We also evaluate performance based upon, among other things, funds from operations (“FFO”). We calculate FFO in accordance with the White Paper issued in December 2018 on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”). The White Paper defines FFO as net income or loss calculated in accordance with GAAP, excluding gains and losses from sales of depreciable real estate and impairment write-downs associated with depreciable real estate, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of
non-real
estate assets) and after adjustment for unconsolidated partnerships and joint ventures. The calculation of FFO includes the amortization of deferred revenue related to tenant-funded tenant improvements and excludes the depreciation of the related tenant improvement assets. In the December 2018 White Paper, NAREIT provided an option to include value changes in
equity securities in the calculation of FFO. We elected this option retroactively during the fourth quarter of 2018.
We believe that FFO is a useful supplemental measure of our operating performance. The exclusion from FFO of gains and losses from the sale of operating real estate assets allows investors and analysts to readily identify the operating results of the assets that form the core of our activity and assists in comparing those operating results between periods. Also, because FFO is generally recognized as the industry standard for reporting the operations of REITs, it facilitates comparisons of operating performance to other REITs. However, other REITs may use different methodologies to calculate FFO, and accordingly, our FFO may not be comparable to all other REITs.
Implicit in historical cost accounting for real estate assets in accordance with GAAP is the assumption that the value of real estate assets diminishes predictably over time. Since real estate values have historically risen or fallen with market conditions, many industry investors and analysts have considered presentations of operating results for real estate companies using historical cost accounting alone to be insufficient. Because FFO excludes depreciation and amortization of real estate assets, we believe that FFO along with the required GAAP presentations provides a more complete measurement of our performance relative to our competitors and a more appropriate basis on which to make decisions involving operating, financing and investing activities than the required GAAP presentations alone would provide. We use FFO per share to calculate annual cash bonuses for certain employees.
However, FFO should not be viewed as an alternative measure of our operating performance because it does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, which are significant economic costs and could materially impact our results from operations.
The table below presents a reconciliation of net (loss) income to FFO for the years ended December 31, 2011, 2020 and 2021 and the three months ended June 30, 2022 (in thousands except per share data):
| | | | | | | | | | | | | | | | |
| | | Year Ended December 31, | | | Three
Months
Ended
June 30, | |
| | | 2011 | | | 2020 | | | 2021 | | | 2022 | |
| Net (loss) income | | $ | (2,238 | ) | | $ | 16,430 | | | $ | 29,012 | | | $ | 3,546 | |
| Adjustments: | | | | | | | | | | | | | | | | |
| Depreciation and amortization—Consolidated | | | 44,660 | | | | 299,682 | | | | 343,614 | | | | 91,438 | |
Depreciation and estate assets | | | — | | | | (2,286 | ) | | | (7,719 | ) | | | (4,485 | ) |
| Depreciation and amortization—Company’s share from unconsolidated real estate entities | | | — | | | | 5,605 | | | | 6,020 | | | | 1,320 | |
| Impairment loss – real estate assets | | | — | | | | — | | | | 2,762 | | | | 3,250 | |
Unrealized loss (gain) on non-real estate investments | | | — | | | | 2,463 | | | | (16,571 | ) | | | 1,818 | |
Tax impact of unrealized gain on non-real estate investment | | | — | | | | — | | | | 3,849 | | | | — | |
FFO attributable to non-controlling interests | | | (1,297 | ) | | | (37,644 | ) | | | (64,388 | ) | | | (18,687 | ) |
| FFO attributable to preferred units | | | (8,108 | ) | | | (612 | ) | | | (2,893 | ) | | | (5,200 | ) |
| | | | | | | | | | | | | | | | |
| FFO to common stockholders and unitholders | | $ | 33,017 | | | $ | 283,638 | | | $ | 293,686 | | | $ | 73,000 | |
| | | | | | | | | | | | | | | | |
| Specified items impacting FFO: | | | | | | | | | | | | | | | | |
| Transaction-related expenses | | | 1,693 | | | | 440 | | | | 8,911 | | | | 1,126 | |
One-time tax reassessment management cost | | | — | | | | 5,500 | | | | — | | | | — | |
One-time straight line rent reserve | | | — | | | | 2,620 | | | | — | | | | — | |
One-time prior period net property tax adjustment – Company’s Share | | | — | | | | (937 | ) | | | (581 | ) | | | 477 | |
One-time debt extinguishment cost-Company’s Share | | | — | | | | 2,654 | | | | 3,187 | | | | — | |
| | | | | | | | | | | | | | | | |
| FFO (excluding specified items) to common stockholders and unitholders | | $ | 34,710 | | | $ | 293,915 | | | $ | 305,203 | | | $ | 74,603 | |
| | | | | | | | | | | | | | | | |
| Weighted average common stock/units outstanding—diluted | | | 32,004 | | | | 154,084 | | | | 153,332 | | | | 146,344 | |
| FFO (excluding specified items) per common stock/unit—diluted | | $ | 1.08 | | | $ | 1.91 | | | $ | 1.99 | | | $ | 0.51 | |
| FFO (excluding specified items) per common stock/unit—diluted, annualized | | | — | | | | — | | | | — | | | $ | 2.04 | |
