Segment Reporting

The Company's reportable operating segments include Established Communities, Other Stabilized Communities and Development/Redevelopment Communities. Annually as of January 1st, the Company determines which of its communities fall into each of these categories and generally maintains that classification throughout the year for the purpose of reporting segment operations, unless disposition or redevelopment plans regarding a community change.

•

Established Communities (also known as Same Store Communities) are consolidated communities where a comparison of operating results from the prior year to the current year period is meaningful, as these communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year period. The Established Communities for the year ended December 31, 2014, are communities that are consolidated for financial reporting purposes, had stabilized occupancy as of January 1, 2013, are not conducting or planning to conduct substantial redevelopment activities and are not held for sale or planned for disposition within the current year period. A community is considered to have stabilized occupancy at the earlier of (i) attainment of 95% physical occupancy or (ii) the one-year anniversary of completion of development or redevelopment.

•

Other Stabilized Communities includes all other completed communities that have stabilized occupancy, as defined above. Other Stabilized Communities do not include communities that are conducting or planning to conduct substantial redevelopment activities within the current year. Other Stabilized Communities for the year ended December 31, 2014 include the stabilized operating communities acquired as part of the Archstone Acquisition.


•	Development/Redevelopment Communities consists of communities that are under construction and have not received a certificate of occupancy for the entire community, and where substantial redevelopment is in progress or is planned to begin during the current year and communities under lease-up that had not reached stabilized occupancy, as defined above, as of January 1, 2014.

In addition, the Company owns land for future development and has other corporate assets that are not allocated to an operating segment.

The Company's segment disclosures present the measure(s) used by the chief operating decision maker for purposes of assessing each segment's performance. The Company's chief operating decision maker is comprised of several members of its executive management team who use net operating income ("NOI") as the primary financial measure for Established Communities and Other Stabilized Communities. NOI is defined by the Company as total revenue less direct property operating expenses. Although the Company considers NOI a useful measure of a community's or communities' operating performance, NOI should not be considered an alternative to net income or net cash flow from operating activities, as determined in accordance with GAAP. NOI excludes a number of income and expense categories as detailed in the reconciliation of NOI to net income.

A reconciliation of NOI to net income for years ended December 31, 2014, 2013 and 2012 is as follows (dollars in thousands):



	For the year ended
	12/31/14			12/31/13			12/31/12
Net income	$	697,327		$	352,771		$	423,562
Indirect operating expenses, net of corporate income	49,055			41,554			31,911
Investments and investment management expense	4,485			3,990			6,071
Expensed acquisition, development and other pursuit costs, net of recoveries	(3,717		)	45,050			11,350
Interest expense, net (1)	180,618			172,402			136,920
Loss on extinguishment of debt, net	412			14,921			1,179
Loss on interest rate contract	—			51,000			—
General and administrative expense	41,425			39,573			34,101
Equity in loss (income) of unconsolidated entities	(148,766		)	11,154			(20,914		)
Depreciation expense (1)	442,682			560,215			243,680
Income tax expense	9,368			—			—
Casualty and impairment loss	—			—			1,449
Gain on acquisition of unconsolidated real estate entity	—			—			(14,194		)
Gain on sale of real estate assets	(85,415		)	(240		)	(280		)
Gain on sale of discontinued operations	(37,869		)	(278,231		)	(146,311		)
Income from discontinued operations	(310		)	(16,713		)	(26,820		)
Net operating income from real estate assets sold or held for sale, not classified as discontinued operations	(15,199		)	(19,448		)	(13,776		)
Net operating income	$	1,134,096		$	977,998		$	667,928

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(1)	Includes amounts associated with assets sold or held for sale, not classified as discontinued operations.

The following is a summary of NOI from real estate assets sold or held for sale, not classified as discontinued operations, for the periods presented (dollars in thousands):



	For the year ended
	12/31/2014			12/31/2013			12/31/2012

Rental income from real estate assets sold or held for sale, not classified as discontinued operations	$	24,389		$	30,867		$	21,463
Operating expenses real estate assets sold or held for sale, not classified as discontinued operations	(9,190		)	(11,419		)	(7,687		)
Net operating income from real estate assets sold or held for sale, not classified as discontinued operations	$	15,199		$	19,448		$	13,776

The primary performance measure for communities under development or redevelopment depends on the stage of completion. While under development, management monitors actual construction costs against budgeted costs as well as lease-up pace and rent levels compared to budget.

The following table provides details of the Company's segment information as of the dates specified (dollars in thousands). The segments are classified based on the individual community's status as of the beginning of the given calendar year. Therefore, each year the composition of communities within each business segment is adjusted. Accordingly, the amounts between years are not directly comparable. Segment information for the years ended December 31, 2014, 2013 and 2012 have been adjusted for the real estate assets that were sold from January 1, 2012 through December 31, 2014, or otherwise qualify as held for sale and/or discontinued operations as of December 31, 2014, as described in Note 7, "Real Estate Disposition Activities."



	Total revenue		NOI		% NOI change from prior year		Gross real estate (1)
For the year ended December 31, 2014 (2)
Established
New England	$	179,116	$	113,905	0.8	%	$	1,373,065
Metro NY/NJ	318,710		223,591		3.1	%	2,379,178
Mid-Atlantic	98,590		69,498		(2.5	)%	647,374
Pacific Northwest	54,230		37,637		7.0	%	500,247
Northern California	174,527		132,899		8.2	%	1,402,444
Southern California	139,841		95,626		5.2	%	1,225,328
Total Established (3)	965,014		673,156		3.5	%	7,527,636

Other Stabilized	497,756		343,061		N/A		6,062,844
Development / Redevelopment	186,852		117,879		N/A		3,972,180
Land Held for Future Development	N/A		N/A		N/A		180,516
Non-allocated (4)	11,050		N/A		N/A		41,643
Total	$	1,660,672	$	1,134,096	16.0	%	$	17,784,819

For the year ended December 31, 2013
Established
New England	$	159,670	$	103,679	2.3	%	$	1,227,582
Metro NY/NJ	249,742		172,912		4.4	%	1,921,307
Mid-Atlantic	100,548		71,851		0.1	%	633,598
Pacific Northwest	46,564		31,283		5.3	%	444,825
Northern California	141,038		106,745		11.7	%	1,233,851
Southern California	119,024		81,182		5.1	%	1,058,883
Total Established (3)	816,586		567,652		4.9	%	6,520,046

Other Stabilized	486,780		330,998		N/A		6,626,884
Development / Redevelopment	117,186		79,348		N/A		3,024,035
Land Held for Future Development	N/A		N/A		N/A		300,364
Non-allocated (4)	11,502		N/A		N/A		10,279
Total	$	1,432,054	$	977,998	46.4	%	$	16,481,608

For the year ended December 31, 2012
Established
New England	$	145,629	$	94,481	5.1	%	$	1,115,098
Metro NY/NJ	213,360		148,441		7.4	%	1,760,429
Mid-Atlantic	103,784		75,313		3.2	%	591,669
Pacific Northwest	32,942		23,433		15.0	%	306,289
Northern California	112,875		83,091		14.1	%	1,015,947
Southern California	99,302		68,880		7.0	%	947,723
Total Established (3)	707,892		493,639		7.6	%	5,737,155

Other Stabilized	131,248		84,504		N/A		1,284,666
Development / Redevelopment	129,767		89,785		N/A		2,032,277
Land Held for Future Development	N/A		N/A		N/A		316,037
Non-allocated (4)	10,257		N/A		N/A		73,724
Total	$	979,164	$	667,928	14.6	%	$	9,443,859

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(1)	Does not include gross real estate assets held for sale of $64,497, $318,713 and $627,483 as of December 31, 2014, 2013 and 2012, respectively.


(2)	Results for the year ended December 31, 2014 reflect the operating segments determined as of January 1, 2014, which include stabilized communities acquired as part of the Archstone Acquisition in the Other Stabilized segment.


(3)	Gross real estate for the Company's Established Communities includes capitalized additions of approximately $52,635, $33,553 and $25,448 in 2014, 2013 and 2012, respectively.


(4)	Revenue represents third-party management, accounting, and developer fees and miscellaneous income which are not allocated to a reportable segment.