SEGMENT DISCLOSURE

3 Months Ended

Mar. 31, 2014

SEGMENT DISCLOSURE

SEGMENT DISCLOSURE

16. SEGMENT DISCLOSURE

        In accordance with ASC Topic 280, Segment Reporting, our reportable segments consist of three types of commercial real estate properties, namely, office properties, hotel properties (which included an investment in a note receivable secured by a hotel property during the three months ended March 31, 2013) and multifamily properties, as well as a segment for our lending operations. Management internally evaluates the operating performance and financial results of the segments based on net operating income. We also have certain general and administrative level activities, including public company expenses, legal, accounting, tax preparation, that are not considered separate operating segments. The reportable segments are accounted for on the same basis of accounting as described in the notes to the audited consolidated financial statements of CIM Urban for the year ended December 31, 2013 included in our current report on Form 8-K/A filed on May 9, 2014.

        We evaluate the performance of our segments based on net operating income for our real estate segment, defined as: rental and other property income and tenant reimbursements less property and related expenses, and excludes other nonproperty income and expenses, interest expense, depreciation and amortization, corporate related general and administrative expenses, and transaction costs. For the lending segment, we define net operating income as interest income net of interest expense and expense for back-office operations and general overhead expenses such as administration and accounting. The net operating income of our reportable segments for the three months ended March 31, 2014 and 2013, is as follows:

	March 31, 2014		March 31, 2013
	(in thousands)
Office properties:
Revenues	$	43,274	$	43,460
Property expenses:
Operating		17,653		16,302
General and administrative		316		100
Total property expenses		17,969		16,402
Segment net operating income—office		25,305		27,058
Hotel properties:
Revenues		14,339		9,947
Property expenses:
Operating		9,846		6,528
General and administrative		37		79
Total property expenses		9,883		6,607
Segment net operating income—hotel		4,456		3,340
Multifamily properties:
Revenues		4,984		4,901
Property expenses:
Operating		2,087		1,891
General and administrative		25		7
Total property expenses		2,112		1,898
Segment net operating income—multifamily		2,872		3,003
Lending(1):
Revenues		1,526		—
Lending expenses:
Interest expense		262		—
General and administrative		405		—
Total lending expenses		667		—
Segment net operating income—lending		859		—
Total segment net operating income	$	33,492	$	33,401

(1)

For the period from the Acquisition Date to March 31, 2014.

        A reconciliation of segment net operating income to net income for the three months ended March 31, 2014 and 2013, is as follows:

	March 31, 2014			March 31, 2013
	(in thousands)
Total segment net operating income	$	33,492		$	33,401
Interest		(3,955	)		(4,677	)
General and administrative		(396	)		(356	)
Asset management fees and other fees to related parties		(5,737	)		(5,409	)
Transaction costs		(468	)		—
Depreciation and amortization		(16,629	)		(17,137	)
		6,307			5,822
Bargain purchase gain		4,918			—
Income before provision for income taxes		11,225			5,822
Provision for income taxes		(8	)		—
Net income		11,217			5,822
Net loss attributable to noncontrolling interests		2			4
Net income attributable to shareholders	$	11,219		$	5,826

        The condensed assets for each of the segments as of March 31, 2014 and December 31, 2013, along with capital expenditures and originations for the three months ended March 31, 2014 and 2013, are as follows:

	March 31, 2014		December 31, 2013
	(in thousands)
Condensed assets:
Office properties	$	1,474,971	$	1,481,757
Hotel properties		175,201		174,263
Multifamily properties		170,723		173,985
Lending		223,954		—
Non-segment assets		6,379		4,472
Total assets	$	2,051,228	$	1,834,477

	March 31, 2014		March 31, 2013
	(in thousands)
Capital expenditures(1):
Office properties	$	6,055	$	3,920
Hotel properties		485		470
Multifamily properties		210		519
Total capital expenditures		6,750		4,909
Originations		1,593		—
Total capital expenditures and originations	$	8,343	$	4,909

(1)

Represents additions and improvements to real estate investments, excluding acquisitions.