Business Segments

Our chief executive officer, who is 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 is defined as our share of rental and other property revenue less our share of property operating expenses, including real estate taxes, for consolidated apartment communities we own and manage. Beginning in 2018, we exclude from rental and other property revenues the amount of utilities cost reimbursed by residents and reflect such amount as a reduction of the related utility expense within property operating expenses in our evaluation of segment results. In our condensed consolidated statements of operations, utility reimbursements are included in rental and other property revenues, in accordance with GAAP. The tables below have been revised to conform to this presentation.

Apartment communities are classified as either part of our Real Estate portfolio or those owned through partnerships served by our Asset Management business. As of June 30, 2018, for segment performance evaluation, our Real Estate segment included 134 consolidated apartment communities with 37,755 apartment homes and excluded four apartment communities with 142 apartment homes that we neither manage nor consolidate.

As of June 30, 2018, through our Asset Management business we also held nominal ownership positions in consolidated partnerships that own 39 low-income housing tax credit apartment communities with 6,211 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 following tables present the revenues, net operating income and income before gain on dispositions of our Real Estate segment on a proportionate basis and excluding amounts related to apartment communities sold or held for sale as of June 30, 2018 for the three and six months ended June 30, 2018 and 2017 (in thousands):



	Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Reportable Segment (2)			Consolidated
Three months ended June 30, 2018:
Rental and other property revenues attributable to Real Estate	$	214,478	$	8,192	$	8,460		$	231,130
Rental and other property revenues of partnerships served by Asset Management business	—		—		19,000			19,000
Tax credit and transaction revenues	—		—		57			57
Total revenues	214,478		8,192		27,517			250,187
Property operating expenses attributable to Real Estate	60,930		7,655		7,446			76,031
Property operating expenses of partnerships served by Asset Management business	—		—		9,062			9,062
Other operating expenses not allocated to reportable segment (3)	—		—		115,733			115,733
Total operating expenses	60,930		7,655		132,241			200,826
Operating income	153,548		537		(104,724		)	49,361
Other items included in income before gain on dispositions (4)	—		—		(42,427		)	(42,427		)
Income before gain on dispositions	$	153,548	$	537	$	(147,151	)	$	6,934



	Real Estate		Proportionate and Other 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	$	193,908	$	13,547	$	20,248		$	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	193,908		13,547		41,637			249,092
Property operating expenses attributable to Real Estate	55,559		8,870		14,653			79,082
Property operating expenses of partnerships served by Asset Management business	—		—		8,391			8,391
Other operating expenses not allocated to reportable segment (3)	—		—		101,913			101,913
Total operating expenses	55,559		8,870		124,957			189,386
Operating income	138,349		4,677		(83,320		)	59,706
Other items included in income before gain on dispositions (4)	—		—		(39,623		)	(39,623		)
Income before gain on dispositions	$	138,349	$	4,677	$	(122,943	)	$	20,083



	Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Reportable Segment (2)			Consolidated
Six months ended June 30, 2018:
Rental and other property revenues attributable to Real Estate	$	420,800	$	16,978	$	18,745		$	456,523
Rental and other property revenues of partnerships served by Asset Management business	—		—		37,808			37,808
Tax credit and transaction revenues	—		—		3,576			3,576
Total revenues	420,800		16,978		60,129			497,907
Property operating expenses attributable to Real Estate	120,273		15,914		18,131			154,318
Property operating expenses of partnerships served by Asset Management business	—		—		18,257			18,257
Other operating expenses not allocated to reportable segment (3)	—		—		222,594			222,594
Total operating expenses	120,273		15,914		258,982			395,169
Operating income	300,527		1,064		(198,853		)	102,738
Other items included in income before gain on dispositions (4)	—		—		(50,438		)	(50,438		)
Income before gain on dispositions	$	300,527	$	1,064	$	(249,291	)	$	52,300



	Real Estate		Proportionate and Other 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	$	385,414	$	27,388	$	40,129		$	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	385,414		27,388		82,771			495,573
Property operating expenses attributable to Real Estate	111,734		17,880		29,094			158,708
Property operating expenses of partnerships served by Asset Management business	—		—		17,587			17,587
Other operating expenses not allocated to reportable segment (3)	—		—		201,783			201,783
Total operating expenses	111,734		17,880		248,464			378,078
Operating income	273,680		9,508		(165,693		)	117,495
Other items included in income before gain on dispositions (4)	—		—		(79,863		)	(79,863		)
Income before gain on dispositions	$	273,680	$	9,508	$	(245,556	)	$	37,632

(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. Also includes the reclassification of utility reimbursements from revenues to property operating expenses for the purpose of evaluating segment results. Utility reimbursements are included in rental and other property revenues in our condensed consolidated statements of operations prepared in accordance with GAAP.

(2)

Includes the operating results of apartment communities sold during the periods shown or held for sale at the end of the period, if any, 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 expenses and casualty gains and losses, which are included in consolidated property operating expenses and are not part of our segment performance measure.


(3)	Other operating expenses not allocated to reportable segment consists 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 consists of interest and income tax benefit.

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



	June 30, 2018		December 31, 2017
Real Estate	$	5,853,287	$	5,391,816
Corporate and other assets (1)	691,069		687,224
Total consolidated assets	$	6,544,356	$	6,079,040


(1)	Includes the assets not allocated to our reportable segment, primarily the assets of consolidated partnerships served by our Asset Management business and apartment communities sold or held for sale as of June 30, 2018.

For the six months ended June 30, 2018 and 2017, capital additions related to our Real Estate segment totaled $158.4 million and $163.2 million, respectively.