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Segment Information (Tables)
 12 Months Ended
Dec. 31, 2018
Segment Reporting [Abstract]  
Real Estate Investments, Net Operating Income and Unconsolidated Real Estate Ventures of Reportable Segments

The following tables provide selected asset information and results of operations of the Company’s reportable segments for the three years ended December 31, 2018, 2017 and 2016 (in thousands):

 

Real estate investments, at cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

December 31, 2017

 

 

December 31, 2016

 

Philadelphia CBD

 

$

1,670,388

 

 

$

1,643,296

 

 

$

1,320,974

 

Pennsylvania Suburbs

 

 

1,004,537

 

 

 

958,796

 

 

 

1,005,446

 

Metropolitan Washington, D.C. (a)

 

 

524,190

 

 

 

978,257

 

 

 

975,987

 

Austin, Texas (b)

 

 

667,698

 

 

 

163,653

 

 

 

146,794

 

Other

 

 

86,506

 

 

 

88,346

 

 

 

137,094

 

 

 

$

3,953,319

 

 

$

3,832,348

 

 

$

3,586,295

 

Assets held for sale (c)

 

 

-

 

 

 

-

 

 

 

73,591

 

      Operating Properties

 

$

3,953,319

 

 

$

3,832,348

 

 

$

3,659,886

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

Construction-in-progress

 

$

150,263

 

 

$

121,188

 

 

$

297,462

 

Land held for development (d)

 

$

86,401

 

 

$

98,242

 

 

$

150,970

 

Prepaid leasehold interests in land held for development, net (e)

 

$

39,999

 

 

$

-

 

 

$

-

 

 

(a)

On December 20, 2018, the Company contributed a portfolio of eight properties containing an aggregate of 1,293,197 square feet, located in its Metropolitan Washington, D.C. segment, known as the Rockpoint Portfolio, to the Herndon Innovation Center Metro Portfolio Venture, LLC for a gross sales price of $312.0 million. The Company and its partner own 15% and 85% interests in the Herndon Innovation Center Metro Portfolio Venture, LLC, respectively. The Herndon Innovation Center Metro Portfolio Venture, LLC funded the acquisition with $265.2 million of cash, which was distributed to the Company at closing. After funding its share of closing costs and working capital contributions of $2.2 million and $0.6 million, respectively, the Company received $262.4 million of cash proceeds at settlement. For further information related to this transaction, see the “Herndon Innovation Center Metro Portfolio Venture, LLC” section in Note 4, “Investment in Unconsolidated Real Estate Ventures,” for further information.

(b)

On December 11, 2018, the Company acquired from DRA Advisors its 50% ownership interest in the G&I Austin Office LLC real estate venture for an aggregate purchase price of $535.1 million. The DRA Austin Venture owned twelve office properties containing an aggregate 1,570,123 square feet, located in Austin, Texas. As a result of the acquisition, the Company acquired complete ownership of the Austin Venture Portfolio. For further information related to this transaction, see the “Acquisitions” section in Note 3, “Real Estate Investments.”

(c)

As of December 31, 2016, three office properties in the Metropolitan Washington, D.C. segment and two office properties in the Other segment were classified as held for sale in accordance with applicable accounting standards for long-lived assets. See the “2016” section of Note 3, “Real Estate Investments,” for further information.

(d)

As of December 31, 2018, the Company classified 37.9 acres of land held for development, comprised of 2.7 acres and 35.2 acres, located in its Pennsylvania Suburbs segment and Other segment, respectively, as held for sale in accordance with applicable accounting standards for long lived assets. See Note 3, “Real Estate Investments,” for further information. As of December 31, 2017, the Company classified 13.1 acres of land held for development located in its Other segment as held for sale in accordance with applicable accounting standards for long lived assets.

(e)

As of December 31, 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.

None of the above aforementioned sales or properties classified as held for sale are considered significant dispositions under the accounting guidance for discontinued operations.

 

 

Years ended

 

 

December 31,

 

 

2018

 

 

2017

 

 

2016

 

 

Total revenue

 

 

Operating expenses (a)

 

 

Net operating income (loss)

 

 

Total revenue

 

 

Operating expenses (a)

 

 

Net operating income

 

 

Total revenue

 

 

Operating expenses (a)

 

 

Net operating income

 

Philadelphia CBD

$

256,717

 

 

$

(99,449

)

 

$

157,268

 

 

$

226,673

 

 

$

(88,818

)

 

$

137,855

 

 

$

200,245

 

 

$

(78,708

)

 

$

121,537

 

Pennsylvania Suburbs

 

138,279

 

 

 

(49,357

)

 

 

88,922

 

 

 

139,785

 

 

 

(47,769

)

 

 

92,016

 

 

 

144,338

 

 

 

(49,208

)

 

 

95,130

 

Metropolitan Washington, D.C.

 

90,308

 

 

 

(34,072

)

 

 

56,236

 

 

 

92,024

 

 

 

(35,014

)

 

 

57,010

 

 

 

99,781

 

 

 

(39,036

)

 

 

60,745

 

Austin, Texas

 

38,665

 

 

 

(16,739

)

 

 

21,926

 

 

 

34,301

 

 

 

(15,456

)

 

 

18,845

 

 

 

34,585

 

 

 

(13,222

)

 

 

21,363

 

Other

 

16,757

 

 

 

(11,888

)

 

 

4,869

 

 

 

18,347

 

 

 

(11,749

)

 

 

6,598

 

 

 

39,359

 

 

 

(23,204

)

 

 

16,155

 

Corporate

 

3,619

 

 

 

(6,518

)

 

 

(2,899

)

 

 

9,363

 

 

 

(7,193

)

 

 

2,170

 

 

 

7,155

 

 

 

(6,070

)

 

 

1,085

 

Operating properties

$

544,345

 

 

$

(218,023

)

 

$

326,322

 

 

$

520,493

 

 

$

(205,999

)

 

$

314,494

 

 

$

525,463

 

 

$

(209,448

)

 

$

316,015

 

 

(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, 2018

 

 

December 31, 2017

 

 

December 31, 2016

 

 

2018

 

 

2017

 

 

2016

 

Philadelphia CBD

$

19,897

 

 

$

39,939

 

 

$

48,691

 

 

$

(105

)

 

$

255

 

 

$

(686

)

Pennsylvania Suburbs

 

-

 

 

 

3,503

 

 

 

15,421

 

 

 

-

 

 

 

631

 

 

 

748

 

Metropolitan Washington, D.C. (a)

 

136,142

 

 

 

119,817

 

 

 

141,786

 

 

 

(15,065

)

 

 

(5,044

)

 

 

(6,293

)

MAP Venture (b)

 

11,173

 

 

 

15,450

 

 

 

20,893

 

 

 

(2,155

)

 

 

(3,443

)

 

 

(4,218

)

Other

 

1,888

 

 

 

1,939

 

 

 

1,654

 

 

 

407

 

 

 

285

 

 

 

814

 

Austin, Texas (c)

 

-

 

 

 

13,973

 

 

 

52,886

 

 

 

1,687

 

 

 

(990

)

 

 

(1,868

)

Total

$

169,100

 

 

$

194,621

 

 

$

281,331

 

 

$

(15,231

)

 

$

(8,306

)

 

$

(11,503

)

 

(a)

On December 20, 2018, the Company formed a joint venture with Rockpoint. See footnote (a) to the “Real estate investments, at cost” table above for further information regarding this transaction.

(b)

The MAP Venture represents a joint venture formed between the Company and MAP Ground Lease Holdings LLC, an affiliate of Och-Ziff Capital Management Group, LLC, on February 4, 2016. 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.

(c)

See footnote (b) to the “Real estate investments, at cost” table above for further information regarding this transaction. 
Reconciliation of Consolidated Net Income (Loss) to Consolidated NOI The following is a reconciliation of consolidated net income (loss), as defined by GAAP, to consolidated NOI, (in thousands):

 

 

 

 

 

 

Years Ended December 31,

 

 

 

 

 

 

2018

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Net income

 

 

 

 

$

137,289

 

 

$

121,859

 

 

$

40,501

 

Plus:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

78,199

 

 

 

81,886

 

 

 

84,708

 

Interest expense - amortization of deferred financing costs

 

 

 

 

 

2,498

 

 

 

2,435

 

 

 

2,696

 

Interest expense - financing obligation

 

 

 

 

 

-

 

 

 

-

 

 

 

679

 

Depreciation and amortization

 

 

 

 

 

174,259

 

 

 

179,357

 

 

 

189,676

 

General and administrative expenses

 

 

 

 

 

27,802

 

 

 

28,538

 

 

 

26,596

 

Equity in loss of Real Estate Ventures

 

 

 

 

 

15,231

 

 

 

8,306

 

 

 

11,503

 

Provision for impairment

 

 

 

 

 

71,707

 

 

 

3,057

 

 

 

40,517

 

Loss on early extinguishment of debt

 

 

 

 

 

105

 

 

 

3,933

 

 

 

66,590

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

4,703

 

 

 

1,113

 

 

 

1,236

 

Income tax (provision) benefit

 

 

 

 

 

(423

)

 

 

628

 

 

 

-

 

Net gain on disposition of real estate

 

 

 

 

 

2,932

 

 

 

31,657

 

 

 

116,983

 

Net gain on sale of undepreciated real estate

 

 

 

 

 

3,040

 

 

 

953

 

 

 

9,232

 

Net gain on real estate venture transactions

 

 

 

 

 

142,233

 

 

 

80,526

 

 

 

20,000

 

Gain on promoted interest in unconsolidated real estate venture

 

 

 

 

 

28,283

 

 

 

-

 

 

 

-

 

Consolidated net operating income

 

 

 

 

$

326,322

 

 

$

314,494

 

 

$

316,015