Business Segments

9 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Business Segments

Note 10 — Business Segments

We have three segments: (i) Development and Redevelopment; (ii) Operating; and (iii) Other.

Our Development and Redevelopment segment consists of properties that are under construction or have not achieved stabilization, as well as land held for development. Our Operating segment includes 21 residential apartment communities that have achieved stabilized level of operations as of January 1, 2021 and maintained it throughout the current year and comparable period. We aggregate all our apartment communities that have reached stabilization into our Operating segment. Our Other segment consists of properties that are not included in our Development and Redevelopment or Operating segments. During the nine months ended September 30, 2022 we disposed of two Seattle, Washington area properties that had previously been reported as held for sale assets and one stabilized property located in Fremont, CA that was previously reported within our Operating segment. In addition, we terminated the leases for four residential apartment communities that were previously reported within our Development and Redevelopment segment. Prior period segment information has been recast based upon our current segment population and is consistent with how our chief operating decision maker ("CODM") evaluates the business. The recast conforms with our reportable segment composition as of September 30, 2022.

Our CODM uses cash flow, construction timeline to completion, and actual versus budgeted results to evaluate our properties in our Development and Redevelopment segment. Our CODM uses proportionate property net operating income to assess the operating performance of our Operating segment. Proportionate property net operating income is defined as our share of rental and other property revenues, excluding reimbursements, less direct property operating expenses, net of utility reimbursements, for consolidated communities. In our Condensed Consolidated Statements of Operations, utility reimbursements are included in Rental and other property revenues, in accordance with GAAP.

As of September 30, 2022, our Development and Redevelopment segment consists of 10 properties: two residential apartment communities with 965 planned apartment homes, a single family rental community with 16 planned homes plus eight accessory dwelling units, and one hotel, with 106 planned rooms, we are actively developing or redeveloping; and, land parcels held for development. Our Operating segment includes 21 consolidated apartment communities with 5,582 apartment homes. Our Other segment includes Eldridge Townhomes apartment community, stabilized but not owned for the comparable reporting period, and 1001 Brickell Bay Drive, our only office building.

The following tables present the results of operations of consolidated properties with our segments reported on a proportionate basis for the three months ended September 30, 2022 and 2021 (in thousands):

	Development and Redevelopment			Operating		Other		Proportionate and Other Adjustments(1)			Corporate and Amounts Not Allocated to Segments (2)			Consolidated
Three Months Ended September 30, 2022:
Rental and other property revenues	$	123		$	34,691	$	4,241	$	1,344		$	7,284		$	47,683
Property operating expenses		336			10,220		1,264		1,377			4,258			17,455
Other operating expenses not allocated    to segments (3)		—			—		—		—			96,247			96,247
Total operating expenses		336			10,220		1,264		1,377			100,505			113,702
Proportionate property net operating    income (loss)		(213	)		24,471		2,977		(33	)		(93,221	)		(66,019	)
Other items included in income before    income tax (4)		—			—		—		—			82,629			82,629
Income (loss) before income tax	$	(213	)	$	24,471	$	2,977	$	(33	)	$	(10,592	)	$	16,610

	Development and Redevelopment			Operating		Other		Proportionate and Other Adjustments(1)		Corporate and Amounts Not Allocated to Segments (2)			Consolidated
Three Months Ended September 30, 2021:
Rental and other property revenues	$	256		$	31,126	$	3,459	$	1,300	$	6,752		$	42,893
Property operating expenses		472			10,301		1,124		1,293		4,965			18,155
Other operating expenses not allocated    to segments (3)		—			—		—		—		30,577			30,577
Total operating expenses		472			10,301		1,124		1,293		35,542			48,732
Proportionate property net operating    income (loss)		(216	)		20,825		2,335		7		(28,790	)		(5,839	)
Other items included in income before    income tax (4)		—			—		—		—		(1,028	)		(1,028	)
Income (loss) before income tax	$	(216	)	$	20,825	$	2,335	$	7	$	(29,818	)	$	(6,867	)

The following tables present the results of operations of consolidated properties with our segments reported on a proportionate basis for the nine months ended September 30, 2022 and 2021 (in thousands):

	Development and Redevelopment			Operating		Other		Proportionate and Other Adjustments(1)		Corporate and Amounts Not Allocated to Segments (2)			Consolidated
Nine Months Ended September 30, 2022:
Rental and other property revenues	$	204		$	100,052	$	13,619	$	4,466	$	30,034		$	148,375
Property operating expenses		908			30,916		4,085		4,455		16,020			56,384
Other operating expenses not allocated    to segments (3)		—			—		—		—		172,663			172,663
Total operating expenses		908			30,916		4,085		4,455		188,683			229,047
Proportionate property net operating    income (loss)		(704	)		69,136		9,534		11		(158,649	)		(80,672	)
Other items included in income before    income tax (4)		—			—		—		—		402,506			402,506
Income (loss) before income tax	$	(704	)	$	69,136	$	9,534	$	11	$	243,857		$	321,834

	Development and Redevelopment		Operating		Other		Proportionate and Other Adjustments(1)		Corporate and Amounts Not Allocated to Segments (2)			Consolidated
Nine Months Ended September 30, 2021:
Rental and other property revenues	$	2,006	$	90,176	$	9,783	$	3,863	$	17,287		$	123,115
Property operating expenses		1,737		30,461		3,251		3,825		12,226			51,500
Other operating expenses not allocated    to segments (3)		—		—		—		—		85,627			85,627
Total operating expenses		1,737		30,461		3,251		3,825		97,853			137,127
Proportionate property net operating    income (loss)		269		59,715		6,532		38		(80,566	)		(14,012	)
Other items included in income before    income tax (4)		—		—		—		—		333			333
Income (loss) before income tax	$	269	$	59,715	$	6,532	$	38	$	(80,233	)	$	(13,679	)

(1)Represents adjustments for redeemable noncontrolling interests in consolidated real estate partnerships' share of the results of consolidated communities in our segments, which are included in the related consolidated amounts, but excluded from proportionate property net operating income for our segment evaluation. Also includes the reclassification of utility reimbursements from revenues to property operating expenses for the purpose of evaluating segment results. Utility reimbursements are included in Rental and other property revenues in our Condensed Consolidated Statements of Operations prepared in accordance with GAAP.

(2)Includes the operating results of apartment communities sold during the periods shown or held for sale at the end of the period, if any. Also includes property management expenses and casualty gains and losses, which are included in consolidated property operating expenses and are not part of our segment performance measure.

(3)Other operating expenses not allocated to segments consist of depreciation and amortization, general and administrative expense, and miscellaneous other expenses.

(4)Other items included in Income before income tax benefit consist primarily of interest expense, gain on our interest rate options, gain on sale of Real Estate, lease modification income and mezzanine investment income, net.

Net real estate and non-recourse property debt, net, of our segments as of September 30, 2022 and December 31, 2021, were as follows (in thousands):

	Development and Redevelopment			Operating			Other			Corporate(1)		Total
As of September 30, 2022:
Buildings and improvements	$	378,117		$	671,670		$	198,218		$	—	$	1,248,005
Land		226,738			259,033			153,501			—		639,272
Total real estate		604,855			930,703			351,719			—		1,887,277
Accumulated depreciation		(1,426	)		(459,722	)		(55,709	)		—		(516,857	)
Net real estate	$	603,429		$	470,981		$	296,010		$	—	$	1,370,420
Non-recourse property debt and construction loans, net	$	170,939		$	743,001		$	26,469		$	—	$	940,409

	Development and Redevelopment			Operating			Other			Corporate(1)			Total
As of December 31, 2021:
Buildings and improvements	$	202,367		$	675,269		$	196,853		$	182,725		$	1,257,214
Land		82,325			259,033			153,501			39,426			534,285
Total real estate		284,692			934,302			350,354			222,151			1,791,499
Accumulated depreciation		(1,426	)		(444,324	)		(41,841	)		(73,524	)		(561,115	)
Net real estate	$	283,266		$	489,978		$	308,513		$	148,627		$	1,230,384
Non-recourse property debt, net	$	36,218		$	428,308		$	—		$	182,181		$	646,707

(1)During the nine months ended September 30, 2022, certain properties were sold or reclassified as Held for Sale, and therefore are not included in our segment balance sheets, as of September 30, 2022. We added a new Corporate segment to this table for presentation purposes to display these assets and the associated debt as of December 31, 2021.

In addition to the amounts disclosed in the tables above, as of September 30, 2022 the Development and Redevelopment segment right-of-use lease assets and lease liabilities aggregated to $95.5 million and $98.5 million, respectively, and as of December 31, 2021, aggregated to $429.8 million and $435.1 million, respectively. As of September 30, 2022, right-of-use lease assets and lease liabilities primarily relate to our investments in Upton Place and Oak Shore. As described in Note 9, we entered into termination agreements to cancel our leases on North Tower of Flamingo Point, 707 Leahy, The Fremont, and Prism on September 1, 2022. Consequently, during the period ended September 30, 2022, we wrote off $326.1 million and $337.3 million right-of-use lease assets and lease liability, respectively.