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 of unconsolidated real estate entities, depreciation expense, corporate income tax expense, casualty and impairment loss (gain), net, gain on sale of communities, loss (gain) on other real estate transactions 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 months ended March 31, 2018 and 2017 is as follows (dollars in thousands):



	For the three months ended
	3/31/2018			3/31/2017
Net income	$	141,590		$	235,781
Indirect operating expenses, net of corporate income	18,082			16,297
Investments and investment management expense	1,643			1,321
Expensed acquisition, development and other pursuit costs, net of recoveries	800			728
Interest expense, net	55,113			49,295
Loss on extinguishment of debt, net	397			—
General and administrative expense	13,664			13,206
Equity in income of unconsolidated real estate entities	(1,740		)	(16,672		)
Depreciation expense	159,059			140,621
Income tax expense	—			20
Casualty and impairment loss (gain), net	(58		)	11,688
Gain on sale of communities	—			(87,949		)
Loss (gain) on other real estate transactions	47			(366		)
Net operating income from real estate assets sold or held for sale	(2,144		)	(8,101		)
Net operating income	$	386,453		$	355,869

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
	3/31/2018			3/31/2017
Rental income from real estate assets sold or held for sale	$	3,225		$	12,706
Operating expenses from real estate assets sold or held for sale	(1,081		)	(4,605		)
Net operating income from real estate assets sold or held for sale	$	2,144		$	8,101

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 months ended March 31, 2018 and 2017 has been adjusted to exclude the real estate assets that were sold from January 1, 2017 through March 31, 2018, or otherwise qualify as held for sale as of March 31, 2018, as described in Note 6, "Real Estate Disposition Activities." Segment information for gross real estate as of March 31, 2018 and 2017 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
	Total revenue		NOI		% NOI change from prior year		Gross real estate (1)
For the period ended March 31, 2018
Established
New England	$	57,909	$	37,643	1.8	%	$	1,973,203
Metro NY/NJ	104,096		71,921		0.9	%	3,722,387
Mid-Atlantic	59,159		41,067		0.2	%	2,233,711
Pacific Northwest	21,242		14,838		(0.6	)%	725,487
Northern California	92,197		70,494		1.8	%	3,017,863
Southern California	82,941		59,394		1.9	%	2,842,685
Total Established	417,544		295,357		1.2	%	14,515,336

Other Stabilized	71,203		47,265		N/A		3,036,815
Development / Redevelopment	67,934		43,831		N/A		4,321,466
Land Held for Development	N/A		N/A		N/A		136,771
Non-allocated (2)	886		N/A		N/A		98,368

Total	$	557,567	$	386,453	8.6	%	$	22,108,756

For the period ended March 31, 2017
Established
New England	$	56,154	$	36,180	1.0	%	$	1,875,024
Metro NY/NJ	85,760		58,938		2.9	%	2,903,317
Mid-Atlantic	55,755		39,147		3.7	%	2,062,311
Pacific Northwest	20,454		14,815		5.2	%	731,537
Northern California	83,323		63,717		2.0	%	2,815,589
Southern California	81,311		59,223		5.0	%	3,005,810
Total Established	382,757		272,020		3.1	%	13,393,588

Other Stabilized	70,116		48,943		N/A		3,032,689
Development / Redevelopment	55,547		34,906		N/A		4,276,266
Land Held for Development	N/A		N/A		N/A		103,954
Non-allocated (2)	1,200		N/A		N/A		112,987

Total	$	509,620	$	355,869	3.4	%	$	20,919,484

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(1)	Does not include gross real estate assets held for sale of $153,151 as of March 31, 2018.


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