
13.	Reportable Segments

Operating segments are defined as components of an enterprise that engage in business activities from which they may earn revenues and incur expenses and about which discrete financial information is available that is evaluated regularly by the chief operating decision maker. The chief operating decision maker decides how resources are allocated and assesses performance on a recurring basis at least quarterly.

The Company’s primary business is the acquisition, development and management of multifamily residential properties, which includes the generation of rental and other related income through the leasing of apartment units to residents. The chief operating decision maker evaluates the Company's operating performance geographically by market and both on a same store and non-same store basis. The Company’s operating segments located in its coastal markets represent its reportable segments. As of January 1, 2016, the Company has revised the presentation of Southern California to show separate results for Los Angeles, San Diego and Orange County, along with a subtotal of the three markets combined, for both the current and comparable periods. The Company's operating segments located in its other markets that are not material have been included in the tables presented below. See also Note 4 for further discussion of the Starwood Transaction and the operating segments/locations in which properties were sold.

The Company’s fee and asset management and development activities are other business activities that do not constitute an operating segment and as such, have been included in the "Other" category in the tables presented below.

All revenues are from external customers and there is no customer who contributed 10% or more of the Company’s total revenues during the nine months and quarters ended September 30, 2016 and 2015, respectively.

The primary financial measure for the Company’s rental real estate segment is net operating income (“NOI”), which represents rental income less: 1) property and maintenance expense and 2) real estate taxes and insurance expense (all as reflected in the accompanying consolidated statements of operations and comprehensive income). As of January 1, 2016, NOI no longer includes an allocation of property management expenses either in the current or comparable periods. The Company believes that NOI is helpful to investors as a supplemental measure of its operating performance because it is a direct measure of the actual operating results of the Company’s apartment properties. Current year NOI is compared to prior year NOI and current year budgeted NOI as a measure of financial performance.

The following table presents a reconciliation of NOI from our rental real estate specific to continuing operations for the nine months and quarters ended September 30, 2016 and 2015, respectively (amounts in thousands):



	Nine Months Ended September 30,						Quarter Ended September 30,
	2016			2015			2016			2015
Rental income	$	1,816,960		$	2,035,359		$	605,856		$	694,245
Property and maintenance expense	(309,688		)	(364,948		)	(104,216		)	(122,383		)
Real estate taxes and insurance expense	(238,954		)	(254,513		)	(81,343		)	(84,962		)
Total operating expenses	(548,642		)	(619,461		)	(185,559		)	(207,345		)
Net operating income	$	1,268,318		$	1,415,898		$	420,297		$	486,900

The following tables present NOI for each segment from our rental real estate specific to continuing operations for the nine months and quarters ended September 30, 2016 and 2015, respectively, as well as total assets and capital expenditures at September 30, 2016 (amounts in thousands):



	Nine Months Ended September 30, 2016						Nine Months Ended September 30, 2015
	Rental Income		Operating Expenses		NOI		Rental Income		Operating Expenses		NOI
Same store (1)
Los Angeles	$	275,157	$	80,489	$	194,668	$	259,974	$	78,781	$	181,193
San Diego	65,699		17,721		47,978		62,201		17,311		44,890
Orange County	59,289		14,251		45,038		55,969		14,151		41,818
Subtotal – Southern California	400,145		112,461		287,684		378,144		110,243		267,901

New York	343,388		120,838		222,550		336,321		115,507		220,814
Washington D.C.	317,584		95,187		222,397		313,773		94,386		219,387
San Francisco	272,729		66,596		206,133		254,032		63,898		190,134
Boston	184,376		51,561		132,815		179,714		52,941		126,773
Seattle	115,072		32,118		82,954		108,391		29,759		78,632
All Other Markets	14,186		5,882		8,304		13,435		6,196		7,239
Total same store	1,647,480		484,643		1,162,837		1,583,810		472,930		1,110,880

Non-same store/other (2) (3)
Los Angeles	26,766		10,085		16,681		20,708		7,230		13,478
Orange County	3,623		1,273		2,350		—		—		—
Subtotal – Southern California	30,389		11,358		19,031		20,708		7,230		13,478

New York	24,587		10,858		13,729		4,424		3,590		834
Washington D.C.	2,640		541		2,099		3,147		555		2,592
San Francisco	26,974		10,303		16,671		4,489		2,006		2,483
Boston	8,310		2,073		6,237		6,264		1,611		4,653
Seattle	20,170		4,785		15,385		6,609		1,924		4,685
Other (3)	56,410		24,081		32,329		405,908		129,615		276,293
Total non-same store/other	169,480		63,999		105,481		451,549		146,531		305,018

Total	$	1,816,960	$	548,642	$	1,268,318	$	2,035,359	$	619,461	$	1,415,898


(1)	Same store primarily includes all properties acquired or completed that are stabilized prior to January 1, 2015, less properties subsequently sold, which represented 71,488 apartment units.


(2)	Non-same store primarily includes properties acquired after January 1, 2015, plus any properties in lease-up and not stabilized as of January 1, 2015.


(3)	Other includes development, other corporate operations and operations prior to sale for properties sold from 2014 through 2016 that do not meet the new discontinued operations criteria.



	Quarter Ended September 30, 2016						Quarter Ended September 30, 2015
	Rental Income		Operating Expenses		NOI		Rental Income		Operating Expenses		NOI
Same store (1)
Los Angeles	$	95,928	$	28,365	$	67,563	$	91,212	$	27,296	$	63,916
San Diego	22,393		6,025		16,368		21,327		5,894		15,433
Orange County	20,173		4,920		15,253		19,047		4,824		14,223
Subtotal – Southern California	138,494		39,310		99,184		131,586		38,014		93,572

Washington D.C.	107,168		32,891		74,277		105,526		31,740		73,786
New York	115,652		42,209		73,443		114,112		37,639		76,473
San Francisco	92,101		22,785		69,316		87,678		21,590		66,088
Boston	63,824		18,297		45,527		62,662		17,825		44,837
Seattle	41,836		11,281		30,555		39,195		10,480		28,715
All Other Markets	4,817		1,933		2,884		4,522		2,055		2,467
Total same store	563,892		168,706		395,186		545,281		159,343		385,938

Non-same store/other (2) (3)
Los Angeles	7,659		3,285		4,374		4,470		1,817		2,653
Orange County	1,265		588		677		—		—		—
Subtotal – Southern California	8,924		3,873		5,051		4,470		1,817		2,653

Washington D.C.	822		177		645		1,088		174		914
New York	8,873		3,365		5,508		3,142		2,137		1,005
San Francisco	12,601		4,869		7,732		2,887		1,044		1,843
Boston	899		189		710		1,003		217		786
Seattle	5,251		1,106		4,145		533		243		290
Other (3)	4,594		3,274		1,320		135,841		42,370		93,471
Total non-same store/other	41,964		16,853		25,111		148,964		48,002		100,962

Total	$	605,856	$	185,559	$	420,297	$	694,245	$	207,345	$	486,900


(1)	Same store primarily includes all properties acquired or completed that are stabilized prior to July 1, 2015, less properties subsequently sold, which represented 72,229 apartment units.


(2)	Non-same store primarily includes properties acquired after July 1, 2015, plus any properties in lease-up and not stabilized as of July 1, 2015.


(3)	Other includes development, other corporate operations and operations prior to sale for properties sold from 2014 through 2016 that do not meet the new discontinued operations criteria.



	Nine Months Ended September 30, 2016
	Total Assets		Capital Expenditures
Same store (1)
Los Angeles	$	2,532,524	$	19,939
San Diego	476,349		4,259
Orange County	263,634		5,930
Subtotal – Southern California	3,272,507		30,128

New York	4,309,221		16,661
Washington D.C.	3,948,781		24,680
San Francisco	2,456,465		17,300
Boston	1,764,497		13,906
Seattle	1,038,137		9,114
All Other Markets	53,578		725
Total same store	16,843,186		112,514

Non-same store/other (2) (3)
Los Angeles	682,199		7,151
Orange County	75,839		123
Subtotal – Southern California	758,038		7,274

New York	438,413		80
Washington D.C.	46,180		826
San Francisco	973,068		140
Boston	168,224		403
Seattle	329,230		542
Other (3)	1,741,405		2,772
Total non-same store/other	4,454,558		12,037
Total	$	21,297,744	$	124,551


(1)	Same store primarily includes all properties acquired or completed that are stabilized prior to January 1, 2015, less properties subsequently sold, which represented 71,488 apartment units.


(2)	Non-same store primarily includes properties acquired after January 1, 2015, plus any properties in lease-up and not stabilized as of January 1, 2015.


(3)	Other includes development, other corporate operations and capital expenditures for properties sold.

Note: Markets/Metro Areas included in the above All Other Markets segment are as follows:

(a) New England (excluding Boston) and Phoenix.