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Segment Information | 6 Months Ended
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Jun. 30, 2017
Segment Reporting [Abstract] |
SEGMENT INFORMATION | 12. SEGMENT INFORMATION As of June 30, 2017, the Company owns and manages properties within five segments: (1) Philadelphia Central Business District (CBD), (2) Pennsylvania Suburbs, (3) Metropolitan Washington, D.C., (4) Austin, Texas and (5) Other. The Philadelphia CBD segment includes properties located in the City of Philadelphia in Pennsylvania. The Pennsylvania Suburbs segment includes properties in Chester, Delaware, and Montgomery counties in the Philadelphia suburbs. 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 located in Camden county in New Jersey and properties in New Castle county in Delaware. On February 2, 2017, the Company sold its last two remaining properties located in California, which were previously included in the Other segment. See Note 3, “Real Estate Investments,” for further information. In addition to the five segments, 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, 2017 |  |  | December 31, 2016 |
Philadelphia CBD |  | $ | 1,536,488 |  |  | $ | 1,320,974 |
Pennsylvania Suburbs |  |  | 1,024,252 |  |  |  | 1,005,446 |
Metropolitan Washington, D.C. |  |  | 974,152 |  |  |  | 975,987 |
Austin, Texas |  |  | 146,859 |  |  |  | 146,794 |
Other |  |  | 87,927 |  |  |  | 137,094 |
|  | $ | 3,769,678 |  |  | $ | 3,586,295 |
Assets held for sale |  |  | - |  |  |  | 73,591 |
Operating properties |  | $ | 3,769,678 |  |  | $ | 3,659,886 |
Corporate |  |  |  |  |  |  |  |
Construction-in-progress |  | $ | 119,690 |  |  | $ | 297,462 |
Land held for development (a) |  | $ | 125,157 |  |  | $ | 150,970 |
(a) | As of June 30, 2017, the Company categorized 50 acres of land held for development located in the Other segment as held for sale in accordance with applicable accounting standards for long lived assets. See Note 3, “Real Estate Investments,” for further information.
None of the above aforementioned sales or properties classified as held for sale are considered significant dispositions under the accounting guidance for discontinued operations. Net operating income (in thousands):
| Three-month periods ended |
| June 30, |
| 2017 |  |  | 2016 |
| Total revenue |  |  | Operating expenses (a) |  |  | Net operating income (loss) |  |  | Total revenue |  |  | Operating expenses (a) |  |  | Net operating income |
Philadelphia CBD | $ | 54,451 |  |  | $ | (21,464 | ) |  | $ | 32,987 |  |  | $ | 48,082 |  |  | $ | (19,775 | ) |  | $ | 28,307 |
Pennsylvania Suburbs |  | 35,157 |  |  |  | (11,240 | ) |  |  | 23,917 |  |  |  | 35,102 |  |  |  | (12,580 | ) |  |  | 22,522 |
Metropolitan Washington, D.C. |  | 22,749 |  |  |  | (8,464 | ) |  |  | 14,285 |  |  |  | 25,291 |  |  |  | (8,768 | ) |  |  | 16,523 |
Austin, Texas |  | 8,763 |  |  |  | (4,132 | ) |  |  | 4,631 |  |  |  | 7,850 |  |  |  | (2,911 | ) |  |  | 4,939 |
Other |  | 4,160 |  |  |  | (2,580 | ) |  |  | 1,580 |  |  |  | 9,062 |  |  |  | (5,074 | ) |  |  | 3,988 |
Corporate |  | 2,511 |  |  |  | (2,738 | ) |  |  | (227 | ) |  |  | 1,794 |  |  |  | (1,113 | ) |  |  | 681 |
Operating properties | $ | 127,791 |  |  | $ | (50,618 | ) |  | $ | 77,173 |  |  | $ | 127,181 |  |  | $ | (50,221 | ) |  | $ | 76,960 |
| Six-month periods ended |
| June 30, |
| 2017 |  |  | 2016 |
| Total revenue |  |  | Operating expenses (a) |  |  | Net operating income |  |  | Total revenue |  |  | Operating expenses (a) |  |  | Net operating income |
Philadelphia CBD | $ | 108,900 |  |  | $ | (42,301 | ) |  | $ | 66,599 |  |  | $ | 97,752 |  |  | $ | (39,031 | ) |  | $ | 58,721 |
Pennsylvania Suburbs |  | 70,812 |  |  |  | (23,824 | ) |  |  | 46,988 |  |  |  | 72,208 |  |  |  | (25,735 | ) |  |  | 46,473 |
Metropolitan Washington, D.C. |  | 46,111 |  |  |  | (17,847 | ) |  |  | 28,264 |  |  |  | 52,630 |  |  |  | (19,667 | ) |  |  | 32,963 |
Austin, Texas |  | 17,886 |  |  |  | (7,705 | ) |  |  | 10,181 |  |  |  | 16,397 |  |  |  | (6,166 | ) |  |  | 10,231 |
Other |  | 10,522 |  |  |  | (6,436 | ) |  |  | 4,086 |  |  |  | 21,802 |  |  |  | (12,676 | ) |  |  | 9,126 |
Corporate |  | 4,480 |  |  |  | (3,586 | ) |  |  | 894 |  |  |  | 2,894 |  |  |  | (1,721 | ) |  |  | 1,173 |
Operating properties | $ | 258,711 |  |  | $ | (101,699 | ) |  | $ | 157,012 |  |  | $ | 263,683 |  |  | $ | (104,996 | ) |  | $ | 158,687 |
(a) Includes property operating expense, real estate taxes and third party management expense.
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, 2017 |  |  | December 31, 2016 |  |  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Philadelphia CBD | $ | 43,164 |  |  | $ | 48,691 |  |  | $ | 45 |  |  | $ | (475 | ) |  | $ | (21 | ) |  | $ | (20 | )
Pennsylvania Suburbs |  | 3,296 |  |  |  | 15,421 |  |  |  | 148 |  |  |  | 315 |  |  |  | 424 |  |  |  | 580 |
Metropolitan Washington, D.C. |  | 143,088 |  |  |  | 141,786 |  |  |  | (75 | ) |  |  | (332 | ) |  |  | 392 |  |  |  | (781 | )
Austin, Texas |  | 53,752 |  |  |  | 52,886 |  |  |  | 1,646 |  |  |  | (459 | ) |  |  | 1,281 |  |  |  | (738 | )
MAP Venture (a) |  | 16,989 |  |  |  | 20,893 |  |  |  | (787 | ) |  |  | (1,042 | ) |  |  | (1,904 | ) |  |  | (1,598 | )
Other |  | 1,818 |  |  |  | 1,654 |  |  |  | 107 |  |  |  | 327 |  |  |  | 164 |  |  |  | 488 |
Total | $ | 262,107 |  |  | $ | 281,331 |  |  | $ | 1,084 |  |  | $ | (1,666 | ) |  | $ | 336 |  |  | $ | (2,069 | )
(a) | 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. 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.
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. Property operating expenses that are included in determining NOI consist of costs that are necessary and allocable to our operating properties such as utilities, property-level salaries, repairs and maintenance, property insurance, management fees and bad debt expense. General and administrative expenses that are not reflected in NOI primarily consist of corporate-level salaries, amortization of share awards and professional fees that are incurred as part of corporate office management. 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 believes NOI provides useful information to investors regarding the financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level. While NOI is a relevant and widely used measure of operating performance of real estate investment trusts, it does not represent cash flow from operations or net income as defined by GAAP and should not be considered as an alternative to those measures in evaluating our liquidity or operating performance. NOI does not reflect interest expenses, real estate impairment losses, depreciation and amortization costs, capital expenditures and leasing costs. The Company believes that net income (loss), as defined by GAAP, is the most appropriate earnings measure. The following is a reconciliation of consolidated net income (loss), as defined by GAAP, to consolidated NOI, (in thousands):
| Three-month periods ended June 30, |  |  | Six-month periods ended June 30, |
| 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Net income (loss) | $ | 7,698 |  |  | $ | (1,323 | ) |  | $ | 28,969 |  |  | $ | 44,987 |
Plus: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  | 20,304 |  |  |  | 19,829 |  |  |  | 41,741 |  |  |  | 43,520 |
Interest expense - amortization of deferred financing costs |  | 596 |  |  |  | 644 |  |  |  | 1,230 |  |  |  | 1,418 |
Interest expense - financing obligation |  | - |  |  |  | 242 |  |  |  | - |  |  |  | 523 |
Depreciation and amortization |  | 44,263 |  |  |  | 46,907 |  |  |  | 90,155 |  |  |  | 95,780 |
General and administrative expenses |  | 6,320 |  |  |  | 6,076 |  |  |  | 15,745 |  |  |  | 15,196 |
Equity in (income) loss of Real Estate Ventures |  | (1,084 | ) |  |  | 1,666 |  |  |  | (336 | ) |  |  | 2,069 |
Provision for impairment |  | 327 |  |  |  | 5,679 |  |  |  | 3,057 |  |  |  | 13,069 |
Loss on early extinguishment of debt |  | - |  |  |  | - |  |  |  | - |  |  |  | 66,590 |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  | 163 |  |  |  | 359 |  |  |  | 556 |  |  |  | 679 |
Net gain (loss) on disposition of real estate |  | 1,088 |  |  |  | (727 | ) |  |  | 8,411 |  |  |  | 114,729 |
Net gain on Real Estate Venture transactions |  | - |  |  |  | 3,128 |  |  |  | 14,582 |  |  |  | 9,057 |
Consolidated net operating income | $ | 77,173 |  |  | $ | 76,960 |  |  | $ | 157,012 |  |  | $ | 158,687 |

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- 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 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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