Annual report pursuant to Section 13 and 15(d)

Information by Business Segment

v2.4.0.8
Information by Business Segment
 12 Months Ended
Dec. 31, 2013
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; Huntsville; Washington, DC — Capitol Riverfront; St. Mary’s and King George Counties; Greater Baltimore; Greater Philadelphia; Colorado Springs; and Other). We also have an operating wholesale data center segment.  In 2013, we made the following revisions to our reportable segments: (1) commenced the reporting of Huntsville (previously grouped into the Other segment) as a separate segment; (2) reclassified certain properties once included in a segment referred to as Suburban Maryland into the Baltimore/Washington Corridor and Other segments; and (3) reclassified a property once previously included in the Colorado Springs segment into the Other segment.  Financial information for prior periods has been presented in conformity with these revisions.
 
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
 
Huntsville
 
Washington,
DC - Capitol
Riverfront
 
St. Mary’s & 
King George
Counties
 
Greater
Baltimore
 
Greater
Philadelphia
 
Colorado
Springs
 
Other
 
Operating
Wholesale
Data Center
 
Total
Year Ended December 31, 2013
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
237,869

 
$
92,010

 
$
33,060

 
$
5,050

 
$
16,863

 
$
16,568

 
$
42,653

 
$
11,924

 
$
25,290

 
$
10,075

 
$
7,271

 
$
498,633

Property operating expenses
80,554

 
31,973

 
17,631

 
1,282

 
7,844

 
5,028

 
16,583

 
3,431

 
9,002

 
1,016

 
6,360

 
180,704

NOI from real estate operations
$
157,315

 
$
60,037

 
$
15,429

 
$
3,768

 
$
9,019

 
$
11,540

 
$
26,070

 
$
8,493

 
$
16,288

 
$
9,059

 
$
911

 
$
317,929

Additions to long-lived assets
$
28,087

 
$
13,090

 
$
335

 
$
3,563

 
$
2,604

 
$
2,341

 
$
2,913

 
$
406

 
$
2,940

 
$
—

 
$
598

 
$
56,877

Transfers from non-operating properties
$
50,105

 
$
61,434

 
$
—

 
$
48,799

 
$
—

 
$
14

 
$
360

 
$
28,034

 
$
5,438

 
$
—

 
$
70,106

 
$
264,290

Segment assets at December 31, 2013
$
1,243,099

 
$
616,082

 
$
118,299

 
$
77,773

 
$
98,962

 
$
96,143

 
$
303,823

 
$
104,657

 
$
—

 
$
80,002

 
$
166,790

 
$
2,905,630

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2012
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
238,488

 
$
79,574

 
$
32,018

 
$
3,867

 
$
16,697

 
$
16,392

 
$
52,616

 
$
9,698

 
$
24,987

 
$
12,116

 
$
6,647

 
$
493,100

Property operating expenses
83,050

 
29,103

 
16,499

 
689

 
7,555

 
4,745

 
19,917

 
2,562

 
9,231

 
2,569

 
4,815

 
180,735

NOI from real estate operations
$
155,438

 
$
50,471

 
$
15,519

 
$
3,178

 
$
9,142

 
$
11,647

 
$
32,699

 
$
7,136

 
$
15,756

 
$
9,547

 
$
1,832

 
$
312,365

Additions to long-lived assets
$
25,921

 
$
65,157

 
$
280

 
$
26

 
$
317

 
$
1,844

 
$
9,690

 
$
286

 
$
2,929

 
$
152

 
$
199

 
$
106,801

Transfers from non-operating properties
$
65,108

 
$
44,250

 
$
468

 
$
—

 
$
—

 
$
289

 
$
37,558

 
$
10,626

 
$
4,295

 
$
394

 
$
58,009

 
$
220,997

Segment assets at December 31, 2012
$
1,267,357

 
$
569,860

 
$
119,369

 
$
28,730

 
$
104,544

 
$
98,027

 
$
320,548

 
$
78,798

 
$
175,830

 
$
82,090

 
$
100,777

 
$
2,945,930

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2011
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
237,162

 
$
74,214

 
$
30,066

 
$
1,368

 
$
17,878

 
$
14,366

 
$
70,668

 
$
7,458

 
$
23,675

 
$
13,923

 
$
5,054

 
$
495,832

Property operating expenses
86,782

 
28,518

 
14,371

 
226

 
6,762

 
4,142

 
29,543

 
1,402

 
8,758

 
3,887

 
3,429

 
187,820

NOI from real estate operations
$
150,380

 
$
45,696

 
$
15,695

 
$
1,142

 
$
11,116

 
$
10,224

 
$
41,125

 
$
6,056

 
$
14,917

 
$
10,036

 
$
1,625

 
$
308,012

Additions to long-lived assets
$
33,142

 
$
14,770

 
$
—

 
$
26,837

 
$
2,794

 
$
1,638

 
$
21,086

 
$
516

 
$
4,085

 
$
182

 
$
59

 
$
105,109

Transfers from non-operating properties
$
67,752

 
$
4

 
$
17,638

 
$
—

 
$
—

 
$
16,858

 
$
16,307

 
$
5,446

 
$
214

 
$
—

 
$
20,169

 
$
144,388

Segment assets at December 31, 2011
$
1,350,678

 
$
484,392

 
$
131,412

 
$
32,341

 
$
111,318

 
$
100,818

 
$
402,067

 
$
102,572

 
$
181,384

 
$
98,808

 
$
43,650

 
$
3,039,440

The following table reconciles our segment revenues to total revenues as reported on our consolidated statements of operations (in thousands):
 
 
For the Years Ended December 31,
 
 
2013
 
2012
 
2011
Segment revenues from real estate operations
 
$
498,633

 
$
493,100

 
$
495,832

Construction contract and other service revenues
 
62,363

 
73,836

 
84,345

Less: Revenues from discontinued operations (Note 20)
 
(37,636
)
 
(58,801
)
 
(87,221
)
Total revenues
 
$
523,360

 
$
508,135

 
$
492,956


 
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,
 
 
2013
 
2012
 
2011
Segment property operating expenses
 
$
180,704

 
$
180,735

 
$
187,820

Less: Property operating expenses from discontinued operations (Note 20)
 
(13,505
)
 
(21,529
)
 
(33,445
)
Total property operating expenses
 
$
167,199

 
$
159,206

 
$
154,375


 
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 Years Ended December 31,
 
 
2013
 
2012
 
2011
Construction contract and other service revenues
 
$
62,363

 
$
73,836

 
$
84,345

Construction contract and other service expenses
 
(58,875
)
 
(70,576
)
 
(81,639
)
NOI from service operations
 
$
3,488

 
$
3,260

 
$
2,706



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 the consolidated statements of operations of COPT and subsidiaries (in thousands):
 
 
For the Years Ended December 31,
 
 
2013
 
2012
 
2011
NOI from real estate operations
 
$
317,929

 
$
312,365

 
$
308,012

NOI from service operations
 
3,488

 
3,260

 
2,706

Interest and other income
 
3,834

 
7,172

 
5,603

Equity in income (loss) of unconsolidated entities
 
2,110

 
(546
)
 
(331
)
Income tax (expense) benefit
 
(1,978
)
 
(381
)
 
6,710

Other adjustments:
 
—

 
 

 
 
Depreciation and other amortization associated with real estate operations
 
(113,214
)
 
(107,998
)
 
(107,003
)
Impairment losses
 
(5,857
)
 
(43,678
)
 
(83,213
)
General, administrative and leasing expenses
 
(30,869
)
 
(31,900
)
 
(30,306
)
Business development expenses and land carry costs
 
(5,436
)
 
(5,711
)
 
(6,122
)
Interest expense on continuing operations
 
(82,010
)
 
(86,401
)
 
(90,037
)
NOI from discontinued operations
 
(24,131
)
 
(37,272
)
 
(53,776
)
Loss on interest rate derivatives
 
—

 
—

 
(29,805
)
Loss on early extinguishment of debt
 
(27,030
)
 
(943
)
 
(1,639
)
COPT consolidated income (loss) from continuing operations
 
$
36,836

 
$
7,967

 
$
(79,201
)


The following table reconciles our segment assets to the consolidated total assets of COPT and subsidiaries (in thousands):
 
 
As of December 31,
 
2013
 
2012
Segment assets
$
2,905,630

 
$
2,945,930

Non-operating property assets
517,564

 
570,402

Other assets
206,758

 
137,427

Total COPT consolidated assets
$
3,629,952

 
$
3,653,759


 
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, impairment losses and gain and loss 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 and land carry costs, interest and other income, loss on interest rate derivatives, equity in income (loss) of unconsolidated entities, income taxes and noncontrolling interests because these items represent general corporate or non-operating property items not attributable to segments.