Segment Reporting

9 Months Ended

Sep. 30, 2016

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, 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 of recoveries, interest expense, net, (gain) loss on extinguishment of debt, net, general and administrative expense, equity in (loss) income of unconsolidated real estate entities, depreciation expense, corporate income tax expense, casualty and impairment loss (gain), net, gain on sale of real estate assets and net operating income from real estate assets sold or held for sale. 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, 2016 and 2015 is as follows (dollars in thousands):

	For the three months ended						For the nine months ended
	9/30/2016			9/30/2015			9/30/2016			9/30/2015
Net income	$	356,329		$	206,076		$	791,525		$	586,381
Indirect operating expenses, net of corporate income	14,946			13,427			46,960			43,642
Investments and investment management expense	1,205			1,167			3,545			3,274
Expensed acquisition, development and other pursuit costs, net of recoveries	3,804			3,391			8,702			5,251
Interest expense, net	47,871			43,234			137,862			133,398
(Gain) loss on extinguishment of debt, net	—			(18,987		)	2,461			(26,736		)
General and administrative expense	11,928			10,464			35,343			31,266
Equity in loss (income) of unconsolidated real estate entities	342			(20,554		)	(54,779		)	(68,925		)
Depreciation expense	131,729			120,184			391,414			355,664
Income tax expense	22			39			95			1,348
Casualty and impairment loss (gain), net	—			658			(3,935		)	(10,668		)
Gain on sale of real estate	(212,941		)	(35,216		)	(295,503		)	(115,798		)
Net operating income from real estate assets sold or held for sale (1)	(5,525		)	(9,180		)	(19,751		)	(28,248		)
Net operating income	$	349,710		$	314,703		$	1,043,939		$	909,849

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(1) Represents NOI from real estate assets sold or held for sale as of September 30, 2016 that are not otherwise classified as discontinued operations.

The following is a summary of NOI from real estate assets sold or held for sale for the periods presented (dollars in thousands):

	For the three months ended						For the nine months ended
	9/30/2016			9/30/2015			9/30/2016			9/30/2015
Rental income from real estate assets sold or held for sale	$	8,814		$	15,098		$	31,731		$	46,610
Operating expenses from real estate assets sold or held for sale	(3,289		)	(5,918		)	(11,980		)	(18,362		)
Net operating income from real estate assets sold or held for sale	$	5,525		$	9,180		$	19,751		$	28,248

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. 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 total revenue and NOI for the three and nine months ended September 30, 2016 and 2015 has been adjusted to exclude the real estate assets that were sold from January 1, 2015 through September 30, 2016, or otherwise qualify as held for sale as of September 30, 2016, as described in Note 6, “Real Estate Disposition Activities.” Segment information for gross real estate as of September 30, 2016 and 2015 has not been adjusted to exclude real estate assets that were sold or otherwise qualified as held for sale subsequent to the respective balance sheet dates.

	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, 2016
Established
New England	$	59,321	$	37,657	0.6	%	$	174,731	$	111,497	5.9	%	$	1,845,679
Metro NY/NJ	96,231		65,299		1.5	%	283,554		193,001		2.0	%	3,206,696
Mid-Atlantic	58,929		40,029		0.4	%	174,922		120,623		1.4	%	2,335,116
Pacific Northwest	20,216		14,502		9.5	%	59,333		42,753		6.6	%	736,377
Northern California	80,783		61,560		5.9	%	238,867		182,658		8.0	%	2,657,020
Southern California	73,570		52,527		11.1	%	217,686		155,242		10.3	%	2,667,875
Total Established	389,050		271,574		4.3	%	1,149,093		805,774		5.5	%	13,448,763
Other Stabilized (2)	53,905		34,812		N/A		177,016		125,017		N/A		2,325,539
Development / Redevelopment	63,122		43,324		N/A		164,865		113,148		N/A		3,994,361
Land Held for Future Development	N/A		N/A		N/A		N/A		N/A		N/A		519,626
Non-allocated (3)	1,320		N/A		N/A		4,310		N/A		N/A		74,374
Total	$	507,397	$	349,710	11.1	%	$	1,495,284	$	1,043,939	14.7	%	$	20,362,663
For the period ended September 30, 2015
Established
New England	$	45,245	$	29,036	3.4	%	$	132,054	$	81,883	0.8	%	$	1,487,944
Metro NY/NJ	92,153		65,207		3.8	%	270,406		190,735		3.1	%	3,196,771
Mid-Atlantic	52,839		36,157		0.3	%	156,806		108,125		(0.4	)%	2,172,951
Pacific Northwest	17,319		12,077		5.0	%	50,563		36,214		8.0	%	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	342,425		239,286		5.2	%	1,002,850		702,699		5.2	%	12,495,778
Other Stabilized	56,564		36,949		N/A		165,319		108,355		N/A		2,106,947
Development / Redevelopment	59,112		38,468		N/A		152,694		98,795		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 (3)	2,161		N/A		N/A		7,714		N/A		N/A		50,556
Total	$	460,262	$	314,703	11.5	%	$	1,328,577	$	909,849	12.8	%	$	19,002,878

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(1) Does not include gross real estate assets held for sale of $135,054 as of September 30, 2016.

(2) Total revenue and NOI for the nine months ended September 30, 2016 includes $20,306 in business interruption insurance proceeds related to the Edgewater casualty loss.

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