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Segment Information (Tables)
 12 Months Ended
Dec. 31, 2017
Segment Reporting [Abstract]  
Real Estate Investments, Net Operating Income and Unconsolidated Real Estate Ventures of Reportable Segments

The following tables provide selected asset information and results of operations of the Company’s reportable segments for the three years ended December 31, 2017, 2016 and 2015 (in thousands):

 

Real estate investments, at cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017

 

 

December 31, 2016

 

 

December 31, 2015

 

Philadelphia CBD

 

$

1,643,296

 

 

$

1,320,974

 

 

$

1,157,667

 

Pennsylvania Suburbs

 

 

958,796

 

 

 

1,005,446

 

 

 

1,019,280

 

Metropolitan Washington, D.C.

 

 

978,257

 

 

 

975,987

 

 

 

1,129,206

 

Austin, Texas

 

 

163,653

 

 

 

146,794

 

 

 

164,518

 

Other (a)

 

 

88,346

 

 

 

137,094

 

 

 

222,329

 

 

 

$

3,832,348

 

 

$

3,586,295

 

 

$

3,693,000

 

Assets held for sale (b)

 

 

-

 

 

 

73,591

 

 

 

794,588

 

      Operating Properties

 

$

3,832,348

 

 

$

3,659,886

 

 

$

4,487,588

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

 

 

 

 

 

 

Construction-in-progress

 

$

121,188

 

 

$

297,462

 

 

$

268,983

 

Land held for development (c)

 

$

98,242

 

 

$

150,970

 

 

$

130,479

 

 

(a)

As a result of the Och-Ziff Sale that occurred on February 4, 2016, the Company narrowed its segments to five segments: (1) Philadelphia Central Business District (“CBD”), (2) Pennsylvania Suburbs, (3) Metropolitan Washington, D.C. and (4) Austin, Texas and (5) Other. The Och-Ziff Sale disposed of the entire Richmond, Virginia segment. See Note 3, “Real Estate Investments,” for further information.

(b)

As of December 31, 2015, the Och-Ziff Portfolio and Cira Square were held for sale. As of December 31, 2016, the Concord Airport Plaza located in the Other segment and the Calverton portfolio located in the Metropolitan Washington, D.C. segment was held for sale. See Note 3, “Real Estate Investments,” for further information.

(c)

As of December 31, 2017, the Company categorized 13.1 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.

 

 

Years ended

 

 

December 31,

 

 

2017

 

 

2016

 

 

2015

 

 

Total revenue

 

 

Operating expenses (a)

 

 

Net operating income

 

 

Total revenue

 

 

Operating expenses (a)

 

 

Net operating income

 

 

Total revenue

 

 

Operating expenses (a)

 

 

Net Operating income

 

Philadelphia CBD

$

226,673

 

 

$

(88,818

)

 

$

137,855

 

 

$

200,245

 

 

$

(78,708

)

 

$

121,537

 

 

$

209,298

 

 

$

(77,352

)

 

$

131,946

 

Pennsylvania Suburbs

 

139,785

 

 

 

(47,769

)

 

 

92,016

 

 

 

144,338

 

 

 

(49,208

)

 

 

95,130

 

 

 

158,398

 

 

 

(57,319

)

 

 

101,079

 

Metropolitan Washington, D.C.

 

92,024

 

 

 

(35,014

)

 

 

57,010

 

 

 

99,781

 

 

 

(39,036

)

 

 

60,745

 

 

 

110,657

 

 

 

(44,294

)

 

 

66,363

 

Austin, Texas (b)

 

34,301

 

 

 

(15,456

)

 

 

18,845

 

 

 

34,585

 

 

 

(13,222

)

 

 

21,363

 

 

 

20,910

 

 

 

(8,010

)

 

 

12,900

 

Other

 

18,347

 

 

 

(11,749

)

 

 

6,598

 

 

 

39,359

 

 

 

(23,204

)

 

 

16,155

 

 

 

98,799

 

 

 

(49,604

)

 

 

49,195

 

Corporate

 

9,363

 

 

 

(7,193

)

 

 

2,170

 

 

 

7,155

 

 

 

(6,070

)

 

 

1,085

 

 

 

4,569

 

 

 

(1,508

)

 

 

3,061

 

Operating properties

$

520,493

 

 

$

(205,999

)

 

$

314,494

 

 

$

525,463

 

 

$

(209,448

)

 

$

316,015

 

 

$

602,631

 

 

$

(238,087

)

 

$

364,544

 

 

(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% of the common interest in Broadmoor Austin Associates. As such, the Company has seven wholly owned properties in its Austin, Texas business segment. Net operating income for the years ended December 31, 2016 and 2015 includes management fees and related expenses for services provided by the Company to the Austin Venture, which are recorded in the Corporate segment. See Note 3, "Real Estate Investments," for further information regarding these transactions.

Unconsolidated real estate ventures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment in real estate ventures, at equity

 

 

Equity in income (loss) of real estate ventures

 

 

As of

 

 

Years ended December 31,

 

 

December 31, 2017

 

 

December 31, 2016

 

 

December 31, 2015

 

 

2017

 

 

2016

 

 

2015

 

Philadelphia CBD

$

39,939

 

 

$

48,691

 

 

$

44,089

 

 

$

255

 

 

$

(686

)

 

$

(188

)

Pennsylvania Suburbs

 

3,503

 

 

 

15,421

 

 

 

16,408

 

 

 

631

 

 

 

748

 

 

 

310

 

Metropolitan Washington, D.C. (a)

 

119,817

 

 

 

141,786

 

 

 

118,422

 

 

 

(5,044

)

 

 

(6,293

)

 

 

(336

)

MAP Venture (b)

 

15,450

 

 

 

20,893

 

 

 

-

 

 

 

(3,443

)

 

 

(4,218

)

 

 

-

 

Other (c)

 

1,939

 

 

 

1,654

 

 

 

1,657

 

 

 

285

 

 

 

814

 

 

 

930

 

Austin, Texas (d)

 

13,973

 

 

 

52,886

 

 

 

60,428

 

 

 

(990

)

 

 

(1,868

)

 

 

(1,527

)

Total

$

194,621

 

 

$

281,331

 

 

$

241,004

 

 

$

(8,306

)

 

$

(11,503

)

 

$

(811

)

 

(a)

On August 31, 2016, the Company terminated its lease for the regional management and leasing office at 3141 Fairview Park Drive, located in Falls Church, Virginia. Accordingly, the Company no longer has any continuing involvement with 3141 Fairview Park Drive and recorded the partial sale under the full accrual method of accounting. See Note 4, “Investment in Unconsolidated Real Estate Ventures,” for further information. The years ended December 31, 2017 and 2016 include impairment charges related to the Brandywine - AI 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. 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 (a) 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 the “Other Liabilities” caption of the consolidated balance sheets. The Company disposed of its interest in this venture during 2016. See Note 4, "Investment in Unconsolidated Real Estate Ventures," for further information. The decrease in the Company’s investment balance primarily relates to distributions from the G&I VII Austin Office LLC real estate venture. See Note 4, “Investment in Unconsolidated Real Estate Ventures,” for further information.
Reconciliation of Consolidated Net Income (Loss) to Consolidated NOI

The following is a reconciliation of consolidated net income (loss), as defined by GAAP, to consolidated NOI, (in thousands):

 

 

Years Ended December 31,

 

 

2017

 

 

2016

 

 

2015

 

 

 

 

Net income (loss)

$

121,859

 

 

$

40,501

 

 

$

(30,740

)

Plus:

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

81,886

 

 

 

84,708

 

 

 

110,717

 

Interest expense - amortization of deferred financing costs

 

2,435

 

 

 

2,696

 

 

 

4,557

 

Interest expense - financing obligation

 

-

 

 

 

679

 

 

 

1,237

 

Depreciation and amortization

 

179,357

 

 

 

189,676

 

 

 

219,029

 

General and administrative expenses

 

28,538

 

 

 

26,596

 

 

 

29,406

 

Equity in loss of Real Estate Ventures

 

8,306

 

 

 

11,503

 

 

 

811

 

Provision for impairment

 

3,057

 

 

 

40,517

 

 

 

82,208

 

Loss on early extinguishment of debt

 

3,933

 

 

 

66,590

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

1,113

 

 

 

1,236

 

 

 

1,224

 

Income tax benefit

 

628

 

 

 

-

 

 

 

-

 

Tax credit transaction income

 

-

 

 

 

-

 

 

 

19,955

 

Net gain from remeasurement of investments in real estate ventures

 

-

 

 

 

-

 

 

 

758

 

Net gain on disposition of real estate

 

31,657

 

 

 

116,983

 

 

 

20,496

 

Net gain on sale of undepreciated real estate

 

953

 

 

 

9,232

 

 

 

3,019

 

Net gain on Real Estate Venture transactions

 

80,526

 

 

 

20,000

 

 

 

7,229

 

Consolidated net operating income

$

314,494

 

 

$

316,015

 

 

$

364,544