Quarterly report pursuant to Section 13 or 15(d)

Information by Business Segment

v3.3.0.814
Information by Business Segment
 9 Months Ended
Sep. 30, 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 September 30, 2015
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
62,009

 
$
23,332

 
$
9,492

 
$
3,061

 
$
3,336

 
$
3,550

 
$
16,134

 
$
4,126

 
$
2,568

 
$
6,078

 
$
133,686

Property operating expenses
20,169

 
7,785

 
4,808

 
888

 
1,962

 
1,325

 
6,461

 
1,249

 
242

 
4,008

 
48,897

NOI from real estate operations
$
41,840

 
$
15,547

 
$
4,684

 
$
2,173

 
$
1,374

 
$
2,225

 
$
9,673

 
$
2,877

 
$
2,326

 
$
2,070

 
$
84,789

Additions to long-lived assets
$
7,943

 
$
1,749

 
$
—

 
$
175

 
$
1,098

 
$
986

 
$
128,933

 
$
246

 
$
(93
)
 
$
—

 
$
141,037

Transfers from non-operating properties
$
25,184

 
$
34,195

 
$
591

 
$
1,207

 
$
—

 
$
1,408

 
$
315

 
$
5,506

 
$
—

 
$
73,804

 
$
142,210

Three Months Ended September 30, 2014
 

 
 

 
 

 
—

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
58,883

 
$
21,369

 
$
9,031

 
$
2,471

 
$
3,524

 
$
4,158

 
$
10,436

 
$
2,951

 
$
2,541

 
$
2,876

 
$
118,240

Property operating expenses
19,457

 
7,500

 
5,100

 
763

 
1,824

 
1,277

 
3,810

 
837

 
260

 
2,053

 
42,881

NOI from real estate operations
$
39,426

 
$
13,869

 
$
3,931

 
$
1,708

 
$
1,700

 
$
2,881

 
$
6,626

 
$
2,114

 
$
2,281

 
$
823

 
$
75,359

Additions to long-lived assets
$
7,248

 
$
5,898

 
$
—

 
$
455

 
$
458

 
$
5,189

 
$
3,021

 
$
625

 
$
(125
)
 
$
24

 
$
22,793

Transfers from non-operating properties
$
22,680

 
$
15,403

 
$
—

 
$
1,496

 
$
—

 
$
—

 
$
495

 
$
2,506

 
$
—

 
$
222

 
$
42,802

Nine Months Ended September 30, 2015
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
184,412

 
$
69,474

 
$
28,867

 
$
8,165

 
$
10,091

 
$
11,246

 
$
40,508

 
$
11,236

 
$
7,659

 
$
12,933

 
$
384,591

Property operating expenses
63,291

 
25,593

 
15,398

 
2,605

 
5,837

 
4,238

 
16,367

 
3,565

 
655

 
8,441

 
145,990

NOI from real estate operations
$
121,121

 
$
43,881

 
$
13,469

 
$
5,560

 
$
4,254

 
$
7,008

 
$
24,141

 
$
7,671

 
$
7,004

 
$
4,492

 
$
238,601

Additions to long-lived assets
$
16,529

 
$
89,152

 
$
21

 
$
466

 
$
2,297

 
$
3,149

 
$
195,013

 
$
824

 
$
164

 
$
108

 
$
307,723

Transfers from non-operating properties
$
44,212

 
$
101,412

 
$
32,150

 
$
13,184

 
$
—

 
$
1,408

 
$
327

 
$
22,222

 
$
8

 
$
89,183

 
$
304,106

Segment assets at September 30, 2015
$
1,297,431

 
$
697,406

 
$
148,336

 
$
108,541

 
$
94,120

 
$
101,985

 
$
455,469

 
$
128,409

 
$
76,259

 
$
246,806

 
$
3,354,762

Nine Months Ended September 30, 2014
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
177,452

 
$
67,235

 
$
26,268

 
$
7,430

 
$
10,989

 
$
12,676

 
$
32,956

 
$
8,657

 
$
7,668

 
$
7,769

 
$
359,100

Property operating expenses
62,402

 
24,124

 
14,391

 
2,275

 
5,343

 
4,070

 
13,786

 
3,281

 
1,195

 
5,622

 
136,489

NOI from real estate operations
$
115,050

 
$
43,111

 
$
11,877

 
$
5,155

 
$
5,646

 
$
8,606

 
$
19,170

 
$
5,376

 
$
6,473

 
$
2,147

 
$
222,611

Additions to long-lived assets
$
19,278

 
$
14,198

 
$
(6
)
 
$
3,296

 
$
999

 
$
6,971

 
$
5,275

 
$
724

 
$
(163
)
 
$
46

 
$
50,618

Transfers from non-operating properties
$
50,303

 
$
42,674

 
$
—

 
$
21,821

 
$
—

 
$
—

 
$
3,522

 
$
15,880

 
$
30

 
$
897

 
$
135,127

Segment assets at September 30, 2014
$
1,278,713

 
$
648,248

 
$
116,837

 
$
98,334

 
$
96,131

 
$
100,009

 
$
274,931

 
$
107,051

 
$
78,240

 
$
164,192

 
$
2,962,686

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 September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Segment revenues from real estate operations
$
133,686

 
$
118,240

 
$
384,591

 
$
359,100

Construction contract and other service revenues
17,058

 
34,739

 
97,554

 
80,390

Less: Revenues from discontinued operations
—

 
36

 
(4
)
 
12

Total revenues
$
150,744

 
$
153,015

 
$
482,141

 
$
439,502


 
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 September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Segment property operating expenses
$
48,897

 
$
42,881

 
$
145,990

 
$
136,489

Less: Property operating expenses from discontinued operations
—

 
175

 
6

 
111

Total property operating expenses
$
48,897

 
$
43,056

 
$
145,996

 
$
136,600


 
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 September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Construction contract and other service revenues
$
17,058

 
$
34,739

 
$
97,554

 
$
80,390

Construction contract and other service expenses
(16,132
)
 
(33,593
)
 
(94,923
)
 
(75,353
)
NOI from service operations
$
926

 
$
1,146

 
$
2,631

 
$
5,037



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 September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
NOI from real estate operations
$
84,789

 
$
75,359

 
$
238,601

 
$
222,611

NOI from service operations
926

 
1,146

 
2,631

 
5,037

Interest and other income
692

 
1,191

 
3,217

 
3,775

Equity in income of unconsolidated entities
18

 
193

 
52

 
206

Income tax expense
(48
)
 
(101
)
 
(153
)
 
(257
)
Other adjustments:
—

 
 

 
—

 
 

Depreciation and other amortization associated with real estate operations
(38,403
)
 
(30,237
)
 
(103,788
)
 
(104,728
)
Impairment losses
(2,307
)
 
(66
)
 
(3,545
)
 
(1,368
)
General, administrative and leasing expenses
(7,439
)
 
(7,211
)
 
(22,864
)
 
(22,882
)
Business development expenses and land carry costs
(5,573
)
 
(1,430
)
 
(10,986
)
 
(4,107
)
Interest expense
(24,121
)
 
(24,802
)
 
(66,727
)
 
(69,107
)
Less: NOI from discontinued operations
—

 
(139
)
 
(10
)
 
(99
)
Gain (loss) on early extinguishment of debt
85,745

 
(176
)
 
85,677

 
(446
)
Income from continuing operations
$
94,279

 
$
13,727

 
$
122,105

 
$
28,635


 
The following table reconciles our segment assets to the consolidated total assets of COPT and subsidiaries (in thousands):
 
 
September 30,
2015
 
September 30,
2014
Segment assets
$
3,354,762

 
$
2,962,686

Non-operating property assets
416,540

 
518,951

Other assets
147,171

 
198,551

Total COPT consolidated assets
$
3,918,473

 
$
3,680,188


 
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, 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.