Annual report pursuant to Section 13 and 15(d)

Information by Business Segment

v2.4.0.6
Information by Business Segment
 12 Months Ended
Dec. 31, 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).  In 2012, we also reclassified costs expensed in connection with marketing space for lease to prospective tenants from property operating expenses to general, administrative and leasing expenses, the result of which is the exclusion of such expenses from NOI from real estate operations. 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
 
Washington,
DC - Capitol
Riverfront
 
St. Mary’s & 
King George
Counties
 
Greater
Baltimore
 
Suburban
Maryland
 
Colorado
Springs
 
Greater
Philadelphia
 
Other
 
Operating
Wholesale
Data Center
 
Total
Year Ended December 31, 2012
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
224,959

 
$
79,574

 
$
32,018

 
$
16,697

 
$
16,392

 
$
52,616

 
$
15,016

 
$
25,189

 
$
9,698

 
$
14,294

 
$
6,647

 
$
493,100

Property operating expenses
77,295

 
29,103

 
16,499

 
7,555

 
4,745

 
19,917

 
6,295

 
9,283

 
2,562

 
2,666

 
4,815

 
180,735

NOI from real estate operations
$
147,664

 
$
50,471

 
$
15,519

 
$
9,142

 
$
11,647

 
$
32,699

 
$
8,721

 
$
15,906

 
$
7,136

 
$
11,628

 
$
1,832

 
$
312,365

Additions to long-lived assets
$
24,599

 
$
65,157

 
$
280

 
$
317

 
$
1,844

 
$
9,690

 
$
1,319

 
$
2,977

 
$
286

 
$
133

 
$
199

 
$
106,801

Transfers from non-operating properties
$
64,318

 
$
44,250

 
$
468

 
$
—

 
$
289

 
$
37,558

 
$
790

 
$
4,295

 
$
10,626

 
$
394

 
$
58,009

 
$
220,997

Segment assets at December 31, 2012
$
1,214,105

 
$
569,860

 
$
119,369

 
$
104,544

 
$
98,027

 
$
320,548

 
$
53,252

 
$
176,726

 
$
78,798

 
$
109,924

 
$
100,777

 
$
2,945,930

Year Ended December 31, 2011
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
218,051

 
$
74,214

 
$
30,066

 
$
17,878

 
$
14,366

 
$
70,668

 
$
21,982

 
$
23,860

 
$
7,458

 
$
12,235

 
$
5,054

 
$
495,832

Property operating expenses
78,631

 
28,518

 
14,371

 
6,762

 
4,142

 
29,543

 
9,174

 
8,800

 
1,402

 
3,048

 
3,429

 
187,820

NOI from real estate operations
$
139,420

 
$
45,696

 
$
15,695

 
$
11,116

 
$
10,224

 
$
41,125

 
$
12,808

 
$
15,060

 
$
6,056

 
$
9,187

 
$
1,625

 
$
308,012

Additions to long-lived assets
$
20,974

 
$
14,770

 
$
—

 
$
2,794

 
$
1,638

 
$
21,086

 
$
12,267

 
$
4,116

 
$
516

 
$
26,889

 
$
59

 
$
105,109

Transfers from non-operating properties
$
67,357

 
$
4

 
$
17,638

 
$
—

 
$
16,858

 
$
16,307

 
$
395

 
$
214

 
$
5,446

 
$
—

 
$
20,169

 
$
144,388

Segment assets at December 31, 2011
$
1,216,770

 
$
484,392

 
$
131,412

 
$
111,318

 
$
100,818

 
$
402,067

 
$
148,635

 
$
182,758

 
$
102,572

 
$
115,048

 
$
43,650

 
$
3,039,440

Year Ended December 31, 2010
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Revenues from real estate operations
$
207,456

 
$
75,063

 
$
21,673

 
$
4,678

 
$
13,967

 
$
71,850

 
$
21,759

 
$
24,897

 
$
6,299

 
$
13,024

 
$
1,062

 
$
461,728

Property operating expenses
74,365

 
26,688

 
10,260

 
1,736

 
4,176

 
30,406

 
9,455

 
8,231

 
2,131

 
4,105

 
1,216

 
172,769

NOI from real estate operations
$
133,091

 
$
48,375

 
$
11,413

 
$
2,942

 
$
9,791

 
$
41,444

 
$
12,304

 
$
16,666

 
$
4,168

 
$
8,919

 
$
(154
)
 
$
288,959

Additions to long-lived assets
$
21,629

 
$
91,919

 
$
17

 
$
92,827

 
$
1,103

 
$
11,501

 
$
1,959

 
$
1,626

 
$
30

 
$
(2,012
)
 
$
369

 
$
220,968

Transfers from non-operating properties
$
48,549

 
$
(42
)
 
$
40,500

 
$
—

 
$
—

 
$
15,289

 
$
5,623

 
$
32,438

 
$
23,119

 
$
14

 
$
19,798

 
$
185,288

Segment assets at December 31, 2010
$
1,182,659

 
$
492,005

 
$
114,850

 
$
119,927

 
$
88,221

 
$
473,977

 
$
145,646

 
$
215,801

 
$
99,701

 
$
85,633

 
$
24,227

 
$
3,042,647

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,
 
 
2012
 
2011
 
2010
Segment revenues from real estate operations
 
$
493,100

 
$
495,832

 
$
461,728

Construction contract and other service revenues
 
73,836

 
84,345

 
104,675

Less: Revenues from discontinued operations (Note 17)
 
(38,929
)
 
(67,336
)
 
(74,169
)
Total revenues
 
$
528,007

 
$
512,841

 
$
492,234


 
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,
 
 
2012
 
2011
 
2010
Segment property operating expenses
 
$
180,735

 
$
187,820

 
$
172,769

Less: Property operating expenses from discontinued operations (Note 17)
 
(13,574
)
 
(25,423
)
 
(26,152
)
Total property operating expenses
 
$
167,161

 
$
162,397

 
$
146,617


 
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,
 
 
2012
 
2011
 
2010
Construction contract and other service revenues
 
$
73,836

 
$
84,345

 
$
104,675

Construction contract and other service expenses
 
(70,576
)
 
(81,639
)
 
(102,302
)
NOI from service operations
 
$
3,260

 
$
2,706

 
$
2,373



The following table reconciles our NOI from real estate operations for reportable segments and NOI from service operations to (loss) income from continuing operations as reported on our consolidated statements of operations (in thousands):
 
 
For the Years Ended December 31,
 
 
2012
 
2011
 
2010
NOI from real estate operations
 
$
312,365

 
$
308,012

 
$
288,959

NOI from service operations
 
3,260

 
2,706

 
2,373

Interest and other income
 
7,172

 
5,603

 
9,568

Equity in (loss) income of unconsolidated entities
 
(546
)
 
(331
)
 
1,376

Income tax (expense) benefit
 
(381
)
 
6,710

 
(108
)
Other adjustments:
 
—

 
 

 
 
Depreciation and other amortization associated with real estate operations
 
(113,480
)
 
(113,111
)
 
(97,897
)
Impairment losses
 
(43,214
)
 
(83,478
)
 
—

General, administrative and leasing expenses
 
(31,900
)
 
(30,314
)
 
(28,501
)
Business development expenses and land carry costs
 
(5,711
)
 
(6,122
)
 
(6,403
)
Interest expense on continuing operations
 
(94,624
)
 
(98,222
)
 
(95,729
)
NOI from discontinued operations
 
(25,355
)
 
(41,913
)
 
(48,017
)
Loss on interest rate derivatives
 
—

 
(29,805
)
 
—

Loss on early extinguishment of debt
 
(943
)
 
(1,639
)
 
—

Income (loss) from continuing operations
 
$
6,643

 
$
(81,904
)
 
$
25,621


The following table reconciles our segment assets to total assets (in thousands):
 
 
As of December 31,
 
2012
 
2011
Segment assets
$
2,945,930

 
$
3,039,440

Non-operating property assets
570,402

 
658,900

Other assets
137,427

 
165,215

Total assets
$
3,653,759

 
$
3,863,555


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