SEGMENT INFORMATION | 13. SEGMENT INFORMATION As of March 31, 2017, the Company managed its portfolio 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 New Jersey/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,” The following tables provide selected asset information and results of operations of the Company's reportable segments (in thousands): Real estate investments, at cost: March 31, 2017 December 31, 2016 Philadelphia CBD $ 1,471,258 $ 1,320,974 Pennsylvania Suburbs 1,006,780 1,005,446 Metropolitan Washington, D.C. 974,838 975,987 Austin, Texas 146,858 146,794 Other 102,470 137,094 $ 3,702,204 $ 3,586,295 Assets held for sale (a) 5,576 73,591 Operating Properties $ 3,707,780 $ 3,659,886 Corporate Construction-in-progress $ 166,372 $ 297,462 Land held for development $ 153,268 $ 150,970 (a) A , “Real Estate Investments,” . 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 March 31, 2017 2016 Total revenue Operating expenses (a) Net operating income Total revenue Operating expenses (a) Net operating income Philadelphia CBD $ 54,449 $ (20,837 ) $ 33,612 $ 49,670 $ (19,256 ) $ 30,414 Pennsylvania Suburbs 35,655 (12,584 ) 23,071 37,106 (13,155 ) 23,951 Metropolitan Washington, D.C. 23,362 (9,383 ) 13,979 27,339 (10,899 ) 16,440 Austin, Texas 9,123 (3,573 ) 5,550 8,547 (3,255 ) 5,292 Other 6,362 (3,856 ) 2,506 12,740 (7,602 ) 5,138 Corporate 1,969 (848 ) 1,121 1,100 (608 ) 492 Operating Properties $ 130,920 $ (51,081 ) $ 79,839 $ 136,502 $ (54,775 ) $ 81,727 (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 loss of real estate ventures As of Three-month periods ended March 31, March 31, 2017 December 31, 2016 2017 2016 Philadelphia CBD $ 44,618 $ 48,691 $ (67 ) $ 455 Pennsylvania Suburbs 3,147 15,421 276 265 Metropolitan Washington, D.C. 143,591 141,786 467 (448 ) MAP Venture (a) 17,776 20,893 (1,117 ) (556 ) Other 1,713 1,654 58 161 Austin, Texas 54,096 52,886 (365 ) (280 ) Total $ 264,941 $ 281,331 $ (748 ) $ (403 ) (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, as defined by GAAP, is the most appropriate earnings measure. The following is a reconciliation of consolidated NOI to consolidated net income, as defined by GAAP (in thousands): Three-month periods ended March 31, 2017 2016 Consolidated net operating income $ 79,839 $ 81,727 Less: Interest expense (21,437 ) (23,691 ) Interest expense - amortization of deferred financing costs (634 ) (774 ) Interest expense - financing obligation - (281 ) Depreciation and amortization (45,892 ) (48,873 ) General and administrative expenses (9,425 ) (9,120 ) Equity in loss of Real Estate Ventures (748 ) (403 ) Provision for impairment (2,730 ) (7,390 ) Loss on early extinguishment of debt - (66,590 ) Plus: Interest income 393 320 Net gain on disposition of real estate 7,323 115,456 Net gain on Real Estate Venture transactions 14,582 5,929 Net income $ 21,271 $ 46,310 |