10.

INCOME TAXES

The Company qualifies as a REIT under the Internal Revenue Code of 1986, as amended, and will generally not be subject to corporate income taxes to the extent it distributes its taxable income to its shareholders and complies with certain other requirements.

The Company has elected to treat one of its subsidiaries as a taxable REIT subsidiary. In general, the Company’s taxable REIT subsidiary may perform additional services for tenants and generally may engage in certain real estate or non-real estate related business. A taxable REIT subsidiary is subject to corporate federal and state income taxes. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities.

For the three months ended June 30, 2015 and 2014, the Company recorded federal and state income tax expense of $0.6 million and $0.3 million, respectively. For the six months ended June 30, 2015 and 2014, the Company recorded federal and state income tax expense of $1.0 million and $0.6 million, respectively. At June 30, 2015 and 2014, there were no material unrecognized tax benefits. Interest and penalties relating to uncertain tax positions will be recognized in income tax expense when incurred. As of June 30, 2015 and 2014, the Company had no interest or penalties related to uncertain tax positions. Net income taxes payable and the deferred tax liability of our taxable REIT subsidiary are classified within accounts payable and accrued liabilities in the consolidated balance sheet. As of June 30, 2015, the Company’s taxable REIT subsidiary has a current tax liability of $0.1 million and a deferred tax liability of $1.2 million. The tax years 2011-2014 remain open to examination by the major taxing jurisdictions to which the Company is subject.