Segment Reporting

12 Months Ended

Dec. 31, 2011

Segment Reporting

9.  Segment Reporting

The Company’s reportable operating segments are 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 plans regarding a community change, throughout the year for the purpose of reporting segment operations.

• 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 2011, the Established Communities are communities that are consolidated for financial reporting purposes, had stabilized occupancy and operating expenses as of January 1, 2010, 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.

• 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, communities where the Company owns a majority interest 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, 2011.

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, 2011, 2010 and 2009 is as follows (dollars in thousands):

	For the year ended
	12-31-11			12-31-10			12-31-09
Net income	$	441,370		$	174,079		$	154,274
Indirect operating expenses, net of corporate income		30,550			30,246			30,315
Investments and investment management expense		5,126			3,824			3,844
Expensed development and other pursuit costs		2,967			2,741			5,842
Interest expense, net		168,179			170,349			145,462
(Gain) loss on extinguishment of debt, net		1,940			—			25,910
General and administrative expense		29,371			26,846			28,748
Equity in income of unconsolidated entities		(5,120	)		(762	)		(1,441	)
Depreciation expense		246,666			227,878			204,481
Impairment loss - land holdings		14,052			—			21,152
Gain on sale of real estate assets		(294,806	)		(74,074	)		(68,717	)
(Income) loss from discontinued operations		5,658			3,768			(7,689	)
Net operating income	$	645,953		$	564,895		$	542,181

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, 2011, 2010 and 2009 have been adjusted for the real estate assets that were sold from January 1, 2009 through December 31, 2011, or otherwise qualify as discontinued operations as of December 31, 2011, 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, 2011
Established
New England	$	169,939	$	109,048		9.6	%	$	1,302,368
Metro NY/NJ		195,652		131,605		6.6	%		1,534,923
Mid-Atlantic/Midwest		110,215		79,498		6.9	%		660,885
Pacific Northwest		37,652		25,059		6.3	%		364,987
Northern California		102,960		72,962		11.3	%		933,226
Southern California		75,120		50,391		9.8	%		697,705
Total Established (2)		691,538		468,563		8.4	%		5,494,094
Other Stabilized		137,779		89,949		n/a			1,567,875
Development / Redevelopment		129,738		87,441		n/a			1,822,448
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	$	968,711	$	645,953		14.3	%	$	9,288,496
For the period ended December 31, 2010
Established
New England	$	143,564	$	89,712		(0.3	)%	$	1,109,016
Metro NY/NJ		181,639		121,033		(1.5	)%		1,386,850
Mid-Atlantic/Midwest		98,899		69,965		0.8	%		602,395
Pacific Northwest		26,352		16,775		(11.8	)%		240,093
Northern California		118,791		80,466		(6.2	)%		1,118,324
Southern California		58,888		37,703		(6.7	)%		470,162
Total Established (2)		628,133		415,654		(2.8	)%		4,926,840
Other Stabilized		122,404		74,609		n/a			1,580,910
Development / Redevelopment		116,114		74,632		n/a			1,736,880
Land Held for Future Development		n/a		n/a		n/a			184,150
Non-allocated (3)		7,354		n/a		n/a			82,806
Total	$	874,005	$	564,895		4.2	%	$	8,511,586
For the period ended December 31, 2009
Established
New England	$	121,455	$	75,766		(7.5	)%	$	858,858
Metro NY/NJ		155,468		103,558		(7.4	)%		1,048,636
Mid-Atlantic/Midwest		100,817		71,091		(3.3	)%		626,559
Pacific Northwest		28,184		19,101		(9.3	)%		239,215
Northern California		98,529		70,819		(7.9	)%		857,321
Southern California		62,751		42,900		(9.7	)%		428,241
Total Established (2)		567,204		383,235		(7.1	)%		4,058,830
Other Stabilized		125,691		81,568		n/a			1,411,395
Development / Redevelopment		129,700		77,378		n/a			2,264,590
Land Held for Future Development		n/a		n/a		n/a			237,095
Non-allocated (3)		7,328		n/a		n/a			62,118
Total	$	829,924	$	542,181		0.8	%	$	8,034,028

(1) Does not include gross real estate assets held for sale of $0, $149,626 and $315,807 as of December 31, 2011, December 31, 2010 and December 31, 2009 respectively.

(2) Gross real estate for the Company’s established communities includes capitalized additions of approximately $34,359, $38,670 and $10,783 in 2011, 2010 and 2009, respectively.

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