NOTE 11. BUSINESS SEGMENTS

Our current business strategy consists of two operating segments: Real Estate Operations and Strategic Capital. We generate revenues, net operating income, earnings and cash flows through our segments, as follows:

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Real Estate Operations. This operating segment represents the ownership and development of operating properties and is the largest component of our revenues and earnings. We collect rent from our customers through operating leases, including reimbursements for the majority of our property operating costs. Each operating property is considered to be an individual operating segment with similar economic characteristics; these properties are combined within the reportable business segment based on geographic location. Our Real Estate Operations segment also includes development activities that lead to rental operations, including land held for development and properties currently under development. Within this line of business, we utilize the following: (i) our land bank; (ii) the development expertise of our local teams; and (iii) our customer relationships. Land we own and lease to customers under ground leases is also included in this segment.

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Strategic Capital. This operating segment represents the management of unconsolidated co-investment ventures. We generate strategic capital revenues primarily from our unconsolidated co-investment ventures through asset and property management services and we earn additional revenues by providing leasing, acquisition, construction, development, financing, legal and disposition services. Depending on the structure of the venture and the returns provided to our partners, we also earn revenues through promotes periodically during the life of a venture or upon liquidation. Each unconsolidated co-investment venture we manage is considered to be an individual operating segment with similar economic characteristics; these ventures are combined within the reportable business segment based on geographic location.

Reconciliations are presented below for: (i) each reportable business segment’s revenues from external customers to Total Revenues; (ii) each reportable business segment’s net operating income from external customers to Operating Income and Earnings Before Income Taxes; and (iii) each reportable business segment’s assets to Total Assets. 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, Operating Income, Earnings 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 not allocated but reflected as reconciling items. The following reconciliations are presented in thousands:

	Three Months Ended September 30,						Nine Months Ended September 30,
		2018			2017			2018			2017
Segment revenues:
Real estate operations segment:
U.S.	$	556,314		$	478,718		$	1,546,622		$	1,532,706
Other Americas		29,091			23,157			89,470			54,690
Europe		13,806			16,369			43,916			56,676
Asia		12,079			16,588			37,556			48,399
Total real estate operations segment		611,290			534,832			1,717,564			1,692,471
Strategic capital segment:
U.S.		19,040			17,340			53,014			159,925
Other Americas		6,979			6,061			25,388			21,976
Europe		29,371			26,289			96,676			78,524
Asia		15,752			18,352			104,722			45,316
Total strategic capital segment		71,142			68,042			279,800			305,741

Total segment revenues		682,432			602,874			1,997,364			1,998,212

Segment net operating income:
Real estate operations segment:
U.S. (1)		422,682			363,802			1,159,981			1,144,176
Other Americas		20,362			16,037			65,773			36,403
Europe		8,683			11,454			29,835			40,713
Asia		8,988			11,711			27,376			33,386
Total real estate operations segment		460,715			403,004			1,282,965			1,254,678
Strategic capital segment:
U.S. (1)		4,071			1,645			5,728			103,252
Other Americas		3,988			3,934			15,927			14,666
Europe		20,162			16,497			67,207			49,229
Asia		7,531			9,970			76,838			18,813
Total strategic capital segment		35,752			32,046			165,700			185,960

Total segment net operating income		496,467			435,050			1,448,665			1,440,638

Reconciling items:
General and administrative expenses		62,244			57,656			182,287			171,350
Depreciation and amortization expenses		252,702			201,903			660,456			656,639
Operating income		181,521			175,491			605,922			612,649
Earnings from unconsolidated entities, net		56,634			55,066			181,839			172,267
Interest expense		(64,186	)		(64,190	)		(166,761	)		(212,456	)
Interest and other income, net		1,891			4,816			9,508			9,493
Gains on dispositions of investments in real estate and revaluation of equity investments upon acquisition of a controlling interest, net		194,058			779,053			483,430			959,384
Foreign currency and derivative gains (losses), net		21,513			(18,872	)		65,801			(46,327	)
Losses on early extinguishment of debt, net		(1,955	)		-			(2,657	)		(30,596	)
Earnings before income taxes	$	389,476		$	931,364		$	1,177,082		$	1,464,414

	September 30, 2018		December 31, 2017
Segment assets:
Real estate operations segment:
U.S.	$	27,633,382	$	19,058,610
Other Americas		1,644,248		1,767,385
Europe		1,047,842		1,008,340
Asia		1,026,954		1,083,764
Total real estate operations segment		31,352,426		22,918,099
Strategic capital segment:
U.S.		16,120		16,818
Europe		25,280		25,280
Asia		373		544
Total strategic capital segment		41,773		42,642
Total segment assets		31,394,199		22,960,741

Reconciling items:
Investments in and advances to unconsolidated entities		5,618,178		5,496,450
Assets held for sale or contribution		761,575		342,060
Notes receivable backed by real estate		-		34,260
Cash and cash equivalents		275,562		447,046
Other assets		218,648		200,518
Total reconciling items		6,873,963		6,520,334
Total assets	$	38,268,162	$	29,481,075

(1)	This includes compensation and personnel costs for employees who were located in the U.S. but also support other regions.