Segment Reporting

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

Reportable Segments

We have four reportable operating segments at March 31, 2014, the first three of which consist of the ownership and rental of (i) industrial, (ii) office and (iii) medical office real estate investments. The operations of our industrial, office and medical office properties, along with our retail properties, are collectively referred to as "Rental Operations." Our retail properties, as well as any other properties not included in our reportable segments, do not by themselves meet the quantitative thresholds for separate presentation as a reportable segment and are referred to as non-reportable Rental Operations. The fourth reportable segment consists of various real estate services such as property management, asset management, maintenance, leasing, development, general contracting and construction management to third-party property owners and joint ventures, 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.

Revenues by Reportable Segment

The following table shows the revenues for each of the reportable segments, as well as a reconciliation to consolidated revenues, for the three months ended March 31,2014 and 2013, respectively (in thousands): 

	Three Months Ended March 31,
	2014		2013
Revenues
Rental Operations:
Industrial	$	134,002	$	114,700
Office	66,972		61,197
Medical Office	33,310		30,484
Non-reportable Rental Operations	2,087		2,301
Service Operations	55,820		47,404
Total segment revenues	292,191		256,086
Other revenue	979		1,197
Consolidated revenue from continuing operations	293,170		257,283
Discontinued operations	1,368		16,404
Consolidated revenue	$	294,538	$	273,687

Supplemental Performance Measure

In prior periods, we evaluated the profitability of our reportable segments using net earnings excluding depreciation and other items that were not allocated to our operating segments. As the result of a recent shift in the focus of our executive management team on the metrics used to evaluate the performance of, and to allocate resources among, our reportable segments, we have elected to change our segment measurement of profitability beginning with the period ended March 31, 2014. We have also revised prior period information in order to provide period-over-period comparability. Property level net operating income, on a cash basis (“PNOI”) is the supplemental performance measure that we now use to evaluate the performance of, and to allocate resources among, the real estate investments in the reportable and operating segments that comprise our Rental Operations. PNOI excludes certain items such as straight-line rental income and expense, lease buyout revenues, and the amortization of lease concessions and above and below market rents (collectively referred to as "Rental Operations revenues and expenses excluded from PNOI," as shown in the table below). Additionally, we do not allocate interest expense, depreciation expense and certain other non-property specific revenues and expenses (collectively referred to as "Non-Segment Items," as shown in the table below) to our individual operating segments.

We evaluate the performance of our Service Operations reportable segment using net income or loss, as allocated to that segment ("Earnings from Service Operations").

The following table shows a reconciliation of our segment-level measures of profitability to consolidated income from continuing operations before income taxes for the three months ended March 31,2014 and 2013, respectively (in thousands and excluding discontinued operations): 

	Three Months Ended March 31,
	2014			2013
PNOI
Industrial	$	91,909		$	81,279
Office	36,264			36,816
Medical Office	20,577			16,502
Non-reportable Rental Operations	1,105			971
Total PNOI	149,855			135,568
Earnings from Service Operations	8,549			9,063
Rental Operations revenues and expenses excluded from PNOI:
Straight-line rental income and expense, net	6,463			4,270
Revenues related to lease buyouts	2,695			1,993
Amortization of lease concessions and above and below market rents	(2,467		)	(1,897		)
Intercompany rents and other adjusting items	(1,142		)	(1,034		)
PNOI from sold properties included in continuing operations	(96		)	2,767
Non-Segment Items:
Equity in earnings of unconsolidated companies	2,321			49,378
Interest expense	(55,257		)	(57,181		)
Depreciation expense	(98,059		)	(92,993		)
Gain on sale of properties	15,853			168
Interest and other income, net	351			153
Other operating expenses	(92		)	(68		)
General and administrative expenses	(14,694		)	(13,145		)
Gain on land sales	152			—
Undeveloped land carrying costs	(2,124		)	(2,198		)
Acquisition-related activity	(14		)	643
Other non-segment revenues and expenses, net	(692		)	311
Income from continuing operations before income taxes	$	11,602		$	35,798

The most comparable GAAP measure to PNOI is income from continuing operations before income taxes. PNOI excludes expenses that materially impact our overall results of operations and, therefore, should not be considered as a substitute for income from continuing operations before income taxes or any other measures derived in accordance with GAAP. Furthermore, PNOI may not be comparable to other similarly titled measures of other companies.

Assets by Reportable Segment

The assets for each of the reportable segments at March 31, 2014 and December 31, 2013 were as follows (in thousands):

	March 31, 2014		December 31, 2013
Assets
Rental Operations:
Industrial	$	4,438,376	$	4,414,740
Office	1,527,997		1,524,501
Medical Office	1,155,112		1,170,420
Non-reportable Rental Operations	79,899		81,056
Service Operations	151,724		145,222
Total segment assets	7,353,108		7,335,939
Non-segment assets	414,255		416,675
Consolidated assets	$	7,767,363	$	7,752,614