Segment Reporting

The Company's reportable operating segments include Established Communities, Other Stabilized Communities, and Development/Redevelopment Communities. Annually as of January 1, the Company determines which of its communities fall into each of these categories and generally maintains that classification throughout the year for the purpose of reporting segment operations, unless disposition or redevelopment plans regarding a community change.

In addition, the Company owns land for future development and has other corporate assets that are not allocated to an operating segment.

The Company's segment disclosures present the measure(s) used by the chief operating decision maker for purposes of assessing each segment's performance. The Company's chief operating decision maker is comprised of several members of its executive management team who use net operating income ("NOI") as the primary financial measure for Established Communities and Other Stabilized Communities. NOI is defined by the Company as total property revenue less direct property operating expenses (including property taxes), and excluding corporate-level income (including management, development and other fees), corporate-level property management and other indirect operating expenses, investments and investment management expenses, expensed acquisition, development and other pursuit costs, net of recoveries, interest expense, net, loss (gain) on extinguishment of debt, net, general and administrative expense, equity in (loss) income of unconsolidated real estate entities, depreciation expense, corporate income tax expense, casualty and impairment (gain) loss, net, gain on sale of real estate assets and net operating income from real estate assets sold or held for sale. Although the Company considers NOI a useful measure of a community's or communities' operating performance, NOI should not be considered an alternative to net income or net cash flow from operating activities, as determined in accordance with GAAP. NOI excludes a number of income and expense categories as detailed in the reconciliation of NOI to net income.

A reconciliation of NOI to net income for the three and six months ended June 30, 2017 and 2016 is as follows (dollars in thousands):



	For the three months ended						For the six months ended
	6/30/2017			6/30/2016			6/30/2017			6/30/2016
Net income	$	165,194		$	197,319		$	400,975		$	435,197
Indirect operating expenses, net of corporate income	16,423			15,477			32,720			32,015
Investments and investment management expense	1,455			1,194			2,776			2,340
Expensed acquisition, development and other pursuit costs, net of recoveries	570			1,436			1,298			4,897
Interest expense, net	50,102			46,581			99,397			89,991
Loss on extinguishment of debt, net	24,162			2,461			24,162			2,461
General and administrative expense	13,947			12,011			27,153			23,414
Equity in income of unconsolidated real estate entities	(1,146		)	(27,151		)	(17,819		)	(55,120		)
Depreciation expense	141,439			132,469			282,060			259,685
Income tax expense	58			36			78			73
Casualty and impairment (gain) loss, net	—			(1,732		)	11,688			(3,935		)
Gain on sale of real estate	(44,067		)	(31,133		)	(132,382		)	(82,563		)
Net operating income from real estate assets sold or held for sale	(1,038		)	(9,345		)	(3,900		)	(19,321		)
Net operating income	$	367,099		$	339,623		$	728,206		$	689,134

The following is a summary of NOI from real estate assets sold or held for sale for the periods presented (dollars in thousands):



	For the three months ended						For the six months ended
	6/30/2017			6/30/2016			6/30/2017			6/30/2016
Rental income from real estate assets sold or held for sale	$	1,664		$	15,277		$	6,376		$	31,188
Operating expenses from real estate assets sold or held for sale	(626		)	(5,932		)	(2,476		)	(11,867		)
Net operating income from real estate assets sold or held for sale	$	1,038		$	9,345		$	3,900		$	19,321

The primary performance measure for communities under development or redevelopment depends on the stage of completion. While under development, management monitors actual construction costs against budgeted costs as well as lease-up pace and rent levels compared to budget.

The following table provides details of the Company's segment information as of the dates specified (dollars in thousands). The segments are classified based on the individual community's status at the beginning of the given calendar year. Therefore, each year the composition of communities within each business segment is adjusted. Accordingly, the amounts between years are not directly comparable. Segment information for total revenue and NOI for the three and six months ended June 30, 2017 and 2016 has been adjusted to exclude the real estate assets that were sold from January 1, 2016 through June 30, 2017, or otherwise qualify as held for sale as of June 30, 2017, as described in Note 6, "Real Estate Disposition Activities." Segment information for gross real estate as of June 30, 2017 and 2016 has not been adjusted to exclude real estate assets that were sold or otherwise qualified as held for sale subsequent to the respective balance sheet dates.



	For the three months ended						For the six months ended
	Total revenue		NOI		% NOI change from prior year		Total revenue		NOI		% NOI change from prior year		Gross real estate (1)
For the period ended June 30, 2017
Established
New England	$	59,292	$	37,658	1.3	%	$	117,898	$	75,474	2.3	%	$	1,879,079
Metro NY/NJ	90,402		61,538		0.9	%	179,564		122,502		2.3	%	2,967,335
Mid-Atlantic	56,022		38,343		—	%	111,777		77,490		1.8	%	2,064,723
Pacific Northwest	20,791		15,017		5.9	%	41,245		29,832		5.6	%	732,351
Northern California	84,028		64,587		2.3	%	167,351		128,304		2.1	%	2,819,965
Southern California	83,778		59,808		4.2	%	167,003		120,359		5.2	%	3,008,947
Total Established	394,313		276,951		2.1	%	784,838		553,961		3.0	%	13,472,400

Other Stabilized	70,907		50,009		N/A		141,248		99,200		N/A		2,903,017
Development / Redevelopment	62,530		40,139		N/A		118,077		75,045		N/A		4,533,086
Land Held for Development	N/A		N/A		N/A		N/A		N/A		N/A		86,016
Non-allocated (2)	1,098		N/A		N/A		2,298		N/A		N/A		94,277

Total	$	528,848	$	367,099	8.1	%	$	1,046,461	$	728,206	5.7	%	$	21,088,796

For the period ended June 30, 2016
Established
New England	$	59,288	$	37,977	2.9	%	$	117,854	$	75,415	9.0	%	$	1,841,109
Metro NY/NJ	85,021		58,778		2.3	%	168,099		115,480		2.7	%	2,889,770
Mid-Atlantic	58,464		40,530		2.5	%	115,994		80,593		1.9	%	2,331,290
Pacific Northwest	17,968		12,866		5.4	%	35,458		25,624		6.2	%	795,977
Northern California	79,632		60,850		6.8	%	158,084		121,097		9.1	%	2,653,785
Southern California	71,612		50,933		10.3	%	142,869		101,975		10.1	%	2,635,803
Total Established	371,985		261,934		5.1	%	738,358		520,184		6.5	%	13,147,734

Other Stabilized (3)	53,118		35,784		N/A		124,557		91,718		N/A		2,166,893
Development / Redevelopment	60,460		41,905		N/A		113,711		77,232		N/A		4,065,071
Land Held for Development	N/A		N/A		N/A		N/A		N/A		N/A		511,797
Non-allocated (2)	1,467		N/A		N/A		2,990		N/A		N/A		81,186

Total	$	487,030	$	339,623	12.0	%	$	979,616	$	689,134	16.8	%	$	19,972,681

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(1)	Does not include gross real estate assets held for sale of $15,271 and $77,943 as of June 30, 2017 and 2016, respectively.


(2)	Revenue represents third-party management, asset management and developer fees and miscellaneous income which are not allocated to a reportable segment.


(3)	Total revenue and NOI for the six months ended June 30, 2016 includes $20,306 in business interruption insurance proceeds related to the Edgewater casualty loss.