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, prior to the sale in July 2018, those owned through partnerships served by our Asset Management business. As of September 30, 2018, for segment performance evaluation, our Real Estate segment included 129 consolidated apartment communities with 36,339 apartment homes and excluded four apartment communities with 142 apartment homes that we neither manage nor consolidate.

Prior to the July 2018 sale of our Asset Management business, we consolidated certain partnerships in which we held nominal ownership positions. These partnerships own low-income housing tax credit apartment communities. Neither the results of operations nor the assets of these partnerships and apartment communities were 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 as of September 30, 2018 for the three and nine months ended September 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 September 30, 2018:
Rental and other property revenues attributable to Real Estate	$	222,856	$	8,926	$	2,266		$	234,048
Rental and other property revenues of partnerships served by Asset Management business	—		—		5,022			5,022
Tax credit and transaction revenues	—		—		3,411			3,411
Total revenues	222,856		8,926		10,699			242,481
Property operating expenses attributable to Real Estate	62,863		8,405		6,986			78,254
Property operating expenses of partnerships served by Asset Management business	—		—		2,608			2,608
Other operating expenses not allocated to reportable segment (3)	—		—		114,665			114,665
Total operating expenses	62,863		8,405		124,259			195,527
Operating income	159,993		521		(113,560		)	46,954
Other items included in income before gain on dispositions (4)	—		—		(15,122		)	(15,122		)
Income before gain on dispositions	$	159,993	$	521	$	(128,682	)	$	31,832



	Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Reportable Segment (2)			Consolidated
Three months ended September 30, 2017:
Rental and other property revenues attributable to Real Estate	$	203,935	$	8,155	$	21,618		$	233,708
Rental and other property revenues of partnerships served by Asset Management business	—		—		18,232			18,232
Tax credit and transaction revenues	—		—		2,695			2,695
Total revenues	203,935		8,155		42,545			254,635
Property operating expenses attributable to Real Estate	57,592		7,609		16,043			81,244
Property operating expenses of partnerships served by Asset Management business	—		—		8,872			8,872
Other operating expenses not allocated to reportable segment (3)	—		—		105,314			105,314
Total operating expenses	57,592		7,609		130,229			195,430
Operating income	146,343		546		(87,684		)	59,205
Other items included in income before gain on dispositions (4)	—		—		(36,828		)	(36,828		)
Income before gain on dispositions	$	146,343	$	546	$	(124,512	)	$	22,377



	Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Reportable Segment (2)			Consolidated
Nine months ended September 30, 2018:
Rental and other property revenues attributable to Real Estate	$	643,656	$	25,903	$	21,012		$	690,571
Rental and other property revenues of partnerships served by Asset Management business	—		—		42,830			42,830
Tax credit and transaction revenues	—		—		6,987			6,987
Total revenues	643,656		25,903		70,829			740,388
Property operating expenses attributable to Real Estate	183,119		24,337		25,116			232,572
Property operating expenses of partnerships served by Asset Management business	—		—		20,865			20,865
Other operating expenses not allocated to reportable segment (3)	—		—		337,259			337,259
Total operating expenses	183,119		24,337		383,240			590,696
Operating income	460,537		1,566		(312,411		)	149,692
Other items included in income before gain on dispositions (4)	—		—		(65,560		)	(65,560		)
Income before gain on dispositions	$	460,537	$	1,566	$	(377,971	)	$	84,132



	Real Estate		Proportionate and Other Adjustments (1)		Corporate and Amounts Not Allocated to Reportable Segment (2)			Consolidated
Nine months ended September 30, 2017:
Rental and other property revenues attributable to Real Estate	$	589,349	$	35,542	$	61,748		$	686,639
Rental and other property revenues of partnerships served by Asset Management business	—		—		55,327			55,327
Tax credit and transaction revenues	—		—		8,242			8,242
Total revenues	589,349		35,542		125,317			750,208
Property operating expenses attributable to Real Estate	169,311		25,505		45,138			239,954
Property operating expenses of partnerships served by Asset Management business	—		—		26,458			26,458
Other operating expenses not allocated to reportable segment (3)	—		—		307,096			307,096
Total operating expenses	169,311		25,505		378,692			573,508
Operating income	420,038		10,037		(253,375		)	176,700
Other items included in income before gain on dispositions (4)	—		—		(116,691		)	(116,691		)
Income before gain on dispositions	$	420,038	$	10,037	$	(370,066	)	$	60,009

(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 prior to its sale in July 2018. 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):



	September 30, 2018		December 31, 2017
Real Estate	$	5,861,647	$	5,391,816
Corporate and other assets (1)	323,374		687,224
Total consolidated assets	$	6,185,021	$	6,079,040


(1)	Includes the assets not allocated to our reportable segment, primarily corporate assets, and as of December 31, 2017, assets of apartment communities and the Asset Management business, which were sold as of September 30, 2018.

For the nine months ended September 30, 2018 and 2017, capital additions related to our Real Estate segment totaled $241.6 million and $243.3 million, respectively.