Segment Reporting

6 Months Ended

Jun. 30, 2016

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

Management reviews the performance of individual properties and aggregates individual properties based on operating criteria into two reportable segments—commercial real estate investments in data centers and healthcare—and makes operating decisions based on these two reportable segments. The Company’s commercial real estate investments in data centers and healthcare are based on certain underwriting assumptions and operating criteria, which are different for data centers and healthcare. There were no intersegment sales or transfers during the six months ended June 30, 2016 and 2015.

The Company evaluates performance based on net operating income of the individual properties in each segment. Net operating income, a non-GAAP financial measure, is defined as total revenues, less rental expenses, which excludes depreciation and amortization, general and administrative expenses, acquisition related expenses, asset management fees, change in fair value of contingent consideration, interest expense, net, loss on debt extinguishment, provision for loan losses, and other interest and dividend income. The Company believes that segment net operating income serves as a useful supplement to net income because it allows investors and management to measure unlevered property-level operating results and to compare operating results to the operating results of other real estate companies between periods on a consistent basis. Segment net operating income should not be considered as an alternative to net income determined in accordance with GAAP as an indicator of financial performance, and accordingly, the Company believes that in order to facilitate a clear understanding of the consolidated historical operating results, segment net operating income should be examined in conjunction with net income as presented in the accompanying condensed consolidated financial statements and data included elsewhere in this Quarterly Report on Form 10-Q.

Real estate-related notes receivable interest income, general and administrative expenses, change in fair value of contingent consideration, acquisition related expenses, asset management fees, depreciation and amortization, provision for loan losses, other interest and dividend income and interest expense, net are not allocated to individual segments for purposes of assessing segment performance.

Non-segment assets primarily consist of corporate assets, including cash and cash equivalents, real estate and escrow deposits, deferred financing costs attributable to the revolving line of credit portion of the Company's unsecured credit facility, real estate-related notes receivable, the Preferred Equity Investment and other assets not attributable to individual properties.

Summary information for the reportable segments during the three and six months ended June 30, 2016 and 2015, is as follows (amounts in thousands):

	Data Centers			Healthcare			Three Months Ended June 30, 2016
Revenue:
Rental, parking and tenant reimbursement revenue	$	28,971		$	30,052		$	59,023
Expenses:
Rental and parking expenses	(4,936		)	(2,437		)	(7,373		)
Segment net operating income	$	24,035		$	27,615		51,650
Revenue:
Real estate-related notes receivable interest income							15
Expenses:
General and administrative expenses							(1,587		)
Change in fair value of contingent consideration							(125		)
Acquisition related expenses							(1,640		)
Asset management fees							(4,877		)
Depreciation and amortization							(17,349		)
Income from operations							26,087
Other income (expense):
Other interest and dividend income							2,706
Interest expense, net							(9,213		)
Provision for loan losses							(1,666		)
Net income							$	17,914

	Data Centers			Healthcare			Three Months Ended June 30, 2015
Revenue:
Rental, parking and tenant reimbursement revenue	$	28,706		$	24,010		$	52,716
Expenses:
Rental and parking expenses	(5,380		)	(1,719		)	(7,099		)
Segment net operating income	$	23,326		$	22,291		45,617
Revenue:
Real estate-related notes receivable interest income							216
Expenses:
General and administrative expenses							(1,451		)
Change in fair value of contingent consideration							(150		)
Acquisition related expenses							(509		)
Asset management fees							(4,533		)
Depreciation and amortization							(16,445		)
Income from operations							22,745
Other income (expense):
Other interest and dividend income							2,603
Interest expense, net							(7,004		)
Net income							$	18,344

	Data Centers			Healthcare			Six Months Ended June 30, 2016
Revenue:
Rental, parking and tenant reimbursement revenue	$	57,633		$	58,001		$	115,634
Expenses:
Rental and parking expenses	(9,759		)	(4,253		)	(14,012		)
Segment net operating income	$	47,874		$	53,748		101,622
Revenue:
Real estate-related notes receivable interest income							31
Expenses:
General and administrative expenses							(3,168		)
Change in fair value of contingent consideration							(245		)
Acquisition related expenses							(1,640		)
Asset management fees							(9,664		)
Depreciation and amortization							(34,348		)
Income from operations							52,588
Other income (expense):
Other interest and dividend income							5,411
Interest expense, net							(19,827		)
Provision for loan losses							(1,666		)
Net income							$	36,506

	Data Centers			Healthcare			Six Months Ended June 30, 2015
Revenue:
Rental, parking and tenant reimbursement revenue	$	57,819		$	46,280		$	104,099
Expenses:
Rental and parking expenses	(10,440		)	(4,243		)	(14,683		)
Segment net operating income	$	47,379		$	42,037		89,416
Revenue:
Real estate-related notes receivable interest income							355
Expenses:
General and administrative expenses							(2,860		)
Change in fair value of contingent consideration							(300		)
Acquisition related expenses							(3,654		)
Asset management fees							(8,566		)
Depreciation and amortization							(32,228		)
Income from operations							42,163
Other income (expense):
Other interest and dividend income							3,119
Interest expense, net							(13,310		)
Net income							$	31,972

Assets by each reportable segment as of June 30, 2016 and December 31, 2015 are as follows (amounts in thousands):

	June 30, 2016		December 31, 2015
Assets by segment:
Data centers	$	1,098,562	$	1,097,952
Healthcare	1,223,286		1,124,928
All other	157,534		159,560
Total assets	$	2,479,382	$	2,382,440

Capital additions and acquisitions by reportable segments for the six months ended June 30, 2016 and 2015 are as follows (amounts in thousands):

	Six Months Ended June 30,
	2016		2015
Capital additions and acquisitions by segment:
Data centers	$	7,139	$	116
Healthcare	94,691		146,764
Total capital additions and acquisitions	$	101,830	$	146,880