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 transaction, 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 nine months ended September 30, 2018 and 2017 is as follows (dollars in thousands):



	For the three months ended						For the nine months ended
	9/30/2018			9/30/2017			9/30/2018			9/30/2017
Net income	$	192,407		$	238,199		$	588,540		$	639,174
Indirect operating expenses, net of corporate income	18,855			15,752			55,850			48,472
Investments and investment management expense	1,726			1,501			4,898			4,277
Expensed transaction, development and other pursuit costs, net of recoveries	1,020			789			2,709			2,087
Interest expense, net	54,097			47,741			165,795			147,138
Loss on extinguishment of debt, net	1,678			—			2,717			24,162
General and administrative expense	13,905			11,655			42,013			38,808
Equity in income of unconsolidated real estate entities	(10,031		)	(52,568		)	(12,560		)	(70,386		)
Depreciation expense	156,538			144,990			472,282			427,050
Income tax expense	29			24			87			102
Casualty and impairment (gain) loss, net	(554		)	—			(612		)	11,688
Gain on sale of communities	(27,243		)	(27,738		)	(132,444		)	(159,754		)
(Gain) loss on other real estate transactions, net	(12		)	120			(335		)	(246		)
Net operating income from real estate assets sold or held for sale	(2,545		)	(10,340		)	(15,913		)	(35,162		)
Net operating income	$	399,870		$	370,125		$	1,173,027		$	1,077,410

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 nine months ended
	9/30/2018			9/30/2017			9/30/2018			9/30/2017
Rental income from real estate assets sold or held for sale	$	4,006		$	16,280		$	24,747		$	54,803
Operating expenses from real estate assets sold or held for sale	(1,461		)	(5,940		)	(8,834		)	(19,641		)
Net operating income from real estate assets sold or held for sale	$	2,545		$	10,340		$	15,913		$	35,162

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



	For the three months ended				For the nine months ended
	Total revenue		NOI		Total revenue		NOI		Gross real estate (1)
For the period ended September 30, 2018
Established
New England	$	60,690	$	40,005	$	178,841	$	117,008	$	2,006,671
Metro NY/NJ	106,341		74,562		315,683		219,396		3,729,612
Mid-Atlantic	59,752		41,432		177,342		123,056		2,223,386
Pacific Northwest	22,014		15,681		64,609		45,753		726,752
Northern California	92,292		70,465		274,206		209,866		2,983,019
Southern California	85,934		60,931		255,385		182,875		2,916,530
Total Established	427,023		303,076		1,266,066		897,954		14,585,970

Other Stabilized	66,542		45,196		195,034		132,498		2,740,944
Development / Redevelopment	77,499		51,598		217,416		142,575		4,895,487
Land Held for Development	N/A		N/A		N/A		N/A		116,582
Non-allocated (2)	912		N/A		2,752		N/A		96,876

Total	$	571,976	$	399,870	$	1,681,268	$	1,173,027	$	22,435,859

For the period ended September 30, 2017
Established
New England	$	58,872	$	38,635	$	174,018	$	113,423	$	1,988,987
Metro NY/NJ	105,225		71,864		311,301		215,187		3,617,773
Mid-Atlantic	58,561		40,020		174,653		120,186		2,213,522
Pacific Northwest	21,531		15,692		62,833		45,632		723,674
Northern California	89,798		68,731		267,316		205,168		2,966,133
Southern California	83,343		59,013		246,087		177,326		2,901,525
Total Established	417,330		293,955		1,236,208		876,922		14,411,614

Other Stabilized	52,885		34,746		137,739		88,946		2,477,846
Development / Redevelopment (3)	63,012		41,424		171,297		111,542		3,847,578
Land Held for Development	N/A		N/A		N/A		N/A		85,863
Non-allocated (2)	993		N/A		3,290		N/A		93,778
Real estate disposed or held for sale (4)									629,970

Total	$	534,220	$	370,125	$	1,548,534	$	1,077,410	$	21,546,649

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(1)	Does not include gross real estate assets held for sale of $109,900 and $53,723 as of September 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)	Total revenue and NOI for the three and nine months ended September 30, 2017 includes $3,495 in business interruption insurance proceeds related to the Maplewood casualty loss.


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