Segment Reporting

12 Months Ended

Dec. 31, 2012

Segment Reporting

Segment Reporting

8. Segment Reporting

        The Company's reportable operating segments are 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 maintains that classification, unless disposition or redevelopment plans regarding a community change, throughout the year for the purpose of reporting segment operations.

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  Established Communities (also known as Same Store Communities) are communities where a comparison of operating results from the prior year to the current year is meaningful, as these communities were owned and had stabilized occupancy and operating expenses as of the beginning of the prior year. For the year 2012, the Established Communities are communities that are consolidated for financial reporting purposes, had stabilized occupancy and operating expenses as of January 1, 2011, are not conducting or planning to conduct substantial redevelopment activities and are not held for sale or planned for disposition within the current year. A community is considered to have stabilized occupancy at the earlier of (i) attainment of 95% physical occupancy or (ii) the one-year anniversary of completion of development or redevelopment.

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  Other Stabilized Communities includes all other completed communities that have stabilized occupancy, as defined above. Other Stabilized Communities do not include communities that are conducting or planning to conduct substantial redevelopment activities within the current year.

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  Development/Redevelopment Communities consists of communities that are under construction and have not received a final certificate of occupancy, communities where the Company owns a majority interest and where substantial redevelopment is in progress or is planned to begin during the current year and communities under lease-up that had not reached stabilized occupancy, as defined above, as of January 1, 2012.

        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. 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 years ended December 31, 2012, 2011 and 2010 is as follows (dollars in thousands):

	For the year ended
	12-31-12			12-31-11			12-31-10
Net income	$	423,562		$	441,370		$	174,079
Indirect operating expenses, net of corporate income		31,911			30,550			30,246
Investments and investment management expense		6,071			5,126			3,824
Expensed acquisition, development and other pursuit costs		11,350			2,967			2,741
Interest expense, net		136,920			167,814			169,997
(Gain) loss on extinguishment of debt, net		1,179			1,940			—
General and administrative expense		34,101			29,371			26,846
Equity in income of unconsolidated entities		(20,914	)		(5,120	)		(762	)
Depreciation expense		256,026			239,060			220,563
Casualty and impairment loss		1,449			14,052			—
Gain on sale of real estate assets		(146,591	)		(294,806	)		(74,074	)
Income from discontinued operations		(12,495	)		(7,880	)		(7,950	)
Gain on acquisition of unconsolidated real estate entity		(14,194	)		—			—
Net operating income	$	708,375		$	624,444		$	545,510

        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 as of the beginning of the given calendar year. 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 years ended December 31, 2012, 2011 and 2010 have been adjusted for the real estate assets that were sold from January 1, 2010 through December 31, 2012, or otherwise qualify as discontinued operations as of December 31, 2012, as described in Note 6, "Real Estate Disposition Activities."

	Total revenue		NOI		% NOI change from prior year			Gross real estate(1)
For the period ended December 31, 2012
Established
New England	$	168,260	$	109,301		4.9	%	$	1,289,604
Metro NY/NJ		229,624		160,026		7.3	%		1,947,668
Mid-Atlantic		103,784		75,313		6.9	%		591,669
Pacific Northwest		32,942		23,433		15.0	%		306,289
Northern California		129,493		94,915		14.0	%		1,181,395
Southern California		99,302		68,880		7.0	%		947,743
Total Established(2)		763,405		531,868		7.6	%		6,264,368
Other Stabilized		135,231		86,722		n/a			1,314,690
Development / Redevelopment		129,767		89,785		n/a			2,032,277
Land Held for Future Development		n/a		n/a		n/a			316,037
Non-allocated(3)		10,257		n/a		n/a			73,724
Total	$	1,038,660	$	708,375		14.2	%	$	10,001,096
For the period ended December 31, 2011
Established
New England	$	169,939	$	109,048		9.6	%	$	1,302,368
Metro NY/NJ		195,652		131,605		6.6	%		1,534,923
Mid-Atlantic		102,834		74,756		6.6	%		603,345
Pacific Northwest		30,057		20,374		6.0	%		301,662
Northern California		95,209		68,173		10.9	%		869,254
Southern California		75,120		50,391		9.8	%		697,705
Total Established(2)		668,811		454,347		8.3	%		5,309,257
Other Stabilized		137,779		89,949		n/a			1,567,875
Development / Redevelopment		119,841		80,148		n/a			1,752,006
Land Held for Future Development		n/a		n/a		n/a			325,918
Non-allocated(3)		9,656		n/a		n/a			78,161
Total	$	936,087	$	624,444		14.5	%	$	9,033,217
For the period ended December 31, 2010
Established
New England	$	143,564	$	89,712		(0.3	)%	$	1,109,016
Metro NY/NJ		181,639		121,033		(1.5	)%		1,386,850
Mid-Atlantic		91,927		65,737		1.0	%		545,190
Pacific Northwest		19,045		12,426		(10.7	)%		176,940
Northern California		111,474		76,362		(6.4	)%		1,056,111
Southern California		58,888		37,703		(6.7	)%		470,162
Total Established(2)		606,537		402,973		(2.6	)%		4,744,269
Other Stabilized		122,403		74,609		n/a			1,580,910
Development / Redevelopment		106,526		67,928		n/a			1,670,398
Land Held for Future Development		n/a		n/a		n/a			184,150
Non-allocated(3)		7,354		n/a		n/a			82,806
Total	$	842,820	$	545,510		4.6	%	$	8,262,533

(1)

Does not include gross real estate assets held for sale of $70,246, $255,274 and $398,679 as of December 31, 2012, December 31, 2011 and December 31, 2010 respectively.

(2)

Gross real estate for the Company's established communities includes capitalized additions of approximately $25,448, $34,359 and $38,670 in 2012, 2011 and 2010, respectively.

(3)

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