Segment Information

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

SEGMENT INFORMATION

13. SEGMENT INFORMATION

As of June 30, 2020, 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, New Jersey and New Castle County, 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, 2020		December 31, 2019
Philadelphia CBD (a)	$	1,384,550	$	1,726,299
Pennsylvania Suburbs	987,069		1,003,890
Austin, Texas	722,710		721,255
Metropolitan Washington, D.C.	469,091		468,035
Other	87,101		86,980
	$	3,650,521	$	4,006,459
Assets held for sale (a)	327,286		—
Operating Properties	$	3,977,807	$	4,006,459
Right of use asset - operating leases, net	$	21,315	$	21,656
Corporate
Construction-in-progress	$	235,475	$	180,718
Land held for development (b)	$	112,420	$	96,124
Prepaid leasehold interests in land held for development, net (c)	$	39,389	$	39,592

(a) As of June 30, 2020, two properties in the Philadelphia CBD segment were classified as held for sale. See Note 3, “Real Estate Investments,” for further information.

(b) Does not include 35.2 acres of land classified as held for sale as of June 30, 2020 and December 31, 2019.

(c) Includes leasehold interests in prepaid 99-year ground leases at 3025 and 3001-3003 JFK Boulevard, in Philadelphia, Pennsylvania as of June 30, 2020 and December 31, 2019.

Net operating income:

	Three Months Ended June 30,
	2020								2019
	Total revenue		Operating expenses (a)			Net operating income (loss)			Total revenue		Operating expenses (a)			Net operating income
Philadelphia CBD	$	62,648	$	(22,895	)	$	39,753		$	64,956	$	(25,353	)	$	39,603
Pennsylvania Suburbs	34,683		(11,161		)	23,522			34,299		(11,808		)	22,491
Austin, Texas	25,012		(9,943		)	15,069			26,188		(9,804		)	16,384
Metropolitan Washington, D.C.	10,091		(4,930		)	5,161			13,673		(6,339		)	7,334
Other	3,381		(2,367		)	1,014			3,464		(2,390		)	1,074
Corporate	1,022		(1,186		)	(164		)	1,571		(1,528		)	43
Operating properties	$	136,837	$	(52,482	)	$	84,355		$	144,151	$	(57,222	)	$	86,929

	Six Months Ended June 30,
	2020								2019
	Total revenue		Operating expenses (a)			Net operating income (loss)			Total revenue		Operating expenses (a)			Net operating income (loss)
Philadelphia CBD	$	128,563	$	(47,093	)	$	81,470		$	130,754	$	(50,538	)	80,216
Pennsylvania Suburbs	71,920		(23,839		)	48,081			69,926		(24,799		)	45,127
Austin, Texas	51,593		(20,088		)	31,505			50,954		(18,880		)	32,074
Metropolitan Washington, D.C.	20,845		(10,442		)	10,403			27,193		(12,543		)	14,650
Other	7,033		(5,060		)	1,973			6,646		(4,535		)	2,111
Corporate	1,971		(2,870		)	(899		)	2,574		(3,327		)	(753		)
Operating properties	$	281,925	$	(109,392	)	$	172,533		$	288,047	$	(114,622	)	$	173,425

(a) Includes property operating expenses, real estate taxes and third party management expense.

Unconsolidated real estate ventures:
	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, 2020			December 31, 2019			2020			2019			2020			2019
Philadelphia CBD	$	16,611		$	17,524		$	83		$	84		$	161		$	162
Metropolitan Washington, D.C.	101,947			102,840			(647		)	(260		)	(1,096		)	(435		)
MAP Venture (a)	(5,503		)	(70		)	(1,639		)	(1,445		)	(3,159		)	(2,812		)
Other	—			—			—			130			—			236
Total	$	113,055		$	120,294		$	(2,203	)	$	(1,491	)	$	(4,094	)	$	(2,849	)

(a) Included in Other liabilities on the consolidated balance sheets.

Net operating income (“NOI”) is a non-GAAP financial measure, which we define 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. NOI presented by the Company may not be comparable to NOI reported by other companies that define NOI differently. 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,
	2020		2019			2020		2019
Net income	$	4,020	$	6,252		$	12,107	$	10,835
Plus:
Interest expense	20,191		20,516			40,200		40,873
Interest expense - amortization of deferred financing costs	731		666			1,480		1,332
Depreciation and amortization	49,743		51,667			101,781		103,111
General and administrative expenses	8,343		8,399			16,904		18,243
Equity in loss of Real Estate Ventures	2,203		1,491			4,094		2,849
Less:
Interest income	445		553			1,020		1,078
Income tax (provision) benefit	230		(17		)	226		(46		)
Net gain on disposition of real estate	—		—			2,586		—
Net gain on sale of undepreciated real estate	201		250			201		1,251
Net gain on real estate venture transactions	—		1,276			—		1,535
Consolidated net operating income	$	84,355	$	86,929		$	172,533	$	173,425