Segment Reporting

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

Reportable Segments

We have four reportable operating segments at September 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 nine months ended September 30,2014 and 2013, respectively (in thousands): 

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Revenues
Rental Operations:
Industrial	$	131,212	$	122,643	$	394,209	$	354,468
Office	60,672		63,120		194,236		187,973
Medical Office	36,715		32,542		104,979		94,571
Non-reportable Rental Operations	1,698		1,765		5,414		5,807
Service Operations	59,739		62,807		185,072		161,004
Total segment revenues	290,036		282,877		883,910		803,823
Other revenue	1,025		1,585		3,352		4,023
Consolidated revenue from continuing operations	291,061		284,462		887,262		807,846
Discontinued operations	454		11,140		2,415		39,807
Consolidated revenue	$	291,515	$	295,602	$	889,677	$	847,653

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 nine months ended September 30,2014 and 2013, respectively (in thousands and excluding discontinued operations): 

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
PNOI
Industrial	$	97,324		$	88,968		$	284,191		$	254,849
Office	34,894			30,982			100,237			94,959
Medical Office	23,228			18,239			65,592			51,764
Non-reportable Rental Operations	929			1,087			3,234			3,138
Total PNOI	156,375			139,276			453,254			404,710
Earnings from Service Operations	7,211			3,415			21,415			18,079
Rental Operations revenues and expenses excluded from PNOI:
Straight-line rental income and expense, net	5,527			2,942			16,929			11,040
Revenues related to lease buyouts	145			2,936			4,365			9,615
Amortization of lease concessions and above and below market rents	(1,220		)	(2,267		)	(5,376		)	(6,485		)
Intercompany rents and other adjusting items	(1,221		)	(1,125		)	(3,323		)	(3,470		)
PNOI from sold/held-for-sale properties included in continuing operations	807			9,332			11,568			25,449
Non-Segment Items:
Equity in earnings (loss) of unconsolidated companies	19,178			(27		)	82,325			50,442
Interest expense	(53,343		)	(56,618		)	(163,479		)	(171,365		)
Depreciation expense	(95,000		)	(101,191		)	(290,700		)	(289,508		)
Gain on sale of properties	47,143			—			133,617			1,108
Impairment charges on non-depreciable properties	(6,368		)	—			(8,891		)	(3,777		)
Interest and other income, net	356			145			936			1,219
Other operating expenses	(56		)	(47		)	(277		)	(150		)
General and administrative expenses	(10,573		)	(10,373		)	(35,632		)	(33,225		)
Gain on land sales	3,167			3,365			7,208			3,365
Undeveloped land carrying costs	(1,773		)	(2,108		)	(5,755		)	(6,837		)
Loss on extinguishment of debt	—			—			(139		)	—
Acquisition-related activity	(110		)	(726		)	(871		)	(2,506		)
Other non-segment revenues and expenses, net	(269		)	(31		)	(1,041		)	491
Income (loss) from continuing operations before income taxes	$	69,976		$	(13,102	)	$	216,133		$	8,195

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 September 30, 2014 and December 31, 2013 were as follows (in thousands):

	September 30, 2014		December 31, 2013
Assets
Rental Operations:
Industrial	$	4,673,507	$	4,414,740
Office	1,378,083		1,524,501
Medical Office	1,172,615		1,170,420
Non-reportable Rental Operations	76,736		81,056
Service Operations	157,815		145,222
Total segment assets	7,458,756		7,335,939
Non-segment assets	425,439		416,675
Consolidated assets	$	7,884,195	$	7,752,614