XML 38 R23.htm IDEA: XBRL DOCUMENT
v3.5.0.2

Segment Information | 6 Months Ended
--- | ---
Jun. 30, 2016
Segment Reporting [Abstract] |
SEGMENT INFORMATION | 12. SEGMENT INFORMATION During the year ended December 31, 2015, the Company managed its portfolio within seven segments: (1) Pennsylvania Suburbs, (2) Philadelphia Central Business District (CBD), (3) Metropolitan Washington, D.C., (4) New Jersey/Delaware, (5) Richmond, Virginia, (6) Austin, Texas and (7) California. As a result of the Och-Ziff Sale that occurred on February 4, 2016, the Company narrowed its segments to five segments located in: (1) Pennsylvania Suburbs, (2) Philadelphia Central Business District (“CBD”), (3) Metropolitan Washington, D.C. and (4) Austin, Texas. The Och-Ziff Sale disposed of the entire Richmond, Virginia segment. Subsequent to the Och-Ziff Sale, the segments previously defined as New Jersey/Delaware and California are now being managed as a consolidated segment entitled (5) “Other,” as these geographies no longer provide a significant revenue contribution. The Pennsylvania Suburbs segment includes properties in Chester, Delaware, and Montgomery counties in the Philadelphia suburbs. The Philadelphia CBD segment includes properties located in the City of Philadelphia in Pennsylvania. The Metropolitan Washington, D.C. segment includes properties in the District of Columbia, Northern Virginia and southern Maryland. The Austin, Texas segment includes properties in the City of Austin, Texas. The Other segment includes properties in Burlington and Camden counties in New Jersey, properties in New Castle County in the state of Delaware, and properties in the City of Oakland and City of Concord in California. The corporate group is responsible for cash and investment management, development of certain real estate properties during the construction period, and certain other general support functions. Land held for development and construction in progress are transferred to operating properties by region upon completion of the associated construction or project. The following tables provide selected asset information and results of operations of the Company's reportable segments (in thousands):
Real estate investments, at cost: |  |  |  |  |  |  |  |
|  | June 30, 2016 |  |  | December 31, 2015 |
Philadelphia CBD (a) |  | $ | 1,274,818 |  |  | $ | 1,157,667 |
Pennsylvania Suburbs |  |  | 1,022,239 |  |  |  | 1,019,280 |
Metropolitan Washington, D.C. (b) |  |  | 1,068,170 |  |  |  | 1,129,206 |
Austin, Texas (c) |  |  | 147,157 |  |  |  | 164,518 |
Other (d), (e) |  |  | 209,021 |  |  |  | 222,329 |
|  | $ | 3,721,405 |  |  | $ | 3,693,000 |
Assets held for sale (f), (g) |  |  | 17,622 |  |  |  | 794,588 |
Operating Properties |  | $ | 3,739,027 |  |  | $ | 4,487,588 |
Corporate |  |  |  |  |  |  |  |
Construction-in-progress |  | $ | 254,188 |  |  | $ | 268,983 |
Land held for development |  | $ | 131,015 |  |  | $ | 130,479 |
(a) | The increase primarily relates to the office component of the FMC Tower at Cira Centre South being placed into service during the three-month period ended June 30, 2016.
(b) | The decrease primarily relates to the sale of Herndon Metro Plaza I & II. See Note 3, "Real Estate Investments," for further information. The sale is not classified as a significant disposition under the accounting guidance for discontinued operations.
(c) | The decrease primarily relates to a building from the Broadmoor Austin portfolio being placed into redevelopment during the three-month period ended June 30, 2016.
(d) | The decrease primarily relates to the office property at 1120 Executive Boulevard in Mount Laurel, New Jersey and Oakland Lot B in Oakland, California being classified as held for sale at June 30, 2016. See Note 3, "Real Estate Investments," for further information. These sales are not classified as significant dispositions under the accounting guidance for discontinued operations.
(e) | As a result of the Och-Ziff Sale that occurred on February 4, 2016, the Company narrowed its segments to five segments located in: (1) Pennsylvania Suburbs, (2) Philadelphia Central Business District (“CBD”), (3) Metropolitan Washington, D.C. and (4) Austin, Texas. The Och-Ziff Sale disposed of the entire Richmond, Virginia segment. Subsequent to the Och-Ziff Sale, the segments previously defined as New Jersey/Delaware and California are now being managed as a consolidated segment entitled (5) “Other,” as these geographies no longer provide a significant revenue contribution. Accordingly, the chief operating decision maker revised the management structure, reallocated resources, and is assessing business operations of the five segments as of January 1, 2016.
(f) | As of December 31, 2015, the office property located at 2970 Market Street in Philadelphia, Pennsylvania commonly known as 30th Street Main Post Office (“Cira Square”) was classified as held for sale on the consolidated balance sheets. The Company disposed of its interests in the property on February 5, 2016. See Note 3, "Real Estate Investments," for further information. The sale is not classified as a significant disposition under the accounting guidance for discontinued operations.
(g) | As of December 31, 2015, the 58 properties associated with the series of related transactions with Och-Ziff Real Estate were classified as held for sale on the consolidated balance sheets. On February 4, 2016, the Company completed a series of transactions, resulting in the disposition of the properties. See Note 3, “Real Estate Investments,” for further information regarding the disposition. The sale is not classified as a significant disposition under the accounting guidance for discontinued operations. Additionally, as of June 30, 2016, the Company categorized one office property located at 1120 Executive Boulevard in Mt. Laurel, New Jersey and one property located in Oakland, California known as Oakland Lot B as held for sale in accordance with applicable accounting standards for long lived assets. The sale is not classified as a significant disposition under the accounting guidance for discontinued operations.
Net operating income (in thousands):
| Three-month periods ended |
| June 30, |
| 2016 |  |  | 2015 |
| Total revenue |  |  | Operating expenses (a) |  |  | Net operating income |  |  | Total revenue |  |  | Operating expenses (a) |  |  | Net operating income |
Philadelphia CBD | $ | 48,082 |  |  | $ | (19,775 | ) |  | $ | 28,307 |  |  | $ | 52,420 |  |  | $ | (19,448 | ) |  | $ | 32,972 |
Pennsylvania Suburbs |  | 35,102 |  |  |  | (12,580 | ) |  |  | 22,522 |  |  |  | 39,010 |  |  |  | (12,856 | ) |  |  | 26,154 |
Metropolitan Washington, D.C. |  | 25,291 |  |  |  | (8,768 | ) |  |  | 16,523 |  |  |  | 26,953 |  |  |  | (10,544 | ) |  |  | 16,409 |
Austin, Texas (b) |  | 7,850 |  |  |  | (2,911 | ) |  |  | 4,939 |  |  |  | 2,533 |  |  |  | (1,498 | ) |  |  | 1,035 |
Other (c) |  | 9,062 |  |  |  | (5,074 | ) |  |  | 3,988 |  |  |  | 24,074 |  |  |  | (11,407 | ) |  |  | 12,667 |
Corporate |  | 1,794 |  |  |  | (1,113 | ) |  |  | 681 |  |  |  | 658 |  |  |  | (596 | ) |  |  | 62 |
Operating Properties | $ | 127,181 |  |  | $ | (50,221 | ) |  | $ | 76,960 |  |  | $ | 145,648 |  |  | $ | (56,349 | ) |  | $ | 89,299 |
| Six-month periods ended |
| June 30, |
| 2016 |  |  | 2015 |
| Total revenue |  |  | Operating expenses (a) |  |  | Net operating income |  |  | Total revenue |  |  | Operating expenses (a) |  |  | Net operating income |
Philadelphia CBD | $ | 97,752 |  |  | $ | (39,031 | ) |  | $ | 58,721 |  |  | $ | 105,393 |  |  | $ | (37,838 | ) |  | $ | 67,555 |
Pennsylvania Suburbs |  | 72,208 |  |  |  | (25,735 | ) |  |  | 46,473 |  |  |  | 78,900 |  |  |  | (27,441 | ) |  |  | 51,459 |
Metropolitan Washington, D.C. |  | 52,630 |  |  |  | (19,667 | ) |  |  | 32,963 |  |  |  | 54,359 |  |  |  | (22,404 | ) |  |  | 31,955 |
Austin, Texas (b) |  | 16,397 |  |  |  | (6,166 | ) |  |  | 10,231 |  |  |  | 3,467 |  |  |  | (2,369 | ) |  |  | 1,098 |
Other (c) |  | 21,802 |  |  |  | (12,676 | ) |  |  | 9,126 |  |  |  | 51,853 |  |  |  | (25,985 | ) |  |  | 25,868 |
Corporate |  | 2,894 |  |  |  | (1,721 | ) |  |  | 1,173 |  |  |  | 2,082 |  |  |  | (1,010 | ) |  |  | 1,072 |
Operating Properties | $ | 263,683 |  |  | $ | (104,996 | ) |  | $ | 158,687 |  |  | $ | 296,054 |  |  | $ | (117,047 | ) |  | $ | 179,007 |
(a) | Includes property operating expense, real estate taxes and third party management expense.
(b) | On June 22, 2015 the Company acquired the remaining 50.0% interest in Broadmoor Austin Associates. As such, the Company has seven wholly owned properties in its Austin, Texas business segment at June 30, 2016. In addition, net operating income for the three and six months ended June 30, 2016 and 2015 includes management fees and related expenses for services provided by the Company to the Austin Venture.
(c) | See footnote (e) to the “Real estate investments, at cost” table above for further information regarding this segment.
Unconsolidated real estate ventures (in thousands): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Investment in real estate ventures, at equity |  |  | Equity in income (loss) of real estate ventures |
| As of |  |  | Three-month periods ended June 30, |  |  | Six-month periods ended June 30, |
| June 30, 2016 |  |  | December 31, 2015 |  |  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |
Philadelphia CBD (a) | $ | 50,542 |  |  | $ | 44,089 |  |  | $ | (475 | ) |  | $ | (150 | ) |  | $ | (20 | ) |  | $ | (450 | )
Pennsylvania Suburbs |  | 20,199 |  |  |  | 16,408 |  |  |  | 315 |  |  |  | (17 | ) |  |  | 580 |  |  |  | (22 | )
Metropolitan Washington, D.C. |  | 120,656 |  |  |  | 118,422 |  |  |  | (332 | ) |  |  | (179 | ) |  |  | (781 | ) |  |  | (229 | )
MAP Venture (b) |  | 23,513 |  |  |  | - |  |  |  | (1,042 | ) |  |  | - |  |  |  | (1,598 | ) |  |  | - |
Other (c) |  | 1,570 |  |  |  | 1,657 |  |  |  | 327 |  |  |  | 362 |  |  |  | 488 |  |  |  | 495 |
Austin, Texas (d) |  | 55,668 |  |  |  | 60,428 |  |  |  | (459 | ) |  |  | (889 | ) |  |  | (738 | ) |  |  | (536 | )
Total | $ | 272,148 |  |  | $ | 241,004 |  |  | $ | (1,666 | ) |  | $ | (873 | ) |  | $ | (2,069 | ) |  | $ | (742 | )
(a) | Net increase of investment of $6.5 million primary relates to the evo at Cira real estate venture. See Note 4, “Investment in Unconsolidated Real Estate Ventures,” for further information.
(b) | The MAP Venture represents a joint venture formed between the Company and MAP Ground Lease Holdings LLC, an affiliate of Och-Ziff Capital Management Group, LLC, on February 4, 2016. See Note 4 “Investment in Unconsolidated Real Estate Ventures,” to our consolidated financial statements for further information. The MAP Venture’s business operations, including properties in Richmond, Virginia; Metropolitan Washington, D.C.; New Jersey/Delaware and Pennsylvania Suburbs, are centrally managed with the results reported to management of the Company on a consolidated basis. As a result, the investment in the MAP Venture is separately presented. All other unconsolidated real estate ventures are managed consistently with the Company’s regional segments.
(c) | See footnote (e) to the “Real estate investments, at cost” table above for further information regarding this segment.
(d) | Investment in real estate ventures does not include the $1.1 million negative investment balance in one real estate venture as of December 31, 2015, which is included in other liabilities. The Company disposed of its interest in this venture during the three-month period ended March 31, 2016. See Note 4, "Investment in Unconsolidated Real Estate Ventures," for further information. The decrease primarily relates to distributions from the DRA-Austin real estate venture.
Net operating income (“NOI”) is a non-GAAP financial measure defined as total revenue less property operating expenses, real estate taxes and third party management expenses. Segment NOI includes revenue, real estate taxes and property operating expenses directly related to operation and management of the properties owned and managed within the respective geographical region. Segment NOI excludes property level depreciation and amortization, revenue and expenses directly associated with third party real estate management services, expenses associated with corporate administrative support services, and inter-company eliminations. NOI also does not reflect general and administrative expenses, interest expenses, real estate impairment losses, depreciation and amortization costs, capital expenditures and leasing costs. Trends in development and construction activities that could materially impact the Company’s results from operations are also not reflected in NOI. All companies may not calculate NOI in the same manner. NOI is the measure that is used by the Company to evaluate the operating performance of its real estate assets by segment. The Company also believes that NOI provides useful information to investors regarding its financial condition and results of operations because it reflects only those income and expenses recorded at the property level. The Company believes that net income, as defined by GAAP, is the most appropriate earnings measure. The following is a reconciliation of consolidated NOI to consolidated net income (loss), as defined by GAAP (in thousands):
| Three Months Ended June 30, |  |  | Six Months Ended June 30, |
| 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |
Consolidated net operating income | $ | 76,960 |  |  | $ | 89,299 |  |  | $ | 158,687 |  |  | $ | 179,007 |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  | (19,829 | ) |  |  | (27,895 | ) |  |  | (43,520 | ) |  |  | (56,071 | )
Interest expense - amortization of deferred financing costs |  | (644 | ) |  |  | (1,288 | ) |  |  | (1,418 | ) |  |  | (2,367 | )
Interest expense - financing obligation |  | (242 | ) |  |  | (324 | ) |  |  | (523 | ) |  |  | (610 | )
Depreciation and amortization |  | (46,907 | ) |  |  | (50,930 | ) |  |  | (95,780 | ) |  |  | (102,041 | )
General and administrative expenses |  | (6,076 | ) |  |  | (6,791 | ) |  |  | (15,196 | ) |  |  | (15,427 | )
Equity in loss of real estate ventures |  | (1,666 | ) |  |  | (873 | ) |  |  | (2,069 | ) |  |  | (742 | )
Provision for impairment |  | (5,679 | ) |  |  | (782 | ) |  |  | (13,069 | ) |  |  | (2,508 | )
Loss on early extinguishment of debt |  | - |  |  |  | - |  |  |  | (66,590 | ) |  |  | - |
Plus: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  | 359 |  |  |  | 313 |  |  |  | 679 |  |  |  | 1,063 |
Net gain (loss) on disposition of real estate |  | (727 | ) |  |  | 1,571 |  |  |  | 114,729 |  |  |  | 10,590 |
Net gain from remeasurement of investment in a real estate venture |  | - |  |  |  | 758 |  |  |  | - |  |  |  | 758 |
Net gain on Real Estate Venture transactions |  | 3,128 |  |  |  | - |  |  |  | 9,057 |  |  |  | - |
Net income (loss) | $ | (1,323 | ) |  | $ | 3,058 |  |  | $ | 44,987 |  |  | $ | 11,652 |

X
- References No definition available. + Details
Name: | us-gaap_SegmentReportingAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8981-108599 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e9038-108599 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 33 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8971-108599 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 12 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8595-108599 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8380-108599 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 35 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8984-108599 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e9031-108599 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e9054-108599 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8538-108599 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 29 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8864-108599 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8924-108599 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8906-108599 + Details
Name: | us-gaap_SegmentReportingDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration