Segment Reporting

3 Months Ended

Mar. 31, 2020

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 ("CODM") 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, 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) loss on other real estate transactions, net, gain on for-sale condominiums, net of marketing and administrative costs 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 months ended March 31, 2020 and 2019 is as follows (dollars in thousands):



	For the three months ended
	3/31/2020			3/31/2019
Net income	$	168,006		$	170,418
Indirect operating expenses, net of corporate income	22,799			19,722
Expensed transaction, development and other pursuit costs, net of recoveries	3,334			622
Interest expense, net	55,914			47,892
Loss on extinguishment of debt, net	9,170			280
General and administrative expense	17,320			13,706
Equity in (income) loss of unconsolidated real estate entities	(1,175		)	1,060
Depreciation expense	177,911			162,057
Income tax expense (benefit)	91			(6		)
Gain on sale of communities	(24,436		)	(14,835		)
Gain on other real estate transactions, net	(43		)	(267		)
Gain on for-sale condominiums, net of marketing and administrative costs	(3,460		)	473
Net operating income from real estate assets sold or held for sale	(896		)	(6,205		)
Net operating income	$	424,535		$	394,917

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
	3/31/2020			3/31/2019
Rental income from real estate assets sold or held for sale	$	1,424		$	10,640
Operating expenses from real estate assets sold or held for sale	(528		)	(4,435		)
Net operating income from real estate assets sold or held for sale	$	896		$	6,205

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, 2020. Segment information for the three months ended March 31, 2020 and 2019 has been adjusted to exclude the real estate assets that were sold from January 1, 2019 through March 31, 2020, or otherwise qualify as held for sale as of March 31, 2020, as described in Note 6, "Real Estate Disposition Activities."



	For the three months ended
	Total revenue		NOI			Gross real estate (1)
For the period ended March 31, 2020
Established
New England	$	81,669	$	53,680		$	2,765,270
Metro NY/NJ	120,731		84,484			4,343,033
Mid-Atlantic	91,717		66,309			3,545,582
Pacific Northwest	28,736		20,838			991,802
Northern California	104,360		80,451			3,268,787
Southern California	114,810		82,455			4,142,235
Expansion Markets	5,933		3,428			320,415
Total Established	547,956		391,645			19,377,124

Other Stabilized	35,491		23,496			1,591,348
Development / Redevelopment (2)	15,773		9,394			2,220,386
Land Held for Development	N/A		N/A			38,115
Non-allocated (3)	1,007		N/A			481,095

Total	$	600,227	$	424,535		$	23,708,068

For the period ended March 31, 2019
Established
New England	$	78,688	$	52,083		$	2,717,130
Metro NY/NJ	118,377		82,984			4,311,202
Mid-Atlantic	88,370		62,916			3,507,734
Pacific Northwest	27,802		20,210			986,190
Northern California	101,261		78,715			3,248,903
Southern California	111,466		79,916			4,092,527
Expansion Markets	5,865		3,513			319,558
Total Established	531,829		380,337			19,183,244

Other Stabilized	22,027		14,729			1,171,127
Development / Redevelopment (2)	549		(149		)	1,130,302
Land Held for Development	N/A		N/A			104,963
Non-allocated (3)	1,139		N/A			672,727

Total	$	555,544	$	394,917		$	22,262,363

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(1)	Does not include gross real estate held for sale of $41,866 as of March 31, 2020 and gross real estate either sold or classified as held for sale subsequent to March 31, 2019 of $285,943.


(2)	The Company had no Redevelopment Communities for the three months ended March 31, 2020 and 2019.

(3)

Revenue represents third-party management, accounting, and developer fees and miscellaneous income which are not allocated to a reportable segment. Gross real estate includes the for-sale residential condominiums at The Park Loggia, as discussed in Note 6, "Real Estate Disposition Activities."