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Segments
 3 Months Ended
Mar. 31, 2023
Segment Reporting [Abstract]  
Segments Segments
 
The Company operates its business in five reportable segments: (i) office real estate, (ii) retail real estate, (iii) multifamily real estate, (iv) general contracting and real estate services, and (v) real estate financing. Refer to Note 1 of the Company's Form 10-K for the composition of properties within each property segment. Since the Company's Annual Report on Form 10-K for the year ended December 31, 2022, the Company introduced real estate financing as a reportable segment. The real estate financing segment includes the Company's mezzanine loans and preferred equity investments on development projects. The change in segmental presentation is a result of the chief operating decision-maker now separately reviewing the results of the real estate financing investments, which are no longer considered to be ad hoc investments, but an evolving portfolio.

Net operating income ("NOI") is the primary measure used by the Company’s chief operating decision-maker to assess segment performance. NOI is calculated as segment revenues less segment expenses. Segment revenues include rental revenues for the property segments, general contracting and real estate services revenues for the general contracting and real estate services segment, and interest income for the real estate financing segment. Segment expenses include rental expenses and real estate taxes for the property segments, general contracting and real estate services expenses for the general contracting and real estate services segment, and interest expense for the real estate financing segment. Segment NOI for the general contracting and real estate services and real estate financing segments is also referred to as segment gross profit as illustrated in the table below. NOI 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, NOI should not be considered an alternative to cash flows as a measure of liquidity. Not all companies calculate NOI in the same manner. The Company considers NOI 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, construction, and real estate financing businesses.
The following table presents NOI for the Company's five reportable segments for the three months ended March 31, 2023 and 2022 (in thousands):
Three Months Ended March 31,
20232022
Office real estate
Rental revenues$19,574 $17,023 
Rental expenses5,103 4,140 
Real estate taxes2,095 1,504 
Segment net operating income12,376 11,379 
Retail real estate
Rental revenues22,438 21,430 
Rental expenses3,564 3,501 
Real estate taxes2,207 2,238 
Segment net operating income16,667 15,691 
Multifamily real estate
Rental revenues14,206 16,182 
Rental expenses4,293 5,028 
Real estate taxes1,110 1,662 
Segment net operating income8,803 9,492 
General contracting and real estate services
General contracting and real estate services revenues84,238 24,650 
General contracting and real estate services expenses81,170 23,821 
Segment gross profit3,068 829 
Real estate financing
Interest income3,536 3,459 
Interest expense(a)
1,097 825 
Segment gross profit2,439 2,634 
Net operating income$43,353 $40,025 
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(a) Interest expense within the real estate financing segment is allocated based on the average outstanding principal of notes receivable in the real estate financing portfolio, and the effective interest rate on the credit facility, as defined in Note 8.
The following table reconciles NOI to net income, the most directly comparable GAAP measure, for the three months ended March 31, 2023 and 2022 (in thousands):
Three Months Ended March 31,
20232022
Net operating income$43,353 $40,025 
Interest income(a)
183 109 
Depreciation and amortization(18,468)(18,557)
Amortization of right-of-use assets - finance leases(277)(278)
General and administrative expenses(5,448)(4,708)
Acquisition, development and other pursuit costs— (11)
Impairment charges(102)(47)
Interest expense(b)
(11,205)(8,206)
Loss on extinguishment of debt— (158)
Change in fair value of derivatives and other(2,447)4,182 
Unrealized credit loss provision(77)(605)
Other income (expense), net93 229 
Income tax (provision) benefit(188)301 
Net income$5,417 $12,276 
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(a) Excludes real estate financing segment interest income of $3.5 million and $3.5 million for the three months ended March 31, 2023 and 2022, respectively.
(b) Excludes real estate financing segment interest expense of $1.1 million and $0.8 million for the three months ended March 31, 2023 and 2022, respectively.
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, 2023 and 2022 exclude revenue related to intercompany construction contracts of $13.7 million and $8.6 million, respectively, as it is eliminated in consolidation. General contracting and real estate services expenses for the three months ended March 31, 2023 and 2022 exclude expenses related to intercompany construction contracts of $13.5 million and $8.5 million, respectively.
 
Depreciation and amortization expense for the three months ended March 31, 2023 was $6.9 million, $7.3 million, and $4.2 million for the office, retail, and multifamily real estate segments. Depreciation and amortization expense for the three months ended March 31, 2022 was $6.6 million, $7.1 million, and $4.7 million for the office, retail, and multifamily real estate segments.

General and administrative expenses represent costs not directly associated with the operation and management of the Company’s real estate properties, general contracting and real estate services, and real estate financing businesses. These costs include corporate office personnel compensation and benefits, bank fees, accounting fees, legal fees, and other corporate office expenses.

Interest expense on secured property debt for the three months ended March 31, 2023 was $2.4 million, $2.1 million, and $2.6 million for the office, retail, and multifamily real estate segments, respectively. Interest expense on secured property debt for the three months ended March 31, 2022 was $2.0 million, $2.0 million, and $3.2 million for the office, retail, and multifamily real estate segments, respectively.
Assets included in each property segment are presented in Schedule III of the financial statements accompanying the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which have not materially changed as of March 31, 2023. Assets attributable to the general contracting and real estate services segment are presented in Note 7 of these financial statements. Assets of the real estate financing segment are presented in Note 6 of these financial statements.