Segments

12 Months Ended

Dec. 31, 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 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, 2022, 2021, and 2020 was as follows (in thousands):

	Years Ended December 31,
	2022		2021		2020
Office real estate
Rental revenues	$	74,036	$	47,363	$	43,494
Rental expenses	18,710		12,412		10,799
Real estate taxes	7,625		6,112		5,111
Segment net operating income	47,701		28,839		27,584
Retail real estate
Rental revenues	86,344		78,572		73,032
Rental expenses	13,769		12,512		11,029
Real estate taxes	8,873		8,416		7,784
Segment net operating income	63,702		57,644		54,219
Multifamily residential real estate
Rental revenues	58,914		66,205		49,962
Rental expenses	18,263		21,570		17,132
Real estate taxes	5,559		7,324		5,241
Segment net operating income	35,092		37,311		27,589
General contracting and real estate services
Segment revenues	234,859		91,936		217,146
Segment expenses	227,158		88,100		209,472
Segment gross profit	7,701		3,836		7,674
Net operating income	$	154,196	$	127,630	$	117,066

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, 2022, 2021, and 2020 exclude revenue related to intercompany construction contracts of $58.1 million, $27.8 million, and $26.6 million, respectively, as it is eliminated in consolidation. General contracting and real estate services expenses for the years ended December 31, 2022, 2021, and 2020 exclude expenses related to intercompany construction contracts of $57.5 million, $27.6 million, and $26.3 million, respectively, as it is eliminated in consolidation.

The following table reconciles net operating income to net income for the years ended December 31, 2022, 2021, and 2020 (in thousands):

	Years Ended December 31,
	2022		2021		2020
Net operating income	$	154,196	$	127,630	$	117,066
Depreciation and amortization	(72,974)		(68,853)		(59,972)
Amortization of right-of-use assets - finance leases	(1,110)		(1,022)		(586)
General and administrative expenses	(15,691)		(14,610)		(12,905)
Acquisition, development and other pursuit costs	(37)		(112)		(584)
Impairment charges	(416)		(21,378)		(666)
Gain on real estate dispositions	53,466		19,040		6,388
Interest income	16,978		18,457		19,841
Interest expense	(39,680)		(33,905)		(31,035)
Loss on extinguishment of debt	(3,374)		(3,810)		—
Change in fair value of derivatives and other	8,698		2,182		(1,130)
Unrealized credit loss release (provision)	(626)		792		(256)
Other income (expense), net	378		302		515
Income tax benefit	145		742		283
Net income	$	99,953	$	25,455	$	36,959

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.