Segments

12 Months Ended

Dec. 31, 2020

Segment Reporting [Abstract]

Segments

Segments

Net operating income (segment revenues minus segment expenses) is the measure used by the Company’s chief operating decision-maker to assess segment performance. Net operating income is not a measure of operating income or cash flows from operating activities as measured by GAAP and is not indicative of cash available to fund cash needs. As a result, net operating income should not be considered as an alternative to cash flows as a measure of liquidity. Not all companies calculate net operating income in the same manner. The Company considers net operating income to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations of the Company’s real estate and construction businesses. 

Net operating income of the Company’s reportable segments for the years ended December 31, 2020, 2019, and 2018 was as follows (in thousands):

	Years Ended December 31,
	2020		2019		2018
Office real estate
Rental revenues	$	43,494	$	33,269	$	20,701
Rental expenses	10,799		8,722		5,858
Real estate taxes	5,111		3,471		2,034
Segment net operating income	27,584		21,076		12,809
Retail real estate
Rental revenues	73,032		77,593		67,959
Rental expenses	11,029		11,656		10,903
Real estate taxes	7,784		7,916		6,801
Segment net operating income	54,219		58,021		50,255
Multifamily residential real estate
Rental revenues	49,962		40,477		28,298
Rental expenses	17,132		13,954		10,461
Real estate taxes	5,241		3,574		2,548
Segment net operating income	27,589		22,949		15,289
General contracting and real estate services
Segment revenues	217,146		105,859		76,359
Segment expenses	209,472		101,538		73,628
Segment gross profit	7,674		4,321		2,731
Net operating income	$	117,066	$	106,367	$	81,084

Rental expenses represent costs directly associated with the operation and management of the Company’s real estate properties. Rental expenses include asset management fees, property management fees, repairs and maintenance, insurance, and utilities.

General contracting and real estate services revenues for the years ended December 31, 2020, 2019, and 2018 exclude revenue related to intercompany construction contracts of $26.6 million, $99.9 million and $134.4 million, respectively, as it is eliminated in consolidation. General contracting and real estate services expenses for the years ended December 31, 2020, 2019, and 2018 exclude expenses related to intercompany construction contracts of $26.3 million, $99.0 million and $133.4 million, respectively, as it is eliminated in consolidation.

The following table reconciles net operating income to net income for the years ended December 31, 2020, 2019, and 2018 (in thousands):

	Years Ended December 31,
	2020		2019		2018
Net operating income	$	117,066	$	106,367	$	81,084
Depreciation and amortization	(59,972)		(54,564)		(39,913)
Amortization of right-of-use assets - finance leases	(586)		(377)		—
General and administrative expenses	(12,905)		(12,392)		(11,431)
Acquisition, development and other pursuit costs	(584)		(844)		(352)
Impairment charges	(666)		(252)		(1,619)
Gain on real estate dispositions	6,388		4,699		4,254
Interest income	19,841		23,215		10,729
Interest expense on indebtedness	(30,120)		(30,776)		(19,087)
Interest expense on finance leases	(915)		(568)		—
Equity in income of unconsolidated real estate entities	—		273		372
Change in fair value of derivatives and other	(1,130)		(3,599)		(951)
Provision for unrealized credit losses	(256)		—		—
Other income (expense), net	515		585		377
Income tax benefit	283		491		29
Net income	$	36,959	$	32,258	$	23,492

General and administrative expenses represent costs not directly associated with the operation and management of the Company’s real estate properties and general contracting and real estate services businesses. General and administrative expenses include corporate office personnel salaries and benefits, bank fees, accounting fees, legal fees, and other corporate office expenses.