NOTE 17 SEGMENTS

We have three business segments which offer different products and services. Our three segments are managed separately because each requires different operating strategies or management expertise and are reflective of management's operating philosophies and methods. In addition, our segments or assets within such segments could change in the future as development of certain properties commences or other operational or management changes occur. We do not distinguish or group our combined operations on a geographic basis. Furthermore, 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 ("MPCs") – 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.

•

Operating Assets – includes retail and office properties, a multi-family property, The Woodlands Resort and Conference Center, The Club at Carlton Woods and other real estate investments. These assets are currently generating revenues, and we believe there is an opportunity to redevelop or reposition many of these assets to improve operating performance.

•

Strategic Developments – includes all properties held for development and redevelopment which are not currently operating (primarily retail and other interests in real estate at such locations), and our one residential condominium project located in Natick (Boston), Massachusetts, in which the remaining units were sold during the first six months of 2012.

As more fully discussed in Note 4, on July 1, 2011, we acquired our partner's interest in The Woodlands. We now own 100% of The Woodlands and consolidate its operations. As such, The Woodlands operating results for historical periods when this investment was a Real Estate Affiliate are now analyzed internally on a non-GAAP consolidation basis by management in order to provide management comparability between periods for analyzing operating results.

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

REP EBT, as it relates to our business, is defined as net income (loss) excluding general and administrative expenses, corporate interest income, corporate interest and depreciation expense, provision (benefit) for income taxes, warrant liability gain (loss), the reduction in tax indemnity receivable, equity in earnings from Real Estate Affiliates, Investment in Real Estate Affiliate basis adjustment and reorganization items. We present REP 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) to calculate REP EBT is appropriate to provide additional information to investors.

Segment operating results are as follows:

	Year Ended December 31,

	2012			2011									2010
	Segment Basis			Consolidated Properties			Real Estate Affiliates			Segment Basis			Consolidated Properties			Real Estate Affiliates			Segment Basis
	(In thousands)
Master Planned Communities
Land sales	$	182,643		$	114,610		$	46,773		$	161,383		$	38,058		$	90,986		$	129,044
Builder price participation		5,747			3,816			1,108			4,924			4,124			2,777			6,901
Minimum rents		576			659			14			673			—			27			27
Other land revenues		18,073			13,133			3,924			17,057			6,332			8,827			15,159

Total revenues		207,039			132,218			51,819			184,037			48,514			102,617			151,131

Cost of sales – land		89,298			70,108			23,932			94,040			23,388			49,745			73,133
Land sales operations		32,817			24,533			7,432			31,965			17,153			20,829			37,982
Land sales real estate and business taxes		7,558			7,713			1,906			9,619			12,699			—			12,699
Other property operating costs		—			—			—			—			(1	)		—			(1	)
Provisions for impairment		—			—			—			—			405,331			—			405,331
Depreciation and amortization		72			2			46			48			17			111			128
Interest income		(45	)		(144	)		(364	)		(508	)		—			(824	)		(824	)
Interest expense (*)		(14,598	)		(11,920	)		2,132			(9,788	)		(14,127	)		7,857			(6,270	)

Total expenses		115,102			90,292			35,084			125,376			444,460			77,718			522,178

Venture partner share of The Woodlands EBT		—			—			(7,949	)		(7,949	)		—			(11,827	)		(11,827	)

MPC EBT		91,937			41,926			8,786			50,712			(395,946	)		13,072			(382,874	)

Operating Assets
Minimum rents		81,140			69,602			2,803			72,405			65,911			4,026			69,937
Tenant recoveries		23,210			19,193			1,061			20,254			18,220			1,484			19,704
Resort and conference center revenues		39,782			15,744			19,106			34,850			—			28,850			28,850
Other rental and property revenues		20,959			14,072			6,992			21,064			7,390			14,613			22,003

Total revenues		165,091			118,611			29,962			148,573			91,521			48,973			140,494

Rental property real estate taxes		11,292			9,666			972			10,638			9,962			2,185			12,147
Rental property maintenance costs		8,073			6,405			517			6,922			5,811			1,063			6,874
Resort and conference center operations		29,112			13,220			13,904			27,124			—			24,471			24,471
Other property operating costs		60,072			46,522			9,223			55,745			30,717			17,316			48,033
Provision for (recovery of) doubtful accounts		1,335			(98	)		(9	)		(107	)		1,607			154			1,761
Provisions for impairment		—			—			—			—			80,924			—			80,924
Depreciation and amortization		23,318			16,341			3,968			20,309			16,313			7,148			23,461
Interest income		(185	)		(125	)		(2	)		(127	)		(170	)		2			(168	)
Interest expense		16,289			10,586			2,316			12,902			16,515			836			17,351
Early extinguishment of debt		—			11,305			—			11,305			—			—			—
Equity in Earnings from Real Estate Affiliates		(3,683	)		—			(3,926	)		(3,926	)		—			338			338

Total expenses		145,623			113,822			26,963			140,785			161,679			53,513			215,192

Venture partner share of The Woodlands EBT		—			—			425			425			—			2,157			2,157

Operating Assets EBT		19,468			4,789			3,424			8,213			(70,158	)		(2,383	)		(72,541	)

Strategic Developments
Minimum rents		905			917			—			917			1,015			—			1,015
Tenant recoveries		141			130			—			130			347			—			347
Condominium unit sales		267			22,067			—			22,067			1,139			—			1,139
Other rental and property revenues		3,443			1,746			—			1,746			182			—			182

Total revenues		4,756			24,860			—			24,860			2,683			—			2,683

Condominium unit cost of sales		96			14,465			—			14,465			1,000			—			1,000
Condominium sales operations		131			1,401			—			1,401			252			—			252
Real estate taxes		2,351			604			—			604			3,756			—			3,756
Rental property maintenance costs		582			671			—			671			684			—			684
Other property operating costs		2,963			4,027			—			4,027			5,925			—			5,925
Provision for (recovery of) doubtful accounts		(111	)		(137	)		—			(137	)		175			—			175
Provisions for impairment		—			—			—			—			17,101			—			17,101
Depreciation and amortization		225			234			—			234			212			—			212
Interest expense		219			323			—			323			34			—			34

Total expenses		6,456			21,588			—			21,588			29,139			—			29,139

Strategic Developments EBT		(1,700	)		3,272			—			3,272			(26,456	)		—			(26,456	)

EBT	$	109,705		$	49,987		$	12,210		$	62,197		$	(492,560	)	$	10,689		$	(481,871	)

(*): Negative interest expense amounts relate to interest capitalized on debt assigned to our Operating Assets Segment for the years ended December 31, 2011 and 2011.

The following reconciles REP EBT to GAAP-basis income (loss):

Reconciliation of REP EBT to GAAP-net income (loss)	Year Ended December 31,

	2012			2011			2010
	(In thousands)
Real Estate Property EBT:
Segment basis	$	109,705		$	62,197		$	(481,871	)
Real Estate Affiliates		(3,683	)		(12,210	)		(10,689	)

Segment EBT		106,022			49,987			(492,560	)
General and administrative		(34,423	)		(32,342	)		(21,538	)
Corporate interest income, net		10,153			8,595			199
Warrant liability gain (loss)		(185,017	)		101,584			(140,900	)
Benefit (provision) for income taxes		(6,887	)		18,325			633,459
Reduction in tax indemnity receivable		(20,260	)		—			—
Equity in earnings from Real Estate Affiliates		3,683			8,578			9,413
Investment in Real Estate Affiliate basis adjustment		—			(6,053	)		—
Reorganization items		—			—			(57,282	)
Corporate depreciation		(814	)		(204	)		(21	)

Net income (loss)	$	(127,543	)	$	148,470		$	(69,230	)

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

Reconciliation of Segment Basis Revenues to GAAP Revenues	Year Ended December 31,

	2012		2011			2010
	(In thousands)
Master Planned Communities – Total Segment	$	207,039	$	184,037		$	151,131
Operating Assets – Total Segment		165,091		148,573			140,494
Strategic Developments – Total Segment		4,756		24,860			2,683

Total Segment revenues		376,886		357,470			294,308
Less: The Woodlands Partnerships revenues		—		(81,781	)		(151,590	)

Total revenues – GAAP basis	$	376,886	$	275,689		$	142,718

The assets by segment and the reconciliation of total segment assets to the total assets in the combined financial statements at December 31, 2012 and 2011 are summarized as follows:

	Year Ended December 31,

	2012		2011		2010
	(In thousands)
Master Planned Communities	$	1,756,625	$	1,780,596	$	1,765,487
Operating Assets		944,562		871,549		812,646
Strategic Developments		288,287		189,807		206,037

Total segment assets		2,989,474		2,841,952		2,784,170
Corporate and other		513,568		557,641		730,741
Real Estate Affiliates		—		—		(492,204	)

Total assets	$	3,503,042	$	3,399,593	$	3,022,707

The increase in the 2012 Strategic Development segment's asset balance of $98.5 million as compared to 2011, is primarily due to approximately $60.0 million of costs incurred related to our Woodlands development projects (approximately $18.0 million of these costs are due to a reclassification of land from our Master Planned Communities Segment) and the collection of approximately $19.6 million of pre-sale condominium deposits from our ONE Ala Moana project. The balance of the increase is due to costs incurred related to our other development projects.