Quarterly report pursuant to Section 13 or 15(d)

Information by Business Segment

v2.4.0.6
Information by Business Segment
 3 Months Ended
Mar. 31, 2012
Information by Business Segment  
Information by Business Segment

10.                               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 March 31, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from real estate operations

 

$

56,250

 

$

18,560

 

$

7,608

 

$

3,894

 

$

4,212

 

$

15,372

 

$

5,749

 

$

6,453

 

$

2,172

 

$

3,618

 

$

1,416

 

$

125,304

 

Property operating expenses

 

20,151

 

7,400

 

3,817

 

1,910

 

1,258

 

5,890

 

2,521

 

2,385

 

615

 

1,233

 

1,207

 

48,387

 

NOI from real estate operations

 

$

36,099

 

$

11,160

 

$

3,791

 

$

1,984

 

$

2,954

 

$

9,482

 

$

3,228

 

$

4,068

 

$

1,557

 

$

2,385

 

$

209

 

$

76,917

 

Additions to long-lived assets

 

$

1,864

 

$

1,661

 

$

—

 

$

(729

)

$

167

 

$

719

 

$

771

 

$

99

 

$

—

 

$

26

 

$

—

 

$

4,578

 

Transfers from non-operating properties

 

$

25,594

 

$

—

 

$

362

 

$

—

 

$

556

 

$

365

 

$

335

 

$

316

 

$

7,303

 

$

—

 

$

—

 

$

34,831

 

Segment assets at March 31, 2012

 

$

1,231,949

 

$

480,457

 

$

120,024

 

$

108,649

 

$

99,946

 

$

370,754

 

$

147,197

 

$

181,241

 

$

109,432

 

$

114,108

 

$

43,390

 

$

3,007,147

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from real estate operations

 

$

53,252

 

$

18,274

 

$

7,663

 

$

4,590

 

$

3,534

 

$

17,612

 

$

5,609

 

$

5,920

 

$

1,939

 

$

2,838

 

$

1,210

 

$

122,441

 

Property operating expenses

 

21,058

 

7,590

 

3,813

 

1,627

 

1,014

 

8,452

 

2,661

 

2,343

 

418

 

467

 

709

 

50,152

 

NOI from real estate operations

 

$

32,194

 

$

10,684

 

$

3,850

 

$

2,963

 

$

2,520

 

$

9,160

 

$

2,948

 

$

3,577

 

$

1,521

 

$

2,371

 

$

501

 

$

72,289

 

Additions to long-lived assets

 

$

6,405

 

$

2,033

 

$

—

 

$

156

 

$

380

 

$

8,088

 

$

1,052

 

$

736

 

$

(4

)

$

(646

)

$

—

 

$

18,200

 

Transfers from non-operating properties

 

$

19,883

 

$

(7

)

$

600

 

$

—

 

$

—

 

$

4,247

 

$

354

 

$

—

 

$

(2,474

)

$

—

 

$

6,654

 

$

29,257

 

Segment assets at March 31, 2011

 

$

1,199,244

 

$

488,599

 

$

115,221

 

$

117,758

 

$

87,690

 

$

479,474

 

$

145,913

 

$

214,111

 

$

96,372

 

$

83,247

 

$

30,714

 

$

3,058,343

 

 

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 March 31,

 

 

 

2012

 

2011

 

Segment revenues from real estate operations

 

$

125,304

 

$

122,441

 

Construction contract and other service revenues

 

21,534

 

21,028

 

Less: Revenues from discontinued operations (Note 13)

 

(3,365

)

(5,980

)

Total revenues

 

$

143,473

 

$

137,489

 

 

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 March 31,

 

 

 

2012

 

2011

 

Segment property operating expenses

 

$

48,387

 

$

50,152

 

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

 

(1,185

)

(3,091

)

Total property operating expenses

 

$

47,202

 

$

47,061

 

 

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 March 31,

 

 

 

2012

 

2011

 

Construction contract and other service revenues

 

$

21,534

 

$

21,028

 

Construction contract and other service expenses

 

(20,607

)

(20,618

)

NOI from service operations

 

$

927

 

$

410

 

 

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

 

 

 

Ended March 31,

 

 

 

2012

 

2011

 

NOI from real estate operations

 

$

76,917

 

$

72,289

 

NOI from service operations

 

927

 

410

 

Interest and other income

 

1,217

 

1,168

 

Equity in (loss) income of unconsolidated entities

 

(89

)

30

 

Income tax (expense) benefit

 

(4,173

)

544

 

Other adjustments:

 

 

 

 

 

Depreciation and other amortization associated with real estate operations

 

(31,066

)

(30,043

)

Impairment losses

 

(5,126

)

(27,742

)

General and administrative expenses

 

(7,017

)

(6,777

)

Business development expenses and land carry costs

 

(1,594

)

(1,241

)

Interest expense on continuing operations

 

(25,224

)

(26,115

)

NOI from discontinued operations

 

(2,180

)

(2,889

)

Income (loss) from continuing operations

 

$

2,592

 

$

(20,366

)

 

The following table reconciles our segment assets to total assets (in thousands):

 

 

 

March 31,

 

March 31,

 

 

 

2012

 

2011

 

Segment assets

 

$

3,007,147

 

$

3,058,343

 

Non-operating property assets

 

638,856

 

652,223

 

Other assets

 

151,365

 

155,243

 

Total assets

 

$

3,797,368

 

$

3,865,809

 

 

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) income of unconsolidated entities, income taxes and noncontrolling interests because these items represent general corporate or non-operating property items not attributable to segments.