
13.	Reportable Segments

Operating segments are defined as components of an enterprise that engage in business activities from which they may earn revenues and incur expenses and about which discrete financial information is available that is evaluated regularly by the chief operating decision maker. The chief operating decision maker decides how resources are allocated and assesses performance on a recurring basis at least quarterly.

The Company’s primary business is the acquisition, development and management of multifamily residential properties, which includes the generation of rental and other related income through the leasing of apartment units to residents. The chief operating decision maker evaluates the Company's operating performance geographically by market and both on a same store and non-same store basis. The Company’s operating segments located in its coastal markets represent its reportable segments. As of January 1, 2016, the Company has revised the presentation of Southern California to show separate results for Los Angeles, San Diego and Orange County, along with a subtotal of the three markets combined, for both the current and comparable periods. The Company's operating segments located in its other markets that are not material have been included in the tables presented below. See also Note 4 for further discussion of the Starwood Transaction and the operating segments/locations in which properties were sold.

The Company’s fee and asset management and development activities are other business activities that do not constitute an operating segment and as such, have been included in the "Other" category in the tables presented below.

All revenues are from external customers and there is no customer who contributed 10% or more of the Company’s total revenues during the six months and quarters ended June 30, 2016 and 2015, respectively.

The primary financial measure for the Company’s rental real estate segment is net operating income (“NOI”), which represents rental income less: 1) property and maintenance expense and 2) real estate taxes and insurance expense (all as reflected in the accompanying consolidated statements of operations and comprehensive income). As of January 1, 2016, NOI no longer includes an allocation of property management expenses either in the current or comparable periods. The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company’s apartment properties. Current year NOI is compared to prior year NOI and current year budgeted NOI as a measure of financial performance.

The following table presents a reconciliation of NOI from our rental real estate specific to continuing operations for the six months and quarters ended June 30, 2016 and 2015, respectively (amounts in thousands):



	Six Months Ended June 30,						Quarter Ended June 30,
	2016			2015			2016			2015
Rental income	$	1,211,104		$	1,341,114		$	594,939		$	676,508
Property and maintenance expense	(205,472		)	(242,565		)	(96,307		)	(118,005		)
Real estate taxes and insurance expense	(157,611		)	(169,551		)	(77,415		)	(83,119		)
Total operating expenses	(363,083		)	(412,116		)	(173,722		)	(201,124		)
Net operating income	$	848,021		$	928,998		$	421,217		$	475,384

The following tables present NOI for each segment from our rental real estate specific to continuing operations for the six months and quarters ended June 30, 2016 and 2015, respectively, as well as total assets and capital expenditures at June 30, 2016 (amounts in thousands):



	Six Months Ended June 30, 2016						Six Months Ended June 30, 2015
	Rental Income		Operating Expenses		NOI		Rental Income		Operating Expenses		NOI
Same store (1)
Los Angeles	$	181,849	$	52,847	$	129,002	$	171,169	$	52,082	$	119,087
San Diego	43,306		11,696		31,610		40,874		11,417		29,457
Orange County	39,116		9,332		29,784		36,922		9,327		27,595
Subtotal – Southern California	264,271		73,875		190,396		248,965		72,826		176,139

New York	227,736		78,629		149,107		222,210		77,223		144,987
Washington D.C.	210,416		62,296		148,120		208,247		62,646		145,601
San Francisco	182,485		44,428		138,057		168,047		42,909		125,138
Boston	123,890		34,272		89,618		120,294		36,320		83,974
Seattle	75,565		21,392		54,173		71,250		19,868		51,382
All Other Markets	14,754		5,992		8,762		14,104		6,374		7,730
Total same store	1,099,117		320,884		778,233		1,053,117		318,166		734,951

Non-same store/other (2) (3)
Los Angeles	16,460		5,726		10,734		13,825		4,766		9,059
Orange County	2,358		685		1,673		—		—		—
Subtotal – Southern California	18,818		6,411		12,407		13,825		4,766		9,059

New York	15,714		7,533		8,181		1,291		1,453		(162		)
Washington D.C.	1,818		346		1,472		2,062		380		1,682
San Francisco	13,328		4,710		8,618		640		615		25
Boston	5,542		1,415		4,127		3,375		782		2,593
Seattle	12,584		3,035		9,549		4,003		1,090		2,913
Other (3)	44,183		18,749		25,434		262,801		84,864		177,937
Total non-same store/other	111,987		42,199		69,788		287,997		93,950		194,047

Total	$	1,211,104	$	363,083	$	848,021	$	1,341,114	$	412,116	$	928,998


(1)	Same store primarily includes all properties acquired or completed that are stabilized prior to January 1, 2015, less properties subsequently sold, which represented 72,494 apartment units.


(2)	Non-same store primarily includes properties acquired after January 1, 2015, plus any properties in lease-up and not stabilized as of January 1, 2015.


(3)	Other includes development, other corporate operations and operations prior to sale for properties sold from 2014 through 2016 that do not meet the new discontinued operations criteria.



	Quarter Ended June 30, 2016						Quarter Ended June 30, 2015
	Rental Income		Operating Expenses		NOI		Rental Income		Operating Expenses		NOI
Same store (1)
Los Angeles	$	91,699	$	26,489	$	65,210	$	86,515	$	25,893	$	60,622
San Diego	21,877		5,861		16,016		20,643		5,756		14,887
Orange County	19,802		4,599		15,203		18,601		4,639		13,962
Subtotal – Southern California	133,378		36,949		96,429		125,759		36,288		89,471

New York	114,532		38,487		76,045		111,885		37,716		74,169
Washington D.C.	106,148		30,871		75,277		104,907		30,609		74,298
San Francisco	91,811		22,230		69,581		85,224		21,390		63,834
Boston	62,272		16,848		45,424		60,467		17,470		42,997
Seattle	40,401		11,344		29,057		38,103		10,564		27,539
All Other Markets	7,480		2,840		4,640		7,137		2,849		4,288
Total same store	556,022		159,569		396,453		533,482		156,886		376,596

Non-same store/other (2) (3)
Los Angeles	9,198		3,021		6,177		6,505		2,382		4,123
Orange County	1,201		350		851		—		—		—
Subtotal – Southern California	10,399		3,371		7,028		6,505		2,382		4,123

New York	8,628		3,898		4,730		1,006		1,021		(15		)
Washington D.C.	859		166		693		1,017		183		834
San Francisco	8,043		2,647		5,396		524		394		130
Boston	2,909		698		2,211		2,433		580		1,853
Seattle	4,827		1,164		3,663		68		88		(20		)
Other (3)	3,252		2,209		1,043		131,473		39,590		91,883
Total non-same store/other	38,917		14,153		24,764		143,026		44,238		98,788

Total	$	594,939	$	173,722	$	421,217	$	676,508	$	201,124	$	475,384


(1)	Same store primarily includes all properties acquired or completed that are stabilized prior to April 1, 2015, less properties subsequently sold, which represented 72,781 apartment units.


(2)	Non-same store primarily includes properties acquired after April 1, 2015, plus any properties in lease-up and not stabilized as of April 1, 2015.


(3)	Other includes development, other corporate operations and operations prior to sale for properties sold from 2014 through 2016 that do not meet the new discontinued operations criteria.



	Six Months Ended June 30, 2016
	Total Assets		Capital Expenditures
Same store (1)
Los Angeles	$	2,550,146	$	11,718
San Diego	480,150		2,465
Orange County	265,300		3,741
Subtotal – Southern California	3,295,596		17,924

New York	4,314,790		9,838
Washington D.C.	3,965,195		13,191
San Francisco	2,501,535		10,250
Boston	1,789,339		8,285
Seattle	1,045,598		4,800
All Other Markets	78,771		594
Total same store	16,990,824		64,882

Non-same store/other (2) (3)
Los Angeles	455,857		5,803
Orange County	76,337		26
Subtotal – Southern California	532,194		5,829

New York	436,213		33
Washington D.C.	45,869		308
San Francisco	951,966		261
Boston	169,544		357
Seattle	331,810		432
Other (3)	1,771,502		2,348
Total non-same store/other	4,239,098		9,568
Total	$	21,229,922	$	74,450


(1)	Same store primarily includes all properties acquired or completed that are stabilized prior to January 1, 2015, less properties subsequently sold, which represented 72,494 apartment units.


(2)	Non-same store primarily includes properties acquired after January 1, 2015, plus any properties in lease-up and not stabilized as of January 1, 2015.


(3)	Other includes development, other corporate operations and capital expenditures for properties sold.

Note: Markets/Metro Areas included in the above All Other Markets segment are as follows:

(a) New England (excluding Boston) and Phoenix.