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 on extinguishment of debt, net, general and administrative expense, equity in income of unconsolidated real estate entities, depreciation expense, corporate income tax expense, casualty and impairment (gain) loss, net, gain on sale of communities, gain on other real estate transactions, net 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, 2018 and 2017 is as follows (dollars in thousands):



	For the three months ended						For the six months ended
	6/30/2018			6/30/2017			6/30/2018			6/30/2017
Net income	$	254,543		$	165,194		$	396,133		$	400,975
Indirect operating expenses, net of corporate income	18,913			16,423			36,996			32,720
Investments and investment management expense	1,529			1,455			3,172			2,776
Expensed acquisition, development and other pursuit costs, net of recoveries	889			570			1,689			1,298
Interest expense, net	56,585			50,102			111,698			99,397
Loss on extinguishment of debt, net	642			24,162			1,039			24,162
General and administrative expense	14,444			13,947			28,108			27,153
Equity in income of unconsolidated real estate entities	(789		)	(1,146		)	(2,529		)	(17,819		)
Depreciation expense	156,685			141,439			315,743			282,060
Income tax expense	58			58			58			78
Casualty and impairment (gain) loss, net	—			—			(58		)	11,688
Gain on sale of communities	(105,201		)	(44,067		)	(105,201		)	(132,016		)
Gain on other real estate transactions, net	(370		)	—			(323		)	(366		)
Net operating income from real estate assets sold or held for sale	(4,442		)	(9,727		)	(9,900		)	(21,493		)
Net operating income	$	393,486		$	358,410		$	776,625		$	710,613

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
	6/30/2018			6/30/2017			6/30/2018			6/30/2017
Rental income from real estate assets sold or held for sale	$	6,778		$	15,138		$	15,241		$	33,198
Operating expenses from real estate assets sold or held for sale	(2,336		)	(5,411		)	(5,341		)	(11,705		)
Net operating income from real estate assets sold or held for sale	$	4,442		$	9,727		$	9,900		$	21,493

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 January 1, 2018. Segment information for the three and six months ended June 30, 2018 and 2017 has been adjusted to exclude the real estate assets that were sold from January 1, 2017 through June 30, 2018, or otherwise qualify as held for sale as of June 30, 2018, as described in Note 6, "Real Estate Disposition Activities."



	For the three months ended				For the six months ended
	Total revenue		NOI		Total revenue		NOI		Gross real estate (1)
For the period ended June 30, 2018
Established
New England	$	58,571	$	38,354	$	116,480	$	75,997	$	1,977,465
Metro NY/NJ	105,246		72,913		209,342		144,835		3,726,001
Mid-Atlantic	60,192		41,759		119,351		82,826		2,236,706
Pacific Northwest	21,352		15,234		42,594		30,072		726,279
Northern California	91,487		70,342		181,913		139,400		2,978,830
Southern California	83,709		60,473		166,650		119,867		2,845,699
Total Established	420,557		299,075		836,330		592,997		14,490,980

Other Stabilized	68,968		47,264		136,703		92,650		2,833,892
Development / Redevelopment	71,982		47,147		139,917		90,978		4,625,227
Land Held for Development	N/A		N/A		N/A		N/A		130,802
Non-allocated (2)	954		N/A		1,841		N/A		98,530

Total	$	562,461	$	393,486	$	1,114,791	$	776,625	$	22,179,431

For the period ended June 30, 2017
Established
New England	$	57,137	$	36,762	$	113,483	$	73,733	$	1,962,635
Metro NY/NJ	103,694		72,027		206,077		143,323		3,612,725
Mid-Atlantic	59,104		40,331		117,819		81,314		2,225,022
Pacific Northwest	20,825		15,010		41,302		29,940		722,654
Northern California	89,133		68,608		177,517		136,437		2,961,569
Southern California	80,195		57,999		159,899		116,309		2,832,453
Total Established	410,088		290,737		816,097		581,056		14,317,058

Other Stabilized	49,298		32,019		92,959		59,438		2,400,217
Development / Redevelopment	54,890		35,654		108,285		70,119		3,634,897
Land Held for Development	N/A		N/A		N/A		N/A		86,016
Non-allocated (2)	1,098		N/A		2,298		N/A		94,277
Real estate disposed or held for sale (3)									556,331

Total	$	515,374	$	358,410	$	1,019,639	$	710,613	$	21,088,796

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(1)	Does not include gross real estate assets held for sale of $167,247 and $15,271 as of June 30, 2018 and 2017, respectively.


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


(3)	Represents real estate sold or held for sale during the period of June 30, 2017 to June 30, 2018, which is not allocated to a reportable segment.