SEGMENT INFORMATION

12 Months Ended

Dec. 31, 2019

18. SEGMENT INFORMATION

During the year ended December 31, 2019, the Company owned and managed its portfolio within five segments: (1) Philadelphia Central Business District (Philadelphia CBD), (2) Pennsylvania Suburbs, (3) Austin, Texas (4) Metropolitan Washington, D.C., and (5) Other. The Philadelphia CBD segment includes properties located in the City of Philadelphia, Pennsylvania. The Pennsylvania Suburbs segment includes properties in Chester, Delaware, and Montgomery counties in the Philadelphia suburbs. The Austin, Texas segment includes properties in the City of Austin, Texas. The Metropolitan Washington, D.C. segment includes properties in the District of Columbia, Northern Virginia and southern Maryland. The Other segment includes properties located in Camden County, New Jersey and properties in New Castle County, Delaware. In addition to the five segments, the corporate group is responsible for cash and investment management, development of certain real estate properties during the construction period, and certain other general support functions. Land held for development and construction in progress is transferred to operating properties by region upon completion of the associated construction or project.

The following tables provide selected asset information and results of operations of the Company’s reportable segments as of and for the three years ended December 31, 2019, 2018 and 2017 (in thousands):



Real estate investments, at cost:
	December 31, 2019		December 31, 2018		December 31, 2017
Philadelphia CBD	$	1,726,299	$	1,670,388	$	1,643,296
Pennsylvania Suburbs	1,003,890		1,002,937		957,272
Austin, Texas (a)	721,255		667,698		163,653
Metropolitan Washington, D.C. (b)	468,035		524,190		978,257
Other	86,980		86,506		88,346
Operating Properties	$	4,006,459	$	3,951,719	$	3,830,824

Corporate
Right of use asset - operating leases, net (c)	$	21,656	$	—	$	—
Construction-in-progress	$	180,718	$	150,263	$	121,188
Land held for development (d)	$	96,124	$	86,401	$	98,242
Prepaid leasehold interests in land held for development, net (e)	$	39,592	$	39,999	$	—


(a)	Refer to Note 3, ''Real Estate Investments,” for details related to the Company's acquisition of DRA Advisors' ownership interest in the Austin Venture in December 2018.


(b)	Refer to Note 4, ''Investment in Unconsolidated Real Estate Ventures.” for details of the Company's transaction with the Herndon Innovation Center Metro Portfolio Venture, LLC in December 2018.


(c)	Refer to Note 2, ''Summary of Significant Accounting Policies,” for further information on the impact of adoption of Topic 842.


(d)	Does not include 35.2 acres, 37.9 acres, and 13.1 acres of land classified as held for sale as of December 31, 2019, 2018, and 2017, respectively. Refer to Note 3, ''Real Estate Investments,” for further information.


(e)	Includes leasehold interests in prepaid 99-year ground leases at 3025 and 3001-3003 JFK Boulevard, in Philadelphia, Pennsylvania as of December 31, 2019 and December 31, 2018. Refer to Note 3, ''Real Estate Investments,” for further information.



	Year Ended December 31,
	2019								2018								2017
	Total revenue		Operating expenses (a)			Net operating income (loss)			Total revenue		Operating expenses (a)			Net operating income (loss)			Total revenue		Operating expenses (a)			Net operating income
Philadelphia CBD	$	263,769	$	(100,219	)	$	163,550		$	256,717	$	(99,449	)	$	157,268		$	226,673	$	(88,818	)	$	137,855
Pennsylvania Suburbs	141,084		(47,418		)	93,666			138,279		(49,433		)	88,846			139,785		(47,845		)	91,940
Austin, Texas	104,157		(38,285		)	65,872			38,665		(16,739		)	21,926			34,301		(15,456		)	18,845
Metropolitan Washington, D.C.	51,498		(23,455		)	28,043			90,308		(34,072		)	56,236			92,024		(35,014		)	57,010
Other	14,558		(9,328		)	5,230			16,757		(11,888		)	4,869			18,347		(11,749		)	6,598
Corporate	5,351		(7,141		)	(1,790		)	3,619		(6,518		)	(2,899		)	9,363		(7,193		)	2,170
Operating properties	$	580,417	$	(225,846	)	$	354,571		$	544,345	$	(218,099	)	$	326,246		$	520,493	$	(206,075	)	$	314,418


(a)	Includes property operating expense, real estate taxes and third party management expense.



Unconsolidated real estate ventures:
	Investment in real estate ventures, at equity							Equity in income (loss) of real estate venture
	As of							Years ended December 31,
	December 31, 2019			December 31, 2018		December 31, 2017		2019			2018			2017
Philadelphia CBD	$	17,524		$	19,897	$	39,939	$	328		$	(105	)	$	255
Pennsylvania Suburbs	—			—		3,503		—			—			631
Metropolitan Washington, D.C. (a)	102,840			136,142		119,817		(4,234		)	(15,065		)	(5,044		)
MAP Venture	(70		)	11,173		15,450		(6,102		)	(2,155		)	(3,443		)
Other	—			1,888		1,939		86			407			285
Austin, Texas (b)	—			—		13,973		—			1,687			(990		)
Total	$	120,294		$	169,100	$	194,621	$	(9,922	)	$	(15,231	)	$	(8,306	)


(a)	Refer to Note 4, ''Investment in Unconsolidated Real Estate Ventures," for details of the Company's transaction with the Herndon Innovation Center Metro Portfolio Venture, LLC in December 2018.


(b)	Refer to Note 3, ''Real Estate Investments," for details related to the Company's acquisition of DRA Advisors' ownership interest in the Austin Venture in December 2018.

Net operating income (“NOI”) is a non-GAAP financial measure defined as total revenue less property operating expenses, real estate taxes, and third party management expenses. Property operating expenses that are included in determining NOI consist of costs that are necessary and allocable to our operating properties such as utilities, property-level salaries, repairs and maintenance, property insurance, management fees, and bad debt expense. General and administrative expenses that are not reflected in NOI primarily consist of corporate-level salaries, amortization of share awards and professional fees that are incurred as part of corporate office management. All companies may not calculate NOI in the same manner. NOI is the measure that is used by the Company to evaluate the operating performance of its real estate assets by segment. The Company believes NOI provides useful information to investors regarding the financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. While NOI is a relevant and widely used measure of operating performance of real estate investment trusts, it does not represent cash flow from operations or net income as defined by GAAP and should not be considered as an alternative to those measures in evaluating our liquidity or operating performance. NOI does not reflect interest expenses, real estate impairment losses, depreciation and amortization costs, capital expenditures and leasing costs. The Company believes that net income (loss), as defined by GAAP, is the most appropriate earnings measure. The following is a reconciliation of consolidated net income (loss), as defined by GAAP, to consolidated NOI, (in thousands):



	Year Ended December 31,
	2019			2018			2017
Net income	$	34,529		$	135,472		$	121,177
Plus:
Interest expense	81,512			78,199			81,886
Interest expense - amortization of deferred financing costs	2,768			2,498			2,435
Depreciation and amortization	210,005			176,000			180,323
General and administrative expenses	32,156			27,802			28,538
Equity in loss of Real Estate Ventures	9,922			15,231			8,306
Provision for impairment	—			71,707			3,057
Loss on early extinguishment of debt	—			105			3,933
Less:
Interest income	2,318			4,703			1,113
Income tax (provision) benefit	(12		)	(423		)	628
Net gain on disposition of real estate	356			2,932			32,017
Net gain on sale of undepreciated real estate	2,020			3,040			953
Net gain on real estate venture transactions	11,639			142,233			80,526
Gain on promoted interest in unconsolidated real estate venture	—			28,283			—
Consolidated net operating income	$	354,571		$	326,246		$	314,418