Segment Reporting

The Company's reportable operating segments include Established Communities, Other Stabilized Communities, and Development/Redevelopment Communities. Annually as of January 1, the Company determines which of its communities fall into each of these categories and generally maintains that classification throughout the year for the purpose of reporting segment operations, unless disposition or redevelopment plans regarding a community change.

In addition, the Company owns land for future development and has other corporate assets that are not allocated to an operating segment.

The Company's segment disclosures present the measure(s) used by the chief operating decision maker for purposes of assessing each segment's performance. The Company's chief operating decision maker is comprised of several members of its executive management team who use net operating income ("NOI") as the primary financial measure for Established Communities and Other Stabilized Communities. NOI is defined by the Company as total property revenue less direct property operating expenses (including property taxes), and excluding corporate-level income (including management, development and other fees), corporate-level property management and other indirect operating expenses, investments and investment management expenses, expensed acquisition, development and other pursuit costs, net of recoveries, interest expense, net, loss on extinguishment of debt, net, general and administrative expense, equity in (income) loss of unconsolidated real estate entities, depreciation expense, corporate income tax expense, casualty and impairment loss (gain), net, (loss) gain on sale of real estate assets and net operating income from real estate assets sold or held for sale. Although the Company considers NOI a useful measure of a community's or communities' operating performance, NOI should not be considered an alternative to net income or net cash flow from operating activities, as determined in accordance with GAAP. NOI excludes a number of income and expense categories as detailed in the reconciliation of NOI to net income.

A reconciliation of NOI to net income for the three and nine months ended September 30, 2017 and 2016 is as follows (dollars in thousands):



	For the three months ended						For the nine months ended
	9/30/2017			9/30/2016			9/30/2017			9/30/2016
Net income	$	238,199		$	356,329		$	639,174		$	791,525
Indirect operating expenses, net of corporate income	15,752			14,946			48,472			46,960
Investments and investment management expense	1,501			1,205			4,277			3,545
Expensed acquisition, development and other pursuit costs, net of recoveries	789			3,804			2,087			8,702
Interest expense, net	47,741			47,871			147,138			137,862
Loss on extinguishment of debt, net	—			—			24,162			2,461
General and administrative expense	11,655			11,928			38,808			35,343
Equity in (income) loss of unconsolidated real estate entities	(52,568		)	342			(70,386		)	(54,779		)
Depreciation expense	144,990			131,729			427,050			391,414
Income tax expense	24			22			102			95
Casualty and impairment loss (gain), net	—			—			11,688			(3,935		)
Gain on sale of real estate	(27,618		)	(212,941		)	(160,000		)	(295,503		)
Net operating income from real estate assets sold or held for sale	(1,874		)	(10,039		)	(9,633		)	(33,175		)
Net operating income	$	378,591		$	345,196		$	1,102,939		$	1,030,515

The following is a summary of NOI from real estate assets sold or held for sale for the periods presented (dollars in thousands):



	For the three months ended						For the nine months ended
	9/30/2017			9/30/2016			9/30/2017			9/30/2016
Rental income from real estate assets sold or held for sale	$	3,044		$	16,388		$	15,582		$	53,582
Operating expenses from real estate assets sold or held for sale	(1,170		)	(6,349		)	(5,949		)	(20,407		)
Net operating income from real estate assets sold or held for sale	$	1,874		$	10,039		$	9,633		$	33,175

The primary performance measure for communities under development or redevelopment depends on the stage of completion. While under development, management monitors actual construction costs against budgeted costs as well as lease-up pace and rent levels compared to budget.

The following table provides details of the Company's segment information as of the dates specified (dollars in thousands). The segments are classified based on the individual community's status at the beginning of the given calendar year. Therefore, each year the composition of communities within each business segment is adjusted. Accordingly, the amounts between years are not directly comparable. Segment information for total revenue and NOI for the three and nine months ended September 30, 2017 and 2016 has been adjusted to exclude the real estate assets that were sold from January 1, 2016 through September 30, 2017, or otherwise qualify as held for sale as of September 30, 2017, as described in Note 6, "Real Estate Disposition Activities." Segment information for gross real estate as of September 30, 2017 and 2016 has not been adjusted to exclude real estate assets that were sold or otherwise qualified as held for sale subsequent to the respective balance sheet dates.



	For the three months ended						For the nine months ended
	Total revenue		NOI		% NOI change from prior year		Total revenue		NOI		% NOI change from prior year		Gross real estate (1)
For the period ended September 30, 2017
Established
New England	$	58,941	$	38,055	3.0	%	$	174,348	$	111,931	2.6	%	$	1,846,937
Metro NY/NJ	91,699		61,932		1.6	%	271,262		184,434		2.0	%	2,969,873
Mid-Atlantic	56,321		38,782		1.8	%	168,098		116,272		1.8	%	2,069,486
Pacific Northwest	21,528		15,687		5.1	%	62,773		45,519		5.4	%	734,407
Northern California	84,634		64,557		1.3	%	251,985		192,861		1.9	%	2,824,608
Southern California	85,226		60,024		2.3	%	252,229		180,383		4.3	%	3,013,215
Total Established	398,349		279,037		2.1	%	1,180,695		831,400		2.7	%	13,458,526

Other Stabilized (2)	71,150		49,177		N/A		208,729		146,242		N/A		3,086,022
Development / Redevelopment	76,964		50,377		N/A		195,041		125,297		N/A		4,766,894
Land Held for Development	N/A		N/A		N/A		N/A		N/A		N/A		85,863
Non-allocated (3)	993		N/A		N/A		3,290		N/A		N/A		95,621

Total	$	547,456	$	378,591	9.7	%	$	1,587,755	$	1,102,939	7.0	%	$	21,492,926

For the period ended September 30, 2016
Established
New England	$	59,321	$	37,657	0.6	%	$	174,731	$	111,497	5.9	%	$	1,845,679
Metro NY/NJ	91,181		61,905		1.2	%	268,781		183,155		1.8	%	3,206,696
Mid-Atlantic	58,928		40,029		0.4	%	174,922		120,623		1.4	%	2,335,116
Pacific Northwest	18,627		13,541		12.1	%	54,085		39,165		8.1	%	736,377
Northern California	80,783		61,560		5.9	%	238,867		182,658		8.0	%	2,657,020
Southern California	73,570		52,527		11.1	%	217,686		155,242		10.3	%	2,667,875
Total Established	382,410		267,219		4.4	%	1,129,072		792,340		4.4	%	13,448,763

Other Stabilized (4)	52,971		34,653		N/A		175,186		125,027		N/A		2,325,539
Development / Redevelopment	63,122		43,324		N/A		164,865		113,148		N/A		3,994,361
Land Held for Development	N/A		N/A		N/A		N/A		N/A		N/A		519,626
Non-allocated (3)	1,320		N/A		N/A		4,310		N/A		N/A		74,374

Total	$	499,823	$	345,196	20.2	%	$	1,473,433	$	1,030,515	37.3	%	$	20,362,663

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(1)	Does not include gross real estate assets held for sale of $53,723 and $135,054 as of September 30, 2017 and 2016, respectively.


(2)	Total revenue and NOI for the three and nine months ended September 30, 2017 includes $3,495 in business interruption insurance proceeds related to the Maplewood casualty loss.


(3)	Revenue represents third-party management, asset management and developer fees and miscellaneous income which are not allocated to a reportable segment.


(4)	Total revenue and NOI for the nine months ended September 30, 2016 includes $20,306 in business interruption insurance proceeds related to the Edgewater casualty loss.