| Business Segments |
Our current business strategy includes two operating segments: Real
Estate Operations and Strategic Capital (formerly Investment
Management). We generate revenues, earnings, net operating income
and cash flows through our segments, as follows:
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Real Estate Operations.
This represents the direct long-term ownership of industrial
operating properties and is the primary source of our revenue and
earnings. We collect rent from our customers under operating
leases, including reimbursements for the vast majority of our
operating costs. Each operating property is considered to be an
individual operating segment having similar economic
characteristics that are combined within the reportable segment
based upon geographic location. Our Real Estate Operations segment
also includes development, re-development and acquisition
activities. We develop, re-develop and acquire industrial
properties primarily in global and regional markets to meet our
customers’ needs. Within this line of business, we capitalize
on: (i) the land that we currently own; (ii) the
development expertise of our local personnel; (iii) our global
customer relationships; and (iv) the demand for high quality
distribution facilities in key markets. Land held for development,
properties currently under development and land we own and lease to
customers under ground leases are also included in this
segment. |
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Strategic Capital. This
represents the long-term management of unconsolidated co-investment
ventures. We invest with partners and investors through our
ventures, both private and public. We tailor industrial portfolios
to investors’ specific needs and deploy capital with a focus
on larger, long duration ventures and open ended funds with leading
global institutions. These private and public vehicles source
strategic capital for distinct geographies across our
global platform. We hold an ownership interest in these ventures
and believe our significant ownership in each of our ventures
provides a strong alignment of interests with our partners. We
generate strategic capital revenues from our unconsolidated
co-investment ventures by providing asset management and property
management services. We earn revenues through additional services
provided such as leasing, acquisition, construction, development,
disposition, legal and tax services. Depending on the structure of
the venture and the returns provided to our partners, we may also
earn revenues through promote fees during the life of a venture or
upon liquidation. Each unconsolidated co-investment venture we
manage is considered to be an individual operating segment having
similar economic characteristics that are combined within the
reportable segment based upon geographic location. |
Reconciliations are presented below for: (i) each reportable
business segment’s revenue from external customers to
Total Revenues in the Consolidated Statements of Operations;
(ii) each reportable business segment’s net operating
income from external customers to Earnings (Loss) before Income
Taxes in the Consolidated Statements of Operations; and
(iii) each reportable business segment’s assets to
Total Assets in the Consolidated Balance Sheets. Our chief
operating decision makers rely primarily on net operating income
and similar measures to make decisions about allocating resources
and assessing segment performance. The applicable components of
Total Revenues, Earnings (Loss) before Income Taxes
and Total Assets are allocated to each reportable business
segment’s revenues, net operating income and assets. Items
that are not directly assignable to a segment, such as certain
corporate income and expenses, are reflected as reconciling items.
The following reconciliations are presented in thousands:
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Three Months
Ended
September 30, |
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Nine Months
Ended
September 30, |
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2014 |
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2013 |
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2014 |
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2013 |
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Revenues:
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Real estate operations:
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Americas
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$ |
324,877 |
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$ |
324,294 |
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$ |
1,025,349 |
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$ |
948,165 |
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Europe
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20,422 |
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26,199 |
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57,083 |
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154,961 |
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Asia
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15,782 |
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24,243 |
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51,776 |
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85,031 |
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Total Real Estate Operations segment
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361,081 |
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374,736 |
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1,134,208 |
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1,188,157 |
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Strategic capital:
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Americas
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18,567 |
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18,357 |
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80,457 |
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49,972 |
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Europe
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24,713 |
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20,037 |
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65,866 |
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44,504 |
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Asia
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10,790 |
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9,928 |
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29,391 |
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31,089 |
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Total Strategic Capital segment
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54,070 |
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48,322 |
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175,714 |
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125,565 |
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Total revenues
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$ |
415,151 |
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$ |
423,058 |
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$ |
1,309,922 |
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$ |
1,313,722 |
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Net operating income:
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Real estate operations:
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Americas
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$ |
230,515 |
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$ |
225,664 |
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$ |
727,245 |
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$ |
658,458 |
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Europe
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12,072 |
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18,623 |
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31,706 |
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104,321 |
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Asia
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11,302 |
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17,268 |
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37,469 |
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60,882 |
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Total Real Estate Operations segment
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253,889 |
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261,555 |
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796,420 |
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823,661 |
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Strategic capital:
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Americas
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6,451 |
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5,578 |
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38,599 |
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8,822 |
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Europe
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17,791 |
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14,115 |
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43,600 |
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28,516 |
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Asia
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7,386 |
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6,606 |
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19,073 |
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21,289 |
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Total Strategic Capital segment
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31,628 |
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26,299 |
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101,272 |
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58,627 |
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Total segment net operating income
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285,517 |
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287,854 |
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897,692 |
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882,288 |
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Reconciling items:
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General and administrative expenses
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(58,203 |
) |
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(55,034 |
) |
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(181,781 |
) |
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(166,140 |
) |
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Depreciation and amortization
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(149,202 |
) |
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(155,439 |
) |
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(471,059 |
) |
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(483,215 |
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Earnings from unconsolidated entities, net
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28,514 |
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26,365 |
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79,411 |
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59,554 |
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Interest expense
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(69,086 |
) |
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(84,642 |
) |
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(234,793 |
) |
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(291,496 |
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Interest and other income, net
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550 |
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5,653 |
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19,716 |
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21,772 |
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Gains on acquisitions and dispositions of investments in real
estate, net
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151,057 |
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46,074 |
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337,695 |
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445,954 |
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Foreign currency and derivative gains (losses) and related
amortization, net
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20,792 |
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6,875 |
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2,738 |
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15 |
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Losses on early extinguishment of debt, net
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(86,076 |
) |
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(114,196 |
) |
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(163,361 |
) |
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(164,155 |
) |
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Total reconciling items
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(161,654 |
) |
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(324,344 |
) |
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(611,434 |
) |
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(577,711 |
) |
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Earnings (loss) before income taxes
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$ |
123,863 |
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$ |
(36,490 |
) |
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$ |
286,258 |
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$ |
304,577 |
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September 30,
2014 |
|
|
December 31,
2013 |
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|
Assets:
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Real estate operations:
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Americas
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$ |
14,811,609 |
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$ |
16,293,109 |
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Europe
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|
1,865,727 |
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1,634,867 |
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Asia
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|
870,852 |
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1,176,774 |
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|
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Total Real Estate Operations segment
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17,548,188 |
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19,104,750 |
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Strategic capital (1):
|
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Americas
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20,954 |
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22,154 |
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Europe
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56,103 |
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60,327 |
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Asia
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2,861 |
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3,634 |
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Total Strategic Capital segment
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79,918 |
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86,115 |
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Total segment assets
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17,628,106 |
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19,190,865 |
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Reconciling items:
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Investments in and advances to unconsolidated entities
|
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5,814,056 |
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4,430,239 |
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Notes receivable backed by real estate and other
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— |
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|
192,042 |
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Cash and cash equivalents
|
|
|
311,879 |
|
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|
491,129 |
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Other assets
|
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|
318,062 |
|
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|
268,032 |
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|
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Total reconciling items
|
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6,443,997 |
|
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5,381,442 |
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Total assets
|
|
$ |
24,072,103 |
|
|
$ |
24,572,307 |
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| (1) |
Represents management contracts
recorded in connection with business combinations and goodwill
associated with the Strategic Capital segment. |
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