Reportable Segments

9 Months Ended

Sep. 30, 2019

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 geographic same store operating segments located in urban and high-density suburban communities represent its reportable segments (the recently acquired Denver properties owned by the Company are currently included in non-same store). The Company’s operating segments located in its other markets (Phoenix) that are not material have also been included in the tables presented below.

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 aggregated 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 nine months and quarters ended September 30, 2019 and 2018, 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). 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. Revenues for all leases are reflected on a straight-line basis in accordance with GAAP for the current and comparable periods.

The following table presents a reconciliation of NOI from our rental real estate for the nine months and quarters ended September 30, 2019 and 2018, respectively (amounts in thousands):

	Nine Months Ended September 30,						Quarter Ended September 30,
	2019			2018			2019			2018
Rental income	$	2,016,796		$	1,925,128		$	685,120		$	652,677
Property and maintenance expense		(338,497	)		(322,487	)		(114,966	)		(110,541	)
Real estate taxes and insurance expense		(270,434	)		(268,784	)		(87,546	)		(87,388	)
Total operating expenses		(608,931	)		(591,271	)		(202,512	)		(197,929	)
Net operating income	$	1,407,865		$	1,333,857		$	482,608		$	454,748

The following tables present NOI for each segment from our rental real estate for the nine months and quarters ended September 30, 2019 and 2018, respectively, as well as total assets and capital expenditures at September 30, 2019 (amounts in thousands):

	Nine Months Ended September 30, 2019						Nine Months Ended September 30, 2018
	Rental Income		Operating Expenses		NOI		Rental Income		Operating Expenses		NOI
Same store (1)
Los Angeles	$	350,841	$	102,851	$	247,990	$	337,047	$	96,431	$	240,616
Orange County		78,522		18,583		59,939		75,595		18,434		57,161
San Diego		71,088		18,532		52,556		68,640		17,988		50,652
Subtotal - Southern California		500,451		139,966		360,485		481,282		132,853		348,429

San Francisco		359,867		87,104		272,763		346,485		84,581		261,904
Washington D.C.		330,944		101,969		228,975		323,549		100,575		222,974
New York		340,828		142,047		198,781		332,474		133,001		199,473
Boston		169,576		46,645		122,931		163,292		45,473		117,819
Seattle		154,453		41,517		112,936		150,103		42,084		108,019
Other Markets		1,560		545		1,015		1,453		503		950
Total same store		1,857,679		559,793		1,297,886		1,798,638		539,070		1,259,568

Non-same store/other (2) (3)
Non-same store		136,353		43,801		92,552		69,334		25,322		44,012
Other (3)		22,764		5,337		17,427		57,156		26,879		30,277
Total non-same store/other		159,117		49,138		109,979		126,490		52,201		74,289

Totals	$	2,016,796	$	608,931	$	1,407,865	$	1,925,128	$	591,271	$	1,333,857

(1)	For the nine months ended September 30, 2019 and 2018, same store primarily includes all properties acquired or completed that were stabilized prior to January 1, 2018, less properties subsequently sold, which represented 72,979 apartment units.

(2)	For the nine months ended September 30, 2019 and 2018, non-same store primarily includes properties acquired after January 1, 2018, plus any properties in lease-up and not stabilized as of January 1, 2018.

(3)	Other includes development, other corporate operations and operations prior to disposition for properties sold.

	Quarter Ended September 30, 2019							Quarter Ended September 30, 2018
	Rental Income		Operating Expenses			NOI		Rental Income		Operating Expenses		NOI
Same store (1)
Los Angeles	$	122,506	$	36,666		$	85,840	$	118,864	$	34,683	$	84,181
Orange County		26,636		6,382			20,254		25,599		6,203		19,396
San Diego		24,064		6,447			17,617		23,215		6,234		16,981
Subtotal - Southern California		173,206		49,495			123,711		167,678		47,120		120,558

San Francisco		127,104		31,438			95,666		122,075		30,420		91,655
Washington D.C.		111,712		34,797			76,915		108,979		34,549		74,430
New York		117,382		48,293			69,089		114,407		45,143		69,264
Boston		59,354		16,243			43,111		56,724		16,124		40,600
Seattle		60,434		16,086			44,348		58,107		16,062		42,045
Other Markets		520		168			352		484		164		320
Total same store		649,712		196,520			453,192		628,454		189,582		438,872

Non-same store/other (2) (3)
Non-same store		32,171		9,676			22,495		8,160		2,785		5,375
Other (3)		3,237		(3,684	)		6,921		16,063		5,562		10,501
Total non-same store/other		35,408		5,992			29,416		24,223		8,347		15,876

Totals	$	685,120	$	202,512		$	482,608	$	652,677	$	197,929	$	454,748

(1)	For the quarters ended September 30, 2019 and 2018, same store primarily includes all properties acquired or completed that were stabilized

prior to July 1, 2018, less properties subsequently sold, which represented 75,290 apartment units.

(2)	For the quarters ended September 30, 2019 and 2018, non-same store primarily includes properties acquired after July 1, 2018, plus any properties in lease-up and not stabilized as of July 1, 2018.

(3)	Other includes development, other corporate operations and operations prior to disposition for properties sold.

	Nine Months Ended September 30, 2019
	Total Assets		Capital Expenditures
Same store (1)
Los Angeles	$	3,002,609	$	23,301
Orange County		409,559		7,460
San Diego		394,352		3,161
Subtotal - Southern California		3,806,520		33,922

San Francisco		3,267,869		19,422
Washington D.C.		3,600,267		16,517
New York		3,915,125		17,532
Boston		1,479,159		18,191
Seattle		1,304,042		14,162
Other Markets		12,867		165
Total same store		17,385,849		119,911

Non-same store/other (2) (3)
Non-same store		3,109,994		7,757
Other (3)		558,213		667
Total non-same store/other		3,668,207		8,424

Totals	$	21,054,056	$	128,335

(1)	Same store primarily includes all properties acquired or completed that were stabilized prior to January 1, 2018, less properties subsequently sold, which represented 72,979 apartment units.

(2)	Non-same store primarily includes properties acquired after January 1, 2018, plus any properties in lease-up and not stabilized as of January 1, 2018.

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