Segment Reporting

9 Months Ended

Sep. 30, 2013

Segment Reporting

Segment Reporting

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

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 segments’ 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 the three and nine months ended September 30, 2013 and 2012 is as follows (dollars in thousands):

	For the three months ended						For the nine months ended
	9-30-13			9-30-12			9-30-13			9-30-12
Net (loss) income	$	(10,885	)	$	86,747		$	100,681		$	301,178
Indirect operating expenses, net of corporate income	10,780			7,396			30,673			24,049
Investments and investment management expense	1,043			1,582			3,154			4,526
Expensed acquisition, development and other pursuit costs	2,176			608			46,041			1,749
Interest expense, net	43,945			33,985			127,772			100,804
Loss on interest rate contract	53,484			—			51,000			—
Loss on extinguishment of debt, net	—			—			—			1,179
General and administrative expense	9,878			8,372			31,262			26,398
Equity in (income) loss of unconsolidated entities	(3,260		)	(5,553		)	16,244			(9,801		)
Depreciation expense	160,682			62,750			457,837			183,688
Gain on sale of real estate assets	—			—			(118,413		)	(95,329		)
Income from discontinued operations	(3,221		)	(4,340		)	(7,073		)	(15,062		)
Gain on acquisition of unconsolidated real estate entity	—			(14,194		)	—			(14,194		)
Net operating income	$	264,622		$	177,353		$	739,178		$	509,185

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 three and nine months ended September 30, 2013 and 2012 have been adjusted for the real estate assets that were sold from January 1, 2012 through September 30, 2013, or otherwise qualify as discontinued operations as of September 30, 2013, as described in Note 7, “Real Estate Disposition Activities.”

	For the three months ended						For the nine months ended
	Total				% NOI change		Total				% NOI change		Gross
	revenue		NOI		from prior year		revenue		NOI		from prior year		real estate (1)
For the period ended September 30, 2013
Established
New England	$	46,319	$	29,323	(0.6	)%	$	136,528	$	88,220	2.0	%	$	1,398,194
Metro NY/NJ	63,103		43,327		3.4	%	186,897		129,215		4.6	%	1,919,151
Mid-Atlantic	25,262		17,652		(1.0	)%	75,608		54,169		1.1	%	632,102
Pacific Northwest	11,773		7,752		1.7	%	34,752		23,539		7.4	%	443,812
Northern California	38,491		29,905		15.0	%	112,569		85,627		13.1	%	1,313,694
Southern California	30,001		20,165		4.7	%	88,873		60,640		5.7	%	1,057,512
Total Established	214,949		148,124		4.2	%	635,227		441,410		5.5	%	6,764,465
Other Stabilized	142,795		95,044		N/A		357,342		243,626		N/A		6,683,016
Development / Redevelopment	32,369		21,454		N/A		79,704		54,142		N/A		2,676,384
Land Held for Future Development	N/A		N/A		N/A		N/A		N/A		N/A		282,285
Non-allocated (2)	3,014		N/A		N/A		8,198		N/A		N/A		47,921
Total	$	393,127	$	264,622	49.2	%	$	1,080,471	$	739,178	45.2	%	$	16,454,071
For the period ended September 30, 2012
Established
New England	$	42,755	$	27,374	2.7	%	$	125,568	$	81,268	5.6	%	$	1,287,578
Metro NY/NJ	55,257		38,155		5.5	%	162,608		112,757		7.4	%	1,779,699
Mid-Atlantic	26,300		18,618		3.7	%	77,825		56,156		4.2	%	591,802
Pacific Northwest	8,401		5,984		19.6	%	24,426		17,207		13.6	%	304,381
Northern California	31,208		22,931		15.1	%	90,853		66,646		14.5	%	1,096,166
Southern California	25,131		17,224		6.2	%	74,000		51,225		8.8	%	946,802
Total Established	189,052		130,286		6.9	%	555,280		385,259		8.1	%	6,006,428
Other Stabilized	34,469		22,384		N/A		96,282		61,924		N/A		1,249,203
Development / Redevelopment	35,267		24,683		N/A		90,692		62,002		N/A		1,871,336
Land Held for Future Development	N/A		N/A		N/A		N/A		N/A		N/A		304,295
Non-allocated (2)	2,533		N/A		N/A		7,852		N/A		N/A		54,828
Total	$	261,321	$	177,353	14.7	%	$	750,106	$	509,185	14.6	%	$	9,486,090

(1) Does not include gross real estate assets held for sale of $318,406 and $405,662 as of September 30, 2013 and 2012, respectively.

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