| Business Segments |
Our current business
strategy includes two operating segments: Real Estate Operations
and Strategic Capital. 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
ownership of industrial operating properties and is the main source
of our revenue and earnings. We collect rent from our customers
through operating leases, including reimbursements for the 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 that lead to rental operations. 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 teams;
(iii) our global customer relationships; and (iv) the
demand for high-quality distribution facilities. 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 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, ventures with longer
duration and open-ended funds with leading global institutions.
These private and public vehicles provide capital for
distinct geographies across our global platform. We hold a
significant ownership interest in these ventures; we believe this
aligns our interests with those of our partners. We generate
strategic capital revenues from our unconsolidated co-investment
ventures through asset management and property management services
and we earn additional revenues from leasing, acquisition,
construction, development and disposition services provided.
Depending on the structure of the venture and the returns provided
to our partners, we also earn revenues through promotes 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.
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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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Years Ended
December 31, |
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2014 |
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2013 |
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2012 |
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Revenues (1):
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Real estate
operations:
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Americas
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$ |
1,403,564 |
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$ |
1,288,925 |
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$ |
1,176,920 |
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Europe
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74,413 |
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|
174,397 |
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|
435,244 |
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Asia
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62,939 |
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|
107,692 |
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221,575 |
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Total Real Estate
Operations segment
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1,540,916 |
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1,571,014 |
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1,833,739 |
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Strategic
capital:
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Americas
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95,168 |
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72,474 |
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69,422 |
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Europe
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86,549 |
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63,794 |
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37,047 |
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Asia
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38,154 |
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43,204 |
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20,310 |
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Total Strategic Capital
segment
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219,871 |
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179,472 |
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126,779 |
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Total
revenues
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$ |
1,760,787 |
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$ |
1,750,486 |
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$ |
1,960,518 |
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Net operating
income:
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Real estate
operations:
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Americas
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$ |
1,000,773 |
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$ |
899,053 |
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$ |
818,393 |
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Europe
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40,627 |
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116,178 |
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325,571 |
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Asia
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45,262 |
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76,863 |
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171,980 |
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Total Real Estate
Operations segment
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1,086,662 |
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1,092,094 |
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1,315,944 |
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Strategic
capital:
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Americas
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42,042 |
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18,785 |
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31,637 |
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Europe
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57,266 |
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41,263 |
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21,699 |
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Asia
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24,067 |
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30,145 |
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9,623 |
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Total Strategic Capital
segment
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123,375 |
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90,193 |
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62,959 |
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Total segment net operating
income
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1,210,037 |
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1,182,287 |
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1,378,903 |
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Reconciling
items:
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General and administrative
expenses
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(247,768) |
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(229,207) |
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(228,068) |
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Depreciation and
amortization
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(642,461) |
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(648,668) |
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(724,262) |
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Merger, acquisition and
other integration expenses
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- |
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- |
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(80,676) |
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Impairment of real estate
properties
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- |
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- |
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(252,914) |
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Earnings from
unconsolidated entities, net
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134,288 |
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97,220 |
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31,676 |
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Interest expense
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(308,885) |
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(379,327) |
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(505,215) |
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Interest and other income,
net
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25,768 |
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26,948 |
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22,878 |
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Gains on dispositions of
investments in real estate and revaluation of equity investments
upon acquisition of a controlling interest, net
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725,790 |
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597,656 |
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305,607 |
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Foreign currency and
derivative losses and related amortization, net
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(17,841) |
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(33,633) |
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(20,497) |
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Losses on early
extinguishment of debt, net
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(165,300) |
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(277,014) |
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(14,114) |
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Impairment of other
assets
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- |
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- |
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(16,135) |
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Total reconciling
items
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(496,409) |
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(846,025) |
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(1,481,720) |
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Earnings (loss) before
income taxes
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$ |
713,628 |
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$ |
336,262 |
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$ |
(102,817) |
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December 31, |
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|
2014 |
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2013 |
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Assets (2):
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Real estate
operations:
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Americas
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$ |
17,432,909 |
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$ |
16,272,868 |
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Europe
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1,820,529 |
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1,634,867 |
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Asia
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926,645 |
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1,176,774 |
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Total Real Estate
Operations segment
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20,180,083 |
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19,084,509 |
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Strategic capital
(3):
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Americas
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20,635 |
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22,154 |
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Europe
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54,577 |
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60,327 |
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Asia
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2,718 |
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3,634 |
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Total Strategic Capital
segment
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77,930 |
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86,115 |
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Total segment
assets
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20,258,013 |
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19,170,624 |
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Reconciling
items:
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Investments in and advances
to unconsolidated entities
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4,824,724 |
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4,430,239 |
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Assets held for
sale
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43,934 |
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4,042 |
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Notes receivable backed by
real estate
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- |
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188,000 |
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Cash and cash
equivalents
|
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350,692 |
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491,129 |
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Other assets
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340,860 |
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288,273 |
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Total reconciling
items
|
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5,560,210 |
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5,401,683 |
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Total
assets
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$ |
25,818,223 |
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$ |
24,572,307 |
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| (1) |
Includes revenues
attributable to the United States for the years ended
December 31, 2014, 2013 and 2012 of $1.4 billion, $1.1 billion
and $1.1 billion, respectively. |
| (2) |
Includes long-lived assets
attributable to the United States at December 31, 2014 and
2013 of $17.3 billion and $15.3 billion, respectively. |
| (3) |
Represents management
contracts and goodwill recorded in connection with business
combinations associated with the Strategic Capital segment.
Goodwill was $25.3 million at December 31, 2014 and
2013. |
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