Quarterly report pursuant to Section 13 or 15(d)

Information by Business Segment

v2.4.1.9
Information by Business Segment
 3 Months Ended
Mar. 31, 2015
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). In our 2015 quarterly reports on Form 10-Q, our Colorado Springs segment is, and will be, included in our Other segment as it is insignificant in the 2014 and 2015 reporting periods. We also have an operating wholesale data center segment. 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
 
Other
 
Operating
Wholesale
Data Center
 
Total
Three Months Ended March 31, 2015
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
61,792

 
$
21,749

 
$
9,171

 
$
2,446

 
$
3,364

 
$
3,901

 
$
11,485

 
$
3,224

 
$
2,543

 
$
3,035

 
$
122,710

Property operating expenses
23,583

 
9,121

 
4,975

 
829

 
1,814

 
1,584

 
4,997

 
1,375

 
196

 
2,212

 
50,686

NOI from real estate operations
$
38,209

 
$
12,628

 
$
4,196

 
$
1,617

 
$
1,550

 
$
2,317

 
$
6,488

 
$
1,849

 
$
2,347

 
$
823

 
$
72,024

Additions to long-lived assets
$
3,445

 
$
2,821

 
$
21

 
$
83

 
$
393

 
$
1,200

 
$
63,604

 
$
294

 
$
80

 
$
30

 
$
71,971

Transfers from non-operating properties
$
12,930

 
$
58,571

 
$
31,091

 
$
2,997

 
$
—

 
$
—

 
$
—

 
$
11,498

 
$
8

 
$
177

 
$
117,272

Segment assets at March 31, 2015
$
1,280,742

 
$
696,276

 
$
147,078

 
$
99,335

 
$
94,400

 
$
100,849

 
$
334,271

 
$
117,919

 
$
77,340

 
$
162,170

 
$
3,110,380

Three Months Ended March 31, 2014
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
61,113

 
$
24,968

 
$
8,479

 
$
2,555

 
$
3,634

 
$
4,316

 
$
11,496

 
$
3,340

 
$
2,594

 
$
2,401

 
$
124,896

Property operating expenses
23,597

 
8,973

 
4,474

 
653

 
1,765

 
1,504

 
5,476

 
1,300

 
322

 
1,688

 
49,752

NOI from real estate operations
$
37,516

 
$
15,995

 
$
4,005

 
$
1,902

 
$
1,869

 
$
2,812

 
$
6,020

 
$
2,040

 
$
2,272

 
$
713

 
$
75,144

Additions to long-lived assets
$
5,741

 
$
3,495

 
$
(6
)
 
$
2,507

 
$
63

 
$
839

 
$
1,012

 
$
11

 
$
55

 
$
12

 
$
13,729

Transfers from non-operating properties
$
6,911

 
$
26,588

 
$
—

 
$
20,102

 
$
—

 
$
—

 
$
74

 
$
3,176

 
$
11

 
$
78

 
$
56,940

Segment assets at March 31, 2014
$
1,244,876

 
$
636,895

 
$
117,812

 
$
99,378

 
$
97,843

 
$
95,645

 
$
300,619

 
$
94,428

 
$
79,542

 
$
165,711

 
$
2,932,749

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,
 
 
2015
 
2014
Segment revenues from real estate operations
 
$
122,710

 
$
124,896

Construction contract and other service revenues
 
38,324

 
21,790

Less: Revenues from discontinued operations
 
—

 
(19
)
Total revenues
 
$
161,034

 
$
146,667


 
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,
 
 
2015
 
2014
Segment property operating expenses
 
$
50,686

 
$
49,752

Less: Property operating expenses from discontinued operations
 
(5
)
 
20

Total property operating expenses
 
$
50,681

 
$
49,772


 
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,
 
 
2015
 
2014
Construction contract and other service revenues
 
$
38,324

 
$
21,790

Construction contract and other service expenses
 
(37,498
)
 
(18,624
)
NOI from service operations
 
$
826

 
$
3,166



The following table reconciles our NOI from real estate operations for reportable segments and NOI from service operations to income from continuing operations as reported on our consolidated statements of operations (in thousands):
 
 
For the Three Months Ended March 31,
 
 
2015
 
2014
NOI from real estate operations
 
$
72,024

 
$
75,144

NOI from service operations
 
826

 
3,166

Interest and other income
 
1,283

 
1,285

Equity in income of unconsolidated entities
 
25

 
60

Income tax expense
 
(55
)
 
(64
)
Other adjustments:
 
—

 
 

Depreciation and other amortization associated with real estate operations
 
(31,599
)
 
(43,596
)
General, administrative and leasing expenses
 
(7,891
)
 
(8,143
)
Business development expenses and land carry costs
 
(2,790
)
 
(1,326
)
Interest expense on continuing operations
 
(20,838
)
 
(20,827
)
NOI from discontinued operations
 
5

 
(39
)
Loss on early extinguishment of debt
 
(3
)
 
—

Income from continuing operations
 
$
10,987

 
$
5,660


 
The following table reconciles our segment assets to the consolidated total assets of COPT and subsidiaries (in thousands):
 
 
March 31,
2015
 
March 31,
2014
Segment assets
$
3,110,380

 
$
2,932,749

Non-operating property assets
496,930

 
503,030

Other assets
169,845

 
170,118

Total COPT consolidated assets
$
3,777,155

 
$
3,605,897


 
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, loss on early extinguishment of debt and gain on sales of real estate 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 income of unconsolidated entities, income taxes and noncontrolling interests because these items represent general corporate or non-operating property items not attributable to segments.