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Segments
 12 Months Ended
Dec. 31, 2019
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 as 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, 2019, 2018, and 2017 was as follows (in thousands):
 
 
Years Ended December 31, 
 
2019
 
2018
 
2017
Office real estate
    
 
    
 
    
Rental revenues
$
33,269

 
$
20,701

 
$
19,207

Rental expenses
8,722

 
5,858

 
5,483

Real estate taxes
3,471

 
2,034

 
1,859

Segment net operating income
21,076

 
12,809

 
11,865

Retail real estate
 
 
 
 
 
Rental revenues
77,593

 
67,959

 
63,109

Rental expenses
11,656

 
10,903

 
10,234

Real estate taxes
7,916

 
6,801

 
6,175

Segment net operating income
58,021

 
50,255

 
46,700

Multifamily residential real estate
 
 
 
 
 
Rental revenues
40,477

 
28,298

 
26,421

Rental expenses
13,954

 
10,461

 
9,705

Real estate taxes
3,574

 
2,548

 
2,494

Segment net operating income
22,949

 
15,289

 
14,222

General contracting and real estate services
 
 
 
 
 
Segment revenues
105,859

 
76,359

 
194,034

Segment expenses
101,538

 
73,628

 
186,590

Segment gross profit
4,321

 
2,731

 
7,444

Net operating income
$
106,367

 
$
81,084

 
$
80,231


 
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, 2019, 2018, and 2017 exclude revenue related to intercompany construction contracts of $99.9 million, $134.4 million and $51.5 million, respectively, as it is eliminated in consolidation. General contracting and real estate services expenses for the years ended December 31, 2019, 2018, and 2017 exclude expenses related to intercompany construction contracts of $99.0 million, $133.4 million and $51.0 million, respectively, as it is eliminated in consolidation.
The following table reconciles net operating income to net income for the years ended December 31, 2019, 2018, and 2017 (in thousands):
 
 
Years Ended December 31, 
 
2019
 
2018
 
2017
Net operating income
$
106,367

 
$
81,084

 
$
80,231

Depreciation and amortization
(54,564
)
 
(39,913
)
 
(37,321
)
Amortization of right-of-use assets - finance leases
(377
)
 
—

 
—

General and administrative expenses
(12,392
)
 
(11,431
)
 
(10,435
)
Acquisition, development and other pursuit costs
(844
)
 
(352
)
 
(648
)
Impairment charges
(252
)
 
(1,619
)
 
(110
)
Gain on real estate dispositions
4,699

 
4,254

 
8,087

Interest income
23,215

 
10,729

 
7,077

Interest expense on indebtedness
(30,776
)
 
(19,087
)
 
(17,439
)
Interest expense on finance leases
(568
)
 
—

 
—

Equity in income of unconsolidated real estate entities
273

 
372

 
—

Loss on extinguishment of debt
—

 
(11
)
 
(50
)
Change in fair value of interest rate derivatives
(3,599
)
 
(951
)
 
1,127

Other income (expense), net
585

 
388

 
131

Income tax benefit (provision)
491

 
29

 
(725
)
Net income
$
32,258

 
$
23,492

 
$
29,925


 
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.