Reportable Segments

3 Months Ended

Mar. 31, 2019

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 geographic same store operating segments located in urban and high-density suburban markets represent its reportable segments (the three Denver properties owned by the Company are currently included in non-same store). The Company’s operating segments located in its other markets (Phoenix) that are not material have also been included in the tables presented below.

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 aggregated 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 quarters ended March 31, 2019 and 2018, 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). 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. Revenues for all leases are reflected on a straight-line basis in accordance with GAAP for the current and comparable periods.

The following table presents a reconciliation of NOI from our rental real estate for the quarters ended March 31, 2019 and 2018, respectively (amounts in thousands):

	Quarter Ended March 31,
	2019			2018
Rental income	$	662,302		$	632,831
Property and maintenance expense		(115,070	)		(108,202	)
Real estate taxes and insurance expense		(91,442	)		(91,914	)
Total operating expenses		(206,512	)		(200,116	)
Net operating income	$	455,790		$	432,715

The following tables present NOI for each segment from our rental real estate for the quarters ended March 31, 2019 and 2018, respectively, as well as total assets and capital expenditures at March 31, 2019 (amounts in thousands):

	Quarter Ended March 31, 2019							Quarter Ended March 31, 2018
	Rental Income		Operating Expenses		NOI			Rental Income		Operating Expenses		NOI
Same store (1)
Los Angeles	$	115,399	$	34,484	$	80,915		$	110,996	$	32,041	$	78,955
Orange County		25,828		6,205		19,623			24,803		6,091		18,712
San Diego		23,304		6,127		17,177			22,492		5,964		16,528
Subtotal - Southern California		164,531		46,816		117,715			158,291		44,096		114,195

San Francisco		121,761		30,417		91,344			117,352		29,410		87,942
Washington D.C.		110,784		34,674		76,110			108,528		33,910		74,618
New York		116,064		49,089		66,975			113,328		45,549		67,779
Boston		58,320		16,611		41,709			56,294		16,199		40,095
Seattle		50,621		13,531		37,090			49,516		13,853		35,663
Other Markets		522		185		337			488		164		324
Total same store		622,603		191,323		431,280			603,797		183,181		420,616

Non-same store/other (2) (3)
Non-same store		39,409		13,293		26,116			17,396		7,105		10,291
Other (3)		290		1,896		(1,606	)		11,638		9,830		1,808
Total non-same store/other		39,699		15,189		24,510			29,034		16,935		12,099

Totals	$	662,302	$	206,512	$	455,790		$	632,831	$	200,116	$	432,715

(1)	For the quarters ended March 31, 2019 and 2018, same store primarily includes all properties acquired or completed that were stabilized prior to January 1, 2018, less properties subsequently sold, which represented 74,166 apartment units.

(2)	For the quarters ended March 31, 2019 and 2018, non-same store primarily includes properties acquired after January 1, 2018, plus any properties in lease-up and not stabilized as of January 1, 2018.

(3)	Other includes development, other corporate operations and operations prior to disposition for properties sold.

	Quarter Ended March 31, 2019
	Total Assets		Capital Expenditures
Same store (1)
Los Angeles	$	3,049,292	$	7,061
Orange County		415,698		1,833
San Diego		401,881		630
Subtotal - Southern California		3,866,871		9,524

San Francisco		3,400,898		6,039
Washington D.C.		3,749,155		3,683
New York		4,144,468		3,754
Boston		1,581,121		5,981
Seattle		1,322,060		2,773
Other Markets		12,852		44
Total same store		18,077,425		31,798

Non-same store/other (2) (3)
Non-same store		2,192,615		2,220
Other (3)		498,771		—
Total non-same store/other		2,691,386		2,220

Totals	$	20,768,811	$	34,018

(1)	Same store primarily includes all properties acquired or completed that were stabilized prior to January 1, 2018, less properties subsequently sold, which represented 74,166 apartment units.

(2)	Non-same store primarily includes properties acquired after January 1, 2018, plus any properties in lease-up and not stabilized as of January 1, 2018.

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