NOTE 15 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 segment 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 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 have no substantial operations.

The assets included in each segment as of June 30, 2013, are contained in the following chart:

[See the EDGAR documents for referenced chart details.]

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 REP EBT provides useful information about the operating performance for 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 for income taxes, warrant liability gain (loss) and the reduction in tax indemnity receivable. 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:

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(In thousands)						(In thousands)
Master Planned Communities
Land sales	$	66,021		$	43,928		$	113,247		$	80,017
Builder price participation	2,426			1,528			3,701			2,341
Minimum rents	194			121			389			254
Other land revenues	3,830			3,531			6,632			7,016
Other rental and property revenues	—			19			—			35
Total revenues	72,471			49,127			123,969			89,663

Cost of sales - land	29,854			22,978			55,553			41,657
Land sales operations	8,359			8,269			15,312			17,173
Land sales real estate and business taxes	1,435			1,698			2,978			3,782
Depreciation and amortization	8			2			15			3
Interest income	(1		)	(61		)	(16		)	(130		)
Interest expense (*)	(3,646		)	(3,657		)	(9,606		)	(7,071		)
Total expenses	36,009			29,229			64,236			55,414
MPC EBT	36,462			19,898			59,733			34,249

Operating Assets
Minimum rents	19,756			20,222			38,267			38,744
Tenant recoveries	5,041			5,956			10,293			11,787
Resort and conference center revenues	11,270			11,970			22,374			21,626
Other rental and property revenues	6,612			6,240			10,045			10,965
Total revenues	42,679			44,388			80,979			83,122

Other property operating costs	16,552			14,594			31,517			28,421
Rental property real estate taxes	2,923			2,607			5,906			5,226
Rental property maintenance costs	2,032			1,885			3,688			3,725
Resort and conference center operations	7,680			7,371			15,156			14,785
Provision for doubtful accounts	277			174			706			149
Depreciation and amortization	6,398			5,672			12,516			10,529
Interest income	(44		)	(41		)	(90		)	(86		)
Interest expense	3,893			3,714			10,698			7,060
Equity in Earnings from Real Estate Affiliates	(363		)	(446		)	(3,096		)	(3,122		)
Total expenses	39,348			35,530			77,001			66,687
Operating Assets EBT	3,331			8,858			3,978			16,435

Strategic Developments
Minimum rents	184			234			404			476
Tenant recoveries	24			47			97			80
Condominium rights and unit sales	30,381			134			30,381			267
Other land revenues	—			—			—			32
Other rental and property revenues	1,313			9			1,313			62
Total revenues	31,902			424			32,195			917

Condominium rights and unit cost of sales	15,272			36			15,272			96
Condominium sales operations	—			13			—			71
Other property operating costs	782			441			1,337			952
Real estate taxes	436			564			1,210			1,783
Rental property maintenance costs	111			201			260			316
Provision for doubtful accounts	—			—			—			(104		)
Depreciation and amortization	48			59			91			117
Interest expense *	(675		)	180			(962		)	254
Equity in Earnings from Real Estate Affiliates	(5,344		)	—			(5,344		)	—
Total expenses	10,630			1,494			11,864			3,485
Strategic Developments EBT	21,272			(1,070		)	20,331			(2,568		)
REP EBT	$	61,065		$	27,686		$	84,042		$	48,116

(*) Negative interest expense amounts relate to interest capitalized on debt assigned to our Operating Assets Segments.

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

Reconciliation of REP EBT to GAAP-net	Three Months Ended June 30,						Six Months Ended June 30,
income (loss)	2013			2012			2013			2012
	(In thousands)						(In thousands)

REP EBT	$	61,065		$	27,686		$	84,042		$	48,116
General and administrative	(6,769		)	(8,160		)	(17,940		)	(16,557		)
Corporate interest income, net	1,594			2,277			4,304			4,499
Warrant liability gain (loss)	(111,200		)	23,430			(144,227		)	(98,421		)
Provision for income taxes	(13,361		)	(1,301		)	(15,840		)	(5,085		)
Reduction in tax indemnity receivable	(7,499		)	(8,782		)	(9,403		)	(8,782		)
Corporate depreciation	(326		)	(158		)	(602		)	(302		)
Net income (loss)	$	(76,496	)	$	34,992		$	(99,666	)	$	(76,532	)

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

Reconciliation of Segment Basis Revenues to	Three Months Ended June 30,				Six Months Ended June 30,
GAAP Revenues	2013		2012		2013		2012
	(In thousands)				(In thousands)

Master Planned Communities	$	72,471	$	49,127	$	123,969	$	89,663
Operating Assets	42,679		44,388		80,979		83,122
Strategic Developments	31,902		424		32,195		917
Total revenues	$	147,052	$	93,939	$	237,143	$	173,702

The assets by segment and the reconciliation of total segment assets to the total assets in the condensed consolidated balance sheets as of June 30, 2013 and December 31, 2012 are summarized as follows:

	June 30,		December 31,
	2013		2012
	(In thousands)
Master Planned Communities	$	1,816,675	$	1,756,625
Operating Assets *	1,069,209		944,562
Strategic Developments	265,284		288,287
Total segment assets	3,151,168		2,989,474
Corporate and other **	453,428		513,568
Total assets	$	3,604,596	$	3,503,042

* Certain assets included in our Operating Asset segments are in various stages of redevelopment and are included in Developments on our condensed consolidated balance sheets.

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

The increase in the Operating Assets segment’s asset balance as of June 30, 2013 of $125.0 million as compared to December 31, 2012 is primarily due to $50.8 million of total assets from 3 Waterway Square being reclassified from the Strategic Developments segment because it was placed in service. The decrease in the Corporate and other segment’s asset balance as of June 30, 2013 of $60.1 million as compared to December 31, 2012 is primarily due to increased real estate and property cash expenditures for our ongoing re-development and development projects within our Operating Assets and Strategic Developments segments.