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.

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Established Communities (also known as Same Store Communities) are consolidated communities where the Company has a significant presence (New England, New York/New Jersey, Mid-Atlantic, Pacific Northwest, and Northern and Southern California) and where a comparison of operating results from the prior year to the current year is meaningful, as these communities were owned and had stabilized occupancy as of the beginning of the prior year. The Established Communities for the year ended December 31, 2018, are communities that are consolidated for financial reporting purposes, had stabilized occupancy as of January 1, 2017, are not conducting or planning to conduct substantial redevelopment activities and are not held for sale or planned for disposition within the fiscal year. A community is considered to have stabilized occupancy at the earlier of (i) attainment of 95% physical occupancy or (ii) the one-year anniversary of completion of development or redevelopment.

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Other Stabilized Communities includes all other completed consolidated communities that have stabilized occupancy, as defined above, as January 1, 2018, or which were acquired during the year ended December 31, 2018. Other Stabilized Communities includes stabilized operating communities in our expansion markets of Denver, Colorado, and Southeast Florida, but excludes communities that are conducting or planning to conduct substantial redevelopment activities within the fiscal year.

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Development/Redevelopment Communities consists of (i) consolidated communities that are either currently under construction, or were under construction during the fiscal year, which may be partially or fully complete and operating, (ii) consolidated communities where substantial redevelopment is in progress or is planned to begin during the fiscal year and (iii) communities under lease-up that have been complete for less than one year and have not reached stabilized occupancy, as defined above, as of January 1, 2018.

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 (gain) on extinguishment of debt, net, general and administrative expense, equity in income of unconsolidated real estate entities, depreciation expense, corporate income tax (benefit) expense, casualty and impairment loss (gain), net, gain on sale of communities, loss (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 years ended December 31, 2018, 2017 and 2016 is as follows (dollars in thousands):



	For the year ended
	12/31/18			12/31/17			12/31/16
Net income	$	974,175		$	876,660		$	1,033,708
Indirect operating expenses, net of corporate income	76,522			65,398			61,403
Investments and investment management expense	7,709			5,936			4,822
Expensed acquisition, development and other pursuit costs, net of recoveries	4,309			2,736			9,922
Interest expense, net	220,974			199,661			187,510
Loss on extinguishment of debt, net	17,492			25,472			7,075
General and administrative expense	56,365			50,673			45,771
Equity in income of unconsolidated real estate entities	(15,270		)	(70,744		)	(64,962		)
Depreciation expense	631,196			584,150			531,434
Income tax (benefit) expense	(160		)	141			305
Casualty and impairment loss (gain), net	215			6,250			(3,935		)
Gain on sale of communities	(374,976		)	(252,599		)	(374,623		)
(Gain) loss on other real estate transactions	(345		)	10,907			(10,224		)
Net operating income from real estate assets sold or held for sale	(58,620		)	(84,650		)	(114,219		)
Net operating income	$	1,539,586		$	1,419,991		$	1,313,987

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 year ended
	12/31/2018			12/31/2017			12/31/2016

Rental income from real estate assets sold or held for sale	$	88,865		$	133,956		$	179,226
Operating expenses from real estate assets sold or held for sale	(30,245		)	(49,306		)	(65,007		)
Net operating income from real estate assets sold or held for sale	$	58,620		$	84,650		$	114,219

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 for the years ended December 31, 2018 and 2017 and at January 1, 2017, for the year ended December 31, 2016. Segment information for the years ended December 31, 2018, 2017 and 2016 has been adjusted to exclude the real estate assets that were sold from January 1, 2016 through December 31, 2018, or otherwise qualify as held for sale as of December 31, 2018, as described in Note 6, “Real Estate Disposition Activities.”



	Total revenue		NOI		Gross real estate (1)
For the year ended December 31, 2018
Established
New England	$	239,638	$	157,109	$	2,014,158
Metro NY/NJ	360,430		254,132		3,086,133
Mid-Atlantic	237,113		165,724		2,226,315
Pacific Northwest	86,571		62,194		727,652
Northern California	366,834		280,994		2,986,068
Southern California	341,840		245,356		2,921,616
Total Established (2)	1,632,426		1,165,509		13,961,942

Other Stabilized	262,053		178,172		2,934,711
Development / Redevelopment	297,619		195,905		5,201,454
Land Held for Future Development	N/A		N/A		84,712
Non-allocated (3)	3,572		N/A		94,350
Total	$	2,195,670	$	1,539,586	$	22,277,169

For the year ended December 31, 2017
Established
New England	$	232,688	$	152,514	$	1,993,653
Metro NY/NJ	354,444		251,760		3,071,563
Mid-Atlantic	232,987		161,546		2,216,292
Pacific Northwest	84,313		61,705		724,751
Northern California	357,209		273,940		2,972,311
Southern California	330,024		237,796		2,905,512
Total Established (2)	1,591,665		1,139,261		13,884,082

Other Stabilized	193,594		127,678		2,571,356
Development / Redevelopment (4)	235,266		153,052		4,104,956
Land Held for Future Development	N/A		N/A		68,364
Non-allocated (3)	4,147		N/A		78,864
Real estate disposed or held for sale (5)					1,228,314
Total	$	2,024,672	$	1,419,991	$	21,935,936

For the year ended December 31, 2016
Established
New England	$	209,935	$	136,019	$	1,667,171
Metro NY/NJ	294,199		204,882		2,412,742
Mid-Atlantic	203,003		141,624		1,862,091
Pacific Northwest	79,958		57,857		731,277
Northern California	331,610		253,582		2,812,859
Southern California	313,404		224,955		2,840,773
Total Established (2)	1,432,109		1,018,919		12,326,913

Other Stabilized	221,272		151,475		2,650,966
Development / Redevelopment (6)	207,049		143,593		4,154,778
Land Held for Future Development	N/A		N/A		84,293
Non-allocated (3)	5,599		N/A		80,700
Real estate disposed or held for sale (5)					1,458,130
Total	$	1,866,029	$	1,313,987	$	20,755,780

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(1)	Does not include gross real estate assets held for sale of $65,408 and $20,846 as of December 31, 2018 and 2016, respectively.


(2)	Gross real estate for the Company's Established Communities includes capitalized additions of approximately $78,469, $78,241 and $85,676 in 2018, 2017 and 2016, respectively.


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


(4)	Total revenue and NOI for the year ended December 31, 2017 includes $3,495 in business interruption insurance proceeds related to the Maplewood casualty loss.


(5)	Represents real estate sold or held for sale between the reported year end date and December 31, 2018, which is not allocated to a reportable segment.


(6)	Total revenue and NOI for the year ended December 31, 2016 includes $20,306 in business interruption insurance proceeds related to the Edgewater casualty loss.