Reportable Segments

3 Months Ended

Mar. 31, 2020

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. While the Company does maintain a retail presence, it is only approximately 4.0% of total revenues and is designed as an amenity for our residential residents. The chief operating decision maker evaluates the performance of each property on a consolidated residential and retail basis. The Company’s geographic same store operating segments located in urban and high-density

suburban communities represent its reportable segments.

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 quarters ended March 31, 2020 and 2019, 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 quarters ended March 31, 2020 and 2019, respectively (amounts in thousands):

	Quarter Ended March 31,
	2020			2019
Rental income	$	682,305		$	662,302
Property and maintenance expense		(115,816	)		(115,070	)
Real estate taxes and insurance expense		(97,732	)		(91,442	)
Total operating expenses		(213,548	)		(206,512	)
Net operating income	$	468,757		$	455,790

The following tables present NOI for each segment from our rental real estate for the quarters ended March 31, 2020 and 2019, respectively, as well as total assets and capital expenditures at March 31, 2020 (amounts in thousands):

	Quarter Ended March 31, 2020							Quarter Ended March 31, 2019
	Rental Income		Operating Expenses		NOI			Rental Income		Operating Expenses		NOI
Same store (1)
Los Angeles	$	121,920	$	36,916	$	85,004		$	119,536	$	36,430	$	83,106
Orange County		26,694		6,214		20,480			25,828		6,175		19,653
San Diego		24,142		6,317		17,825			23,304		6,148		17,156
Subtotal - Southern California		172,756		49,447		123,309			168,668		48,753		119,915

San Francisco		121,950		30,694		91,256			118,071		29,502		88,569
Washington D.C.		103,884		32,044		71,840			101,504		31,520		69,984
New York		116,590		50,932		65,658			114,761		48,894		65,867
Seattle		64,956		17,427		47,529			61,598		17,118		44,480
Boston		63,683		18,160		45,523			61,920		18,241		43,679
Denver		4,558		1,233		3,325			4,577		1,196		3,381
Total same store		648,377		199,937		448,440			631,099		195,224		435,875

Non-same store/other (2) (3)
Non-same store		29,653		9,165		20,488			5,838		1,783		4,055
Other (3)		4,275		4,446		(171	)		25,365		9,505		15,860
Total non-same store/other		33,928		13,611		20,317			31,203		11,288		19,915

Totals	$	682,305	$	213,548	$	468,757		$	662,302	$	206,512	$	455,790

(1)	For the quarters ended March 31, 2020 and 2019, same store primarily includes all properties acquired or completed that were stabilized prior to January 1, 2019, less properties subsequently sold, which represented 74,919 apartment units.

(2)	For the quarters ended March 31, 2020 and 2019, non-same store primarily includes properties acquired after January 1, 2019, plus any properties in lease-up and not stabilized as of January 1, 2019.

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

	Quarter Ended March 31, 2020
	Total Assets		Capital Expenditures
Same store (1)
Los Angeles	$	3,090,294	$	9,360
Orange County		401,249		2,021
San Diego		385,989		1,117
Subtotal - Southern California		3,877,532		12,498

San Francisco		3,362,398		4,121
Washington D.C.		3,343,974		6,836
New York		4,001,406		6,327
Seattle		1,855,378		2,026
Boston		1,809,524		5,665
Denver		253,763		184
Total same store		18,503,975		37,657

Non-same store/other (2) (3)
Non-same store		1,660,327		548
Other (3)		755,016		137
Total non-same store/other		2,415,343		685

Totals	$	20,919,318	$	38,342

(1)	Same store primarily includes all properties acquired or completed that were stabilized prior to January 1, 2019, less properties subsequently sold, which represented 74,919 apartment units.

(2)	Non-same store primarily includes properties acquired after January 1, 2019, plus any properties in lease-up and not stabilized as of January 1, 2019.

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