Business Segments

In 2017, we revised the information regularly reviewed by our chief executive officer, who is our chief operating decision maker, to assess our operating performance. Apartment communities are classified as either part of our Real Estate portfolio or those owned through partnerships served by our Asset Management business.

Our Real Estate portfolio consisted of 141 apartment communities with 39,187 apartment homes at June 30, 2017. This portfolio is diversified by both price point and geography and consists primarily of market rate apartment communities.

Our chief operating decision maker uses proportionate property net operating income to assess the operating performance of our apartment communities. Proportionate property net operating income reflects our share of rental and other property revenues less direct property operating expenses, including real estate taxes, for consolidated apartment communities we own and manage. As of June 30, 2017, for segment performance evaluation, our Real Estate segment included 137 consolidated apartment communities with 39,045 apartment homes and excluded four apartment communities with 142 apartment homes that we neither manage nor consolidate.

As discussed in Note 1, as of June 30, 2017, through our Asset Management business we also owned nominal ownership positions in consolidated partnerships for which we provide asset management services. These partnerships own 46 low-income housing tax credit apartment communities with 6,898 apartment homes. Neither the results of operations, nor the assets of these partnerships and apartment communities are quantitatively material; therefore, we have one reportable segment, Real Estate. The results of operations for the three and six months ended June 30, 2016, and the segment assets as of December 31, 2016, shown below have been revised to reflect the change in our reportable segments.

The following tables present the revenues, net operating income and income before gain on dispositions of our Real Estate segment on a proportionate basis (excluding amounts related to apartment communities sold) for the three and six months ended June 30, 2017 and 2016 (in thousands):



	Real Estate		Proportionate Adjustments (1)		Corporate and Amounts Not Allocated to Reportable Segment (2)			Consolidated
Three Months Ended June 30, 2017
Rental and other property revenues attributable to Real Estate	$	219,137	$	7,199	$	1,367		$	227,703
Rental and other property revenues of partnerships served by Asset Management business	—		—		18,533			18,533
Tax credit and transaction revenues	—		—		2,856			2,856
Total revenues	219,137		7,199		22,756			249,092
Property operating expenses attributable to Real Estate	68,387		2,265		8,362			79,014
Property operating expenses of partnerships served by Asset Management business					8,382			8,382
Other operating expenses not allocated to reportable segment (3)	—		—		101,990			101,990
Total operating expenses	68,387		2,265		118,734			189,386
Net operating income	150,750		4,934		(95,978		)	59,706
Other items included in income before gain on dispositions (4)	—		—		(39,623		)	(39,623		)
Income before gain on dispositions	$	150,750	$	4,934	$	(135,601	)	$	20,083



	Real Estate		Proportionate Adjustments (1)		Corporate and Amounts Not Allocated to Reportable Segment (2)			Consolidated
Three Months Ended June 30, 2016
Rental and other property revenues attributable to Real Estate	$	205,283	$	7,429	$	11,029		$	223,741
Rental and other property revenues of partnerships served by Asset Management business	—		—		19,130			19,130
Tax credit and transaction revenues	—		—		8,347			8,347
Total revenues	205,283		7,429		38,506			251,218
Property operating expenses attributable to Real Estate	66,694		2,279		10,735			79,708
Property operating expenses of partnerships served by Asset Management business	—		—		9,252			9,252
Other operating expenses not allocated to reportable segment (3)	—		—		97,822			97,822
Total operating expenses	66,694		2,279		117,809			186,782
Net operating income	138,589		5,150		(79,303		)	64,436
Other items included in income before gain on dispositions (4)	—		—		(35,024		)	(35,024		)
Income before gain on dispositions	$	138,589	$	5,150	$	(114,327	)	$	29,412



	Real Estate		Proportionate Adjustments (1)		Corporate and Amounts Not Allocated to Reportable Segment (2)			Consolidated
Six Months Ended June 30, 2017
Rental and other property revenues attributable to Real Estate	$	436,112	$	14,496	$	2,323		$	452,931
Rental and other property revenues of partnerships served by Asset Management business	—		—		37,095			37,095
Tax credit and transaction revenues	—		—		5,547			5,547
Total revenues	436,112		14,496		44,965			495,573
Property operating expenses attributable to Real Estate	137,851		4,568		16,221			158,640
Property operating expenses of partnerships served by Asset Management business					17,579			17,579
Other operating expenses not allocated to reportable segment (3)	—		—		201,859			201,859
Total operating expenses	137,851		4,568		235,659			378,078
Net operating income	298,261		9,928		(190,694		)	117,495
Other items included in income before gain on dispositions (4)	—		—		(79,863		)	(79,863		)
Income before gain on dispositions	$	298,261	$	9,928	$	(270,557	)	$	37,632



	Real Estate		Proportionate Adjustments (1)		Corporate and Amounts Not Allocated to Reportable Segment (2)			Consolidated
Six Months Ended June 30, 2016
Rental and other property revenues attributable to Real Estate	$	407,347	$	15,022	$	23,963		$	446,332
Rental and other property revenues of partnerships served by Asset Management business	—		—		38,020			38,020
Tax credit and transaction revenues	—		—		13,105			13,105
Total revenues	407,347		15,022		75,088			497,457
Property operating expenses attributable to Real Estate	131,941		4,224		23,015			159,180
Property operating expenses of partnerships served by Asset Management business					18,789			18,789
Other operating expenses not allocated to reportable segment (3)	—		—		191,518			191,518
Total operating expenses	131,941		4,224		233,322			369,487
Net operating income	275,406		10,798		(158,234		)	127,970
Other items included in income before gain on dispositions (4)	—		—		(74,860		)	(74,860		)
Income before gain on dispositions	$	275,406	$	10,798	$	(233,094	)	$	53,110


(1)	Represents adjustments for the noncontrolling interests in consolidated real estate partnerships’ share of the results of consolidated apartment communities in our Real Estate segment, which are included in the related consolidated amounts, but excluded from proportionate property net operating income for our segment evaluation.

(2)

Includes the operating results of apartment communities sold during 2017 or 2016, and the operating results of apartment communities owned by consolidated partnerships served by our Asset Management business. Corporate and Amounts Not Allocated to Reportable Segment also includes property management revenues (which are included in consolidated rental and other property revenues), property management expenses and casualty gains and losses (which are included in consolidated property operating expenses) and depreciation and amortization, which are not part of our segment performance measure.


(3)	Other operating expenses not allocated to reportable segment consist of depreciation and amortization, general and administrative expenses and other operating expenses, which are not included in our measure of segment performance.


(4)	Other items included in income before gain on dispositions primarily consist of interest expense and income tax benefit.

For the six months ended June 30, 2017 and 2016, capital additions related to our Real Estate segment totaled $172.3 million and $163.1 million, respectively.

The assets of our reportable segment and the consolidated assets not allocated to our segment are as follows (in thousands):



	June 30, 2017		December 31, 2016
Real Estate	$	5,583,603	$	5,545,693
Corporate and other assets (1)	615,599		687,125
Total consolidated assets	$	6,199,202	$	6,232,818


(1)	Includes the assets of consolidated partnerships served by the Asset Management business and apartment communities sold as of June 30, 2017.