Segment Reporting

9 Months Ended

Sep. 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 property revenue less direct property operating expenses, including property taxes, and excluding corporate-level income (including management, development and other fees), corporate-level property management and other indirect operating expenses, investments and investment management expenses, expensed acquisition, development and other pursuit costs, net interest expense, gain (loss) on extinguishment of debt, general and administrative expense, joint venture income (loss), depreciation expense, impairment loss on land holdings, gain on sale of real estate assets, income from discontinued operations and net operating income from 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 nine months ended September 30, 2014 and 2013 is as follows (dollars in thousands):

	For the three months ended						For the nine months ended
	9/30/2014			9/30/2013			9/30/2014			9/30/2013
Net income	$	241,001		$	(10,885	)	$	554,801		$	100,681
Indirect operating expenses, net of corporate income	13,173			10,780			36,333			30,673
Investments and investment management expense	1,079			1,043			3,195			3,154
Expensed acquisition, development and other pursuit costs	406			2,176			3,139			46,041
Interest expense, net (1)	46,376			43,945			132,631			127,772
Loss on extinguishment of debt, net	—			—			412			—
Loss on interest rate contract	—			53,484			—			51,000
General and administrative expense	11,290			9,878			30,745			31,262
Equity in (income) loss of unconsolidated real estate entities	(130,592		)	(3,260		)	(143,527		)	16,244
Depreciation expense (1)	111,836			159,873			328,598			455,410
Gain on sale of real estate assets	—			—			(60,945		)	(240		)
Gain on sale of discontinued operations	—			—			(37,869		)	(118,173		)
Income from discontinued operations	—			(5,063		)	(310		)	(12,890		)
Net operating income from real estate assets sold or held for sale, not classified as discontinued operations	(1,216		)	(3,535		)	(8,373		)	(9,587		)
Net operating income	$	293,353		$	258,436		$	838,830		$	721,347

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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 nine months ended
	9/30/2014			9/30/2013			9/30/2014			9/30/2013
Rental income from real estate assets sold or held for sale, not classified as discontinued operations	$	2,238		$	5,871		$	13,809		$	15,659
Operating expenses real estate assets sold or held for sale, not classified as discontinued operations	(1,022		)	(2,336		)	(5,436		)	(6,072		)
Net operating income from real estate assets sold or held for sale, not classified as discontinued operations	$	1,216		$	3,535		$	8,373		$	9,587

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 nine months ended September 30, 2014 and 2013 has been adjusted to exclude amounts for the real estate assets that were both sold between January 1, 2013 and September 30, 2014, or qualified as held for sale as of September 30, 2014, as described in Note 7, “Real Estate Disposition Activities.”

	For the three months ended						For the nine 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 September 30, 2014 (2)
Established
New England	$	49,227	$	31,858	4.6	%	$	140,891	$	89,693	0.7	%	$	1,427,605
Metro NY/NJ	96,112		67,255		3.9	%	237,732		165,867		2.4	%	2,376,493
Mid-Atlantic	47,122		32,284		(2.2	)%	73,964		51,947		(3.3	)%	645,872
Pacific Northwest	16,744		11,668		9.4	%	40,437		28,104		6.3	%	499,611
Northern California	64,120		48,805		12.2	%	129,560		99,030		7.8	%	1,401,286
Southern California	63,126		41,655		6.8	%	103,919		71,054		4.5	%	1,224,729
Total Established	336,451		233,525		5.5	%	726,503		505,695		3.0	%	7,575,596
Other Stabilized	45,023		31,838		N/A		370,627		255,085		N/A		6,008,289
Development / Redevelopment	44,310		27,990		N/A		125,215		78,050		N/A		3,639,770
Land Held for Future Development	N/A		N/A		N/A		N/A		N/A		N/A		176,484
Non-allocated (3)	2,503		N/A		N/A		8,253		N/A		N/A		43,215
Total	$	428,287	$	293,353	13.5	%	$	1,230,598	$	838,830	16.3	%	$	17,443,354
For the period ended September 30, 2013
Established
New England	$	42,853	$	27,221	(0.6	)%	$	126,239	$	81,882	2.1	%	$	1,286,876
Metro NY/NJ	63,103		43,327		3.4	%	186,897		129,215		4.6	%	1,919,151
Mid-Atlantic	25,262		17,652		(1.0	)%	75,608		54,169		1.1	%	632,102
Pacific Northwest	11,773		7,752		1.7	%	34,752		23,539		7.4	%	443,812
Northern California	35,850		28,009		15.3	%	104,794		79,914		13.1	%	1,232,724
Southern California	30,001		20,165		4.7	%	88,873		60,640		5.7	%	1,057,512
Total Established	208,842		144,126		4.2	%	617,163		429,359		5.4	%	6,572,177
Other Stabilized	139,093		92,856		N/A		348,028		237,846		N/A		6,539,176
Development / Redevelopment	32,369		21,454		N/A		79,704		54,142		N/A		2,676,384
Land Held for Future Development	N/A		N/A		N/A		N/A		N/A		N/A		282,285
Non-allocated (3)	3,014		N/A		N/A		8,198		N/A		N/A		47,921
Total	$	383,318	$	258,436	49.3	%	$	1,053,093	$	721,347	45.4	%	$	16,117,943

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(1) Does not include gross real estate assets held for sale of $87,393 and $654,729 as of September 30, 2014 and 2013, respectively.

(2) Results for the three months ended September 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 nine months ended September 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.