Segments

6 Months Ended

Jun. 30, 2011

Segments [Abstract]

SEGMENTS

NOTE 10 SEGMENTS

We have three business segments which offer different products and services. In 2010, we reported in two segments predominantly as the assets within our current Operating Assets segment and our current Strategic Developments segment were managed jointly as a group. Our current three segments are managed separately because each requires different operating strategies or management expertise. These segments are different than those of the Predecessors with respect to the HHC Businesses and are reflective of our current management’s operating philosophies and methods. All resulting changes from the Predecessors’ previous presentation of our segments have been applied to all periods presented. In addition, our current segments or assets within such segments could change in the future as development of certain properties commence or other operational or management changes occur. We do not distinguish or group our combined operations on a geographic basis. Further, all operations are within the United States and no customer or tenant comprises more than 10% of revenues. Our reportable segments are as follows:

• Master Planned Communities — includes the development and sale of land, in large-scale, long-term community development projects in and around Las Vegas, Nevada; Houston, Texas and Columbia, Maryland. This segment also includes certain office properties and other ownership interests owned by The Woodlands Partnerships as such assets are managed jointly with The Woodlands Master Planned Community.

• Operating Assets — includes commercial, mixed use and retail properties currently generating revenues, many of which we believe there is an opportunity to redevelop or reposition the asset to increase operating performance.

• Strategic Developments — includes all properties held for development and redevelopment, including the current rental property operations (primarily retail and other interests in real estate at such locations) as well as our one residential condominium project located in Natick (Boston), Massachusetts.

The assets included in each segment are contained in the following chart:

As our segments are managed separately, different operating measures are utilized to assess operating results and allocate resources. The one common operating measure used to assess operating results for the business segments is Real Estate Property Earnings Before Taxes (“EBT”) which represents the operating revenues of the properties less property operating expenses, as further described below. Management believes that EBT provides useful information about the operating performance of all of our assets, projects and property.

EBT is defined as net income (loss) from continuing operations as adjusted for: (1) reorganization items; (2) income tax provision (benefit); (3) warrant liability gain (loss); and (4) general and administrative costs. The net income (loss) from our Real Estate Affiliates, at our proportionate share, is similarly adjusted for items (1) through (4) immediately above. We present EBT because we use this measure, among others, internally to assess the core operating performance of our assets. We also present this measure because we believe certain investors use it as a measure of a company’s historical operating performance and its ability to service and incur debt. We believe that the inclusion of certain adjustments to net income (loss) from continuing operations to calculate EBT is appropriate to provide additional information to investors because EBT excludes certain non-recurring and non-cash items, including reorganization items related to the bankruptcy, which we believe are not indicative of our core operating performance. EBT should not be considered as an alternative to GAAP net income (loss) attributable to common stockholders or GAAP net income (loss) from continuing operations, it has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.

We report the operations of our equity method Real Estate Affiliates using the proportionate share method, whereby our share of the revenues and expenses of these Real Estate Affiliates are aggregated with the revenues and expenses of consolidated or combined properties. Our investment in the Summerlin Hospital Medical Center is accounted for on the cost method. Approximately $3.9 million was received in the first quarter of 2011 as dividends related to this investment and has been reflected as other rental and property revenues for the six months ended June 30, 2011 within the Operating Assets segment.

The total cash expenditures for additions to long-lived assets for the Master Planned Communities segment was $27.0 million for the six months ended June 30, 2011 and $30.6 million for the six months ended June 30, 2010. Similarly, cash expenditures for long-lived assets for the Operating Assets and Strategic Developments segments was $16.5 million and $2.1 million, respectively, for the six months ended June 30, 2011 and $36.5 million and $0.6 million, respectively, for the six months ended June 30, 2010. Such amounts for the Master Planned Communities segment and certain amounts in the Strategic Developments segment are included in the amounts listed in our consolidated and combined statements of cash flow as Land/residential development and acquisitions expenditures. With respect to the long-lived assets within the Operating Assets segment and certain other investing amounts in the Strategic Developments segment, such amounts are included in the amounts listed as Development of real estate and property additions/improvements primarily previously accrued, respectively, in our consolidated and combined statements of cash flows.

As more fully discussed in this report, on July 1, 2011 we acquired our partner’s interest in The Woodlands master planned community for $117.5 million. We now own 100% of The Woodlands and will consolidate its operations beginning the third quarter 2011.

Segment operating results are as follows:

	Three Months Ended June 30, 2011
	Consolidated			Real Estate			Segment
	Properties			Affiliates			Basis
				(In thousands)
Master Planned Communities
Land sales	$	18,148		$	12,982		$	31,130
Builder price participation		597			619			1,216
Minimum rents		383			2,302			2,685
Other land sale revenues		2,248			592			2,840
Other rental and property revenues		1			11,257			11,258
Total revenues		21,377			27,752			49,129
Cost of sales — land		9,438			6,532			15,970
CSA participation expense		—			—			—
Land sales operations		3,044			3,949			6,993
Land sales real estate and business taxes		1,541			471			2,012
Rental property real estate taxes		54			268			322
Rental property maintenance costs		59			299			358
Property operating costs		207			11,162			11,369
Provisions for impairment		—			—			—
Depreciation and amortization		66			1,006			1,072
Interest income (a)		1,165			(335	)		830
Interest expense (b)		(2,602	)		1,584			(1,018	)
Total expenses		12,972			24,936			37,908
MPC EBT		8,405			2,816			11,221
Operating Assets
Minimum rents		16,357			—			16,357
Tenant recoveries		4,522			—			4,522
Other rental and property revenues		1,551			—			1,551
Total revenues		22,430			—			22,430
Rental property real estate taxes		2,439			—			2,439
Rental property maintenance costs		1,378			—			1,378
Property operating costs		7,977			—			7,977
Provision for doubtful accounts		291			—			291
Provisions for impairment		—			—			—
Depreciation and amortization		3,060			—			3,060
Interest income		(3,409	)		—			(3,409	)
Interest expense		2,602			—			2,602
Total expenses		14,338			—			14,338
Operating Assets EBT		8,092			—			8,092
Strategic Developments
Minimum rents		236			—			236
Tenant recoveries		93			—			93
Condominium unit sales		6,660			—			6,660
Other rental and property revenues		27			—			27
Total revenues		7,016			—			7,016
Condominium unit cost of sales		5,272			—			5,272
Real estate taxes		459			—			459
Rental property maintenance costs		129			—			129
Property operating costs		1,289			—			1,289
Provision for doubtful accounts		13			—			13
Provisions for impairment		—			—			—
Depreciation and amortization		59			—			59
Total expenses		7,221			—			7,221
Strategic Developments EBT		(205	)		—			(205	)
EBT	$	16,292		$	2,816		$	19,108

(a)	Reflects a reclassification of amounts recongnized in this segment in the three months ended March 31, 2011.
(b)	Negative interest expense relates to interest costs of debt at our Operating Assets segment which are allocated to the MPC segment assets eligible for interest capitalization.

	Three Months Ended June 30, 2010
	Combined			Real Estate			Segment
	Properties			Affiliates			Basis
				(In thousands)
Master Planned Communities
Land sales	$	4,174		$	12,282		$	16,456
Builder price participation		1,451			496			1,947
Minimum rents		494			1,341			1,835
Other land sale revenues		1,412			559			1,971
Other rental and property revenues		208			8,585			8,793
Total revenues		7,739			23,263			31,002
Cost of sales — land		1,924			7,379			9,303
CSA participation expense		(4,689	)		—			(4,689	)
Land sales operations		9,170			744			9,914
Land sales real estate and business taxes		4,375			635			5,010
Rental property real estate taxes		254			260			514
Rental property maintenance costs		74			291			365
Property operating costs		155			7,886			8,041
Provisions for impairment		—			—			—
Depreciation and amortization		103			970			1,073
Interest income		—			(299	)		(299	)
Interest expense (*)		(4,053	)		1,280			(2,773	)
Total expenses		7,313			19,146			26,459
MPC EBT		426			4,117			4,543
Operating Assets
Minimum rents		16,209			—			16,209
Tenant recoveries		4,340			—			4,340
Other rental and property revenues		1,956			—			1,956
Total revenues		22,505			—			22,505
Rental property real estate taxes		2,489			—			2,489
Rental property maintenance costs		1,184			—			1,184
Property operating costs		7,374			—			7,374
Provision for doubtful accounts		226			—			226
Provisions for impairment		178			—			178
Depreciation and amortization		3,812			—			3,812
Interest income		—			—			—
Interest expense		4,587			—			4,587
Total expenses		19,850			—			19,850
Operating Assets EBT		2,655			—			2,655
Strategic Developments
Minimum rents		266			—			266
Tenant recoveries		93			—			93
Condominium unit sales		—			—			—
Other rental and property revenues		26			—			26
Total revenues		385			—			385
Condominium unit cost of sales		—			—			—
Real estate taxes		1,308			—			1,308
Rental property maintenance costs		181			—			181
Property operating costs		2,200			—			2,200
Provision for doubtful accounts		30			—			30
Provisions for impairment		30			—			30
Depreciation and amortization		60			—			60
Interest expense		7			—			7
Total expenses		3,816			—			3,816
Strategic Developments EBT		(3,431	)		—			(3,431	)
EBT	$	(350	)	$	4,117		$	3,767

* Negative interest expense relates to interest costs of debt at our Operating Assets segment which are allocated to the MPC segment assets eligible for interest capitalization.

	Six Months Ended June 30, 2011
	Consolidated			Real Estate			Segment
	Properties			Affiliates			Basis
				(In thousands)
Master Planned Communities
Land sales	$	41,540		$	23,844		$	65,384
Builder price participation		1,118			1,293			2,411
Minimum rents		776			3,269			4,045
Other land sale revenues		3,496			1,053			4,549
Other rental and property revenues		106			17,500			17,606
Total revenues		47,036			46,959			93,995
Cost of sales – land		24,874			12,564			37,438
CSA participation expense		—			—			—
Land sales operations		7,161			6,235			13,396
Land sales real estate and business taxes		3,052			999			4,051
Rental property real estate taxes		107			530			637
Rental property maintenance costs		99			545			644
Property operating costs		371			17,021			17,392
Provisions for impairment		—			—			—
Depreciation and amortization		143			2,082			2,225
Interest income		—			(569	)		(569	)
Interest expense (a)		(5,128	)		2,855			(2,273	)
Total expenses		30,679			42,262			72,941
MPC EBT		16,357			4,697			21,054
Operating Assets
Minimum rents		32,470			—			32,470
Tenant recoveries		9,004			—			9,004
Other rental and property revenues (b)		3,396			3,894			7,290
Total revenues		44,870			3,894			48,764
Rental property real estate taxes		4,874			—			4,874
Rental property maintenance costs		2,694			—			2,694
Property operating costs		16,094			—			16,094
Provision for doubtful accounts		12			—			12
Provisions for impairment		—			—			—
Depreciation and amortization		6,124			—			6,124
Interest income		(4,756	)		—			(4,756	)
Interest expense		5,128			—			5,128
Total expenses		30,170			—			30,170
Operating Assets EBT		14,700			3,894			18,594
Strategic Developments
Minimum rents		449			—			449
Tenant recoveries		135			—			135
Condominium unit sales		10,424			—			10,424
Other rental and property revenues		1,010			—			1,010
Total revenues		12,018			—			12,018
Condominium unit cost of sales		8,252			—			8,252
Real estate taxes		1,445			1			1,446
Rental property maintenance costs		332			—			332
Property operating costs		2,600			—			2,600
Provision for doubtful accounts		303			—			303
Provisions for impairment		—			—			—
Depreciation and amortization		117			—			117
Total expenses		13,049			1			13,050
Strategic Developments EBT		(1,031	)		(1	)		(1,032	)
EBT	$	30,026		$	8,590		$	38,616

(a)	Negative interest expense relates to interest costs of debt at our Operating Assets segment which are allocated to the MPC segment assets eligible for interest capitalization.
(b)	Reflects the $3.9 million cash dividend from Summerlin Hospital Medical Center which is a Real Estate Affiliate accounted for using the cost method as described above.

	Six Months Ended June 30, 2010
	Combined			Real Estate			Segment
	Properties			Affiliates			Basis
				(In thousands)
Master Planned Communities
Land sales	$	7,388		$	24,154		$	31,542
Builder price participation		2,195			901			3,096
Minimum rents		988			2,384			3,372
Other land sale revenues		2,524			917			3,441
Other rental and property revenues		438			15,844			16,282
Total revenues		13,533			44,200			57,733
Cost of sales — land		3,250			13,758			17,008
CSA participation expense		(4,689	)		—			(4,689	)
Land sales operations		13,367			3,711			17,078
Land sales real estate and business taxes		8,669			1,271			9,940
Rental property real estate taxes		508			517			1,025
Rental property maintenance costs		122			246			368
Property operating costs		290			14,985			15,275
Provisions for impairment		—			—			—
Depreciation and amortization		176			1,997			2,173
Interest income		—			(703	)		(703	)
Interest expense (*)		(7,880	)		2,646			(5,234	)
Total expenses		13,813			38,428			52,241
MPC EBT		(280	)		5,772			5,492
Operating Assets
Minimum rents		32,474			—			32,474
Tenant recoveries		9,061			—			9,061
Other rental and property revenues		3,602			—			3,602
Total revenues		45,137			—			45,137
Rental property real estate taxes		5,029			—			5,029
Rental property maintenance costs		2,804			—			2,804
Property operating costs		14,672			—			14,672
Provision for doubtful accounts		388			—			388
Provisions for impairment		430			—			430
Depreciation and amortization		8,162			—			8,162
Interest income		(59	)		—			(59	)
Interest expense		9,073			—			9,073
Total expenses		40,499			—			40,499
Operating Assets EBT		4,638			—			4,638
Strategic Developments
Minimum rents		538			—			538
Tenant recoveries		191			—			191
Condominium unit sales		—			—			—
Other rental and property revenues		20			—			20
Total revenues		749			—			749
Condominium unit cost of sales		—			—			—
Real estate taxes		1,492			—			1,492
Rental property maintenance costs		357			—			357
Property operating costs		3,239			—			3,239
Provision for doubtful accounts		(31	)		—			(31	)
Provisions for impairment		56			—			56
Depreciation and amortization		87			—			87
Interest expense		14			—			14
Total expenses		5,214			—			5,214
Strategic Developments EBT		(4,465	)		—			(4,465	)
EBT	$	(107	)	$	5,772		$	5,665

* Negative interest expense relates to interest costs of debt at our Operating Assets segment which are allocated to the MPC segment assets eligible for interest capitalization.

The following reconciles EBT to GAAP-basis income (loss) from continuing operations:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2011			2010			2011			2010
Reconciliation of EBT to GAAP-basis income (loss) from continuing operations
Real estate property EBT:
Segment basis	$	19,108		$	3,767		$	38,616		$	5,665
Real Estate Affiliates		(2,816	)		(4,117	)		(8,590	)		(5,772	)
Consolidated properties		16,292			(350	)		30,026			(107	)
General and administrative		(8,359	)		(4,861	)		(13,591	)		(8,996	)
Warrant liability gain (loss)		56,910			—			(69,135	)		—
Provision for income taxes		(958	)		(16,467	)		(3,415	)		(17,953	)
Income from Real Estate Affiliates		2,108			3,680			7,621			5,172
Reorganization costs		—			(10,019	)		—			(26,614	)
Income (loss) from continuing operations	$	65,993		$	(28,017	)	$	(48,494	)	$	(48,498	)

The following reconciles segment revenue to GAAP-basis consolidated and combined revenues:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2011			2010			2011			2010
Reconciliation of segment basis revenues to GAAP revenues
Master Planned Communities — Total segment	$	49,129		$	31,002		$	93,995		$	57,733
Operating Assets — Total segment		22,430			22,505			48,764			45,137
Strategic Developments — Total segment		7,016			385			12,018			749
Total segment revenues		78,575			53,892			154,777			103,619
Less: The Woodlands Partnerships revenues, at our ownership share		(27,752	)		(23,263	)		(46,959	)		(44,200	)
Operating Assets Real Estate Affiliates revenues		—			—			(3,894	)		—
Total revenues — GAAP basis	$	50,823		$	30,629		$	103,924		$	59,419

The assets by segment and the reconciliation of total segment assets to the total assets in the consolidated balance sheets at June 30, 2011 and December 31, 2010 are summarized as follows:

	June 30,			December 31,
	2011			2010
	(In thousands)
Assets by segment
Master Planned Communities	$	1,936,334		$	1,823,399
Operating Assets		585,123			718,330
Strategic Developments		207,333			215,037
Total segment assets		2,728,790			2,756,766
Corporate and other		597,027			601,902
Less Real Estate Affiliates		(300,386	)		(335,961	)
Total assets	$	3,025,431		$	3,022,707