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Segments
 3 Months Ended
Mar. 31, 2020
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 three months ended March 31, 2020 and 2019 was as follows (in thousands): 
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Office real estate
 
 
 
 
Rental revenues
 
$
10,192

 
$
5,556

Rental expenses
 
2,546

 
1,486

Real estate taxes
 
1,146

 
526

Segment net operating income
 
6,500

 
3,544

Retail real estate
 
 
 
 
Rental revenues
 
20,411

 
17,257

Rental expenses
 
3,020

 
2,600

Real estate taxes
 
2,166

 
1,811

Segment net operating income
 
15,225

 
12,846

Multifamily residential real estate
 
 
 
 
Rental revenues
 
11,686

 
8,096

Rental expenses
 
3,809

 
2,639

Real estate taxes
 
1,021

 
791

Segment net operating income
 
6,856

 
4,666

General contracting and real estate services
 
 
 
 
Segment revenues
 
47,268

 
17,036

Segment expenses
 
45,550

 
16,286

Segment gross profit
 
1,718

 
750

Net operating income
 
$
30,299

 
$
21,806


 
Rental expenses represent costs directly associated with the operation and management of the Company’s real estate properties. Rental expenses include asset management expenses, property management fees, repairs and maintenance, insurance, and utilities.

General contracting and real estate services revenues for the three months ended March 31, 2020 and 2019 exclude revenue related to intercompany construction contracts of $13.1 million and $30.2 million, respectively, as it is eliminated in consolidation. General contracting and real estate services expenses for the three months ended March 31, 2020 and 2019 exclude expenses related to intercompany construction contracts of $13.0 million and $29.9 million, respectively.

The following table reconciles net operating income to net income, the most directly comparable GAAP measure, for the three months ended March 31, 2020 and 2019 (in thousands): 
 
 
Three Months Ended March 31,
 
 
2020
 
2019
Net operating income
 
$
30,299

 
$
21,806

Depreciation and amortization
 
(14,279
)
 
(9,904
)
Amortization of right-of-use assets - finance leases
 
(147
)
 
—

General and administrative expenses
 
(3,793
)
 
(3,401
)
Acquisition, development and other pursuit costs
 
(27
)
 
(400
)
Impairment charges
 
(158
)
 
—

Interest income
 
7,226

 
5,319

Interest expense on indebtedness
 
(7,959
)
 
(5,886
)
Interest expense on finance leases
 
(229
)
 
—

Equity in income of unconsolidated real estate entities
 
—

 
273

Change in fair value of interest rate derivatives
 
(1,736
)
 
(1,463
)
Provision for unrealized credit losses
 
(377
)
 
—

Other income (expense), net
 
58

 
60

Income tax benefit
 
257

 
110

Net income
 
$
9,135

 
$
6,514


 
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, including corporate office personnel salaries and benefits, bank fees, accounting fees, legal fees, and other corporate office expenses.