NOTE 10. BUSINESS SEGMENTS

Our current business strategy consists of 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 operating segment represents the ownership and development of operating properties and is the largest component of our revenues and earnings. We collect rent from our customers through operating leases, including reimbursements for the majority of our property operating costs. Each operating property is considered to be an individual operating segment with similar economic characteristics; these properties are combined within the reportable business segment based on geographic location. Our Real Estate Operations segment also includes development activities that lead to rental operations, including land held for development and properties currently under development. Within this line of business, we utilize the following: (i) our land bank; (ii) the development expertise of our local teams; (iii) our customer relationships; and (iv) our in-depth knowledge in connection with our development activities. Land we own and lease to customers under ground leases is also included in this segment.

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Strategic Capital. This operating segment represents the management of unconsolidated co-investment ventures. We generate strategic capital revenues from our unconsolidated co-investment ventures through asset management and property management services and we earn additional revenues by providing leasing, acquisition, construction, development, financing and disposition services. Depending on the structure of the venture and the returns provided to our partners, we also earn revenues through promotes periodically during the life of a venture or upon liquidation. Each unconsolidated co-investment venture we manage is considered to be an individual operating segment with similar economic characteristics; these ventures are combined within the reportable business segment based on geographic location.

Reconciliations are presented below for: (i) each reportable business segment’s revenues from external customers to Total Revenues; (ii) each reportable business segment’s net operating income from external customers to Operating Income and Earnings Before Income Taxes; and (iii) each reportable business segment’s assets to Total Assets. 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, Operating Income, Earnings 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 not allocated but reflected as reconciling items. The following reconciliations are presented in thousands:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
		2017			2016			2017			2016
Revenues:
Real estate operations segment:
U.S.	$	478,718		$	512,759		$	1,532,706		$	1,525,623
Other Americas		23,157			15,598			54,690			44,616
Europe		16,369			18,967			56,676			54,975
Asia		16,588			14,660			48,399			40,687
Total real estate operations segment		534,832			561,984			1,692,471			1,665,901
Strategic capital segment:
U.S.		17,340			9,940			159,925			28,876
Other Americas		6,061			5,805			21,976			16,884
Europe		26,289			113,577			78,524			161,686
Asia		18,352			13,259			45,316			39,673
Total strategic capital segment		68,042			142,581			305,741			247,119

Total revenues		602,874			704,565			1,998,212			1,913,020

Segment net operating income:
Real estate operations segment:
U.S.		363,802			385,837			1,144,176			1,131,340
Other Americas		16,037			10,417			36,403			29,127
Europe		11,454			13,787			40,713			40,420
Asia		11,711			7,650			33,386			24,830
Total real estate operations segment		403,004			417,691			1,254,678			1,225,717
Strategic capital segment:
U.S.		1,645			(577	)		103,252			1,959
Other Americas		3,934			2,975			14,666			9,163
Europe		16,497			91,390			49,229			125,460
Asia		9,970			4,169			18,813			12,754
Total strategic capital segment		32,046			97,957			185,960			149,336

Total segment net operating income		435,050			515,648			1,440,638			1,375,053

Reconciling items:
General and administrative expenses		57,656			58,157			171,350			165,634
Depreciation and amortization expenses		201,903			224,867			656,639			705,249
Operating income		175,491			232,624			612,649			504,170
Earnings from unconsolidated entities, net		55,066			45,857			172,267			145,622
Interest expense		(64,190	)		(75,310	)		(212,456	)		(232,577	)
Interest and other income, net		4,816			2,932			9,493			7,051
Gains on dispositions of investments in real estate and revaluation of equity investments upon acquisition of a controlling interest, net		779,053			117,296			959,384			461,963
Foreign currency and derivative losses, net		(18,872	)		(1,730	)		(46,327	)		(26,277	)
Gains (losses) on early extinguishment of debt, net		-			1,492			(30,596	)		2,484
Earnings before income taxes	$	931,364		$	323,161		$	1,464,414		$	862,436

	September 30,		December 31,
		2017		2016
Assets:
Real estate operations segment:
U.S.	$	19,199,770	$	21,286,422
Other Americas		1,857,678		978,476
Europe		1,058,894		1,346,589
Asia		1,008,217		936,462
Total real estate operations segment		23,124,559		24,547,949
Strategic capital segment:
U.S.		17,136		18,090
Europe		44,990		47,635
Asia		748		1,301
Total strategic capital segment		62,874		67,026
Total segment assets		23,187,433		24,614,975

Reconciling items:
Investments in and advances to unconsolidated entities		5,371,758		4,230,429
Assets held for sale or contribution		321,905		322,139
Notes receivable backed by real estate		-		32,100
Cash and cash equivalents		568,726		807,316
Other assets		204,328		242,973
Total reconciling items		6,466,717		5,634,957
Total assets	$	29,654,150	$	30,249,932