SEGMENTS

12 Months Ended

Dec. 31, 2013

SEGMENTS

SEGMENTS

NOTE 18 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 & 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 or redevelopment which have no substantial operations.

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. We believe that REP EBT provides useful information about the operating performance of all of our properties.

REP EBT, as it relates to our business, is defined as net income (loss) excluding general and administrative expenses, other income, 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, and Investment in Real Estate Affiliate basis adjustment. 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,
	2013			2012			2011
	Segment Basis			Segment Basis			Consolidated Properties			Real Estate Affiliates			Segment Basis
	(In thousands)
Master Planned Communities
Land sales	$	251,217		$	182,643		$	114,610		$	46,773		$	161,383
Builder price participation		9,356			5,747			3,816			1,108			4,924
Minimum rents		781			576			659			14			673
Other land revenues		13,416			18,073			13,133			3,924			17,057
Total revenues		274,770			207,039			132,218			51,819			184,037
Cost of sales – land		124,040			89,298			70,108			23,932			94,040
Land sales operations		30,826			32,817			24,533			7,432			31,965
Land sales real estate and business taxes		7,588			7,558			7,713			1,906			9,619
Depreciation and amortization		32			72			2			46			48
Interest income		(16	)		(45	)		(144	)		(364	)		(508	)
Interest expense (*)		(18,678	)		(14,598	)		(11,920	)		2,132			(9,788	)
Total expenses		143,792			115,102			90,292			35,084			125,376
Venture partner share of The Woodlands EBT		—			—			—			(7,949	)		(7,949	)
MPC EBT		130,978			91,937			41,926			8,786			50,712
Operating Assets
Minimum rents		80,124			81,140			69,602			2,803			72,405
Tenant recoveries		20,901			23,210			19,193			1,061			20,254
Resort and conference center revenues		39,201			39,782			15,744			19,106			34,850
Other rental and property revenues		20,360			20,959			14,072			6,992			21,064
Total revenues		160,586			165,091			118,611			29,962			148,573
Other property operating costs		64,608			60,072			46,522			9,223			55,745
Rental property real estate taxes		12,065			11,292			9,666			972			10,638
Rental property maintenance costs		7,552			8,073			6,405			517			6,922
Resort and conference center operations		29,454			29,112			13,220			13,904			27,124
Provision for (recovery of) doubtful accounts		835			1,335			(98	)		(9	)		(107	)
Demolition costs		2,078			—			—			—			—
Depreciation and amortization		31,427			23,318			16,341			3,968			20,309
Interest income		(135	)		(185	)		(125	)		(2	)		(127	)
Interest expense		19,146			16,289			10,586			2,316			12,902
Early extinguishment of debt		—			—			11,305			—			11,305
Equity in Earnings from Real Estate Affiliates		(3,893	)		(3,683	)		—			(3,926	)		(3,926	)
Total expenses		163,137			145,623			113,822			26,963			140,785
Venture partner share of The Woodlands EBT		—			—			—			425			425
Operating Assets EBT		(2,551	)		19,468			4,789			3,424			8,213
Strategic Developments
Minimum rents		763			905			917			—			917
Tenant recoveries		167			141			130			—			130
Condominium rights and unit sales		32,969			267			22,067			—			22,067
Other land revenues		3,899			—			—			—			—
Other rental and property revenues		1,456			3,443			1,746			—			1,746
Total revenues		39,254			4,756			24,860			—			24,860
Condominium rights and unit cost of sales		16,572			96			14,465			—			14,465
Other property operating costs		8,578			3,094			5,428			—			5,428
Real estate taxes		2,226			2,351			604			—			604
Rental property maintenance costs		531			582			671			—			671
Provision for (recovery of) doubtful accounts		1			(111	)		(137	)		—			(137	)
Depreciation and amortization		189			225			234			—			234
Interest expense (*)		(4,318	)		219			323			—			323
Equity in Earnings from Real Estate Affiliates		(10,535	)		—			—			—			—
Total expenses		13,244			6,456			21,588			—			21,588
Strategic Developments EBT		26,010			(1,700	)		3,272			—			3,272
REP EBT	$	154,437		$	109,705		$	49,987		$	12,210		$	62,197

(*)

Negative interest expense amounts relate to interest capitalized on debt assigned to our Operating Assets Segment and Corporate for the years ended December 31, 2013, 2012 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,
	2013			2012			2011
	(In thousands)
Real Estate Property EBT:
Segment basis	$	154,437		$	109,705		$	62,197
Real Estate Affiliates		(14,428	)		(3,683	)		(12,210	)
REP EBT		140,009			106,022			49,987
General and administrative		(48,466	)		(36,548	)		(32,342	)
Corporate interest income, net		(10,575	)		10,153			8,595
Warrant liability gain (loss)		(181,987	)		(185,017	)		101,584
Benefit (provision) for income taxes		(9,570	)		(6,887	)		18,325
Reduction in tax indemnity receivable		(1,206	)		(20,260	)		—
Equity in earnings from Real Estate Affiliates		14,428			3,683			8,578
Investment in Real Estate Affiliate basis adjustment		—			—			(6,053	)
Other income		25,869			2,125			—
Corporate depreciation		(2,197	)		(814	)		(204	)
Net income (loss)	$	(73,695	)	$	(127,543	)	$	148,470

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

Reconciliation of Segment Basis Revenues to GAAP Revenues	Year Ended December 31,
	2013		2012		2011
	(In thousands)
Master Planned Communities	$	274,770	$	207,039	$	184,037
Operating Assets		160,586		165,091		148,573
Strategic Developments		39,254		4,756		24,860
Total revenues		474,610		376,886		357,470
Less: The Woodlands Partnerships revenues		—		—		(81,781	)
Total revenues – GAAP basis	$	474,610	$	376,886	$	275,689

The assets by segment and the reconciliation of total segment assets to the total assets in the Consolidated Balance Sheets are summarized as follows:

	Year Ended December 31,
	2013		2012		2011
	(In thousands)
Master Planned Communities	$	1,760,639	$	1,756,625	$	1,780,596
Operating Assets (a)		1,344,005		944,562		871,549
Strategic Developments		462,525		288,287		189,807
Total segment assets		3,567,169		2,989,474		2,841,952
Corporate and other (b)		1,000,699		513,568		557,641
Total assets	$	4,567,868	$	3,503,042	$	3,399,593

(a)

Certain assets included in our Operating Asset segment are in various stages of redevelopment and are included in Developments on our Consolidated Balance Sheets.

(b)

Assets included in Corporate and other consist primarily of the Tax Indemnity receivable, including interest, and Cash and cash equivalents.

Capital expenditures in 2013 for the strategic developments, operating assets and corporate were $221.1 million, $22.2 million and $26.8 million, respectively. Capital expenditures in 2012 for the strategic developments, operating assets and corporate were $58.9 million, $14.2 million and $1.3 million, respectively. Capital expenditures in 2011 for the strategic developments, operating assets and corporate were $35.2 million, $8.5 million and $0.7 million, respectively.