companies, there was no payout value in connection with the termination of the PSUs;
•
56,883 PSUs on March 3, 2011 (the “2011 PSU Grants”) with an aggregate grant date fair value of $2.8 million which were all outstanding at December 31, 2012; and
•
54,070 PSUs on March 1, 2012, (the “2012 PSU Grants”) with an aggregate grant date fair value of $1.8 million which were all outstanding at December 31, 2012. 

The PSUs have a performance period beginning on the respective grant dates and concluding on the earlier of three years from the respective grant dates or the date of: (1) termination by the Company without cause, death or disability of the executive or constructive discharge of the executive (collectively, “qualified termination”); or (2) a sale event.  The number of PSUs earned (“earned PSUs”) at the end of the performance period will be determined based on the percentile rank of the Company’s total shareholder return relative to a peer group of companies, as set forth in the following schedule:
Percentile Rank
 
Earned PSUs Payout %
75th or greater
 
200% of PSUs granted
50th or greater
 
100% of PSUs granted
25th
 
50% of PSUs granted
Below 25th
 
0% of PSUs granted


If the percentile rank exceeds the 25th percentile and is between two of the percentile ranks set forth in the table above, then the percentage of the earned PSUs will be interpolated between the ranges set forth in the table above to reflect any performance between the listed percentiles.  At the end of the performance period, we, in settlement of the award, will issue a number of fully-vested common shares equal to the sum of:

•
the number of earned PSUs in settlement of the award plan; plus
•
the aggregate dividends that would have been paid with respect to the common shares issued in settlement of the earned PSUs through the date of settlement had such shares been issued on the grant date, divided by the share price on such settlement date, as defined under the terms of the agreement.
 
If a performance period ends due to a sale event or qualified termination, the number of earned PSUs is prorated based on the portion of the three-year performance period that has elapsed.  If employment is terminated by the employee or by the Company for cause, all PSUs are forfeited.  PSUs do not carry voting rights.
 
We computed grant date fair values for PSUs using Monte Carlo models and are recognizing these values over three-year periods that commenced on the respective grant dates. The grant date fair value and certain of the assumptions used in the Monte Carlo models for PSUs granted in 2010, 2011 and 2012 are set forth below:
 
 
For the Years Ended December 31,
 
 
2012
 
2011
 
2010
Grant date fair value
 
$
32.77

 
$
49.15

 
$
53.31

Baseline common share value
 
$
24.39

 
$
35.17

 
$
37.84

Expected volatility of common shares
 
43.2
%
 
61.1
%
 
62.2
%
Risk-free interest rate
 
0.41
%
 
1.32
%
 
1.38
%


The following table summarizes option transactions under our share-based compensation plans for 2010, 2011 and 2012 (dollars in thousands, except per share data):
 
 
 Shares
 
Range of Exercise Price per Share
 
Weighted Average Exercise Price per Share
 
Weighted Average Remaining Contractual Term
(in Years)
 
Aggregate Intrinsic Value
Outstanding at December 31, 2009
 
1,501,906

 
$8.63 - $57.00
 
$
30.29

 
5
 
$
14,579

Forfeited/Expired – 2010
 
(34,966
)
 
$41.33 - $49.60
 
$
46.59

 
 
 
 
Exercised – 2010
 
(278,656
)
 
$8.63 - $42.07
 
$
16.42

 
 
 
 
Outstanding at December 31, 2010
 
1,188,284

 
$9.54 - $57.00
 
$
33.07

 
5
 
$
7,987

Forfeited/Expired – 2011
 
(51,598
)
 
$22.49 - $50.59
 
$
42.82

 
 
 
 
Exercised – 2011
 
(191,264
)
 
$9.54 - $30.25
 
$
12.82

 
 
 
 
Outstanding at December 31, 2011
 
945,422

 
$13.40 - $57.00
 
$
36.63

 
4
 
$
510

Forfeited/Expired – 2012
 
(85,588
)
 
$25.52 - $57.00
 
$
42.98

 
 
 
 
Exercised – 2012
 
(61,624
)
 
$13.40 - $22.49
 
$
15.08

 
 
 
 
Outstanding at December 31, 2012
 
798,210

 
$13.60 - $57.00
 
$
37.62

 
3
 
$
325

Exercisable at December 31, 2010
 
1,188,284

 
(1)
 
$
33.07

 
 
 
 
Exercisable at December 31, 2011
 
945,422

 
(2)
 
$
36.63

 
 
 
 
Exercisable at December 31, 2012
 
798,210

 
(3)
 
$
37.62

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
231,946 of these options had an exercise price ranging from $9.54 to $16.73; 246,103 had an exercise price ranging from $16.74 to $30.04; 205,012 had an exercise price ranging from $30.05 to $41.28; 253,607 had an exercise price ranging from $41.29 to $45.24; and 251,616 had an exercise price ranging from $45.25 to $57.00.
(2)
53,957 of these options had an exercise price ranging from $13.40 to $16.73; 225,903 had an exercise price ranging from $16.74 to $30.04; 198,762 had an exercise price ranging from $30.05 to $41.28; and 466,800 had an exercise price ranging from $41.29 to $57.00.
(3)
9,500 of these options had an exercise price ranging from $13.60 to $16.73; 204,736 had an exercise price ranging from $16.74 to $30.04; 180,962 had an exercise price ranging from $30.05 to $41.28; and 403,012 had an exercise price ranging from $41.29 to $57.00.

The aggregate intrinsic value of options exercised was $553,000 in 2012, $4.0 million in 2011 and $5.9 million in 2010.

We own a taxable REIT subsidiary that is subject to Federal and state income taxes. We realized a windfall tax benefit of $43,000 in 2012 and $47,000 in 2011 on options exercised and vesting restricted shares in connection with employees of that subsidiary.

The table below sets forth our reporting for share based compensation expense (in thousands):
 
 
 For the Years Ended December 31,
 
 
2012
 
2011
 
2010
General, administrative and leasing expenses
 
$
8,611

 
$
9,077

 
$
7,511

Property operating expenses
 
1,371

 
2,843

 
2,543

Capitalized to development activities
 
1,202

 
2,347

 
1,791

Share-based compensation expense
 
$
11,184

 
$
14,267

 
$
11,845



The amounts included in our consolidated statements of operations for share-based compensation reflected an estimate of pre-vesting forfeitures of: 0% for all PSUs; 0% to 5% for restricted shares for 2012; and 0% to 4% for restricted shares for 2011 and 2010.

As of December 31, 2012, all of our options are vested and fully expensed. As of December 31, 2012, there was $6.8 million of unrecognized compensation cost related to unvested restricted shares that is expected to be recognized over a weighted average period of approximately two years. As of December 31, 2012, there was $2.3 million of unrecognized compensation cost related to PSUs that is expected to be recognized over a weighted average performance period of approximately two years.

401(k) Plan

We have a 401(k) defined contribution plan covering substantially all of our employees that permits participants to contribute up to 90% of their compensation, as defined in the Plan, per pay period on a before-tax basis or after-tax basis, or a combination of both, subject to limitations under the Internal Revenue Code of 1986 ( the “IRC”), as amended. Participants who are 50 years of age or older by the end of a particular plan year and have contributed the maximum 401(k) deferral amount allowed under the plan for that year are eligible to contribute an additional portion of their annual compensation on a before-tax basis as catch-up contributions, up to the annual limit under the IRC. We match 100% of the first 1% of pre-tax and/or after-tax contributions that participants contribute to the plan and 50% of the next 5% in participant contributions to the plan (representing an aggregate match by us of 3.5% on the first 6% of participant pre-tax and/or after-tax contributions to the plan).  Participants’ contributions are fully vested. Participants are 50% vested in Company matching contributions after one year of credited service and 100% vested after two years of credited service. We fund all contributions with cash. Our matching contributions under the plan totaled approximately $1.1 million in 2012, $1.1 million in 2011 and $1.0 million in 2010. The 401(k) plan is fully funded at December 31, 2012.

Deferred Compensation Plan

We have a non-qualified elective deferred compensation plan for certain members of our management team that permits participants to defer up to 100% of their compensation on a pre-tax basis and receive a tax-deferred return on such deferrals. The balance of the plan, which was fully funded, totaled $6.8 million at December 31, 2012 and $7.6 million at December 31, 2011, and is included in the accompanying consolidated balance sheets.