Segment Reporting

9 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The Company’s reportable operating segments include Established Communities, Other Stabilized Communities, and Development/Redevelopment Communities.  Annually as of January 1^st, 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.

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 property revenue less direct property operating expenses, including property taxes, and excluding corporate-level income (including management, development and other fees), corporate-level property management and other indirect operating expenses, investments and investment management expenses, expensed acquisition, development and other pursuit costs, net interest expense, gain (loss) on extinguishment of debt, general and administrative expense, joint venture income (loss), depreciation expense, casualty and impairment loss (gain), net, gain on sale of real estate assets, gain on sale of discontinued operations, income from discontinued operations and net operating income from real estate assets sold or held for sale, not classified as discontinued operations. 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 the three and nine months ended September 30, 2015 and 2014 is as follows (dollars in thousands):

	For the three months ended						For the nine months ended
	9/30/2015			9/30/2014			9/30/2015			9/30/2014
Net income	$	206,076		$	241,001		$	586,381		$	554,801
Indirect operating expenses, net of corporate income	13,427			13,173			43,642			36,333
Investments and investment management expense	1,167			1,079			3,274			3,195
Expensed acquisition, development and other pursuit costs, net of recoveries	3,391			406			5,251			3,139
Interest expense, net (1)	43,234			46,376			133,398			132,631
(Gain) loss on extinguishment of debt, net	(18,987		)	—			(26,736		)	412
General and administrative expense	10,503			11,290			32,614			30,745
Equity in income of unconsolidated real estate entities	(20,554		)	(130,592		)	(68,925		)	(143,527		)
Depreciation expense (1)	120,184			111,836			355,664			328,598
Casualty and impairment loss (gain), net	658			—			(10,668		)	—
Gain on sale of real estate assets	(35,216		)	—			(115,798		)	(60,945		)
Gain on sale of discontinued operations	—			—			—			(37,869		)
Income from discontinued operations	—			—			—			(310		)
Net operating income from real estate assets sold or held for sale, not classified as discontinued operations	(843		)	(4,144		)	(3,634		)	(16,666		)
Net operating income	$	323,040		$	290,425		$	934,463		$	830,537

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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 three months ended						For the nine months ended
	9/30/2015			9/30/2014			9/30/2015			9/30/2014
Rental income from real estate assets sold or held for sale, not classified as discontinued operations	$	1,353		$	6,904		$	6,162		$	27,499
Operating expenses from real estate assets sold or held for sale, not classified as discontinued operations	(510		)	(2,760		)	(2,528		)	(10,833		)
Net operating income from real estate assets sold or held for sale, not classified as discontinued operations	$	843		$	4,144		$	3,634		$	16,666

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 at the beginning of the given calendar year, or April 1, 2014, when the Company updated its operating segments, primarily to include communities acquired as part of the Archstone Acquisition in its Established Community portfolio. 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 three and nine months ended September 30, 2015 and 2014 has been adjusted for the real estate assets that were sold from January 1, 2014 through September 30, 2015, or otherwise qualify as held for sale and/or discontinued operations as of September 30, 2015, as described in Note 6, “Real Estate Disposition Activities.”

	For the three months ended						For the nine months ended
	Total revenue		NOI		% NOI  change from  prior year		Total revenue		NOI		% NOI  change from  prior year		Gross real estate (1)
For the period ended September 30, 2015
Established
New England	$	50,377	$	32,202	3.1	%	$	147,138	$	91,026	0.6	%	$	1,487,944
Metro NY/NJ	98,585		68,973		3.7	%	289,288		201,962		3.2	%	3,196,771
Mid-Atlantic	52,839		36,157		0.3	%	156,806		108,125		(0.4	)%	2,172,951
Pacific Northwest	19,493		13,502		5.1	%	57,029		40,532		7.3	%	720,223
Northern California	69,850		53,095		9.5	%	202,508		155,464		10.8	%	2,412,264
Southern California	65,019		43,714		7.9	%	190,513		130,278		9.1	%	2,505,625
Total Established	356,163		247,643		5.1	%	1,043,282		727,387		5.1	%	12,495,778
Other Stabilized	56,571		36,930		N/A		165,335		108,283		N/A		2,106,947
Development / Redevelopment	59,112		38,467		N/A		152,694		98,793		N/A		3,795,868
Land Held for Future Development	N/A		N/A		N/A		N/A		N/A		N/A		553,729
Non-allocated (2)	2,161		N/A		N/A		7,714		N/A		N/A		50,556
Total	$	474,007	$	323,040	11.2	%	$	1,369,025	$	934,463	12.5	%	$	19,002,878
For the period ended September 30, 2014 (3)
Established
New England	$	46,788	$	30,258	4.6	%	$	133,732	$	85,123	0.9	%	$	1,363,271
Metro NY/NJ	93,905		65,839		3.8	%	231,259		161,879		2.4	%	2,297,417
Mid-Atlantic	47,122		32,284		(2.2	)%	73,964		51,947		(3.3	)%	645,872
Pacific Northwest	16,744		11,668		9.4	%	40,437		28,104		6.3	%	499,611
Northern California	64,120		48,805		12.2	%	129,560		99,030		7.8	%	1,401,286
Southern California	63,126		41,655		6.8	%	103,919		71,054		4.5	%	1,224,729
Total Established	331,805		230,509		5.5	%	712,871		497,137		3.0	%	7,432,186
Other Stabilized	45,003		31,926		N/A		370,569		255,350		N/A		6,003,229
Development / Redevelopment	44,310		27,990		N/A		125,215		78,050		N/A		3,639,770
Land Held for Future Development	N/A		N/A		N/A		N/A		N/A		N/A		176,484
Non-allocated (2)	2,503		N/A		N/A		8,253		N/A		N/A		34,018
Total	$	423,621	$	290,425	13.6	%	$	1,216,908	$	830,537	16.5	%	$	17,285,687

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(1) Does not include gross real estate assets held for sale of $245,060 as of September 30, 2014.

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

(3) Results for the three months ended September 30, 2014 reflect the operating segments updated as of April 1, 2014, which include most stabilized communities acquired as part of the Archstone Acquisition in the Established Communities segment. Results for the nine months ended September 30, 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.