13.

Business Segments

Our current business strategy includes two operating segments: Real Estate Operations and Investment Management. We generate revenues, earnings, net operating income and cash flows through our segments, as follows:

•

Real Estate Operations. This represents the direct long-term ownership of industrial operating properties and is the primary source of our core revenue and earnings. We collect rent from our customers under operating leases, including reimbursements for the vast majority of our operating costs. Each operating property is considered to be an individual operating segment having similar economic characteristics that are combined within the reportable segment based upon geographic location. Our Real Estate Operations segment also includes development and re-development activities. We develop and re-develop industrial properties primarily in global and regional markets to meet our customers’ needs. We provide additional value creation by utilizing: (i) the land that we currently own in global and regional markets; (ii) the development expertise of our local personnel; (iii) our global customer relationships; and (iv) the demand for high quality distribution facilities in key markets. Land held for development, properties currently under development and land we own and lease to customers under ground leases are also included in this segment.

We own real estate in the Americas (Canada, Mexico and the United States), Europe (Austria, Belgium, the Czech Republic, France, Germany, Hungary, Italy, the Netherlands, Poland, Romania, Slovakia, Spain, Sweden and the United Kingdom) and Asia (China, Japan and Singapore).

•

Investment Management. This represents the long-term management of unconsolidated co-investment ventures and other joint ventures. We have direct and long-standing relationships with a significant number of institutional investors. We tailor industrial portfolios to investors’ specific needs and deploy capital in both close-ended and open-ended venture structures and other joint ventures, while providing complete portfolio management and financial reporting services. We recognize fees and incentives earned for services performed on behalf of the unconsolidated entities and certain third parties.

We report the costs associated with our Investment Management segment for all periods presented in the line item Investment Management Expenses in the Consolidated Statements of Operations. These costs include the direct expenses associated with the asset management of the co-investment ventures provided by individuals who are assigned to our Investment Management segment. In addition, in order to achieve efficiencies and economies of scale, all of our property management functions are provided by a team of professionals who are assigned to our Real Estate Operations segment. These individuals perform the property-level management of the properties in our owned and managed portfolio, including properties we consolidate and the properties we manage that are owned by the unconsolidated entities. We allocate the costs of our property management function to the properties we consolidate (reported in Rental Expenses in the Consolidated Statements of Operations) and the properties owned by the unconsolidated entities (included in Investment Management Expenses in the Consolidated Statements of Operations), by using the square feet owned by the respective portfolios. We are further reimbursed by the co-investment ventures for certain expenses associated with managing these co-investment ventures.

Each entity we manage is considered to be an individual operating segment having similar economic characteristics that are combined within the reportable segment based upon geographic location. Our operations in the Investment Management segment are in the Americas (Brazil, Canada, Mexico and the United States), Europe (Belgium, the Czech Republic, France, Germany, Hungary, Italy, the Netherlands, Poland, Slovakia, Spain, Sweden and the United Kingdom) and Asia (China and Japan).

We present the operations and net gains associated with properties sold to third parties or classified as held for sale as discontinued operations, which results in the restatement of prior year operating results to exclude the items presented as discontinued operations.

Reconciliations are presented below for: (i) each reportable business segment’s revenue from external customers to Total Revenues in the Consolidated Statements of Operations; (ii) each reportable business segment’s net operating income from external customers to Earnings (Loss) before Income Taxes in the Consolidated Statements of Operations; and (iii) each reportable business segment’s assets to Total Assets in the Consolidated Balance Sheets. Our chief operating decision makers rely primarily on net operating income and similar measures to make decisions about allocating resources and assessing segment performance. The applicable components of Total Revenues, Earnings (Loss) before Income Taxes and Total Assets are allocated to each reportable business segment’s revenues, net operating income and assets. Items that are not directly assignable to a segment, such as certain corporate income and expenses, are reflected as reconciling items. The following reconciliations are presented in thousands:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Revenues:
Real estate operations:
Americas	$	328,702		$	303,465		$	961,042		$	883,758
Europe		26,199			104,804			154,961			326,120
Asia		26,962			59,479			92,172			168,688

Total Real Estate Operations segment		381,863			467,748			1,208,175			1,378,566

Investment management:
Americas		18,357			16,934			49,972			51,758
Europe		20,037			9,537			44,504			28,000
Asia		9,928			5,243			31,089			15,306

Total Investment Management segment		48,322			31,714			125,565			95,064


Total revenues	$	430,185		$	499,462		$	1,333,740		$	1,473,630


Net operating income:
Real estate operations:
Americas	$	228,688		$	210,004		$	666,768		$	614,594
Europe		18,625			79,103			104,324			246,158
Asia		19,268			46,630			66,317			131,388

Total Real Estate Operations segment		266,581			335,737			837,409			992,140

Investment management:
Americas		5,578			7,581			8,822			23,326
Europe		14,115			5,762			28,516			16,564
Asia		6,606			2,641			21,289			7,488

Total Investment Management segment		26,299			15,984			58,627			47,378

Total segment net operating income		292,880			351,721			896,036			1,039,518
Reconciling items:
General and administrative expenses		(55,034	)		(55,886	)		(166,140	)		(167,460	)
Depreciation and amortization		(158,889	)		(190,148	)		(492,690	)		(547,036	)
Merger, acquisition and other integration expenses		—			(20,659	)		—			(52,573	)
Impairment of real estate properties		—			(9,778	)		—			(12,963	)
Earnings from unconsolidated entities, net		26,365			2,563			59,554			20,447
Interest expense		(84,885	)		(122,817	)		(292,383	)		(383,369	)
Interest and other income, net		5,653			8,758			21,772			19,771
Gains on acquisitions and dispositions of investments in real estate, net		46,074			12,677			445,954			280,968
Foreign currency and derivative gains (losses), net		6,875			(5,908	)		15			(19,930	)
Gains (losses) on early extinguishment of debt, net		(114,196	)		—			(164,155	)		4,919
Impairment of other assets		—			—			—			(16,135	)

Total reconciling items		(328,037	)		(381,198	)		(588,073	)		(873,361	)

Earnings (loss) before income taxes	$	(35,157	)	$	(29,477	)	$	307,963		$	166,157


	September 30,		December 31,
	2013		2012
Assets:
Real estate operations:
Americas	$	15,885,306	$	15,304,053
Europe		2,160,506		5,738,257
Asia		1,926,527		3,476,996

Total Real Estate Operations segment		19,972,339		24,519,306

Investment management (1):
Americas		23,280		24,373
Europe		60,089		61,266
Asia		4,138		6,108

Total Investment Management segment		87,507		91,747

Total segment assets		20,059,846		24,611,053

Reconciling items:
Investments in and advances to other unconsolidated entities		4,210,305		2,195,782
Notes receivable backed by real estate		189,663		188,000
Assets held for sale		3,958		26,027
Cash and cash equivalents		121,693		100,810
Other assets		204,078		188,473

Total reconciling items		4,729,697		2,699,092

Total assets	$	24,789,543	$	27,310,145

(1)	Represents management contracts recorded in connection with business combinations and goodwill associated with the Investment Management segment.