Segment Reporting

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

Reportable Segments

We have four reportable operating segments at June 30, 2014, the first three of which consist of the ownership and rental of (i) industrial, (ii) office and (iii) medical office real estate investments. The operations of our industrial, office and medical office properties, along with our retail properties, are collectively referred to as "Rental Operations." Our retail properties, as well as any other properties not included in our reportable segments, do not by themselves meet the quantitative thresholds for separate presentation as a reportable segment and are referred to as non-reportable Rental Operations. The fourth reportable segment consists of various real estate services such as property management, asset management, maintenance, leasing, development, general contracting and construction management to third-party property owners and joint ventures, and is collectively referred to as "Service Operations." Our reportable segments offer different products or services and are managed separately because each segment requires different operating strategies and management expertise.

Revenues by Reportable Segment

The following table shows the revenues for each of the reportable segments, as well as a reconciliation to consolidated revenues, for the three and six months ended June 30,2014 and 2013, respectively (in thousands): 

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Revenues
Rental Operations:
Industrial	$	128,995	$	117,125	$	262,997	$	231,824
Office	66,592		63,657		133,564		124,853
Medical Office	34,954		31,546		68,264		62,030
Non-reportable Rental Operations	1,629		1,739		3,716		4,042
Service Operations	69,512		50,793		125,332		98,197
Total segment revenues	301,682		264,860		593,873		520,946
Other revenue	1,348		1,241		2,327		2,438
Consolidated revenue from continuing operations	303,030		266,101		596,200		523,384
Discontinued operations	593		12,263		1,961		28,667
Consolidated revenue	$	303,623	$	278,364	$	598,161	$	552,051

Supplemental Performance Measure

Prior to 2014, we evaluated the profitability of our reportable segments using net earnings excluding depreciation and other items that were not allocated to our operating segments. As the result of a shift in the focus of our executive management team on the metrics used to evaluate the performance of, and to allocate resources among, our reportable segments, we elected to change our segment measurement of profitability beginning with the period ended March 31, 2014. We have also revised prior period information in order to provide period-over-period comparability.

Property level net operating income, on a cash basis (“PNOI”) is the non-GAAP supplemental performance measure that we now use to evaluate the performance of, and to allocate resources among, the real estate investments in the reportable and operating segments that comprise our Rental Operations. PNOI for our Rental Operations segments is comprised of rental revenues from continuing operations less rental expenses and real estate taxes from continuing operations, along with certain other adjusting items (collectively referred to as "Rental Operations revenues and expenses excluded from PNOI," as shown in the table below). Additionally, we do not allocate interest expense, depreciation expense and certain other non-property specific revenues and expenses (collectively referred to as "Non-Segment Items," as shown in the table below) to our individual operating segments.

We evaluate the performance of our Service Operations reportable segment using net income or loss, as allocated to that segment ("Earnings from Service Operations").

The following table shows a reconciliation of our segment-level measures of profitability to consolidated income from continuing operations before income taxes for the three and six months ended June 30,2014 and 2013, respectively (in thousands and excluding discontinued operations): 

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
PNOI
Industrial	$	95,564		$	85,257		$	187,308		$	166,401
Office	34,967			32,851			67,436			65,549
Medical Office	21,787			17,022			42,364			33,525
Non-reportable Rental Operations	1,200			1,064			2,305			2,038
Total PNOI	153,518			136,194			299,413			267,513
Earnings from Service Operations	5,655			5,601			14,204			14,664
Rental Operations revenues and expenses excluded from PNOI:
Straight-line rental income and expense, net	4,940			3,827			11,402			8,097
Revenues related to lease buyouts	1,525			4,686			4,220			6,679
Amortization of lease concessions and above and below market rents	(1,689		)	(2,165		)	(4,156		)	(4,062		)
Intercompany rents and other adjusting items	(960		)	(1,311		)	(2,102		)	(2,345		)
PNOI from sold/held-for-sale properties included in continuing operations	4,362			6,866			8,227			13,883
Non-Segment Items:
Equity in earnings of unconsolidated companies	60,826			1,091			63,147			50,469
Interest expense	(54,872		)	(57,019		)	(110,129		)	(114,343		)
Depreciation expense	(97,641		)	(95,322		)	(195,700		)	(188,316		)
Gain on sale of properties	70,318			940			86,171			1,108
Impairment charges on non-depreciable properties	(2,523		)	(3,777		)	(2,523		)	(3,777		)
Interest and other income, net	229			921			580			1,074
Other operating expenses	(129		)	(35		)	(221		)	(103		)
General and administrative expenses	(10,365		)	(9,707		)	(25,059		)	(22,852		)
Gain on land sales	3,889			—			4,041			—
Undeveloped land carrying costs	(1,858		)	(2,531		)	(3,982		)	(4,729		)
Loss on extinguishment of debt	(139		)	—			(139		)	—
Acquisition-related activity	(747		)	(2,423		)	(761		)	(1,780		)
Other non-segment revenues and expenses, net	(80		)	211			(772		)	522
Income from continuing operations before income taxes	$	134,259		$	(13,953	)	$	145,861		$	21,702

The most comparable GAAP measure to PNOI is income from continuing operations before income taxes. PNOI excludes expenses that materially impact our overall results of operations and, therefore, should not be considered as a substitute for income from continuing operations before income taxes or any other measures derived in accordance with GAAP. Furthermore, PNOI may not be comparable to other similarly titled measures of other companies.

Assets by Reportable Segment

The assets for each of the reportable segments at June 30, 2014 and December 31, 2013 were as follows (in thousands):

	June 30, 2014		December 31, 2013
Assets
Rental Operations:
Industrial	$	4,550,731	$	4,414,740
Office	1,436,477		1,524,501
Medical Office	1,171,828		1,170,420
Non-reportable Rental Operations	78,974		81,056
Service Operations	159,988		145,222
Total segment assets	7,397,998		7,335,939
Non-segment assets	464,506		416,675
Consolidated assets	$	7,862,504	$	7,752,614