Segment Reporting

12 Months Ended

Dec. 31, 2013

Segment Reporting

Segment Reporting

9. 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 maintains that classification, unless disposition or redevelopment plans regarding a community change, throughout the year for the purpose of reporting segment operations.

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  Established Communities (also known as Same Store Communities) are communities where a comparison of operating results from the prior year to the current year is meaningful, as these communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year. For the year 2013, the Established Communities are communities that are consolidated for financial reporting purposes, had stabilized occupancy and operating expenses as of January 1, 2012, are not conducting or planning to conduct substantial redevelopment activities and are not held for sale or planned for disposition within the current year. 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.

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  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.

• •

  Development/Redevelopment Communities consists of communities that are under construction and have not received a final certificate of occupancy, 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, 2013.

        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, 2013, 2012 and 2011 is as follows (dollars in thousands):

	For the year ended
	12-31-13			12-31-12			12-31-11
Net income	$	352,771		$	423,562		$	441,370
Indirect operating expenses, net of corporate income		41,554			31,911			30,550
Investments and investment management expense		3,990			6,071			5,126
Expensed acquisition, development and other pursuit costs		45,050			11,350			2,967
Interest expense, net		172,402			136,920			167,814
Loss on interest rate contract		51,000			—			—
Loss on extinguishment of debt, net		14,921			1,179			1,940
General and administrative expense		39,573			34,101			29,371
Equity in loss (income) of unconsolidated entities		11,154			(20,914	)		(5,120	)
Depreciation expense		560,215			243,680			226,728
Casualty and impairment loss		—			1,449			14,052
Gain on sale of real estate assets		(278,471	)		(146,591	)		(294,806	)
Income from discontinued operations		(16,713	)		(26,820	)		(20,065	)
Gain on acquisition of unconsolidated real estate entity		—			(14,194	)		—
Net operating income	$	997,446		$	681,704		$	599,927

        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, 2013, 2012 and 2011 have been adjusted for the real estate assets that were sold from January 1, 2011 through December 31, 2013, or otherwise qualify as discontinued operations as of December 31, 2013, as described in Note 7, "Real Estate Disposition Activities."

	Total revenue		NOI		% NOI change from prior year			Gross real estate(1)
For the period ended December 31, 2013
Established
New England	$	177,474	$	114,966		1.8	%	$	1,375,961
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(2)		834,390		578,939		4.7	%		6,668,425
Other Stabilized		499,843		339,159		n/a			6,770,517
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(3)		11,502		n/a		n/a			10,279
Total	$	1,462,921	$	997,446		46.3	%	$	16,773,620
For the period ended December 31, 2012
Established
New England	$	163,110	$	106,039		5.0	%	$	1,262,987
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(2)		725,373		505,197		7.5	%		5,885,044
Other Stabilized		135,230		86,722		n/a			1,314,690
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(3)		10,257		n/a		n/a			73,724
Total	$	1,000,627	$	681,704		14.5	%	$	9,621,772
For the period ended December 31, 2011
Established
New England	$	164,929	$	105,848		9.8	%	$	1,275,866
Metro NY/NJ		180,003		120,714		6.8	%		1,347,796
Mid-Atlantic		102,834		74,754		6.6	%		603,349
Pacific Northwest		30,057		20,374		6.0	%		301,661
Northern California		79,868		57,749		10.8	%		704,066
Southern California		75,120		50,391		9.8	%		697,705
Total Established(2)		632,811		429,830		8.3	%		4,930,443
Other Stabilized		137,779		89,949		n/a			1,567,875
Development / Redevelopment		119,841		80,148		n/a			1,752,006
Land Held for Future Development		n/a		n/a		n/a			325,918
Non-allocated(3)		9,656		n/a		n/a			78,161
Total	$	900,087	$	599,927		14.8	%	$	8,654,403

(1)

Does not include gross real estate assets held for sale of $26,701, $449,570 and $634,089 as of December 31, 2013, 2012 and 2011, respectively.

(2)

Gross real estate for the Company's established communities includes capitalized additions of approximately $33,553, $25,448 and $34,359 in 2013, 2012 and 2011, respectively.

(3)

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