Segment Reporting

3 Months Ended

Mar. 31, 2017

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 three months ended March 31, 2017 and 2016.

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 and parking expenses, which excludes depreciation and amortization, general and administrative expenses, asset management fees, change in fair value of contingent consideration, interest expense, net, 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.

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 and other assets not attributable to individual properties.

Summary information for the reportable segments during the three months ended March 31, 2017 and 2016, is as follows (amounts in thousands):

	Data Centers			Healthcare			Three Months Ended March 31, 2017
Revenue:
Rental, parking and tenant reimbursement revenue	$	29,694		$	21,696		$	51,390
Expenses:
Rental and parking expenses	(4,784		)	(2,607		)	(7,391		)
Segment net operating income	$	24,910		$	19,089		43,999
Expenses:
General and administrative expenses							(1,683		)
Change in fair value of contingent consideration							1,140
Asset management fees							(4,819		)
Depreciation and amortization							(18,067		)
Income from operations							20,570
Other income (expense):
Other interest and dividend income							563
Interest expense, net							(8,665		)
Provision for loan losses							(2,484		)
Net income							$	9,984

	Data Centers			Healthcare			Three Months Ended March 31, 2016
Revenue:
Rental, parking and tenant reimbursement revenue	$	28,662		$	27,848		$	56,510
Expenses:
Rental and parking expenses	(4,823		)	(1,816		)	(6,639		)
Segment net operating income	$	23,839		$	26,032		49,871
Expenses:
General and administrative expenses							(1,581		)
Change in fair value of contingent consideration							(120		)
Asset management fees							(4,787		)
Depreciation and amortization							(16,999		)
Income from operations							26,384
Other income (expense):
Other interest and dividend income							2,822
Interest expense, net							(10,614		)
Net income							$	18,592

Assets by each reportable segment as of March 31, 2017 and December 31, 2016 are as follows (amounts in thousands):

	March 31, 2017		December 31, 2016
Assets by segment:
Data centers	$	1,094,095	$	1,102,550
Healthcare	1,185,575		1,190,087
All other	50,834		45,017
Total assets	$	2,330,504	$	2,337,654

Capital additions by reportable segments for the three months ended March 31, 2017 and 2016 are as follows (amounts in thousands):

	Three Months Ended March 31,
	2017		2016
Capital additions by segment:
Data centers	$	58	$	182
Healthcare	4,443		10,250
Total capital additions	$	4,501	$	10,432