Segment Reporting

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The Company’s reportable operating segments include Established Communities, Other Stabilized Communities, and Development/Redevelopment Communities.  Annually as of January 1^st, the Company determines which of its communities fall into each of these categories and generally maintains that classification throughout the year for the purpose of reporting segment operations, unless disposition or redevelopment plans regarding a community change.  At April 1, 2014, the Company updated its reportable operating segments, primarily to include communities acquired as part of the Archstone Acquisition, as described in Note 5, “Archstone Acquisition,” in its Established Community portfolio.

In addition, the Company owns land for future development and has other corporate assets that are not allocated to an operating segment.

The Company’s segment disclosures present the measure(s) used by the chief operating decision maker for purposes of assessing each segment’s performance.  The Company’s chief operating decision maker is comprised of several members of its executive management team who use net operating income (“NOI”) as the primary financial measure for Established Communities and Other Stabilized Communities.  NOI is defined by the Company as total revenue less direct property operating expenses excluding rental income, operating expenses and any disposition gains or losses from real estate assets classified as discontinued operations and real estate assets sold or held for sale, not classified as discontinued operations.  Although the Company considers NOI a useful measure of a community’s or communities’ operating performance, NOI should not be considered an alternative to net income or net cash flow from operating activities, as determined in accordance with GAAP.  NOI excludes a number of income and expense categories as detailed in the reconciliation of NOI to net income.

A reconciliation of NOI to net income for the three and six months ended June 30, 2014 and 2013 is as follows (dollars in thousands):

	For the three months ended						For the six months ended
	6/30/2014			6/30/2013			6/30/2014			6/30/2013
Net income	$	172,197		$	36,097		$	313,796		$	111,570
Indirect operating expenses, net of corporate income	12,343			10,852			23,161			19,894
Investments and investment management expense	1,137			1,096			2,116			2,110
Expensed acquisition, development and other pursuit costs	2,017			3,806			2,732			43,865
Interest expense, net (1)	43,722			43,169			86,255			81,342
Loss on extinguishment of debt, net	412			—			412			—
General and administrative expense	10,220			11,345			19,456			21,384
Equity in (income) loss of unconsolidated real estate entities	(7,710		)	940			(12,933		)	19,503
Depreciation expense (1)	110,395			189,977			216,762			295,536
Gain on sale of real estate assets	(60,945		)	(240		)	(60,945		)	(240		)
Gain on sale of discontinued operations	—			(33,682		)	(37,869		)	(118,173		)
Income from discontinued operations	—			(2,081		)	(310		)	(7,827		)
Net operating income from real estate assets sold or held for sale, not classified as discontinued operations	(2,030		)	(2,308		)	(4,314		)	(4,178		)
Net operating income	$	281,758		$	258,971		$	548,319		$	464,786

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(1) Includes amounts associated with assets sold or held for sale, not classified as discontinued operations.

The following is a summary of NOI from real estate assets sold or held for sale, not classified as discontinued operations, for the periods presented (dollars in thousands):

	For the three months ended						For the six months ended
	6/30/2014			6/30/2013			6/30/2014			6/30/2013
Rental income from real estate assets sold or held for sale, not classified as discontinued operations	$	3,400		$	3,574		$	7,012		$	6,813
Operating expenses real estate assets sold or held for sale, not classified as discontinued operations	(1,370		)	(1,266		)	(2,698		)	(2,635		)
Net operating income from real estate assets sold or held for sale, not classified as discontinued operations	$	2,030		$	2,308		$	4,314		$	4,178

The primary performance measure for communities under development or redevelopment depends on the stage of completion.  While under development, management monitors actual construction costs against budgeted costs as well as lease-up pace and rent levels compared to budget.

The following table provides details of the Company’s segment information as of the dates specified (dollars in thousands). The segments are classified based on the individual community’s status at either the beginning of the given calendar year, or April 1, 2014, when the Company updated its operating segments. Therefore, each year the composition of communities within each business segment is adjusted.  Accordingly, the amounts between years are not directly comparable. Segment information for the three and six months ended June 30, 2014 and 2013 has been adjusted to exclude amounts for the real estate assets that were both sold between January 1, 2013 and June 30, 2014, or qualified as held for sale as of June 30, 2014, as described in Note 7, “Real Estate Disposition Activities.”

	For the three months ended						For the six months ended
	Total revenue		NOI		% NOI  change from  prior year		Total revenue		NOI		% NOI  change from  prior year		Gross real estate (1)
For the period ended June 30, 2014 (2)
Established
New England	$	47,903	$	30,759	(0.9	)%	$	92,845	$	58,590	(1.2	)%	$	1,420,125
Metro NY/NJ	94,471		66,054		0.9	%	157,171		109,353		1.6	%	2,373,214
Mid-Atlantic	46,990		32,531		(6.7	)%	49,260		34,784		(3.9	)%	645,172
Pacific Northwest	16,458		11,554		5.9	%	26,683		18,591		4.8	%	499,383
Northern California	62,319		47,498		13.7	%	85,305		65,364		9.6	%	1,400,573
Southern California	61,852		41,607		5.0	%	68,658		47,198		4.5	%	1,218,170
Total Established	329,993		230,003		2.8	%	479,922		333,880		2.5	%	7,556,637
Other Stabilized	46,001		32,589		N/A		248,887		170,159		N/A		6,091,177
Development / Redevelopment	31,740		19,166		N/A		72,310		44,280		N/A		3,318,362
Land Held for Future Development	N/A		N/A		N/A		N/A		N/A		N/A		195,673
Non-allocated (3)	2,672		N/A		N/A		5,750		N/A		N/A		43,382
Total	$	410,406	$	281,758	8.8	%	$	806,869	$	548,319	18.0	%	$	17,205,231
For the period ended June 30, 2013
Established
New England	$	42,113	$	28,080	4.8	%	$	83,386	$	54,660	3.6	%	$	1,280,776
Metro NY/NJ	62,549		43,449		5.1	%	123,794		85,888		5.3	%	1,917,740
Mid-Atlantic	25,312		18,330		2.8	%	50,346		36,518		2.2	%	631,578
Pacific Northwest	11,603		7,937		10.5	%	22,979		15,787		10.5	%	443,641
Northern California	34,880		26,295		12.5	%	68,945		51,904		12.0	%	1,232,282
Southern California	29,542		20,375		6.9	%	58,872		40,475		6.2	%	1,055,368
Total Established	205,999		144,466		6.5	%	408,322		285,232		6.1	%	6,561,385
Other Stabilized	139,141		96,169		N/A		211,909		146,866		N/A		6,670,671
Development / Redevelopment	26,580		18,336		N/A		47,335		32,688		N/A		2,183,928
Land Held for Future Development	N/A		N/A		N/A		N/A		N/A		N/A		409,930
Non-allocated (3)	2,913		N/A		N/A		5,185		N/A		N/A		50,120
Total	$	374,633	$	258,971	58.1	%	$	672,751	$	464,786	44.0	%	$	15,876,034

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(1) Does not include gross real estate assets held for sale of $566,344 as of June 30, 2013.

(2) Results for the three months ended June 30, 2014 reflect the operating segments updated as of April 1, 2014, which include most stabilized communities acquired as part of the Archstone Acquisition in the Established Communities segment. Results for the six months ended June 30, 2014 reflect the operating segments determined as of January 1, 2014, which include stabilized communities acquired as part of the Archstone Acquisition in the Other Stabilized segment.

(3) Revenue represents third party management, asset management and developer fees and miscellaneous income which are not allocated to a reportable segment.