12. SEGMENT INFORMATION

As of June 30, 2018, the Company owns and manages properties within five segments: (1) Philadelphia Central Business District (Philadelphia CBD), (2) Pennsylvania Suburbs, (3) Metropolitan Washington, D.C., (4) Austin, Texas and (5) Other. The Philadelphia CBD segment includes properties located in the City of Philadelphia in Pennsylvania. The Pennsylvania Suburbs segment includes properties in Chester, Delaware, and Montgomery counties in the Philadelphia suburbs. The Metropolitan Washington, D.C. segment includes properties in the District of Columbia, Northern Virginia and southern Maryland. The Austin, Texas segment includes properties in the City of Austin, Texas. The Other segment includes properties located in Camden County in New Jersey and properties in New Castle County in 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:
	June 30, 2018		December 31, 2017
Philadelphia CBD	$	1,647,843	$	1,643,296
Pennsylvania Suburbs		979,720		958,796
Metropolitan Washington, D.C.		979,573		978,257
Austin, Texas		170,912		163,653
Other		86,581		88,346
	$	3,864,629	$	3,832,348

Corporate
Construction-in-progress	$	120,593	$	121,188
Land held for development (a)	$	95,658	$	98,242
Prepaid leasehold interests in land held for development (b)	$	40,177	$	-

(a)

As of June 30, 2018, the Company categorized 2.7 acres of land held for development, located in the Pennsylvania Suburbs segment, as held for sale in accordance with applicable accounting standards for long lived assets. As of December 31, 2017, the Company categorized 13.1 acres of land held for development, located in the Other segment, as held for sale in accordance with applicable accounting standards for long lived assets.

(b)	As of June 30, 2018, this caption comprised leasehold interests in prepaid 99-year ground leases at 3025 and 3001-3003 JFK Boulevard, in Philadelphia, Pennsylvania. See Note 3, “Real Estate Investments,” for further information.

Net operating income (in thousands):

	Three-month periods ended
	June 30,
	2018								2017
	Total revenue		Operating expenses (a)			Net operating income (loss)			Total revenue		Operating expenses (a)			Net operating income (loss)
Philadelphia CBD	$	63,524	$	(24,805	)	$	38,719		$	54,451	$	(21,464	)	$	32,987
Pennsylvania Suburbs		34,333		(12,117	)		22,216			35,157		(11,240	)	$	23,917
Metropolitan Washington, D.C.		23,199		(8,392	)		14,807			22,749		(8,464	)	$	14,285
Austin, Texas		8,469		(3,395	)		5,074			8,763		(4,132	)	$	4,631
Other		3,339		(2,200	)		1,139			4,160		(2,580	)	$	1,580
Corporate		922		(1,638	)		(716	)		2,511		(2,738	)	$	(227	)
Operating properties	$	133,786	$	(52,547	)	$	81,239		$	127,791	$	(50,618	)	$	77,173

	Six-month periods ended
	June 30,
	2018								2017
	Total revenue		Operating expenses (a)			Net operating income (loss)			Total revenue		Operating expenses (a)			Net operating income
Philadelphia CBD	$	126,126	$	(49,132	)	$	76,994		$	108,900	$	(42,301	)	$	66,599
Pennsylvania Suburbs		69,215		(25,081	)		44,134			70,812		(23,824	)		46,988
Metropolitan Washington, D.C.		46,258		(17,151	)		29,107			46,111		(17,847	)		28,264
Austin, Texas		16,833		(6,918	)		9,915			17,886		(7,705	)		10,181
Other		9,480		(7,165	)		2,315			10,522		(6,436	)		4,086
Corporate		2,232		(3,604	)		(1,372	)		4,480		(3,586	)		894
Operating properties	$	270,144	$	(109,051	)	$	161,093		$	258,711	$	(101,699	)	$	157,012

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

Unconsolidated real estate ventures (in thousands):
	Investment in real estate ventures, at equity				Equity in income (loss) of real estate ventures
	As of				Three-month periods ended June 30,						Six-month periods ended June 30,
	June 30, 2018		December 31, 2017		2018			2017			2018			2017
Philadelphia CBD	$	21,230	$	39,939	$	89		$	45		$	(147	)	$	(21	)
Pennsylvania Suburbs		-		3,503		-			148			-			424
Metropolitan Washington, D.C.		119,678		119,817		(363	)		(75	)		(400	)		392
Austin, Texas		14,684		13,973		653			1,646			734			1,281
MAP Venture (a)		12,883		15,450		(830	)		(787	)		(1,567	)		(1,904	)
Other		1,886		1,939		93			107			197			164
Total	$	170,361	$	194,621	$	(358	)	$	1,084		$	(1,183	)	$	336

(a)

The MAP Venture represents a joint venture, formed on February 4, 2016 between the Company and MAP Ground Lease Holdings LLC, an affiliate of Och-Ziff Capital Management Group, LLC. The MAP Venture’s business operations, including properties in Richmond, Virginia; Metropolitan Washington, D.C.; New Jersey/Delaware and Pennsylvania Suburbs, are centrally managed with the results reported to management of the Company on a consolidated basis. As a result, the investment in the MAP Venture is separately presented. All other unconsolidated real estate ventures are managed consistently with the Company’s regional segments.

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’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-month periods ended June 30,						Six-month periods ended June 30,
	2018			2017			2018			2017

Net income	$	13,136		$	7,698		$	57,841		$	28,969
Plus:
Interest expense		19,301			20,304			38,834			41,741
Interest expense - amortization of deferred financing costs		627			596			1,254			1,230
Depreciation and amortization		43,717			44,263			87,008			90,155
General and administrative expenses		7,523			6,659			16,246			15,984
Equity in (income) loss of Real Estate Ventures		358			(1,084	)		1,183			(336	)
Provision for impairment		-			327			-			3,057

Less:
Interest income		641			163			1,344			556
Income tax (provision) benefit		(20	)		339			(158	)		239
Net gain (loss) on disposition of real estate		(35	)		1,088			(35	)		8,411
Net gain on sale of undepreciated real estate		2,837						2,859			-
Net gain on Real Estate Venture transactions		-			-			37,263			14,582
Consolidated net operating income	$	81,239		$	77,173		$	161,093		$	157,012