Segment Reporting

12 Months Ended

Dec. 31, 2011

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

We have three reportable operating segments, the first two of which consist of the ownership and rental of (i) office and (ii) industrial real estate investments. The operations of our office and industrial properties, along with our medical office and retail properties, are collectively referred to as “Rental Operations.” Our medical office and retail properties do not by themselves meet the quantitative thresholds for separate presentation as reportable segments. The third reportable segment consists of providing various real estate services such as property management, asset management, maintenance, leasing, development and construction management to third-party property owners and joint ventures, as well as our Build-for-Sale operations (defined below), and is collectively referred to as “Service Operations.” Our reportable segments offer different products or services and are managed separately because each segment requires different operating strategies and management expertise.

Gains on sale of properties developed or acquired with the intent to sell (“Build-for-Sale” properties), and whose operations prior to sale are insignificant, are classified as part of the income of the Service Operations business segment. The periods of operation for Build-for-Sale properties prior to sale were of short duration. Build-for-Sale properties, which are no longer part of our operating strategy, did not represent a significant component of our operations in any period presented.

Other revenue consists of other operating revenues not identified with one of our operating segments. Interest expense and other non-property specific revenues and expenses are not allocated to individual segments in determining our performance measure.

We assess and measure our overall operating results based upon an industry performance measure referred to as Funds From Operations (“FFO”), which management believes is a useful indicator of our consolidated operating performance. FFO is used by industry analysts and investors as a supplemental operating performance measure of a REIT. The National Association of Real Estate Investment Trusts (“NAREIT”) created FFO as a supplemental measure of REIT operating performance that excludes historical cost depreciation, among other items, from net income determined in accordance with GAAP. FFO is a non-GAAP financial measure. The most comparable GAAP measure is net income (loss) attributable to common shareholders. FFO attributable to common shareholders should not be considered as a substitute for net income (loss) attributable to common shareholders or any other measures derived in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. FFO is calculated in accordance with the definition that was adopted by the Board of Governors of NAREIT, which was clarified during the fourth quarter of 2011 to exclude impairment charges related to depreciable real estate assets and certain investments in joint ventures. As a result of this clarification, we have revised our calculation of FFO for 2009 to exclude $134.1 million of such impairment charges. We do not allocate certain income and expenses (“Non-Segment Items”, as shown in the table below) to our operating segments. Thus, the operational performance measure presented here on a segment-level basis represents net earnings, excluding depreciation expense and the Non-Segment Items not allocated, and is not meant to present FFO as defined by NAREIT.

Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry analysts and investors have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. FFO, as defined by NAREIT, represents GAAP net income (loss), excluding extraordinary items as defined under GAAP and gains or losses from sales of previously depreciated real estate assets, impairment charges related to depreciable real estate assets, plus certain non-cash items such as real estate asset depreciation and amortization, and after similar adjustments for unconsolidated partnerships and joint ventures.

Management believes that the use of FFO attributable to common shareholders, combined with net income (which remains the primary measure of performance), improves the understanding of operating results of REITs among the investing public and makes comparisons of REIT operating results more meaningful. Management believes that excluding gains or losses related to sales of previously depreciated real estate assets, impairment charges related to depreciable real estate assets and real estate asset depreciation and amortization enables investors and analysts to readily identify the operating results of the long-term assets that form the core of a REIT’s activity and assist them in comparing these operating results between periods or between different companies.

 The following table shows (i) the revenues for each of the reportable segments and (ii) a reconciliation of FFO attributable to common shareholders to net income (loss) attributable to common shareholders for the years ended December 31, 2011, 2010 and 2009 (in thousands):

	2011			2010			2009
Revenues
Rental Operations:
Office	$	271,137		$	312,036		$	321,506
Industrial	388,828			289,946			249,555
Non-reportable Rental Operations segments	80,969			65,719			51,017
General contractor and service fee revenue ("Service Operations")	521,796			515,361			449,509
Total Segment Revenues	1,262,730			1,183,062			1,071,587
Other Revenue	11,544			11,094			12,377
Consolidated Revenue from continuing operations	1,274,274			1,194,156			1,083,964
Discontinued Operations	184,571			238,772			264,240
Consolidated Revenue	$	1,458,845		$	1,432,928		$	1,348,204
Reconciliation of Funds From Operations
Net earnings excluding depreciation and Non-Segment Items
Office	$	159,529		$	184,915		$	192,561
Industrial	283,850			215,751			188,277
Non-reportable Rental Operations segments	52,071			42,931			33,430
Service Operations	41,316			28,496			21,843
	536,766			472,093			436,111
Non-Segment Items:
Interest expense	(223,053		)	(189,094		)	(151,605		)
Impairment charges on non-depreciable properties	(12,931		)	(9,834		)	(168,511		)
Interest and other income	658			534			1,229
Other operating expenses	(1,237		)	(1,231		)	(1,017		)
General and administrative expenses	(43,107		)	(41,329		)	(47,937		)
Gain on land sales	—			—			357
Undeveloped land carrying costs	(8,934		)	(9,203		)	(10,403		)
Gain (loss) on debt transactions	—			(16,349		)	20,700
Acquisition-related activity	(1,188		)	55,820			(1,062		)
Income tax benefit	194			1,126			6,070
Other non-segment income	6,131			8,132			5,905
Net (income) loss attributable to noncontrolling interests	(744		)	536			11,340
Noncontrolling interest share of FFO adjustments	(6,644		)	(7,771		)	(15,826		)
Joint venture items	38,161			40,346			46,862
Dividends on preferred shares	(60,353		)	(69,468		)	(73,451		)
Adjustments for redemption/repurchase of preferred shares	(3,796		)	(10,438		)	—
Discontinued operations	54,693			74,085			83,835
FFO attributable to common shareholders	274,616			297,955			142,597
Depreciation and amortization on continuing operations	(330,450		)	(279,606		)	(245,456		)
Depreciation and amortization on discontinued operations	(55,229		)	(80,578		)	(94,670		)
Company's share of joint venture adjustments	(33,687		)	(34,674		)	(36,966		)
Impairment charges on depreciable properties	—			—			(134,055		)
Earnings from depreciated property sales on continuing operations	68,549			39,662			12,337
Earnings from depreciated property sales on discontinued operations	100,882			33,054			6,786
Earnings from depreciated property sales - share of joint venture	91			2,308			—
Noncontrolling interest share of FFO adjustments	6,644			7,771			15,826
Net income (loss) attributable to common shareholders	$	31,416		$	(14,108	)	$	(333,601	)

The assets for each of the reportable segments as of December 31, 2011 and 2010 are as follows (in thousands):

	December 31, 2011		December 31, 2010
Assets
Rental Operations:
Office	$	1,742,196	$	3,122,565
Industrial	3,586,250		3,210,566
Non-reportable Rental Operations segments	789,233		627,491
Service Operations	167,382		231,662
Total Segment Assets	6,285,061		7,192,284
Non-Segment Assets	719,376		451,992
Consolidated Assets	$	7,004,437	$	7,644,276

Tenant improvements and leasing costs to re-let rental space that had been previously under lease to tenants are referred to as second generation expenditures. Building improvements that are not specific to any tenant but serve to improve integral components of our real estate properties are also second generation expenditures. In addition to revenues and FFO, we also review our second generation capital expenditures in measuring the performance of our individual Rental Operations segments. We review these expenditures to determine the costs associated with re-leasing vacant space and maintaining the condition of our properties. Our second generation capital expenditures by segment are summarized as follows for the years ended December 31, 2011, 2010 and 2009 (in thousands):

	2011		2010		2009
Second Generation Capital Expenditures
Office	$	63,933	$	65,203	$	64,281
Industrial	34,872		23,271		13,845
Non-reportable Rental Operations segments	459		249		928
Total	$	99,264	$	88,723	$	79,054