Segment Reporting

6 Months Ended

Jun. 30, 2015

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.

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, casualty and impairment gain, net, 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 six months ended June 30, 2015 and 2014 is as follows (dollars in thousands):

	For the three months ended						For the six months ended
	6/30/2015			6/30/2014			6/30/2015			6/30/2014
Net income	$	172,253		$	172,197		$	380,306		$	313,796
Indirect operating expenses, net of corporate income	14,817			12,343			30,215			23,161
Investments and investment management expense	1,073			1,137			2,107			2,116
Expensed acquisition, development and other pursuit costs, net of recoveries	673			2,017			1,860			2,732
Interest expense, net (1)	44,590			43,722			90,164			86,255
(Gain) loss on extinguishment of debt, net	(7,749		)	412			(7,749		)	412
General and administrative expense	11,628			10,220			22,111			19,456
Equity in income of unconsolidated real estate entities	(13,806		)	(7,710		)	(48,371		)	(12,933		)
Depreciation expense (1)	118,627			110,395			235,480			216,762
Casualty and impairment gain, net	(17,114		)	—			(11,326		)	—
Gain on sale of real estate assets	(9,625		)	(60,945		)	(80,583		)	(60,945		)
Gain on sale of discontinued operations	—			—			—			(37,869		)
Income from discontinued operations	—			—			—			(310		)
Net operating income from real estate assets sold or held for sale, not classified as discontinued operations	(1,353		)	(6,240		)	(2,791		)	(12,522		)
Net operating income	$	314,014		$	277,548		$	611,423		$	540,111

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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
	6/30/2015			6/30/2014			6/30/2015			6/30/2014
Rental income from real estate assets sold or held for sale, not classified as discontinued operations	$	2,285		$	10,226		$	4,809		$	20,595
Operating expenses from real estate assets sold or held for sale, not classified as discontinued operations	(932		)	(3,986		)	(2,018		)	(8,073		)
Net operating income from real estate assets sold or held for sale, not classified as discontinued operations	$	1,353		$	6,240		$	2,791		$	12,522

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 the beginning of the given calendar year, or April 1, 2014, when the Company updated its operating segments, primarily to include communities acquired as part of the Archstone Acquisition in its Established Community portfolio. 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, 2015 and 2014 has been adjusted for the real estate assets that were sold from January 1, 2014 through June 30, 2015, or otherwise qualify as held for sale and/or discontinued operations as of June 30, 2015, as described in Note 6, “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, 2015
Established
New England	$	49,000	$	30,985	2.3	%	$	96,760	$	58,823	(0.7	)%	$	1,477,145
Metro NY/NJ	96,372		67,880		2.9	%	190,704		132,989		2.9	%	3,191,141
Mid-Atlantic	52,263		35,938		(0.9	)%	103,967		71,969		(0.8	)%	2,170,822
Pacific Northwest	19,047		13,657		7.9	%	37,536		27,030		8.4	%	719,366
Northern California	67,144		52,635		11.7	%	132,658		102,369		11.6	%	2,409,781
Southern California	63,169		43,046		6.7	%	125,493		86,564		9.8	%	2,503,327
Total Established	346,995		244,141		5.0	%	687,118		479,744		5.1	%	12,471,582
Other Stabilized	54,681		36,536		N/A		108,764		71,353		N/A		2,028,096
Development / Redevelopment	50,556		33,337		N/A		93,582		60,326		N/A		3,581,408
Land Held for Future Development	N/A		N/A		N/A		N/A		N/A		N/A		487,205
Non-allocated (2)	2,942		N/A		N/A		5,553		N/A		N/A		42,997
Total	$	455,174	$	314,014	13.1	%	$	895,017	$	611,423	13.2	%	$	18,611,288
For the period ended June 30, 2014 (3)
Established
New England	$	45,523	$	29,179	(0.9	)%	$	88,125	$	55,620	(1.0	)%	$	1,356,000
Metro NY/NJ	92,325		64,724		0.9	%	152,906		106,780		1.7	%	2,294,169
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	325,467		227,093		2.9	%	470,937		328,337		2.6	%	7,413,467
Other Stabilized	43,701		31,289		N/A		244,289		167,494		N/A		5,998,737
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 (2)	2,672		N/A		N/A		5,750		N/A		N/A		34,187
Total	$	403,580	$	277,548	8.9	%	$	793,286	$	540,111	18.1	%	$	16,960,426

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(1) Does not include gross real estate assets held for sale of $79,128 and $244,805 as of June 30, 2015 and 2014, respectively.

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

(3) 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.