SEGMENT DISCLOSURE

9 Months Ended

Sep. 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 nine months ended September 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 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 nine months ended September 30, 2014 and 2013, is as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014(1)		2013
	(in thousands)
Office properties:
Revenues	$	44,378	$	43,812	$	132,833	$	131,409
Property expenses:
Operating		18,644		17,360		54,230		49,854
General and administrative		413		335		805		689
Total property expenses		19,057		17,695		55,035		50,543
Segment net operating income—office		25,321		26,117		77,798		80,866
Hotel properties:
Revenues		13,504		8,630		42,641		29,201
Property expenses:
Operating		9,867		6,419		29,636		20,072
General and administrative		61		29		134		191
Total property expenses		9,928		6,448		29,770		20,263
Segment net operating income—hotel		3,576		2,182		12,871		8,938
Multifamily properties:
Revenues		5,235		5,045		15,427		15,023
Property expenses:
Operating		2,485		2,093		7,155		5,899
General and administrative		553		32		632		74
Total property expenses		3,038		2,125		7,787		5,973
Segment net operating income—multifamily		2,197		2,920		7,640		9,050
Lending:
Revenues		5,078		—		12,875		—
Lending expenses:
Interest expense		657		—		1,554		—
General and administrative		1,263		—		2,921		—
Total lending expenses		1,920		—		4,475		—
Segment net operating income—lending		3,158		—		8,400		—
Total segment net operating income	$	34,252	$	31,219	$	106,709	$	98,854

(1) The lending segment operations are included for the period from the Acquisition Date to September 30, 2014.

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
	(in thousands)
Total segment net operating income	$	34,252		$	31,219		$	106,709		$	98,854
Interest		(4,794	)		(4,611	)		(13,053	)		(14,013	)
General and administrative		(867	)		(168	)		(3,454	)		(867	)
Asset management fees and other fees to related parties		(6,476	)		(5,442	)		(18,551	)		(16,282	)
Transaction costs		(46	)		(2,619	)		(546	)		(4,013	)
Depreciation and amortization		(17,677	)		(16,620	)		(51,592	)		(51,290	)
		4,392			1,759			19,513			12,389
Bargain purchase gain		—			—			4,918			—
Income before provision for income taxes		4,392			1,759			24,431			12,389
Provision for income taxes		(112	)		—			(420	)		—
Net income		4,280			1,759			24,011			12,389
Net loss (income) attributable to noncontrolling interests		5			6			(108	)		(103	)
Net income attributable to stockholders	$	4,285		$	1,765		$	23,903		$	12,286

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

	September 30, 2014		December 31, 2013
	(in thousands)
Condensed assets:
Office properties	$	1,509,247	$	1,481,757
Hotel properties		176,225		174,263
Multifamily properties		170,291		173,985
Lending		210,759		—
Non-segment assets		12,963		4,472
Total assets	$	2,079,485	$	1,834,477

	Nine Months Ended September 30,
	2014		2013
	(in thousands)
Capital expenditures(1):
Office properties	$	15,658	$	12,680
Hotel properties		1,068		1,626
Multifamily properties		546		1,250
Total capital expenditures		17,272		15,556
Originations		36,557		—
Total capital expenditures and originations	$	53,829	$	15,556

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