Segment Reporting

We have identified two reportable segments: (1) real estate and (2) observatory. Our real estate segment includes all activities related to the ownership, management, operation, acquisition, redevelopment, repositioning and disposition of our traditional real estate assets. Our observatory segment includes the operation of the 86th and 102nd floor observatories at the Empire State Building. These two lines of businesses are managed separately because each business requires different support infrastructures, provides different services and has dissimilar economic characteristics such as investments needed, stream of revenues and marketing strategies. We account for intersegment sales and rent as if the sales or rent were to third parties, that is, at current market prices.

The following tables provide components of segment profit for each segment for the three months ended March 31, 2019 and 2018 (amounts in thousands):



	Three Months Ended March 31, 2019
	Real Estate			Observatory			Intersegment Elimination			Total
Revenues:
Rental revenue	$	143,417		$	—		$	—		$	143,417
Intercompany rental revenue	14,021			—			(14,021		)	—
Observatory revenue	—			20,569			—			20,569
Lease termination fees	388			—			—			388
Third-party management and other fees	320			—			—			320
Other revenue and fees	2,599			—			—			2,599
Total revenues	160,745			20,569			(14,021		)	167,293
Operating expenses:
Property operating expenses	42,955			—			—			42,955
Intercompany rent expense	—			14,021			(14,021		)	—
Ground rent expense	2,331			—			—			2,331
General and administrative expenses	14,026			—			—			14,026
Observatory expenses	—			7,575			—			7,575
Real estate taxes	28,232			—			—			28,232
Depreciation and amortization	46,091			7			—			46,098
Total operating expenses	133,635			21,603			(14,021		)	141,217
Total operating income (loss)	27,110			(1,034		)	—			26,076
Other income (expense):
Interest income	3,739			—			—			3,739
Interest expense	(20,689		)	—			—			(20,689		)
Income (loss) before income taxes	10,160			(1,034		)	—			9,126
Income tax benefit (expense)	(234		)	964			—			730
Net income (loss)	$	9,926		$	(70	)	$	—		$	9,856
Segment assets	$	3,930,697		$	261,743		$	—		$	4,192,440
Expenditures for segment assets	$	44,531		$	13,789		$	—		$	58,320



	Three Months Ended March 31, 2018
	Real Estate			Observatory		Intersegment Elimination			Total
Revenues:
Rental revenue	$	122,311		$	—	$	—		$	122,311
Intercompany rental revenue	13,561			—		(13,561		)	—
Tenant expense reimbursement	17,794			—		—			17,794
Observatory revenue	—			21,249		—			21,249
Lease termination fees	622			—		—			622
Third-party management and other fees	463			—		—			463
Other revenue and fees	4,832			—		—			4,832
Total revenues	159,583			21,249		(13,561		)	167,271
Operating expenses:
Property operating expenses	44,185			—		—			44,185
Intercompany rent expense	—			13,561		(13,561		)	—
Ground rent expense	2,331			—		—			2,331
General and administrative expenses	12,628			—		—			12,628
Observatory expenses	—			7,336		—			7,336
Real estate taxes	26,744			—		—			26,744
Depreciation and amortization	39,865			18		—			39,883
Total operating expenses	125,753			20,915		(13,561		)	133,107
Total operating income	33,830			334		—			34,164
Other income (expense):
Interest income	1,225			—		—			1,225
Interest expense	(17,591		)	—		—			(17,591		)
Income before income taxes	17,464			334		—			17,798
Income tax (expense) benefit	(307		)	567		—			260
Net income	$	17,157		$	901	$	—		$	18,058
Segment assets	$	3,887,337		$	254,476	$	—		$	4,141,813
Expenditures for segment assets	$	34,797		$	11,553	$	—		$	46,350