Segment Reporting

9 Months Ended

Sep. 30, 2012

Segment Reporting

Segment Reporting

7.  Segment Reporting

The Company’s reportable operating segments include Established Communities, Other Stabilized Communities, and Development/Redevelopment Communities.  Annually as of January 1st, the Company determines which of its communities fall into each of these categories and unless disposition or redevelopment plans regarding a community change, maintains that classification throughout the year for the purpose of reporting segment operations.

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 segments’ 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 the three and nine months ended September 30, 2012 and 2011 is as follows (dollars in thousands):

	For the three months ended						For the nine months ended
	9-30-12			9-30-11			9-30-12			9-30-11
Net income	$	86,747		$	44,677		$	301,178		$	118,405
Indirect operating expenses, net of corporate income	7,396			7,743			24,049			22,490
Investments and investment management expense	1,582			1,328			4,526			3,860
Expensed acquisition, development and other pursuit costs	608			633			1,749			2,636
Interest expense, net	33,985			42,659			100,804			130,174
Loss on extinguishment of debt, net	—			—			1,179			—
General and administrative expense	8,372			6,087			26,398			21,524
Equity in income of unconsolidated entities	(5,553		)	(2,615		)	(9,801		)	(3,513		)
Depreciation expense	65,998			60,893			193,434			180,953
Impairment loss	—			14,052			—			14,052
Gain on sale of real estate assets	—			(13,716		)	(95,329		)	(21,391		)
Income from discontinued operations	—			(327		)	(2,870		)	(631		)
Gain on acquisition of unconsolidated entity	(14,194		)	—			(14,194		)	—
Net operating income	$	184,941		$	161,414		$	531,123		$	468,559

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 three and nine months ended September 30, 2012 and 2011 have been adjusted for the real estate assets that were sold from January 1, 2011 through September 30, 2012, or otherwise qualify as discontinued operations as of September 30, 2012, as described in Note 6, “Real Estate Disposition Activities.”

	For the three months ended						For the nine months ended
	Total				% NOI change		Total				% NOI change		Gross
	revenue		NOI		from prior year		revenue		NOI		from prior year		real estate (1)
For the period ended September 30, 2012
Established
New England	$	42,755	$	27,374	2.7	%	$	125,568	$	81,268	5.6	%	$	1,287,578
Metro NY/NJ	59,346		41,051		5.6	%	174,734		121,280		7.2	%	1,966,938
Mid-Atlantic	26,300		18,618		3.7	%	77,825		56,156		4.2	%	591,802
Pacific Northwest	8,401		5,984		19.6	%	24,426		17,207		13.6	%	304,381
Northern California	32,949		24,316		15.9	%	95,979		70,344		14.7	%	1,180,656
Southern California	25,131		17,224		6.2	%	74,000		51,225		8.8	%	946,802
Total Established	194,882		134,567		7.1	%	572,532		397,480		8.1	%	6,278,157
Other Stabilized	39,222		25,691		N/A		110,200		71,641		N/A		1,383,135
Development / Redevelopment	35,267		24,683		N/A		90,692		62,002		N/A		1,871,336
Land Held for Future Development	N/A		N/A		N/A		N/A		N/A		N/A		304,295
Non-allocated (2)	2,533		N/A		N/A		7,852		N/A		N/A		54,829
Total	$	271,904	$	184,941	14.6	%	$	781,276	$	531,123	14.4	%	$	9,891,752
For the period ended September 30, 2011
Established
New England	$	43,277	$	27,560	8.6	%	$	126,387	$	80,048	8.6	%	$	1,300,019
Metro NY/NJ	49,721		33,707		10.0	%	145,912		98,420		7.3	%	1,532,296
Mid-Atlantic	26,031		18,403		5.6	%	76,677		55,242		6.7	%	602,609
Pacific Northwest	9,560		6,120		7.1	%	28,035		18,609		4.7	%	362,806
Northern California	24,172		17,244		11.3	%	70,449		50,445		8.9	%	868,400
Southern California	19,035		12,699		13.1	%	55,997		37,047		7.8	%	695,828
Total Established	171,796		115,733		9.3	%	503,457		339,811		7.7	%	5,361,958
Other Stabilized	35,742		23,310		N/A		101,773		65,605		N/A		1,566,557
Development / Redevelopment	33,748		22,371		N/A		93,708		63,143		N/A		1,627,772
Land Held for Future Development	N/A		N/A		N/A		N/A		N/A		N/A		263,155
Non-allocated (2)	2,433		N/A		N/A		7,085		N/A		N/A		76,321
Total	$	243,719	$	161,414	15.1	%	$	706,023	$	468,559	14.0	%	$	8,895,763

(1)Does not include gross real estate assets held for sale of $0 and $269,719 as of September 30, 2012 and 2011, respectively.

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