Segment Reporting

3 Months Ended

Mar. 31, 2013

Segment Reporting

Segment Reporting

8.  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 maintains that classification, unless disposition plans regarding a community change, 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 months ended March 31, 2013 and 2012 is as follows (dollars in thousands):

	For the three months ended
	3-31-13			3-31-12
	(unaudited)			(unaudited)
Net income	$	75,469		$	57,609
Indirect operating expenses, net of corporate income	9,041			8,036
Investments and investment management expense	1,015			1,446
Expensed acquisition, development and other pursuit costs	40,059			239
Interest expense, net	38,174			33,626
Loss on extinguishment of debt	—			1,179
General and administrative expense	10,039			9,710
Equity in (income) loss of unconsolidated entities	18,564			(2,175		)
Depreciation expense	109,829			61,571
Gain on sale of real estate assets	(84,491		)	—
Income from discontinued operations	(2,446		)	(3,935		)
Net operating income	$	215,253		$	167,306

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 months ended March 31, 2013 and 2012 have been adjusted for the real estate assets that were sold from January 1, 2012 through March 31, 2013, or otherwise qualify as discontinued operations as of March 31, 2013, as described in Note 7, “Real Estate Disposition Activities.”

	Total				% NOI change		Gross
	revenue		NOI		from prior year		real estate (1)
For the three months ended March 31, 2013
Established
New England	$	44,655	$	28,577	1.7	%	$	1,387,495
Metro NY/NJ	61,244		42,439		5.5	%	1,915,890
Mid-Atlantic	25,035		18,188		1.6	%	631,207
Pacific Northwest	11,376		7,850		10.5	%	443,564
Northern California	36,603		27,504		11.6	%	1,312,838
Southern California	26,910		18,463		5.9	%	987,209
Total Established	205,823		143,021		5.6	%	6,678,203
Other Stabilized	80,862		56,243		N/A		7,136,065
Development / Redevelopment	23,174		15,989		N/A		1,915,146
Land Held for Future Development	N/A		N/A		N/A		359,029
Non-allocated (2)	2,272		N/A		N/A		69,318
Total	$	312,131	$	215,253	28.7	%	$	16,157,761
For the three months ended March 31, 2012
Established
New England	$	33,881	$	22,065	7.5	%	$	1,100,828
Metro NY/NJ	57,219		39,591		9.8	%	1,962,197
Mid-Atlantic	25,696		18,816		6.4	%	591,140
Pacific Northwest	7,905		5,572		11.9	%	301,793
Northern California	31,112		22,793		15.5	%	1,180,070
Southern California	23,747		16,559		11.9	%	931,512
Total Established	179,560		125,396		10.2	%	6,067,540
Other Stabilized	30,252		19,498		N/A		1,098,074
Development / Redevelopment	33,671		22,412		N/A		1,641,636
Land Held for Future Development	N/A		N/A		N/A		297,127
Non-allocated (2)	2,549		N/A		N/A		104,282
Total	$	246,032	$	167,306	17.4	%	$	9,208,659

(1) Does not include gross real estate assets held for sale of $0 and $255,431 as of March 31, 2013 and 2012, respectively.

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