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, office and industrial 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 or redevelopment which have no substantial operations.

The assets included in each segment as of September 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 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 increase (reduction) in tax indemnity receivable. We present REP EBT because we use this measure, among others, internally to assess the 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 September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(In thousands)						(In thousands)
Master Planned Communities
Land sales	$	53,734		$	40,218		$	166,981		$	120,235
Builder price participation	2,002			1,867			5,703			4,208
Minimum rents	196			130			585			384
Other land revenues	3,579			6,385			10,211			13,401
Other rental and property revenues	—			(7		)	—			28
Total revenues	59,511			48,593			183,480			138,256

Cost of sales - land	27,063			21,439			82,616			63,096
Land sales operations	7,393			8,209			22,705			25,382
Land sales real estate and business taxes	2,370			1,751			5,348			5,533
Depreciation and amortization	10			64			25			67
Interest income	—			(49		)	(16		)	(179		)
Interest expense (*)	(3,689		)	(3,638		)	(13,295		)	(10,709		)
Total expenses	33,147			27,776			97,383			83,190
MPC EBT	26,364			20,817			86,097			55,066

Operating Assets
Minimum rents	21,160			22,788			59,427			61,532
Tenant recoveries	5,254			6,030			15,547			17,817
Resort and conference center revenues	8,169			8,328			30,543			29,954
Other rental and property revenues	4,493			4,342			14,538			15,307
Total revenues	39,076			41,488			120,055			124,610

Other property operating costs	18,688			14,853			50,205			43,274
Rental property real estate taxes	3,148			2,934			9,054			8,160
Rental property maintenance costs	1,906			2,126			5,594			5,851
Resort and conference center operations	7,381			6,965			22,537			21,750
Provision for doubtful accounts	201			237			907			386
Depreciation and amortization	9,171			6,440			21,687			16,969
Interest income	(32		)	(48		)	(122		)	(134		)
Interest expense	4,017			4,313			14,715			11,373
Equity in Earnings from Real Estate Affiliates	(647		)	(310		)	(3,743		)	(3,432		)
Total expenses	43,833			37,510			120,834			104,197
Operating Assets EBT	(4,757		)	3,978			(779		)	20,413

Strategic Developments
Minimum rents	182			217			586			693
Tenant recoveries	38			35			135			115
Condominium rights and unit sales	810			—			31,191			267
Other land revenues	3,899			—			3,899			32
Other rental and property revenues	(2		)	4,482			1,311			4,544
Total revenues	4,927			4,734			37,122			5,651

Condominium rights and unit cost of sales	406			(24		)	15,678			143
Other property operating costs	3,940			2,080			5,277			3,032
Real estate taxes	549			640			1,759			2,423
Rental property maintenance costs	142			137			402			453
Provision for doubtful accounts	3			3			3			(101		)
Demolition costs	1,386			—			1,386			—
Depreciation and amortization	48			56			139			173
Interest expense *	(401		)	(193		)	(1,363		)	61
Equity in Earnings from Real Estate Affiliates	(2,947		)	—			(8,291		)	—
Total expenses	3,126			2,699			14,990			6,184
Strategic Developments EBT	1,801			2,035			22,132			(533		)

REP EBT	$	23,408		$	26,830		$	107,450		$	74,946

(*) 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 September 30,						Nine Months Ended September 30,
income (loss)	2013			2012			2013			2012
	(In thousands)

REP EBT	$	23,408		$	26,830		$	107,450		$	74,946
General and administrative	(11,914		)	(11,464		)	(34,310		)	(28,021		)
Corporate interest income, net	1,955			2,315			6,259			6,814
Warrant liability loss	(4,479		)	(64,303		)	(148,706		)	(162,724		)
Provision for income taxes	(5,172		)	(2,618		)	(21,012		)	(7,703		)
Increase (reduction) in tax indemnity receivable	730			(2,873		)	(8,673		)	(11,655		)
Other income	3,662			2,125			8,118			2,125
Corporate depreciation	(757		)	(204		)	(1,359		)	(506		)
Net income (loss)	$	7,433		$	(50,192	)	$	(92,233	)	$	(126,724	)

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

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

Master Planned Communities	$	59,511	$	48,593	$	183,480	$	138,256
Operating Assets		39,076		41,488		120,055		124,610
Strategic Developments		4,927		4,734		37,122		5,651
Total revenues	$	103,514	$	94,815	$	340,657	$	268,517

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

	September 30,		December 31,
	2013		2012
	(In thousands )
Master Planned Communities	$	1,792,635	$	1,756,625
Operating Assets (a)	1,130,601		944,562
Strategic Developments	296,295		288,287
Total segment assets	3,219,531		2,989,474
Corporate and other (b)	499,699		513,568
Total assets	$	3,719,230	$	3,503,042

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

(b) 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 September 30, 2013 of $186.0 million as compared to December 31, 2012 is primarily due to $61.8 million of total assets from 3 Waterway Square and $37.8 million of total assets from One Hughes Landing being reclassified from the Strategic Developments segment because they were placed in service. We also invested approximately $85.6 million related to development activities in our Operating Assets segment.