Segments

6 Months Ended

Jun. 30, 2022

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 and six months ended June 30, 2022 and 2021 was as follows (in thousands): 

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Office real estate
Rental revenues	$	18,314	$	11,756	$	35,337	$	23,391
Rental expenses	4,600		2,938		8,740		5,813
Real estate taxes	2,035		1,413		3,539		2,771
Segment net operating income	11,679		7,405		23,058		14,807
Retail real estate
Rental revenues	21,544		19,204		42,974		37,459
Rental expenses	3,333		3,013		6,834		5,849
Real estate taxes	2,271		2,180		4,509		4,207
Segment net operating income	15,940		14,011		31,631		27,403
Multifamily residential real estate
Rental revenues	15,366		16,418		31,548		32,269
Rental expenses	4,752		5,341		9,780		10,462
Real estate taxes	1,531		1,872		3,193		3,793
Segment net operating income	9,083		9,205		18,575		18,014
General contracting and real estate services
Segment revenues	45,273		18,408		69,923		53,971
Segment expenses	43,418		18,131		67,239		52,406
Segment gross profit	1,855		277		2,684		1,565
Net operating income	$	38,557	$	30,898	$	75,948	$	61,789

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 June 30, 2022 and 2021 exclude revenue related to intercompany construction contracts of $14.2 million and $5.4 million, respectively, as it is eliminated in consolidation. General contracting and real estate services revenues for the six months ended June 30, 2022 and 2021 exclude revenue related to intercompany construction contracts of $22.8 million and $7.4 million, respectively, as it is eliminated in consolidation.

General contracting and real estate services expenses for the three months ended June 30, 2022 and 2021 exclude expenses related to intercompany construction contracts of $14.0 million and $5.4 million, respectively. General contracting and real estate services expenses for the six months ended June 30, 2022 and 2021 exclude expenses related to intercompany construction contracts of $22.5 million and $7.4 million, respectively, as it is eliminated in consolidation.

The following table reconciles net operating income to net income, the most directly comparable GAAP measure, for the three and six months ended June 30, 2022 and 2021 (in thousands): 

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net operating income	$	38,557	$	30,898	$	75,948	$	61,789
Depreciation and amortization	(18,781)		(17,285)		(37,338)		(35,351)
Amortization of right-of-use assets - finance leases	(277)		(278)		(555)		(467)
General and administrative expenses	(3,617)		(3,487)		(8,325)		(7,508)
Acquisition, development and other pursuit costs	(26)		(32)		(37)		(103)
Impairment charges	(286)		(83)		(333)		(3,122)
Gain on real estate dispositions, net	19,493		—		19,493		3,717
Interest income	3,352		6,746		6,920		10,862
Interest expense	(9,371)		(8,418)		(18,402)		(16,393)
Loss on extinguishment of debt	(618)		—		(776)		—
Change in fair value of derivatives and other	2,548		314		6,730		707
Unrealized credit loss provision	(295)		(388)		(900)		(333)
Other income (expense), net	68		7		297		186
Income tax benefit	20		461		321		480
Net income	$	30,767	$	8,455	$	43,043	$	14,464

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. These costs include corporate office personnel compensation and benefits, bank fees, accounting fees, legal fees, and other corporate office expenses.