Business Segments

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Business Segments

NOTE 12. BUSINESS SEGMENTS

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

• Real Estate Operations. This operating segment represents the ownership and development of operating properties and is the largest component of our revenue 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, along with land and buildings we lease, is also included in this segment.

• 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 management 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,
		2020			2019			2020			2019
Revenues:
Real estate operations segment:
U.S.	$	933,916		$	667,889		$	2,660,178		$	1,969,191
Other Americas		21,132			22,723			66,947			70,435
Europe		19,558			9,517			53,048			30,337
Asia		9,174			11,585			30,723			41,226
Total real estate operations segment		983,780			711,714			2,810,896			2,111,189
Strategic capital segment:
U.S.		29,322			21,537			320,181			62,341
Other Americas		8,851			8,276			27,558			29,800
Europe		36,959			180,365			101,081			242,742
Asia		23,861			20,289			67,422			58,533
Total strategic capital segment		98,993			230,467			516,242			393,416
Total revenues		1,082,773			942,181			3,327,138			2,504,605
Segment net operating income:
Real estate operations segment:
U.S. (1)		699,255			497,686			1,976,985			1,450,393
Other Americas		15,288			16,698			48,561			51,616
Europe		14,207			5,597			33,017			18,029
Asia		6,520			8,575			21,543			31,438
Total real estate operations segment		735,270			528,556			2,080,106			1,551,476
Strategic capital segment:
U.S. (1)		5,184			(10,129	)		222,390			992
Other Americas		6,276			4,402			17,803			19,179
Europe		26,775			162,646			66,483			205,020
Asia		14,967			10,144			35,656			29,557
Total strategic capital segment		53,202			167,063			342,332			254,748
Total segment net operating income		788,472			695,619			2,422,438			1,806,224
Reconciling items:
General and administrative expenses		(74,348	)		(65,199	)		(208,701	)		(201,176	)
Depreciation and amortization expenses		(400,738	)		(282,254	)		(1,144,903	)		(850,639	)
Gains on dispositions of development properties and land, net		134,207			63,935			383,373			303,317
Gains on other dispositions of investments in real estate, net		108,927			59,379			184,357			232,400
Operating income		556,520			471,480			1,636,564			1,290,126
Earnings from unconsolidated entities, net		73,972			46,302			216,844			151,524
Interest expense		(80,711	)		(60,244	)		(237,651	)		(179,873	)
Interest and other income (expense), net		(5,866	)		654			(4,469	)		12,876
Foreign currency and derivative gains (losses), net		(100,974	)		59,492			(48,481	)		70,267
Losses on early extinguishment of debt, net		(98,266	)		(13,585	)		(164,606	)		(16,086	)
Earnings before income taxes	$	344,675		$	504,099		$	1,398,201		$	1,328,834

	September 30, 2020		December 31, 2019
Segment assets:
Real estate operations segment:
U.S.	$	41,605,862	$	27,999,868
Other Americas		1,074,504		1,332,237
Europe		1,615,194		1,379,579
Asia		1,052,497		879,072
Total real estate operations segment		45,348,057		31,590,756
Strategic capital segment: (2)
U.S.		13,575		14,529
Europe		25,280		25,280
Asia		351		359
Total strategic capital segment		39,206		40,168
Total segment assets		45,387,263		31,630,924
Reconciling items:
Investments in and advances to unconsolidated entities		7,310,960		6,237,371
Assets held for sale or contribution		1,757,187		720,685
Lease right-of-use assets		112,319		111,439
Cash and cash equivalents		940,193		1,088,855
Other assets		251,676		242,576
Total reconciling items		10,372,335		8,400,926
Total assets	$	55,759,598	$	40,031,850

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

(2) Represents management contracts and goodwill recorded in connection with business combinations associated with the Strategic Capital segment. Goodwill was $25.3 million at September 30, 2020 and December 31, 2019.