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Segments
 12 Months Ended
Dec. 31, 2017
Segment Reporting [Abstract]  
Segments
Segments
 
Net operating income (segment revenues minus segment expenses) is the measure used by the Company’s chief operating decision-maker to assess segment performance. Net operating income is not a measure of operating income or cash flows from operating activities as measured by GAAP and is not indicative of cash available to fund cash needs. As a result, net operating income should not be considered an alternative to cash flows as a measure of liquidity. Not all companies calculate net operating income in the same manner. The Company considers net operating income to be an appropriate supplemental measure to net income because it assists both investors and management in understanding the core operations of the Company’s real estate and construction businesses. 
 
Net operating income of the Company’s reportable segments for the years ended December 31, 2017, 2016, and 2015 was as follows (in thousands):
 
 
Years Ended December 31, 
 
2017
 
2016
 
2015
Office real estate
    
 
    
 
    
Rental revenues
$
19,207

 
$
20,929

 
$
31,534

Rental expenses
5,483

 
5,560

 
6,938

Real estate taxes
1,859

 
2,000

 
2,950

Segment net operating income
11,865

 
13,369

 
21,646

Retail real estate
 
 
 
 
 
Rental revenues
63,109

 
56,511

 
32,064

Rental expenses
10,233

 
9,116

 
5,915

Real estate taxes
6,176

 
5,395

 
2,928

Segment net operating income
46,700

 
42,000

 
23,221

Multifamily residential real estate
 
 
 
 
 
Rental revenues
26,421

 
21,915

 
17,574

Rental expenses
9,705

 
7,228

 
6,351

Real estate taxes
2,494

 
2,234

 
1,904

Segment net operating income
14,222

 
12,453

 
9,319

General contracting and real estate services
 
 
 
 
 
Segment revenues
194,034

 
159,030

 
171,268

Segment expenses
186,590

 
153,375

 
165,344

Segment gross profit
7,444

 
5,655

 
5,924

Net operating income
$
80,231

 
$
73,477

 
$
60,110


 
Rental expenses represent costs directly associated with the operation and management of the Company’s real estate properties. Rental expenses include asset management fees, property management fees, repairs and maintenance, insurance and utilities.
 
General contracting and real estate services revenues for the years ended December 31, 2017, 2016, and 2015 exclude revenue related to intercompany construction contracts of $51.5 million, $43.3 million and $43.1 million, respectively, as it is eliminated in consolidation. General contracting and real estate services expenses for the years ended December 31, 2017, 2016, and 2015 exclude expenses related to intercompany construction contracts of $51.0 million, $42.7 million and $42.8 million, respectively, as it is eliminated in consolidation. General contracting and real estate services expenses for the years ended December 31, 2017, 2016, and 2015 include noncash stock compensation expense of $0.3 million, $0.2 million, and $0.2 million, respectively.

The following table reconciles net operating income to net income for the years ended December 31, 2017, 2016, and 2015 (in thousands):
 
 
Years Ended December 31, 
 
2017
 
2016
 
2015
Net operating income
$
80,231

 
$
73,477

 
$
60,110

Depreciation and amortization
(37,321
)
 
(35,328
)
 
(23,153
)
General and administrative expenses
(10,435
)
 
(9,552
)
 
(8,397
)
Acquisition, development and other pursuit costs
(648
)
 
(1,563
)
 
(1,935
)
Impairment charges
(110
)
 
(355
)
 
(41
)
Interest income
7,077

 
3,228

 
126

Interest expense
(17,439
)
 
(16,466
)
 
(13,333
)
Loss on extinguishment of debt
(50
)
 
(82
)
 
(512
)
Gain on real estate dispositions
8,087

 
30,533

 
18,394

Change in fair value of interest rate derivatives
1,127

 
(941
)
 
(229
)
Other income
131

 
147

 
119

Income tax benefit (provision)
(725
)
 
(343
)
 
34

Net income
$
29,925

 
$
42,755

 
$
31,183


 
General and administrative expenses represent costs not directly associated with the operation and management of the Company’s real estate properties and general contracting and real estate services businesses. General and administrative expenses include corporate office personnel salaries and benefits, bank fees, accounting fees, legal fees and other corporate office expenses. General and administrative expenses for the years ended December 31, 2017, 2016, and 2015 include noncash stock compensation expense of $0.9 million, $0.7 million and $0.7 million, respectively.