Quarterly report pursuant to Section 13 or 15(d)

Information by Business Segment

v2.3.0.15
Information by Business Segment
 9 Months Ended
Sep. 30, 2011
Information by Business Segment  
Information by Business Segment

11.                               Information by Business Segment

 

As of September 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 September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from real estate operations

 

$

54,744

 

$

18,193

 

$

18,640

 

$

6,037

 

$

5,648

 

$

7,701

 

$

4,507

 

$

1,701

 

$

3,508

 

$

1,283

 

$

3,167

 

$

125,129

 

Property operating expenses

 

19,905

 

7,621

 

7,364

 

2,573

 

2,021

 

3,897

 

1,808

 

462

 

1,143

 

1,054

 

864

 

48,712

 

NOI from real estate operations

 

$

34,839

 

$

10,572

 

$

11,276

 

$

3,464

 

$

3,627

 

$

3,804

 

$

2,699

 

$

1,239

 

$

2,365

 

$

229

 

$

2,303

 

$

76,417

 

Additions to properties, net

 

$

22,208

 

$

2,706

 

$

20,402

 

$

1,293

 

$

4,372

 

$

1,021

 

$

(262

)

$

4,786

 

$

2,795

 

$

21,941

 

$

30,094

 

$

111,356

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from real estate operations

 

$

51,946

 

$

18,288

 

$

18,949

 

$

6,176

 

$

5,243

 

$

5,609

 

$

135

 

$

1,793

 

$

3,431

 

$

162

 

$

3,296

 

$

115,028

 

Property operating expenses

 

18,945

 

7,828

 

7,195

 

2,380

 

2,618

 

2,697

 

50

 

232

 

1,152

 

251

 

956

 

44,304

 

NOI from real estate operations

 

$

33,001

 

$

10,460

 

$

11,754

 

$

3,796

 

$

2,625

 

$

2,912

 

$

85

 

$

1,561

 

$

2,279

 

$

(89

)

$

2,340

 

$

70,724

 

Additions to properties, net

 

$

19,097

 

$

14,578

 

$

7,302

 

$

1,028

 

$

1,373

 

$

5,701

 

$

92,816

 

$

2,187

 

$

3,445

 

$

111,510

 

$

531

 

$

259,568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from real estate operations

 

$

160,856

 

$

53,651

 

$

55,359

 

$

17,869

 

$

16,582

 

$

22,453

 

$

13,349

 

$

5,315

 

$

10,606

 

$

3,769

 

$

8,567

 

$

368,376

 

Property operating expenses

 

59,620

 

23,430

 

22,409

 

7,086

 

6,973

 

10,974

 

5,092

 

1,283

 

3,129

 

2,591

 

2,484

 

145,071

 

NOI from real estate operations

 

$

101,236

 

$

30,221

 

$

32,950

 

$

10,783

 

$

9,609

 

$

11,479

 

$

8,257

 

$

4,032

 

$

7,477

 

$

1,178

 

$

6,083

 

$

223,305

 

Additions to properties, net

 

$

65,551

 

$

20,390

 

$

39,716

 

$

2,712

 

$

7,935

 

$

5,710

 

$

433

 

$

10,819

 

$

9,939

 

$

61,322

 

$

38,176

 

$

262,703

 

Segment assets at September 30, 2011

 

$

1,414,086

 

$

551,942

 

$

571,940

 

$

261,255

 

$

176,336

 

$

159,238

 

$

114,249

 

$

133,077

 

$

104,732

 

$

190,495

 

$

288,042

 

$

3,965,392

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from real estate operations

 

$

154,627

 

$

52,980

 

$

55,780

 

$

18,662

 

$

16,524

 

$

13,775

 

$

135

 

$

4,505

 

$

10,550

 

$

162

 

$

10,315

 

$

338,015

 

Property operating expenses

 

57,953

 

24,149

 

21,214

 

6,928

 

7,518

 

6,426

 

50

 

1,795

 

3,300

 

251

 

3,160

 

132,744

 

NOI from real estate operations

 

$

96,674

 

$

28,831

 

$

34,566

 

$

11,734

 

$

9,006

 

$

7,349

 

$

85

 

$

2,710

 

$

7,250

 

$

(89

)

$

7,155

 

$

205,271

 

Additions to properties, net

 

$

67,313

 

$

29,737

 

$

44,896

 

$

2,541

 

$

3,454

 

$

16,199

 

$

92,816

 

$

18,518

 

$

3,988

 

$

111,510

 

$

14,318

 

$

405,290

 

Segment assets at September 30, 2010

 

$

1,382,234

 

$

584,429

 

$

487,898

 

$

266,228

 

$

175,181

 

$

151,058

 

$

122,737

 

$

121,695

 

$

96,813

 

$

115,722

 

$

233,377

 

$

3,737,372

 

 

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 Nine Months

 

 

 

Ended September 30,

 

Ended September 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

Segment revenues from real estate operations

 

$

125,129

 

$

115,028

 

$

368,376

 

$

338,015

 

Construction contract and other service revenues

 

18,729

 

13,608

 

67,854

 

77,038

 

Less: Revenues from discontinued operations (Note 14)

 

(3,236

)

(3,954

)

(9,434

)

(12,344

)

Total revenues

 

$

140,622

 

$

124,682

 

$

426,796

 

$

402,709

 

 

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 Nine Months

 

 

 

Ended September 30,

 

Ended September 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

Segment property operating expenses

 

$

48,712

 

$

44,304

 

$

145,071

 

$

132,744

 

Less: Property operating expenses from discontinued operations (Note 14)

 

(1,057

)

(1,291

)

(3,784

)

(4,413

)

Total property operating expenses

 

$

47,655

 

$

43,013

 

$

141,287

 

$

128,331

 

 

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 Nine Months

 

 

 

Ended September 30,

 

Ended September 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

Construction contract and other service revenues

 

$

18,729

 

$

13,608

 

$

67,854

 

$

77,038

 

Construction contract and other service expenses

 

(18,171

)

(13,347

)

(65,698

)

(75,148

)

NOI from service operations

 

$

558

 

$

261

 

$

2,156

 

$

1,890

 

 

The following table reconciles our NOI from real estate operations for reportable segments and NOI from service operations to income (loss) from continuing operations as reported on our consolidated statements of operations (in thousands):

 

 

 

For the Three Months

 

For the Nine Months

 

 

 

Ended September 30,

 

Ended September 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

NOI from real estate operations

 

$

76,417

 

$

70,724

 

$

223,305

 

$

205,271

 

NOI from service operations

 

558

 

261

 

2,156

 

1,890

 

Interest and other (loss) income

 

(242

)

395

 

3,682

 

1,942

 

Equity in (loss) income of unconsolidated entities

 

(159

)

648

 

(223

)

371

 

Income tax benefit (expense)

 

457

 

(27

)

6,043

 

(75

)

Other adjustments:

 

 

 

 

 

 

 

 

 

Depreciation and other amortization associated with real estate operations

 

(35,719

)

(29,503

)

(97,720

)

(84,368

)

Impairment losses

 

—

 

—

 

(57,824

)

—

 

General and administrative expenses

 

(6,154

)

(6,079

)

(19,251

)

(17,905

)

Business development expenses

 

(1,050

)

(2,886

)

(2,126

)

(3,506

)

Interest expense on continuing operations

 

(25,381

)

(26,174

)

(78,412

)

(74,042

)

NOI from discontinued operations

 

(2,179

)

(2,663

)

(5,650

)

(7,931

)

Loss on early extinguishment of debt

 

(1,655

)

—

 

(1,680

)

—

 

Income (loss) from continuing operations

 

$

4,893

 

$

4,696

 

$

(27,700

)

$

21,647

 

 

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, impairment losses and losses on early extinguishment of debt 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 and noncontrolling interests because these items represent general corporate items not attributable to segments.