SEGMENT DISCLOSURE

6 Months Ended

Jun. 30, 2014

SEGMENT DISCLOSURE

SEGMENT DISCLOSURE

17. 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 and six months ended June 30, 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 and six months ended June 30, 2014 and 2013, is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014(1)		2013
	(in thousands)
Office properties:
Revenues	$	45,181	$	44,137	$	88,455	$	87,597
Property expenses:
Operating		17,933		16,192		35,586		32,494
General and administrative		76		254		392		354
Total property expenses		18,009		16,446		35,978		32,848
Segment net operating income—office		27,172		27,691		52,477		54,749
Hotel properties:
Revenues		14,798		10,624		29,137		20,571
Property expenses:
Operating		9,923		7,125		19,769		13,653
General and administrative		36		83		73		162
Total property expenses		9,959		7,208		19,842		13,815
Segment net operating income—hotel		4,839		3,416		9,295		6,756
Multifamily properties:
Revenues		5,208		5,077		10,192		9,978
Property expenses:
Operating		2,583		1,915		4,670		3,806
General and administrative		54		35		79		42
Total property expenses		2,637		1,950		4,749		3,848
Segment net operating income—multifamily		2,571		3,127		5,443		6,130
Lending:
Revenues		6,271		—		7,797		—
Lending expenses:
Interest expense		635		—		897		—
General and administrative		1,253		—		1,658		—
Total lending expenses		1,888		—		2,555		—
Segment net operating income—lending		4,383		—		5,242		—
Total segment net operating income	$	38,965	$	34,234	$	72,457	$	67,635

(1)

The lending segment operations are included for the period from the Acquisition Date to June 30, 2014.

        A reconciliation of segment net operating income to net income for the three and six months ended June 30, 2014 and 2013, is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(in thousands)
Total segment net operating income	$	38,965		$	34,234		$	72,457		$	67,635
Interest		(4,304	)		(4,725	)		(8,259	)		(9,402	)
General and administrative		(2,191	)		(343	)		(2,587	)		(699	)
Asset management fees and other fees to related parties		(6,338	)		(5,431	)		(12,075	)		(10,840	)
Transaction costs		(32	)		(1,394	)		(500	)		(1,394	)
Depreciation and amortization		(17,286	)		(17,533	)		(33,915	)		(34,670	)
		8,814			4,808			15,121			10,630
Bargain purchase gain		—			—			4,918			—
Income before provision for income taxes		8,814			4,808			20,039			10,630
Provision for income taxes		(300	)		—			(308	)		—
Net income		8,514			4,808			19,731			10,630
Net income attributable to noncontrolling interests		(115	)		(113	)		(113	)		(109	)
Net income attributable to stockholders	$	8,399		$	4,695		$	19,618		$	10,521

        The condensed assets for each of the segments as of June 30, 2014 and December 31, 2013, along with capital expenditures and originations for the six months ended June 30, 2014 and 2013, are as follows:

	June 30, 2014		December 31, 2013
	(in thousands)
Condensed assets:
Office properties	$	1,518,743	$	1,481,757
Hotel properties		174,898		174,263
Multifamily properties		171,283		173,985
Lending		204,933		—
Non-segment assets		2,841		4,472
Total assets	$	2,072,698	$	1,834,477

	Six Months Ended June 30,
	2014		2013
	(in thousands)
Capital expenditures(1):
Office properties	$	11,428	$	6,830
Hotel properties		721		1,504
Multifamily properties		429		827
Total capital expenditures		12,578		9,161
Originations		25,191		—
Total capital expenditures and originations	$	37,769	$	9,161

(1)

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