Segment Information

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

SEGMENT INFORMATION

13. SEGMENT INFORMATION

As of September 30, 2020, the Company owns and manages properties 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 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 (in thousands):

Real estate investments, at cost:
	September 30, 2020		December 31, 2019
Philadelphia CBD (a)	$	1,414,041	$	1,726,299
Pennsylvania Suburbs	1,000,214		1,003,890
Austin, Texas	726,295		721,255
Metropolitan Washington, D.C.	488,139		468,035
Other	87,076		86,980
Operating Properties	$	3,715,765	$	4,006,459
Right of use asset - operating leases, net	$	21,145	$	21,656
Corporate
Construction-in-progress	$	186,853	$	180,718
Land held for development (b)	$	115,474	$	96,124
Prepaid leasehold interests in land held for development, net (c)	$	39,287	$	39,592

(a) Decrease primarily due to the Commerce Square Venture Transaction. See Note 3, ''Real Estate Investments," for further information.

(b) Does not include 35.2 acres of land classified as held for sale as of September 30, 2020 and December 31, 2019.

(c) Includes leasehold interests in prepaid 99-year ground leases at 3025 and 3001-3003 JFK Boulevard, in Philadelphia, Pennsylvania as of September 30, 2020 and December 31, 2019.

Net operating income:

	Three Months Ended September 30,
	2020								2019
	Total revenue		Operating expenses (a)			Net operating income (loss)			Total revenue		Operating expenses (a)			Net operating income (loss)
Philadelphia CBD	$	52,640	$	(18,522	)	$	34,118		$	66,105	$	(24,773	)	$	41,332
Pennsylvania Suburbs	34,649		(11,141		)	23,508			34,818		(11,667		)	23,151
Austin, Texas	25,328		(9,944		)	15,384			26,280		(9,302		)	16,978
Metropolitan Washington, D.C.	9,675		(5,236		)	4,439			13,179		(5,999		)	7,180
Other	3,188		(2,374		)	814			3,706		(2,691		)	1,015
Corporate	626		(1,782		)	(1,156		)	1,243		(1,642		)	(399		)
Operating properties	$	126,106	$	(48,999	)	$	77,107		$	145,331	$	(56,074	)	$	89,257

	Nine Months Ended September 30,
	2020								2019
	Total revenue		Operating expenses (a)			Net operating income (loss)			Total revenue		Operating expenses (a)			Net operating income (loss)
Philadelphia CBD	$	181,203	$	(65,615	)	$	115,588		$	196,859	$	(75,311	)	121,548
Pennsylvania Suburbs	106,569		(34,980		)	71,589			104,744		(36,466		)	68,278
Austin, Texas	76,921		(30,032		)	46,889			77,234		(28,182		)	49,052
Metropolitan Washington, D.C.	30,520		(15,678		)	14,842			40,372		(18,542		)	21,830
Other	10,221		(7,434		)	2,787			10,352		(7,226		)	3,126
Corporate	2,597		(4,652		)	(2,055		)	3,817		(4,969		)	(1,152		)
Operating properties	$	408,031	$	(158,391	)	$	249,640		$	433,378	$	(170,696	)	$	262,682

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

Unconsolidated real estate ventures:
	Investment in real estate ventures						Equity in income (loss) of real estate venture
	As of						Three Months Ended September 30,						Nine Months Ended September 30,
	September 30, 2020			December 31, 2019			2020			2019			2020			2019
Philadelphia CBD (a)	$	277,161		$	17,524		$	(2,737	)	$	55		$	(2,575	)	$	217
Metropolitan Washington, D.C.	100,325			102,840			(1,367		)	(528		)	(2,463		)	(963		)
MAP Venture (b)	(9,715		)	(70		)	(1,684		)	(1,602		)	(4,844		)	(4,414		)
Other	—			—			—			110			—			346
Total	$	367,771		$	120,294		$	(5,788	)	$	(1,965	)	$	(9,882	)	$	(4,814	)

(a) Increase primarily due to the Commerce Square Venture Transaction. See Note 3, ''Real Estate Investments," for further information.

(b) Included in "Other liabilities" on the consolidated balance sheets.

Net operating income (“NOI”) is a non-GAAP financial measure, which we define 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 and management fees. 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. NOI presented by the Company may not be comparable to NOI reported by other companies that define NOI differently. NOI is the measure that is used by the Company’s management to evaluate the operating performance of the Company’s 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, as defined by GAAP, to consolidated NOI, (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2020			2019		2020		2019
Net income	$	276,133		$	6,820	$	288,240	$	17,655
Plus:
Interest expense	16,310			20,400		56,510		61,273
Interest expense - amortization of deferred financing costs	715			694		2,195		2,026
Depreciation and amortization	43,533			55,627		145,314		158,738
General and administrative expenses	7,069			6,974		23,973		25,217
Equity in loss of Real Estate Ventures	5,788			1,965		9,882		4,814
Less:
Interest income	467			558		1,487		1,636
Income tax (provision) benefit	(2		)	—		224		(46		)
Net gain on disposition of real estate	271,901			356		274,487		356
Net gain on sale of undepreciated real estate	—			250		201		1,501
Net gain on real estate venture transactions	75			2,059		75		3,594
Consolidated net operating income	$	77,107		$	89,257	$	249,640	$	262,682