Quarterly report pursuant to Section 13 or 15(d)

Information by Business Segment

v2.4.0.6
Information by Business Segment
 6 Months Ended
Jun. 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 June 30, 2012
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
55,677

 
$
19,051

 
$
7,830

 
$
4,232

 
$
4,139

 
$
14,664

 
$
4,560

 
$
6,149

 
$
2,458

 
$
3,770

 
$
1,438

 
$
123,968

Property operating expenses
19,065

 
7,176

 
4,023

 
1,716

 
1,139

 
5,805

 
1,882

 
2,194

 
732

 
252

 
1,175

 
45,159

NOI from real estate operations
$
36,612

 
$
11,875

 
$
3,807

 
$
2,516

 
$
3,000

 
$
8,859

 
$
2,678

 
$
3,955

 
$
1,726

 
$
3,518

 
$
263

 
$
78,809

Additions to long-lived assets
$
3,075

 
$
719

 
$
259

 
$
431

 
$
293

 
$
3,616

 
$
412

 
$
687

 
$
90

 
$
133

 
$
11

 
$
9,726

Transfers from non-operating properties
$
4,463

 
$
—

 
$
102

 
$
—

 
$
(362
)
 
$
29

 
$
546

 
$
1,980

 
$
2,087

 
$
(154
)
 
$
57,680

 
$
66,371

Three Months Ended June 30, 2011
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
52,860

 
$
18,445

 
$
7,089

 
$
4,252

 
$
3,564

 
$
17,846

 
$
5,325

 
$
5,912

 
$
1,675

 
$
2,562

 
$
1,276

 
$
120,806

Property operating expenses
17,983

 
7,276

 
3,138

 
1,657

 
961

 
7,233

 
2,178

 
1,980

 
345

 
1,093

 
829

 
44,673

NOI from real estate operations
$
34,877

 
$
11,169

 
$
3,951

 
$
2,595

 
$
2,603

 
$
10,613

 
$
3,147

 
$
3,932

 
$
1,330

 
$
1,469

 
$
447

 
$
76,133

Additions to long-lived assets
$
4,816

 
$
2,781

 
$
—

 
$
656

 
$
461

 
$
4,115

 
$
2,453

 
$
1,085

 
$
—

 
$
650

 
$
—

 
$
17,017

Transfers from non-operating properties
$
6,140

 
$
4

 
$
159

 
$
—

 
$
—

 
$
3,594

 
$
31

 
$
2

 
$
6,024

 
$
—

 
$
—

 
$
15,954

Six Months Ended June 30, 2012
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
111,927

 
$
37,611

 
$
15,438

 
$
8,126

 
$
8,351

 
$
30,036

 
$
10,309

 
$
12,602

 
$
4,630

 
$
7,388

 
$
2,854

 
$
249,272

Property operating expenses
39,216

 
14,576

 
7,840

 
3,626

 
2,397

 
11,695

 
4,403

 
4,579

 
1,347

 
1,485

 
2,382

 
93,546

NOI from real estate operations
$
72,711

 
$
23,035

 
$
7,598

 
$
4,500

 
$
5,954

 
$
18,341

 
$
5,906

 
$
8,023

 
$
3,283

 
$
5,903

 
$
472

 
$
155,726

Additions to long-lived assets
$
4,939

 
$
2,380

 
$
259

 
$
(298
)
 
$
460

 
$
4,335

 
$
1,183

 
$
786

 
$
90

 
$
159

 
$
11

 
$
14,304

Transfers from non-operating properties
$
30,057

 
$
—

 
$
464

 
$
—

 
$
194

 
$
394

 
$
881

 
$
2,296

 
$
9,390

 
$
(154
)
 
$
57,680

 
$
101,202

Segment assets at June 30, 2012
$
1,227,287

 
$
474,959

 
$
120,069

 
$
107,390

 
$
98,779

 
$
369,497

 
$
78,736

 
$
181,808

 
$
111,145

 
$
112,578

 
$
100,708

 
$
2,982,956

Six Months Ended June 30, 2011
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
106,112

 
$
36,719

 
$
14,752

 
$
8,842

 
$
7,098

 
$
35,458

 
$
10,934

 
$
11,832

 
$
3,614

 
$
5,400

 
$
2,486

 
$
243,247

Property operating expenses
39,041

 
14,866

 
6,951

 
3,284

 
1,975

 
15,685

 
4,839

 
4,323

 
763

 
1,560

 
1,538

 
94,825

NOI from real estate operations
$
67,071

 
$
21,853

 
$
7,801

 
$
5,558

 
$
5,123

 
$
19,773

 
$
6,095

 
$
7,509

 
$
2,851

 
$
3,840

 
$
948

 
$
148,422

Additions to long-lived assets
$
11,221

 
$
4,814

 
$
—

 
$
812

 
$
841

 
$
12,203

 
$
3,505

 
$
1,821

 
$
(4
)
 
$
4

 
$
—

 
$
35,217

Transfers from non-operating properties
$
26,023

 
$
(3
)
 
$
759

 
$
—

 
$
—

 
$
7,841

 
$
385

 
$
2

 
$
3,550

 
$
—

 
$
6,654

 
$
45,211

Segment assets at June 30, 2011
$
1,193,626

 
$
485,927

 
$
115,149

 
$
115,515

 
$
85,563

 
$
459,601

 
$
142,334

 
$
213,021

 
$
101,542

 
$
83,437

 
$
30,547

 
$
3,026,262

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 June 30,
 
For the Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
Segment revenues from real estate operations
$
123,968

 
$
120,806

 
$
249,272

 
$
243,247

Construction contract and other service revenues
16,995

 
28,097

 
38,529

 
49,125

Less: Revenues from discontinued operations (Note 13)
(7,577
)
 
(11,787
)
 
(16,805
)
 
(23,710
)
Total revenues
$
133,386

 
$
137,116

 
$
270,996

 
$
268,662


 
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 June 30,
 
For the Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
Segment property operating expenses
$
45,159

 
$
44,673

 
$
93,546

 
$
94,825

Less: Property operating expenses from discontinued operations (Note 13)
(2,775
)
 
(4,223
)
 
(6,245
)
 
(9,840
)
Total property operating expenses
$
42,384

 
$
40,450

 
$
87,301

 
$
84,985


 
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 June 30,
 
For the Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
Construction contract and other service revenues
$
16,995

 
$
28,097

 
$
38,529

 
$
49,125

Construction contract and other service expenses
(16,285
)
 
(26,909
)
 
(36,892
)
 
(47,527
)
NOI from service operations
$
710

 
$
1,188

 
$
1,637

 
$
1,598



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 June 30,
 
For the Six Months Ended June 30,
 
2012
 
2011
 
2012
 
2011
NOI from real estate operations
$
78,809

 
$
76,133

 
$
155,726

 
$
148,422

NOI from service operations
710

 
1,188

 
1,637

 
1,598

Interest and other income
840

 
2,756

 
2,057

 
3,924

Equity in loss of unconsolidated entities
(187
)
 
(94
)
 
(276
)
 
(64
)
Income tax (expense) benefit
(17
)
 
5,042

 
(4,190
)
 
5,586

Other adjustments:
—

 
 

 
—

 
 

Depreciation and other amortization associated with real estate operations
(29,853
)
 
(28,171
)
 
(59,172
)
 
(56,244
)
Impairment (losses) recoveries
—

 
(20,183
)
 
2,303

 
(47,925
)
General and administrative expenses
(7,742
)
 
(6,320
)
 
(14,759
)
 
(13,097
)
Business development expenses and land carry costs
(1,298
)
 
(1,349
)
 
(2,874
)
 
(2,571
)
Interest expense on continuing operations
(24,747
)
 
(25,595
)
 
(49,667
)
 
(51,263
)
NOI from discontinued operations
(4,802
)
 
(7,564
)
 
(10,560
)
 
(13,870
)
Loss on early extinguishment of debt
(169
)
 
(25
)
 
(169
)
 
(25
)
Income (loss) from continuing operations
$
11,544

 
$
(4,182
)
 
$
20,056

 
$
(25,529
)

 
The following table reconciles our segment assets to total assets (in thousands):
 
 
June 30,
2012
 
June 30,
2011
Segment assets
$
2,982,956

 
$
3,026,262

Non-operating property assets
607,590

 
686,806

Other assets
124,529

 
155,162

Total assets
$
3,715,075

 
$
3,868,230


 
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.