Annual report pursuant to Section 13 and 15(d)

Information by Business Segment

v2.4.0.6
Information by Business Segment
 12 Months Ended
Dec. 31, 2011
Information by Business Segment  
Information by Business Segment

16. Information by Business Segment

        As of December 31, 2011, we had nine primary office property segments (comprised of: the Baltimore/Washington Corridor; Northern Virginia; San Antonio, Washington, DC—Capitol Riverfront; St. Mary's & King George Counties; Greater Baltimore; Suburban Maryland; Colorado Springs; and Greater Philadelphia;). We also had a wholesale data center segment.

        The table below reports segment financial information for our real estate operations (in thousands). Our segment entitled "Other" includes assets and operations not specifically associated with the other defined segments, including certain properties as well as corporate assets and investments in unconsolidated entities. We measure the performance of our segments through a measure we define as net operating income from real estate operations ("NOI from real estate operations"), which is derived by subtracting property operating expenses from revenues from real estate operations. We believe that NOI from real estate operations is an important supplemental measure of operating performance for a REIT's operating real estate because it provides a measure of the core operations that is unaffected by depreciation, amortization, impairment losses, financing and general and administrative expenses; this measure is particularly useful in our opinion in evaluating the performance of geographic segments, same-office property groupings and individual properties.

 
   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 		  Wholesale
Data Center 		  Other   Total  

Year Ended December 31, 2011

                                                                          

Revenues from real estate operations

   $ 218,051   $ 74,214   $ 30,066   $ 17,878   $ 14,366   $ 70,668   $ 21,982   $ 23,860   $ 7,458   $ 5,054   $ 12,235   $ 495,832  

Property operating expenses

     81,859     29,644     14,864     6,888     4,320     30,597     9,517     9,822     1,814     3,489     3,202     196,016  
                                                   

NOI from real estate operations

   $ 136,192   $ 44,570   $ 15,202   $ 10,990   $ 10,046   $ 40,071   $ 12,465   $ 14,038   $ 5,644   $ 1,565   $ 9,033   $ 299,816  
                                                   

Additions to properties, net

   $ 79,580   $ 54,565   $ 6,040   $ 2,156   $ 12,293   $ 28,703   $ 12,365   $ 4,108   $ 17,250   $ 67,909   $ 45,997   $ 330,966  
                                                   

Segment assets at December 31, 2011

   $ 1,401,082   $ 583,695   $ 161,419   $ 108,366   $ 105,599   $ 506,415   $ 173,749   $ 208,316   $ 138,623   $ 196,881   $ 283,379   $ 3,867,524  
                                                   

Year Ended December 31, 2010

                                                                          

Revenues from real estate operations

   $ 207,456   $ 75,063   $ 21,673   $ 4,678   $ 13,967   $ 71,850   $ 21,759   $ 24,897   $ 6,299   $ 1,062   $ 13,024   $ 461,728  

Property operating expenses

     77,340     28,115     10,447     1,758     4,340     31,491     9,657     9,137     2,274     1,202     4,002     179,763  
                                                   

NOI from real estate operations

   $ 130,116   $ 46,948   $ 11,226   $ 2,920   $ 9,627   $ 40,359   $ 12,102   $ 15,760   $ 4,025   $ (140 ) $ 9,022   $ 281,965  
                                                   

Additions to properties, net

   $ 90,054   $ 108,438   $ 19,064   $ 92,811   $ 7,090   $ 38,586   $ 4,434   $ 3,499   $ 20,714   $ 125,636   $ 15,084   $ 525,410  
                                                   

Segment assets at December 31, 2010

   $ 1,392,524   $ 545,560   $ 154,787   $ 120,492   $ 99,412   $ 585,001   $ 176,776   $ 265,119   $ 122,734   $ 129,815   $ 252,297   $ 3,844,517  
                                                   

Year Ended December 31, 2009

                                                                          

Revenues from real estate operations

   $ 197,610   $ 79,132   $ 13,566   $ —   $ 13,960   $ 58,275   $ 19,620   $ 23,125   $ 7,983   $ —   $ 13,584   $ 426,855  

Property operating expenses

     72,902     30,111     4,479     —     3,491     25,560     8,393     7,391     1,271     —     3,808     157,406  
                                                   

NOI from real estate operations

   $ 124,708   $ 49,021   $ 9,087   $ —   $ 10,469   $ 32,715   $ 11,227   $ 15,734   $ 6,712   $ —   $ 9,776   $ 269,449  
                                                   

Additions to properties, net

   $ 98,437   $ 7,673   $ 38,353   $ —   $ 2,200   $ 124,637   $ 24,022   $ 22,593   $ 9,126   $ —   $ 3,960   $ 331,001  
                                                   

Segment assets at December 31, 2009

   $ 1,332,579   $ 451,965   $ 134,986   $ —   $ 94,732   $ 569,590   $ 179,453   $ 270,358   $ 105,372   $ —   $ 240,987   $ 3,380,022  
                                                   

        The following table reconciles our segment revenues from real estate operations to total revenues as reported on our consolidated statements of operations (in thousands):

 
   For the Years Ended December 31,  
 
   2011   2010   2009  

Segment revenues from real estate operations

   $ 495,832   $ 461,728   $ 426,855  

Construction contract and other service revenues

     84,345     104,675     343,087  

Less: Revenues from discontinued operations (Note 18)

     (23,336 )   (28,805 )   (32,314 )
               

Total revenues

   $ 556,841   $ 537,598   $ 737,628  
               

        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 Years Ended December 31,  
 
   2011   2010   2009  

Segment property operating expenses

   $ 196,016   $ 179,763   $ 157,406  

Less: Property operating expenses from discontinued operations (Note 18)

     (9,183 )   (10,438 )   (11,433 )
               

Total property operating expenses

   $ 186,833   $ 169,325   $ 145,973  
               

        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 the 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 Years Ended December 31,  
 
   2011   2010   2009  

Construction contract and other service revenues

   $ 84,345   $ 104,675   $ 343,087  

Construction contract and other service expenses

     (81,639 )   (102,302 )   (336,519 )
               

NOI from service operations

   $ 2,706   $ 2,373   $ 6,568  
               

        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 Years Ended December 31,  
 
   2011   2010   2009  

NOI from real estate operations

   $ 299,816   $ 281,965   $ 269,449  

NOI from service operations

     2,706     2,373     6,568  

Interest and other income

     5,603     9,568     5,164  

Equity in (loss) income of unconsolidated entities

     (331 )   1,376     (941 )

Income tax benefit (expense)

     10,679     (108 )   (196 )

Other adjustments:

                    

Depreciation and amortization associated with real estate operations

     (127,444 )   (113,234 )   (97,869 )

Impairment losses

     (127,765 )   —     —  

General and administrative expenses

     (25,843 )   (24,008 )   (23,240 )

Business development expenses

     (3,195 )   (4,197 )   (3,699 )

Interest expense on continuing operations

     (101,281 )   (98,748 )   (79,789 )

NOI from discontinued operations

     (14,153 )   (18,367 )   (20,881 )

Loss on interest rate derivatives

     (29,805 )   —     —  

Loss on early extinguishment of debt

     (1,683 )   —     —  
               

(Loss) income from continuing operations

   $ (112,696 ) $ 36,620   $ 54,566  
               

        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. 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, interest and other income, equity in (loss) income of unconsolidated entities, income taxes, loss on early extinguishment of debt, loss on interest rate derivatives and noncontrolling interests because these items represent general corporate items not attributable to segments.