Segment Information

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

The Company owns and operates industrial properties nationally and owns and operates office properties in a focused group of office markets. Additionally, the Company owns certain assets in the United Kingdom. At December 31, 2016, the Company's reportable segments were based on the Company's method of internal reporting and were as follows:

•Carolinas/Richmond;

•Chicago/Milwaukee;

•Florida

•Houston;

•Lehigh/Central PA;

•Minnesota;

•Philadelphia;

•Southeastern PA; and

•United Kingdom.

Certain other segments are aggregated into an "Other" category which includes the reportable segments: Arizona; Atlanta; Cincinnati/Columbus/Indianapolis; Dallas; DC Metro; New Jersey; Southern California; and other.

Comparative prior periods have been restated to reflect current segment disclosures.

The Company evaluates the performance of its reportable segments based on net operating income. Net operating income includes operating revenue from external customers, real estate taxes, amortization of lease transaction costs and other operating expenses which relate directly to the management and operation of the assets within each reportable segment.

The Company's accounting policies for the segments are the same as those used in the Company's consolidated financial statements.

There are no material inter-segment transactions.

The operating information by reportable segment is as follows (in thousands):

		Year ended
		December 31,
		2016			2015			2014
Operating revenue
	Carolinas/Richmond	$	66,270		$	71,950		$	76,781
	Chicago/Milwaukee	42,836			37,431			33,068
	Florida	99,733			127,184			135,203
	Houston	59,582			54,031			49,309
	Lehigh/Central PA	141,046			133,473			118,145
	Minnesota	41,192			47,932			54,892
	Philadelphia	41,838			40,490			35,238
	Southeastern PA	91,656			147,712			148,714
	United Kingdom	13,376			15,135			16,360
	Other	136,521			133,345			130,013
Segment-level operating revenue		734,050			808,683			797,723
Reconciliation to total operating revenues
	Development service fee income (1)	12,941			—			—
	Discontinued operations	—			—			(4,728		)
	Other	(283		)	90			(364		)
Total operating revenue		$	746,708		$	808,773		$	792,631
Net operating income
	Carolinas/Richmond	$	46,170		$	47,849		$	48,935
	Chicago/Milwaukee	28,199			24,851			20,856
	Florida	62,177			77,283			83,195
	Houston	32,499			31,159			29,134
	Lehigh/Central PA	102,209			94,972			82,050
	Minnesota	17,059			20,112			26,464
	Philadelphia	30,862			29,679			26,722
	Southeastern PA	53,947			80,458			81,183
	United Kingdom	6,390			10,486			10,704
	Other	89,274			87,925			83,991
Segment-level net operating income		468,786			504,774			493,234
Reconciliation to income from continuing operations
	Interest expense (2)	(115,077		)	(135,779		)	(152,444		)
	Loss on debt extinguishment	(27,099		)	—			—
	Depreciation/amortization expense (2) (3)	(152,556		)	(166,500		)	(177,715		)
	Impairment - real estate assets	(3,879		)	(18,244		)	(117		)
	Gain on property dispositions	219,270			100,314			45,147
	Equity in earnings of unconsolidated joint ventures	21,970			3,149			10,314
	General and administrative expense (2) (3)	(45,357		)	(44,529		)	(38,041		)
	Discontinued operations excluding gain on property dispositions	—			—			(1,950		)
	Income taxes (3)	47			(2,351		)	(2,404		)
	Other	40			5,090			(134		)
Income from continuing operations		$	366,145		$	245,924		$	175,890

(1) Prior to the fourth quarter of 2016, development service fee income had been classified as other income and development service fee expense had been classified as general and administrative expense. See Note 2.

(2) Includes activity on discontinued operations.

(3) Excludes costs which are included in determining segment-level net operating income.

The amount of depreciation and amortization expense related to tenant improvement and lease transaction costs within each reporting segment for the net operating income calculation is as follows (in thousands):

	Year ended
	December 31,
	2016		2015		2014
Carolinas/Richmond	$	4,944	$	5,307	$	6,607
Chicago/Milwaukee	2,026		1,161		466
Florida	6,605		9,407		9,324
Houston	4,713		4,466		3,988
Lehigh/Central PA	12,262		11,641		10,157
Minnesota	3,832		4,986		4,478
Philadelphia	2,706		2,220		1,803
Southeastern PA	6,134		12,346		12,272
United Kingdom	259		292		177
Other	9,792		8,249		5,631
Depreciation and amortization of tenant improvement and lease transaction costs	$	53,273	$	60,075	$	54,903

The Company's operating revenue by product type and by reportable segment for the years ended December 31, 2016, 2015 and 2014 is as follows (in thousands):

	Year Ended
	December 31, 2016							December 31, 2015						December 31, 2014
	Industrial		Office		Total			Industrial		Office		Total		Industrial		Office		Total
Carolinas/Richmond	$	66,270	$	—	$	66,270		$	62,075	$	9,875	$	71,950	$	56,794	$	19,987	$	76,781
Chicago/Milwaukee	42,836		—		42,836			37,431		—		37,431		33,068		—		33,068
Florida	66,028		33,705		99,733			67,149		60,035		127,184		62,689		72,514		135,203
Houston	58,370		1,212		59,582			53,802		229		54,031		49,309		—		49,309
Lehigh/Central PA	138,766		2,280		141,046			131,168		2,305		133,473		115,821		2,324		118,145
Minnesota	22,171		19,021		41,192			24,721		23,211		47,932		25,378		29,514		54,892
Philadelphia	12,842		28,996		41,838			11,809		28,681		40,490		10,072		25,166		35,238
Southeastern PA	19,448		72,208		91,656			28,457		119,255		147,712		28,895		119,819		148,714
United Kingdom	10,775		2,601		13,376			12,104		3,031		15,135		13,090		3,270		16,360
Other (1)	91,762		44,759		136,521			86,180		47,165		133,345		82,672		47,341		130,013
	$	529,268	$	204,782	734,050			$	514,896	$	293,787	808,683		$	477,788	$	319,935	797,723
Reconciliation to total operating revenue
Development service fee income					12,941							—						—
Discontinued operations					—							—						(4,728		)
Corporate other					(283		)					90						(364		)
Total operating revenue					$	746,708						$	808,773					$	792,631

The Company's total assets by reportable segment as of December 31, 2016 and 2015 is as follows (in thousands):

	As of December 31,
	2016		2015
Carolinas/Richmond	$	503,920	$	467,098
Chicago/Milwaukee	423,889		429,390
Florida	514,431		874,352
Houston	530,438		522,285
Lehigh/Central PA	1,311,815		1,157,468
Minnesota	192,409		346,840
Philadelphia	557,510		444,889
Southeastern PA	262,155		448,523
United Kingdom	189,766		215,850
Other	1,403,431		1,586,481
Segment-level total assets	5,889,764		6,493,176
Corporate Other	103,049		64,453
Total assets	$	5,992,813	$	6,557,629

The Company's real estate assets by reportable segment as of December 31, 2016 and 2015 is as follows (in thousands):

	As of December 31,
	2016		2015
Carolinas/Richmond	$	482,736	$	446,348
Chicago/Milwaukee	382,325		387,182
Florida	476,046		815,712
Houston	495,817		483,432
Lehigh/Central PA	1,234,090		1,096,195
Minnesota	182,737		322,627
Philadelphia	332,933		282,159
Southeastern PA	236,317		410,195
United Kingdom	149,082		174,390
Other	1,288,212		1,447,322
Total real estate assets	$	5,260,295	$	5,865,562

The Company incurred the following costs related to its long-lived assets for the years ended December 31, 2016, 2015 and 2014 (in thousands):

		Year Ended December 31,
		2016		2015		2014
Costs incurred on long-lived assets
	Carolinas/Richmond	$	51,647	$	31,175	$	82,600
	Chicago/Milwaukee	18,294		13,483		21,698
	Florida	38,312		43,594		45,152
	Houston	25,638		96,681		70,903
	Lehigh/Central PA	176,386		165,319		105,725
	Minnesota	11,023		41,259		28,966
	Philadelphia	57,691		34,122		32,012
	Southeastern PA	13,110		9,047		39,638
	United Kingdom	11,492		12,960		16,298
	Other	107,500		125,412		172,495
Total costs incurred on long-lived assets		$	511,093	$	573,052	$	615,487