SEGMENT REPORTING

Segment information is prepared on the same basis that our management reviews information for operational decision-making purposes. We operate in four business segments: the acquisition, redevelopment, ownership and management of retail real estate, office real estate, multifamily real estate and mixed-use real estate. The products for our retail segment primarily include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental. The products for our office segment primarily include rental of office space and other tenant services, including tenant reimbursements, parking and storage space rental. The products for our multifamily segment include rental of apartments and other tenant services. The products of our mixed-use segment include rental of retail space and other tenant services, including tenant reimbursements, parking and storage space rental and operation of a 369-room all-suite hotel.

We evaluate the performance of our segments based on segment profit, which is defined as property revenue less property expenses. We do not use asset information as a measure to assess performance and make decisions to allocate resources. Therefore, depreciation and amortization expense is not allocated among segments. General and administrative expenses, interest expense, depreciation and amortization expense and other income and expense are not included in segment profit as our internal reporting addresses these items on a corporate level.

Segment profit is not a measure of operating income or cash flows from operating activities as measured by GAAP, and it is not indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity. Not all companies calculate segment profit in the same manner. We consider segment profit to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations of our properties.

The following table represents operating activity within our reportable segments (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Total Retail
Property revenue	$	26,547		$	25,064		$	76,292		$	74,316
Property expense	(6,934		)	(7,159		)	(20,419		)	(20,203		)
Segment profit	19,613			17,905			55,873			54,113
Total Office
Property revenue	26,653			25,818			79,002			76,416
Property expense	(7,874		)	(8,146		)	(23,720		)	(23,395		)
Segment profit	18,779			17,672			55,282			53,021
Total Multifamily
Property revenue	12,410			8,053			31,324			21,407
Property expense	(5,281		)	(3,288		)	(12,574		)	(8,960		)
Segment profit	7,129			4,765			18,750			12,447
Total Mixed-Use
Property revenue	16,729			17,041			46,619			46,387
Property expense	(9,623		)	(9,394		)	(28,139		)	(26,522		)
Segment profit	7,106			7,647			18,480			19,865
Total segments’ profit	$	52,627		$	47,989		$	148,385		$	139,446

The following table is a reconciliation of segment profit to net income attributable to stockholders (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Total segments’ profit	$	52,627		$	47,989		$	148,385		$	139,446
General and administrative	(4,958		)	(4,513		)	(15,171		)	(13,456		)
Depreciation and amortization	(21,192		)	(17,992		)	(63,360		)	(53,159		)
Interest expense	(13,873		)	(13,049		)	(39,856		)	(39,148		)
Other (expense) income, net	(99		)	(577		)	403			(454		)
Net income	12,505			11,858			30,401			33,229
Net income attributable to restricted shares	(60		)	(42		)	(181		)	(128		)
Net income attributable to unitholders in the Operating Partnership	(3,351		)	(3,342		)	(8,220		)	(9,377		)
Net income attributable to American Assets Trust, Inc. stockholders	$	9,094		$	8,474		$	22,000		$	23,724

The following table shows net real estate and secured note payable balances for each of the segments (in thousands):



	September 30, 2017		December 31, 2016
Net Real Estate
Retail	$	662,820	$	629,261
Office	811,193		813,414
Multifamily	425,771		203,014
Mixed-Use	182,062		185,857
	$	2,081,846	$	1,831,546
Secured Notes Payable ⁽¹⁾
Retail	$	35,914	$	36,424
Office	170,589		206,550
Multifamily	73,744		73,744
Mixed-Use	—		130,310
	$	280,247	$	447,028


(1)	Excludes unamortized fair market value adjustments and debt issuance costs of $0.4 million and $1.8 million as of September 30, 2017 and December 31, 2016, respectively.

Capital expenditures for each segment for the three and nine months ended September 30, 2017 and 2016 were as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Capital Expenditures ⁽¹⁾
Retail	$	3,803	$	2,203	$	7,849	$	11,867
Office	10,555		11,637		25,715		33,276
Multifamily	1,953		213		4,521		2,032
Mixed-Use	211		100		414		216
	$	16,522	$	14,153	$	38,499	$	47,391


(1)	Capital expenditures represent cash paid for capital expenditures during the period and include leasing commissions paid.