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Segments
 6 Months Ended
Jun. 30, 2024
Segment Reporting [Abstract]  
Segments Segments
 
The Company operates its business in five reportable segments: (i) retail real estate, (ii) office real estate, (iii) multifamily real estate, (iv) general contracting and real estate services, and (v) real estate financing. Refer to Note 1 for the composition of properties within each property segment.

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.

Since the Company's Annual Report on Form 10-K for the year ended December 31, 2023, the Company retrospectively reclassified certain components of mixed-use properties between the retail, office, and multifamily real estate segments in order to align the components of those properties with their tenant composition. As a result, NOI for the three months ended June 30, 2023 increased $0.5 million and less than $0.1 million for the retail and office real estate segments, respectively, and decreased $0.5 million for the multifamily real estate segment. NOI for the six months ended June 30, 2023 increased $0.8 million and less than $0.1 million for the retail and office real estate segments, respectively, and decreased $0.9 million for the multifamily real estate segment. These reclassifications had no effect on total property NOI as previously reported. These reclassifications also had no impact on our general contracting and real estate services or real estate financing segments.
The following table presents NOI for the Company's five reportable segments for the three and six months ended June 30, 2024 and 2023 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Retail real estate
Rental revenues$26,094 $25,288 $51,745 $48,247 
Rental expenses4,394 4,073 8,605 7,717 
Real estate taxes2,420 2,340 4,835 4,608 
Segment net operating income19,280 18,875 38,305 35,922 
Office real estate
Rental revenues22,870 20,629 44,748 40,286 
Rental expenses5,956 5,332 12,079 10,491 
Real estate taxes2,135 2,157 4,350 4,242 
Segment net operating income14,779 13,140 28,319 25,553 
Multifamily real estate
Rental revenues14,301 14,034 28,653 27,636 
Rental expenses4,737 4,271 9,008 8,428 
Real estate taxes1,331 1,134 2,626 2,193 
Segment net operating income8,233 8,629 17,019 17,015 
General contracting and real estate services
General contracting and real estate services revenues116,839 102,574 243,814 186,812 
General contracting and real estate services expenses112,500 99,071 235,398 180,241 
Segment gross profit4,339 3,503 8,416 6,571 
Real estate financing
Interest income3,966 3,225 7,966 6,761 
Interest expense(a)
1,767 809 3,099 1,906 
Segment gross profit2,199 2,416 4,867 4,855 
Net operating income$48,830 $46,563 $96,926 $89,916 
________________________________________
(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 rates on the credit facility, the M&T term loan facility, and the TD term loan facility, each as defined in Note 9.
The following table reconciles NOI to net income, the most directly comparable GAAP measure, for the three and six months ended June 30, 2024 and 2023 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Net operating income$48,830 $46,563 $96,926 $89,916 
Interest income(a)
666 189 1,292 372 
Depreciation and amortization(20,789)(19,878)(41,224)(38,346)
Amortization of right-of-use assets - finance leases(394)(347)(789)(624)
General and administrative expenses(4,503)(4,052)(10,377)(9,500)
Acquisition, development, and other pursuit costs(5,528)(18)(5,528)(18)
Impairment charges(1,494)— (1,494)(102)
Gain on real estate dispositions, net— 511 — 511 
Interest expense(b)
(19,460)(12,820)(36,103)(24,025)
Change in fair value of derivatives and other4,398 5,005 17,286 2,558 
Unrealized credit loss release (provision)228 (100)145 (177)
Other income, net79 168 158 261 
Income tax benefit (provision) 1,246 (336)712 (524)
Net income$3,279 $14,885 $21,004 $20,302 
________________________________________
(a) Excludes real estate financing segment interest income of $4.0 million and $3.2 million for the three months ended June 30, 2024 and 2023, respectively, and $8.0 million and $6.8 million for the six months ended June 30, 2024 and 2023, respectively.
(b) Excludes real estate financing segment interest expense of $1.8 million and $0.8 million for the three months ended June 30, 2024 and 2023, respectively, and $3.1 million and $1.9 million for the six months ended June 30, 2024 and 2023, 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 June 30, 2024 and 2023 exclude revenues related to intercompany construction contracts of $4.3 million and $12.9 million, respectively, which are eliminated in consolidation. General contracting and real estate services revenues for the six months ended June 30, 2024 and 2023 exclude revenues related to intercompany construction contracts of $12.7 million and $26.6 million, respectively, which are eliminated in consolidation.

General contracting and real estate services expenses for the three months ended June 30, 2024 and 2023 exclude expenses related to intercompany construction contracts of $4.2 million and $12.8 million, respectively, which are eliminated in consolidation. General contracting and real estate services expenses for the six months ended June 30, 2024 and 2023 exclude expenses related to intercompany construction contracts of $12.5 million and $26.3 million, respectively, which are eliminated in consolidation.
 
Depreciation and amortization expense for the three months ended June 30, 2024 was $8.8 million, $8.3 million, and $3.6 million for the retail, office, and multifamily real estate segments, respectively. Depreciation and amortization expense for the six months ended June 30, 2024 was $17.3 million, $16.3 million, and $7.3 million for the retail, office, and multifamily real estate segments, respectively.

Depreciation and amortization expense for the three months ended June 30, 2023 was $7.6 million, $7.8 million, and $4.3 million for the retail, office, and multifamily real estate segments, respectively. Depreciation and amortization expense for the six months ended June 30, 2023 was $14.5 million, $15.1 million, and $8.5 million for the retail, office, and multifamily real estate segments, respectively.

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 June 30, 2024 was $2.9 million, $3.6 million, and $3.8 million for the retail, office, and multifamily real estate segments, respectively. Interest expense on secured property debt for the six months ended June 30, 2024 was $5.7 million, $6.8 million, and $7.4 million for the retail, office, and multifamily real estate segments, respectively.

Interest expense on secured property debt for the three months ended June 30, 2023 was $2.3 million, $2.2 million, and $2.6 million for the retail, office, and multifamily real estate segments, respectively. Interest expense on secured property debt for the six months ended June 30, 2023 was $4.6 million, $4.4 million, and $5.2 million for the retail, office, and multifamily real estate segments, respectively.
As of June 30, 2024, the net carrying amount of consolidated real estate investments was $693.0 million, $638.9 million, and $445.6 million for the retail, office, and multifamily real estate segments, respectively, which excludes $41.4 million attributable to our mixed-use development projects. Assets attributable to the general contracting and real estate services segment are presented in Note 8 of these financial statements. Assets attributable to the real estate financing segment are presented in Note 7 of these financial statements.