XML 38 R23.htm IDEA: XBRL DOCUMENT
v3.19.2

Segment Information | 6 Months Ended
--- | ---
Jun. 30, 2019
Segment Reporting [Abstract] |
SEGMENT INFORMATION | 12. SEGMENT INFORMATION As of June 30, 2019, the Company owns and manages properties within five segments: (1) Philadelphia Central Business District (Philadelphia CBD), (2) Pennsylvania Suburbs, (3) Austin, Texas (4) Metropolitan Washington, D.C. and (5) Other. The Philadelphia CBD segment includes properties located in the City of Philadelphia, Pennsylvania. The Pennsylvania Suburbs segment includes properties in Chester, Delaware, and Montgomery counties in the Philadelphia suburbs. The Austin, Texas segment includes properties in the City of Austin, Texas. The Metropolitan Washington, D.C. segment includes properties in the District of Columbia, Northern Virginia and southern Maryland. The Other segment includes properties located in Camden County in New Jersey and properties in New Castle County in Delaware. 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 is 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, 2019 |  |  | December 31, 2018 |
Philadelphia CBD |  | $ | 1,695,495 |  |  | $ | 1,670,388 |
Pennsylvania Suburbs |  |  | 1,007,981 |  |  |  | 1,002,937 |
Austin, Texas |  |  | 716,212 |  |  |  | 667,698 |
Metropolitan Washington, D.C. |  |  | 524,008 |  |  |  | 524,190 |
Other |  |  | 86,909 |  |  |  | 86,506 |
|  | $ | 4,030,605 |  |  | $ | 3,951,719 |
Right of use asset - operating leases, net (a) |  | $ | 22,001 |  |  | $ | - |
Corporate |  |  |  |  |  |  |  |
Construction-in-progress |  | $ | 120,785 |  |  | $ | 150,263 |
Land held for development (b) |  | $ | 89,219 |  |  | $ | 86,401 |
Prepaid leasehold interests in land held for development, net (c) |  | $ | 39,795 |  |  | $ | 39,999 |
(a) | On January 1, 2019, as a result of the adoption of Topic 842, Leases, the Company recognized operating ground leases for which it is a lessee on its consolidated balance sheets for the period ended March 31, 2019. See Note 2, “Basis of Presentation,” for further information.
(b) | As of June 30, 2019, the Company categorized 35.2 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. As of December 31, 2018, the Company categorized 37.9 acres of land held for development, comprised of 2.7 acres and 35.2 acres, located in the Pennsylvania Suburbs segment and Other segment, respectively, as held for sale in accordance with applicable accounting standards for long lived assets. See Note 3, “Real Estate Investments,” for further information.
(c) | As of June 30, 2019 and December 31, 2018, this caption comprised leasehold interests in prepaid 99-year ground leases at 3025 and 3001-3003 JFK Boulevard, in Philadelphia, Pennsylvania.
Net operating income (in thousands):
| Three Months Ended June 30, |
| 2019 |  |  | 2018 |
| Total revenue |  |  | Operating expenses (a) |  |  | Net operating income |  |  | Total revenue |  |  | Operating expenses (a) |  |  | Net operating income (loss) |
Philadelphia CBD | $ | 64,956 |  |  | $ | (25,353 | ) |  | $ | 39,603 |  |  | $ | 63,524 |  |  | $ | (24,581 | ) |  | $ | 38,943 |
Pennsylvania Suburbs |  | 34,299 |  |  |  | (11,808 | ) |  |  | 22,491 |  |  |  | 34,333 |  |  |  | (11,997 | ) |  |  | 22,336 |
Austin, Texas (b) |  | 26,188 |  |  |  | (9,804 | ) |  |  | 16,384 |  |  |  | 8,469 |  |  |  | (3,395 | ) |  |  | 5,074 |
Metropolitan Washington, D.C. (c) |  | 13,673 |  |  |  | (6,339 | ) |  |  | 7,334 |  |  |  | 23,199 |  |  |  | (8,392 | ) |  |  | 14,807 |
Other |  | 3,464 |  |  |  | (2,390 | ) |  |  | 1,074 |  |  |  | 3,339 |  |  |  | (2,200 | ) |  |  | 1,139 |
Corporate |  | 1,571 |  |  |  | (1,528 | ) |  |  | 43 |  |  |  | 922 |  |  |  | (2,001 | ) |  |  | (1,079 | )
Operating properties | $ | 144,151 |  |  | $ | (57,222 | ) |  | $ | 86,929 |  |  | $ | 133,786 |  |  | $ | (52,566 | ) |  | $ | 81,220 |
| Six Months Ended June 30, |
| 2019 |  |  | 2018 |
| Total revenue |  |  | Operating expenses (a) |  |  | Net operating income (loss) |  |  | Total revenue |  |  | Operating expenses (a) |  |  | Net operating income (loss) |
Philadelphia CBD | $ | 130,754 |  |  | $ | (50,538 | ) |  | $ | 80,216 |  |  | $ | 126,126 |  |  | $ | (48,908 | ) |  |  | 77,218 |
Pennsylvania Suburbs |  | 69,926 |  |  |  | (24,799 | ) |  |  | 45,127 |  |  |  | 69,215 |  |  |  | (24,980 | ) |  |  | 44,235 |
Austin, Texas (b) |  | 50,954 |  |  |  | (18,880 | ) |  |  | 32,074 |  |  |  | 16,833 |  |  |  | (6,918 | ) |  |  | 9,915 |
Metropolitan Washington, D.C. (c) |  | 27,193 |  |  |  | (12,543 | ) |  |  | 14,650 |  |  |  | 46,258 |  |  |  | (17,151 | ) |  |  | 29,107 |
Other |  | 6,646 |  |  |  | (4,535 | ) |  |  | 2,111 |  |  |  | 9,480 |  |  |  | (7,165 | ) |  |  | 2,315 |
Corporate |  | 2,574 |  |  |  | (3,327 | ) |  |  | (753 | ) |  |  | 2,232 |  |  |  | (3,967 | ) |  |  | (1,735 | )
Operating properties | $ | 288,047 |  |  | $ | (114,622 | ) |  | $ | 173,425 |  |  | $ | 270,144 |  |  | $ | (109,089 | ) |  | $ | 161,055 |
(a) | Includes property operating expenses, real estate taxes and third party management expense.
(b) | On December 11, 2018, the Company acquired from DRA Advisors, an unaffiliated third party, DRA’s 50% ownership interest in the G&I Austin Office LLC real estate venture. The DRA Austin Venture owned twelve office properties containing an aggregate 1,570,123 square feet, located in Austin, Texas. As a result of the acquisition, the Company acquired complete ownership of the Austin properties.
(c) | On December 20, 2018, the Company contributed a portfolio of eight properties containing an aggregate of 1,293,197 square feet, located in its Metropolitan Washington, D.C. segment, known as the Rockpoint Portfolio, to the Herndon Innovation Center Venture. The Company and its partner own 15% and 85% interests in the Herndon Innovation Center Venture, respectively.
Unconsolidated real estate ventures (in thousands): |
| Investment in real estate ventures |  |  | Equity in income (loss) of real estate venture |
| As of |  |  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
| June 30, 2019 |  |  | December 31, 2018 |  |  | 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Philadelphia CBD | $ | 18,759 |  |  | $ | 19,897 |  |  | $ | 84 |  |  | $ | 89 |  |  | $ | 162 |  |  | $ | (147 | )
Metropolitan Washington, D.C. (a) |  | 104,384 |  |  |  | 136,142 |  |  |  | (260 | ) |  |  | (363 | ) |  |  | (435 | ) |  |  | (400 | )
MAP Venture (b) |  | 3,242 |  |  |  | 11,173 |  |  |  | (1,445 | ) |  |  | (830 | ) |  |  | (2,812 | ) |  |  | (1,567 | )
Other |  | 1,804 |  |  |  | 1,888 |  |  |  | 130 |  |  |  | 93 |  |  |  | 236 |  |  |  | 197 |
Austin, Texas (c) |  | - |  |  |  | - |  |  |  | - |  |  |  | 653 |  |  |  | - |  |  |  | 734 |
Total | $ | 128,189 |  |  | $ | 169,100 |  |  | $ | (1,491 | ) |  | $ | (358 | ) |  | $ | (2,849 | ) |  | $ | (1,183 | )
(a) | On December 20, 2018, the Company formed the Herndon Innovation Center Venture. See footnote (c) to the “Net operating income” table above for further information regarding this transaction.
(b) | Formed on February 4, 2016, represents a joint venture between the Company and MAP Ground Lease Holdings LLC, an affiliate of Och-Ziff Capital Management Group, LLC, on February 4, 2016. The 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 Company’s investment in MAP Venture is separately presented. All other unconsolidated real estate ventures are managed consistently with the Company’s regional segments.
(c) | On December 11, 2018, the Company acquired from DRA Advisors, an unaffiliated third party, DRA’s 50% ownership interest in the G&I Austin Office LLC real estate venture. The DRA Austin Venture owned twelve office properties containing an aggregate 1,570,123 square feet, located in Austin, Texas. As a result of the acquisition, the Company acquired complete ownership of the Austin properties.
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 and management fees. 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’s management to evaluate the operating performance of the Company’s 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, as defined by GAAP, to consolidated NOI, (in thousands):
| Three Months Ended June 30, |  |  | Six Months Ended June 30, |
| 2019 |  |  | 2018 |  |  | 2019 |  |  | 2018 |
Net income | $ | 6,252 |  |  | $ | 12,876 |  |  | $ | 10,835 |  |  | $ | 57,321 |
Plus: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest expense |  | 20,516 |  |  |  | 19,301 |  |  |  | 40,873 |  |  |  | 38,834 |
Interest expense - amortization of deferred financing costs |  | 666 |  |  |  | 627 |  |  |  | 1,332 |  |  |  | 1,254 |
Depreciation and amortization |  | 51,667 |  |  |  | 43,958 |  |  |  | 103,111 |  |  |  | 87,490 |
General and administrative expenses |  | 8,399 |  |  |  | 7,523 |  |  |  | 18,243 |  |  |  | 16,246 |
Equity in loss of Real Estate Ventures |  | 1,491 |  |  |  | 358 |  |  |  | 2,849 |  |  |  | 1,183 |
Less: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  | 553 |  |  |  | 641 |  |  |  | 1,078 |  |  |  | 1,344 |
Income tax provision |  | (17 | ) |  |  | (20 | ) |  |  | (46 | ) |  |  | (158 | )
Net loss on disposition of real estate |  | - |  |  |  | (35 | ) |  |  | - |  |  |  | (35 | )
Net gain on sale of undepreciated real estate |  | 250 |  |  |  | 2,837 |  |  |  | 1,251 |  |  |  | 2,859 |
Net gain on real estate venture transactions |  | 1,276 |  |  |  | - |  |  |  | 1,535 |  |  |  | 37,263 |
Consolidated net operating income | $ | 86,929 |  |  | $ | 81,220 |  |  | $ | 173,425 |  |  | $ | 161,055 |

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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
Name: | us-gaap_SegmentReportingDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration