Segment Reporting

12 Months Ended

Dec. 31, 2020

Reportable Segments

As of December 31, 2020, we had two reportable operating segments, the first consisting of the ownership and rental of industrial real estate investments. We continue to increase our investments in quality industrial properties largely based on anticipated geographic trends in supply and demand for industrial buildings, as well as the real estate needs of our major tenants that operate on a national level. We treat our industrial properties as a single operating and reportable segment based on our method of internal reporting. Properties not included in our reportable segment, because they are not industrial properties and do not by themselves meet the quantitative thresholds for separate presentation as a reportable segment, are generally referred to as non-reportable Rental Operations. Our non-reportable Rental Operations primarily include our remaining office properties and medical office property at December 31, 2020. The operations of our industrial properties, as well as our non-reportable Rental Operations, are collectively referred to as "Rental Operations."

Our second reportable segment consists of various real estate services such as development, general contracting, construction management, property management, asset management, maintenance and leasing to third-party property customers, owners and joint ventures, and is collectively referred to as "Service Operations." The Service Operations segment is identified as one single operating segment because the lowest level of financial results reviewed by our chief operating decision maker are the results for the Service Operations segment in total. Further, our reportable segments 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 years ended December 31, 2020, 2019 and 2018 (in thousands):


	2020		2019		2018
Revenues
Rental Operations:
Industrial	$	921,612	$	848,806	$	775,713


Non-reportable Rental Operations	5,995		5,794		7,862
Service Operations	64,004		117,926		162,551
Total segment revenues	991,611		972,526		946,126
Other revenue	1,587		1,233		1,744
Consolidated revenue from continuing operations	993,198		973,759		947,870
Discontinued operations	—		—		117
Consolidated revenue	$	993,198	$	973,759	$	947,987

Major Customer

The table below shows the revenues from a major customer from each of our reportable segments (in thousands):


	Twelve Months Ended December 31,
	2020		2019		2018
Revenues
Rental Operations - Industrial	$	92,986	$	63,805	$	56,649


Service Operations	32,771		45,177		44,532

We generated more than 10% of our total revenues from this customer for the year ended December 31, 2020. Revenues from Rental Operations relate to leasing properties to this customer. Revenues from Service Operations for this customer pertained primarily to general contractor services, and the construction costs paid to subcontractors and the associated revenues from billing this customer for those costs are recorded on a gross basis.

Supplemental Performance Measure

PNOI is the non-GAAP supplemental performance measure that we 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 following table). 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 following table) 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 years ended December 31, 2020, 2019 and 2018 (in thousands and excluding discontinued operations):



	2020		2019		2018
PNOI
Industrial	$	653,028	$	588,386	$	515,483


Non-reportable Rental Operations	5,020		3,811		5,264
PNOI, excluding all sold properties	658,048		592,197		520,747
PNOI from sold properties included in continuing operations	7,763		25,924		43,609
PNOI, continuing operations	665,811		618,121		564,356

Earnings from Service Operations	6,028		6,360		8,642

Rental Operations revenues and expenses excluded from PNOI:
Straight-line rental income and expense, net	25,865		21,197		24,604
Revenues related to lease buyouts	2,863		1,611		23
Amortization of lease concessions and above and below market rents	8,984		7,802		2,332
Intercompany rents and other adjusting items	(1,473)		1,012		1,271
Non-Segment Items:
Equity in earnings of unconsolidated joint ventures	11,944		31,406		21,444
Interest expense	(93,442)		(89,756)		(85,006)
Depreciation and amortization expense	(353,013)		(327,223)		(312,217)
Gain on sale of properties	127,700		234,653		204,988
Impairment charges	(5,626)		—		—
Interest and other income, net	1,721		9,941		17,234

General and administrative expenses	(62,404)		(60,889)		(56,218)
Gain on land sales	10,458		7,445		10,334
Other operating expenses	(8,209)		(5,318)		(5,231)
Loss on extinguishment of debt	(32,900)		(6,320)		(388)
Gain on involuntary conversion	4,312		2,259		—
Non-incremental costs related to successful leases	(12,292)		(12,402)		—
Other non-segment revenues and expenses, net	1,210		986		(3,972)
Income from continuing operations before income taxes	$	297,537	$	440,885	$	392,196

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 December 31, 2020 and 2019 were as follows (in thousands):


	December 31, 2020		December 31, 2019
Assets
Rental Operations:
Industrial	$	8,709,960	$	7,843,302


Non-reportable Rental Operations	35,292		39,700
Service Operations	160,194		150,882
Total segment assets	8,905,446		8,033,884
Non-segment assets	205,948		386,678
Consolidated assets	$	9,111,394	$	8,420,562

In addition to revenues and PNOI, we also review our second generation capital expenditures in measuring the performance of our individual Rental Operations segments. We review these expenditures to determine the costs associated with re-leasing vacant space and maintaining the condition of our properties. Our second generation capital expenditures are included within "second generation tenant improvements, leasing costs and building improvements" in our consolidated statements of Cash Flows and are primarily attributable to the industrial segment for the years ended December 31, 2020, 2019 and 2018.