Quarterly report pursuant to Section 13 or 15(d)

Information by Business Segment

 v2.3.0.11
Information by Business Segment
 6 Months Ended
Jun. 30, 2011
Information by Business Segment  
Information by Business Segment

10.                               Information by Business Segment

 

As of June 30, 2011, we had nine primary office property segments (comprised of: the Baltimore/Washington Corridor; Greater Baltimore; Northern Virginia; Colorado Springs; Suburban Maryland; San Antonio; Washington, DC — Capitol Riverfront; Greater Philadelphia; and St. Mary’s and King George Counties).  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 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

 

Greater
Baltimore

 

Northern
Virginia

 

Colorado
Springs

 

Suburban
Maryland

 

San
Antonio

 

Washington,
DC - Capitol
Riverfront

 

Greater
Philadelphia

 

St. Mary’s &
King George
Counties

 

Wholesale
Data Center

 

Other

 

Total

 

Three Months Ended June 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from real estate operations

 

$

52,860

 

$

17,846

 

$

18,445

 

$

5,912

 

$

5,325

 

$

7,089

 

$

4,252

 

$

1,675

 

$

3,564

 

$

1,276

 

$

2,562

 

$

120,806

 

Property operating expenses

 

18,325

 

7,269

 

7,374

 

2,077

 

2,234

 

3,208

 

1,657

 

375

 

970

 

831

 

1,134

 

45,454

 

NOI from real estate operations

 

$

34,535

 

$

10,577

 

$

11,071

 

$

3,835

 

$

3,091

 

$

3,881

 

$

2,595

 

$

1,300

 

$

2,594

 

$

445

 

$

1,428

 

$

75,352

 

Additions to properties, net

 

$

18,588

 

$

5,858

 

$

17,177

 

$

998

 

$

2,388

 

$

2,399

 

$

632

 

$

3,800

 

$

3,894

 

$

15,311

 

$

4,951

 

$

75,996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from real estate operations

 

$

50,623

 

$

16,827

 

$

18,172

 

$

6,154

 

$

5,452

 

$

4,228

 

$

—

 

$

1,510

 

$

3,530

 

$

—

 

$

3,495

 

$

109,991

 

Property operating expenses

 

16,853

 

7,311

 

6,706

 

2,239

 

2,199

 

2,100

 

—

 

800

 

1,041

 

—

 

895

 

40,144

 

NOI from real estate operations

 

$

33,770

 

$

9,516

 

$

11,466

 

$

3,915

 

$

3,253

 

$

2,128

 

$

—

 

$

710

 

$

2,489

 

$

—

 

$

2,600

 

$

69,847

 

Additions to properties, net

 

$

32,257

 

$

7,919

 

$

32,684

 

$

700

 

$

540

 

$

5,559

 

$

—

 

$

6,273

 

$

132

 

$

—

 

$

1,311

 

$

87,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from real estate operations

 

$

106,112

 

$

35,458

 

$

36,719

 

$

11,832

 

$

10,934

 

$

14,752

 

$

8,842

 

$

3,614

 

$

7,098

 

$

2,486

 

$

5,400

 

$

243,247

 

Property operating expenses

 

39,715

 

15,809

 

15,045

 

4,513

 

4,952

 

7,077

 

3,284

 

821

 

1,986

 

1,537

 

1,620

 

96,359

 

NOI from real estate operations

 

$

66,397

 

$

19,649

 

$

21,674

 

$

7,319

 

$

5,982

 

$

7,675

 

$

5,558

 

$

2,793

 

$

5,112

 

$

949

 

$

3,780

 

$

146,888

 

Additions to properties, net

 

$

43,343

 

$

17,684

 

$

19,314

 

$

1,419

 

$

3,563

 

$

4,689

 

$

695

 

$

6,033

 

$

7,144

 

$

39,381

 

$

8,082

 

$

151,347

 

Segment assets at June 30, 2011

 

$

1,389,667

 

$

566,900

 

$

556,037

 

$

261,813

 

$

171,418

 

$

159,350

 

$

115,949

 

$

127,685

 

$

102,402

 

$

168,986

 

$

248,023

 

$

3,868,230

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from real estate operations

 

$

102,681

 

$

34,692

 

$

36,831

 

$

12,486

 

$

11,281

 

$

8,166

 

$

—

 

$

2,712

 

$

7,119

 

$

—

 

$

7,019

 

$

222,987

 

Property operating expenses

 

39,008

 

16,321

 

14,019

 

4,548

 

4,900

 

3,729

 

—

 

1,563

 

2,148

 

—

 

2,204

 

88,440

 

NOI from real estate operations

 

$

63,673

 

$

18,371

 

$

22,812

 

$

7,938

 

$

6,381

 

$

4,437

 

$

—

 

$

1,149

 

$

4,971

 

$

—

 

$

4,815

 

$

134,547

 

Additions to properties, net

 

$

48,216

 

$

15,159

 

$

37,594

 

$

1,513

 

$

2,081

 

$

10,498

 

$

—

 

$

16,331

 

$

543

 

$

—

 

$

13,787

 

$

145,722

 

Segment assets at June 30, 2010

 

$

1,358,956

 

$

570,889

 

$

485,307

 

$

267,356

 

$

172,321

 

$

144,275

 

$

—

 

$

120,432

 

$

93,333

 

$

—

 

$

254,414

 

$

3,467,283

 

 

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

 

 

 

For the Three Months

 

For the Six Months

 

 

 

Ended June 30,

 

Ended June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

Segment revenues from real estate operations

 

$

120,806

 

$

109,991

 

$

243,247

 

$

222,987

 

Construction contract and other service revenues

 

28,097

 

26,065

 

49,125

 

63,430

 

Less: Revenues from discontinued operations (Note 13)

 

(2,263

)

(3,262

)

(4,546

)

(6,627

)

Total revenues

 

$

146,640

 

$

132,794

 

$

287,826

 

$

279,790

 

 

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

 

For the Six Months

 

 

 

Ended June 30,

 

Ended June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

Segment property operating expenses

 

$

45,454

 

$

40,144

 

$

96,359

 

$

88,440

 

Less: Property operating expenses from discontinued operations (Note 13)

 

(733

)

(884

)

(1,928

)

(2,234

)

Total property operating expenses

 

$

44,721

 

$

39,260

 

$

94,431

 

$

86,206

 

 

As previously discussed, we provide real estate services such as property management, construction and development and heating and air conditioning 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

 

For the Six Months

 

 

 

Ended June 30,

 

Ended June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

Construction contract and other service revenues

 

$

28,097

 

$

26,065

 

$

49,125

 

$

63,430

 

Construction contract and other service expenses

 

(26,909

)

(25,402

)

(47,527

)

(61,801

)

NOI from service operations

 

$

1,188

 

$

663

 

$

1,598

 

$

1,629

 

 

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

 

For the Six Months

 

 

 

Ended June 30,

 

Ended June 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

NOI from real estate operations

 

$

75,352

 

$

69,847

 

$

146,888

 

$

134,547

 

NOI from service operations

 

1,188

 

663

 

1,598

 

1,629

 

Interest and other income

 

2,756

 

245

 

3,924

 

1,547

 

Equity in loss of unconsolidated entities

 

(94

)

(72

)

(64

)

(277

)

Income tax benefit (expense)

 

5,042

 

(7

)

5,586

 

(48

)

Other adjustments:

 

 

 

 

 

 

 

 

 

Depreciation and other amortization associated with real estate operations

 

(31,440

)

(28,720

)

(62,830

)

(55,531

)

Impairment losses

 

(38,290

)

—

 

(66,032

)

—

 

General and administrative expenses

 

(6,320

)

(5,926

)

(13,097

)

(11,826

)

Business development expenses

 

(588

)

(465

)

(1,076

)

(620

)

Interest expense on continuing operations

 

(26,607

)

(25,576

)

(53,246

)

(48,068

)

NOI from discontinued operations

 

(1,530

)

(2,378

)

(2,618

)

(4,393

)

Loss on early extinguishment of debt

 

(25

)

—

 

(25

)

—

 

(Loss) income from continuing operations

 

$

(20,556

)

$

7,611

 

$

(40,992

)

$

16,960

 

 

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 of unconsolidated entities, income taxes and noncontrolling interests because these items represent general corporate items not attributable to segments.