Quarterly report pursuant to Section 13 or 15(d)

Information by Business Segment

v2.4.0.6
Information by Business Segment
 9 Months Ended
Sep. 30, 2012
Segment Reporting [Abstract]  
Information by Business Segment
Information by Business Segment
 
We have ten reportable operating office property segments (comprised of: the Baltimore/Washington Corridor; Northern Virginia; San Antonio; Washington, DC — Capitol Riverfront; St. Mary’s and King George Counties; Greater Baltimore; Suburban Maryland; Colorado Springs; Greater Philadelphia; and other). We also have an operating wholesale data center segment.  On January 1, 2012, we revised our reportable segments to include only operating properties.  Accordingly, we revised net operating income from real estate operations (“NOI from real estate operations”) to exclude operating expenses not related to operating properties, revised our definition of segment assets to include only long-lived assets associated with operating properties and revised our definition of additions to long-lived assets to include only additions to existing operating properties (excluding acquisitions and transfers from non-operating properties).  Financial information for prior periods has been presented in conformity with this revision.
 
The table below reports segment financial information for our reportable segments (in thousands).  We measure the performance of our segments through the measure we define as NOI from real estate operations, which is derived by subtracting property operating expenses from revenues from real estate operations.
 
Operating Office Property Segments
 
 
 
 
 
Baltimore/
Washington
Corridor
 
Northern
Virginia
 
San
Antonio
 
Washington,
DC - Capitol
Riverfront
 
St. Mary’s & 
King George
Counties
 
Greater
Baltimore
 
Suburban
Maryland
 
Colorado
Springs
 
Greater
Philadelphia
 
Other
 
Operating
Wholesale
Data Center
 
Total
Three Months Ended September 30, 2012
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
55,799

 
$
20,363

 
$
8,125

 
$
4,389

 
$
4,085

 
$
11,918

 
$
2,371

 
$
6,278

 
$
2,541

 
$
3,589

 
$
1,806

 
$
121,264

Property operating expenses
19,069

 
7,313

 
4,337

 
1,959

 
1,292

 
4,662

 
1,058

 
2,528

 
736

 
716

 
1,346

 
45,016

NOI from real estate operations
$
36,730

 
$
13,050

 
$
3,788

 
$
2,430

 
$
2,793

 
$
7,256

 
$
1,313

 
$
3,750

 
$
1,805

 
$
2,873

 
$
460

 
$
76,248

Additions to long-lived assets
$
4,454

 
$
54,781

 
$
—

 
$
414

 
$
355

 
$
1,055

 
$
36

 
$
548

 
$
195

 
$
(35
)
 
$
—

 
$
61,803

Transfers from non-operating properties
$
12,431

 
$
12,979

 
$
—

 
$
—

 
$
24

 
$
99

 
$
(88
)
 
$
315

 
$
1,843

 
$
548

 
$
(5
)
 
$
28,146

Three Months Ended September 30, 2011
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
54,744

 
$
18,640

 
$
7,701

 
$
4,507

 
$
3,508

 
$
18,193

 
$
5,648

 
$
6,037

 
$
1,701

 
$
3,167

 
$
1,283

 
$
125,129

Property operating expenses
19,628

 
7,278

 
3,824

 
1,808

 
1,143

 
7,553

 
1,975

 
2,465

 
417

 
849

 
1,054

 
47,994

NOI from real estate operations
$
35,116

 
$
11,362

 
$
3,877

 
$
2,699

 
$
2,365

 
$
10,640

 
$
3,673

 
$
3,572

 
$
1,284

 
$
2,318

 
$
229

 
$
77,135

Additions to long-lived assets
$
3,410

 
$
5,420

 
$
—

 
$
(227
)
 
$
197

 
$
2,034

 
$
4,126

 
$
1,369

 
$
694

 
$
26,769

 
$
51

 
$
43,843

Transfers from non-operating properties
$
17,625

 
$
7

 
$
87

 
$
—

 
$
—

 
$
343

 
$
11

 
$
209

 
$
48

 
$
—

 
$
13,515

 
$
31,845

Nine Months Ended September 30, 2012
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
167,726

 
$
57,974

 
$
23,563

 
$
12,515

 
$
12,436

 
$
41,954

 
$
12,680

 
$
18,880

 
$
7,171

 
$
10,977

 
$
4,660

 
$
370,536

Property operating expenses
58,285

 
21,889

 
12,177

 
5,585

 
3,689

 
16,357

 
5,461

 
7,107

 
2,083

 
2,201

 
3,728

 
138,562

NOI from real estate operations
$
109,441

 
$
36,085

 
$
11,386

 
$
6,930

 
$
8,747

 
$
25,597

 
$
7,219

 
$
11,773

 
$
5,088

 
$
8,776

 
$
932

 
$
231,974

Additions to long-lived assets
$
9,393

 
$
57,161

 
$
259

 
$
116

 
$
815

 
$
5,390

 
$
1,219

 
$
1,334

 
$
285

 
$
124

 
$
11

 
$
76,107

Transfers from non-operating properties
$
42,488

 
$
12,979

 
$
464

 
$
—

 
$
218

 
$
493

 
$
793

 
$
2,611

 
$
11,233

 
$
394

 
$
57,675

 
$
129,348

Segment assets at September 30, 2012
$
1,187,700

 
$
535,521

 
$
119,752

 
$
106,090

 
$
97,977

 
$
283,996

 
$
53,395

 
$
173,918

 
$
66,301

 
$
111,426

 
$
100,471

 
$
2,836,547

Nine Months Ended September 30, 2011
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
160,856

 
$
55,359

 
$
22,453

 
$
13,349

 
$
10,606

 
$
53,651

 
$
16,582

 
$
17,869

 
$
5,315

 
$
8,567

 
$
3,769

 
$
368,376

Property operating expenses
58,669

 
22,144

 
10,775

 
5,092

 
3,118

 
23,238

 
6,814

 
6,788

 
1,180

 
2,409

 
2,592

 
142,819

NOI from real estate operations
$
102,187

 
$
33,215

 
$
11,678

 
$
8,257

 
$
7,488

 
$
30,413

 
$
9,768

 
$
11,081

 
$
4,135

 
$
6,158

 
$
1,177

 
$
225,557

Additions to long-lived assets
$
14,631

 
$
10,234

 
$
—

 
$
585

 
$
1,038

 
$
14,237

 
$
7,631

 
$
3,190

 
$
690

 
$
26,773

 
$
51

 
$
79,060

Transfers from non-operating properties
$
43,648

 
$
4

 
$
846

 
$
—

 
$
—

 
$
8,184

 
$
396

 
$
211

 
$
3,598

 
$
—

 
$
20,169

 
$
77,056

Segment assets at September 30, 2011
$
1,200,407

 
$
485,450

 
$
115,001

 
$
112,865

 
$
84,781

 
$
438,041

 
$
145,677

 
$
212,415

 
$
101,432

 
$
115,777

 
$
43,904

 
$
3,055,750

The following table reconciles our segment revenues to total revenues as reported on our consolidated statements of operations (in thousands):
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Segment revenues from real estate operations
$
121,264

 
$
125,129

 
$
370,536

 
$
368,376

Construction contract and other service revenues
15,283

 
18,729

 
53,812

 
67,854

Less: Revenues from discontinued operations (Note 14)
(6,403
)
 
(17,151
)
 
(33,849
)
 
(51,363
)
Total revenues
$
130,144

 
$
126,707

 
$
390,499

 
$
384,867


 
The following table reconciles our segment property operating expenses to property operating expenses as reported on our consolidated statements of operations (in thousands):
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Segment property operating expenses
$
45,016

 
$
47,994

 
$
138,562

 
$
142,819

Less: Property operating expenses from discontinued operations (Note 14)
(2,217
)
 
(6,325
)
 
(12,223
)
 
(19,684
)
Total property operating expenses
$
42,799

 
$
41,669

 
$
126,339

 
$
123,135


 
As previously discussed, we provide real estate services such as property management and construction and development services primarily for our properties but also for third parties.  The primary manner in which we evaluate the operating performance of our service activities is through a measure we define as net operating income from service operations (“NOI from service operations”), which is based on the net of revenues and expenses from these activities.  Construction contract and other service revenues and expenses consist primarily of subcontracted costs that are reimbursed to us by the customer along with a management fee. The operating margins from these activities are small relative to the revenue.  We believe NOI from service operations is a useful measure in assessing both our level of activity and our profitability in conducting such operations. The table below sets forth the computation of our NOI from service operations (in thousands):
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Construction contract and other service revenues
$
15,283

 
$
18,729

 
$
53,812

 
$
67,854

Construction contract and other service expenses
(14,410
)
 
(18,171
)
 
(51,302
)
 
(65,698
)
NOI from service operations
$
873

 
$
558

 
$
2,510

 
$
2,156



The following table reconciles our NOI from real estate operations for reportable segments and NOI from service operations to (loss) income from continuing operations as reported on our consolidated statements of operations (in thousands):
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
NOI from real estate operations
$
76,248

 
$
77,135

 
$
231,974

 
$
225,557

NOI from service operations
873

 
558

 
2,510

 
2,156

Interest and other income
1,095

 
(242
)
 
3,152

 
3,682

Equity in loss of unconsolidated entities
(246
)
 
(159
)
 
(522
)
 
(223
)
Income tax (expense) benefit
(106
)
 
457

 
(4,296
)
 
6,043

Other adjustments:
—

 
 

 
—

 
 

Depreciation and other amortization associated with real estate operations
(28,698
)
 
(31,269
)
 
(84,920
)
 
(84,205
)
Impairment losses
(46,096
)
 
—

 
(41,260
)
 
(42,983
)
General and administrative expenses
(5,061
)
 
(6,154
)
 
(19,820
)
 
(19,251
)
Business development expenses and land carry costs
(1,632
)
 
(1,751
)
 
(4,506
)
 
(4,322
)
Interest expense on continuing operations
(23,239
)
 
(24,176
)
 
(71,909
)
 
(74,861
)
NOI from discontinued operations
(4,186
)
 
(10,826
)
 
(21,626
)
 
(31,679
)
Loss on early extinguishment of debt
(768
)
 
(1,611
)
 
(937
)
 
(1,636
)
(Loss) income from continuing operations
$
(31,816
)
 
$
1,962

 
$
(12,160
)
 
$
(21,722
)

 
The following table reconciles our segment assets to total assets (in thousands):
 
 
September 30,
2012
 
September 30,
2011
Segment assets
$
2,836,547

 
$
3,055,750

Non-operating property assets
616,526

 
727,268

Other assets
144,583

 
182,374

Total assets
$
3,597,656

 
$
3,965,392


 
The accounting policies of the segments are the same as those used to prepare our consolidated financial statements, except that discontinued operations are not presented separately for segment purposes.  In the segment reporting presented above, we did not allocate interest expense, depreciation and amortization and impairment losses to our real estate segments since they are not included in the measure of segment profit reviewed by management.  We also did not allocate general and administrative expenses, business development expenses and land carry costs, interest and other income, equity in loss of unconsolidated entities, income taxes and noncontrolling interests because these items represent general corporate or non-operating property items not attributable to segments.