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 & 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 March 31, 2014, are contained in the following chart:

Master Planned	Operating Assets		Strategic Developments
Communities

	Retail	Office / Other	Under Construction
· Bridgeland	· Cottonwood Square	· Arizona 2 Lease *	· Creekside Village Green	· Alameda Plaza
· Maryland Communities	· Landmark Mall	· 70 Columbia Corporate Center	· ExxonMobil Build-to-Suit	· AllenTowne
· Summerlin	· Park West	· Columbia Office Properties ****	· Hughes Landing Retail	· Bridges at Mint Hill
· The Woodlands	· Outlet Collection at Riverwalk	· Golf Courses at Summerlin	· Millennium Woodlands Phase II, LLC **	· Century Plaza Mall
	· South Street Seaport	and TPC Las Vegas (participation interest)	· ONE Ala Moana ***	· Circle T Ranch and Power Center **
	· Ward Village	· 2201 Lake Woodlands Drive	· One Lake’s Edge	· Cottonwood Mall
	· 20/25 Waterway Avenue	· Millennium Waterway Apartments	· The Metropolitan Downtown	· Elk Grove Promenade
	· Waterway Garage Retail	· 9303 New Trails Office	Columbia Project **	· 80% Interest in Fashion
		· 110 N Wacker	· 3831 Technology Forest Drive	Show Air Rights
		· One Hughes Landing	· The Shops at Summerlin	· Kendall Town Center
		· Stewart Title of Montgomery County, TX **	· Two Hughes Landing	· Lakemoor (Volo) Land
		· Summerlin Hospital Medical Center **		· Maui Ranch Land
		· Summerlin Las Vegas Baseball Club **		· Parcel C **
		· The Club at Carlton Woods		· Redlands Mall
		· The Woodlands Resort &		· Summerlin Apartments, LLC **
		Conference Center (under construction)		· West Windsor
		· Woodlands Sarofim #1 **
		· 1400 Woodloch Forest
		· Waterway Square Garage
		· 3 Waterway Square Office
		· 4 Waterway Square Office

*	Notes receivable.
**	An equity or cost method investment.
***	Asset consists of two equity method investments.
****	Includes the Columbia Regional Building which is under construction.

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, other income, corporate interest income, corporate interest and depreciation expense, provision for income taxes, warrant liability loss and the 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 March 31,
	2014			2013
	(In thousands)
Master Planned Communities
Land sales	$	47,671		$	47,226
Builder price participation	4,097			1,275
Minimum rents	197			195
Other land revenues	2,504			2,802
Other rental and property revenues	67			—
Total revenues	54,536			51,498

Cost of sales - land	23,078			25,699
Land sales operations	7,304			6,953
Land sales real estate and business taxes	1,954			1,543
Depreciation and amortization	100			7
Interest income	(57		)	(15		)
Interest expense (*)	(5,066		)	(5,960		)
Total expenses	27,313			28,227
MPC EBT	27,223			23,271

Operating Assets
Minimum rents	19,900			18,511
Tenant recoveries	5,884			5,252
Resort and conference center revenues	9,426			11,104
Other rental and property revenues	5,110			3,433
Total revenues	40,320			38,300

Other property operating costs	15,260			14,965
Rental property real estate taxes	3,107			2,983
Rental property maintenance costs	1,800			1,656
Resort and conference center operations	7,511			7,476
Provision for doubtful accounts	143			429
Demolition costs	2,494			—
Depreciation and amortization	9,010			6,118
Interest income	(119		)	(46		)
Interest expense	2,044			6,805
Equity in Earnings from Real Estate and Other Affiliates	(1,805		)	(2,733		)
Total expenses	39,445			37,653
Operating Assets EBT	875			647

Strategic Developments
Minimum rents	263			220
Tenant recoveries	131			73
Condominium rights and unit sales	3,126			—
Other land revenues	8			—
Other rental and property revenues	269			—
Total revenues	3,797			293

Condominium rights and unit cost of sales	1,571			—
Other property operating costs	2,771			555
Real estate taxes	633			774
Rental property maintenance costs	115			149
Provision for doubtful accounts	—			—
Demolition costs	22			—
Depreciation and amortization	424			43
Other income	(2,373		)	—
Interest expense (*)	(2,649		)	(287		)
Equity in Earnings from Real Estate and Other Affiliates	(4,263		)	—
Total expenses	(3,749		)	1,234
Strategic Developments EBT	7,546			(941		)
REP EBT	$	35,644		$	22,977

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

Reconciliation of REP EBT to GAAP-net	Three Months Ended March 31,
income (loss)	2014			2013
	(In thousands)

REP EBT	$	35,644		$	22,977
General and administrative	(16,882		)	(11,171		)
Corporate interest (expense)/income, net	(10,980		)	2,710
Warrant liability loss	(96,440		)	(33,027		)
Provision for income taxes	(4,773		)	(2,479		)
Reduction in tax indemnity receivable	—			(1,904		)
Other income	8,075			—
Corporate depreciation	(975		)	(276		)
Net loss	$	(86,331	)	$	(23,170	)

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

Reconciliation of Segment Basis Revenues to	Three Months Ended March 31,
GAAP Revenues	2014		2013
	(In thousands)

Master Planned Communities	$	54,536	$	51,498
Operating Assets	40,320		38,300
Strategic Developments	3,797		293
Total revenues	$	98,653	$	90,091

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:

	March 31,		December 31,
	2014		2013
	(In thousands)
Master Planned Communities	$	1,749,030	$	1,760,639
Operating Assets (a)	1,170,079		1,158,337
Strategic Developments	658,317		462,525
Total segment assets	3,577,426		3,381,501
Corporate and other (b)	1,122,315		1,186,367
Total assets	$	4,699,741	$	4,567,868

(a) Certain assets included in our Operating Assets 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 Cash and cash equivalents and the Tax Indemnity receivable, including accrued interest.

A portion of the tax indemnification asset in the amount of $185.7 million was incorrectly included in the Operating Assets segment at December 31, 2013 rather than the Corporate segment. The amounts in the table above at December 31, 2013 have been corrected to appropriately include the entire tax indemnification asset of $320.5 million in the Corporate segment.

The increase in the Strategic Developments segment’s asset balance as of March 31, 2014 of $195.8 million compared to December 31, 2013 is primarily due to $37.8 million of deposits collected on the sale of condominium units for both our market rate towers at Ward Village, $18.0 million in buildings and equipment from the completion of the transformation of the IBM building at Ward Village into an information center and sales gallery and development and other costs of $72.8 million for The Shops at Summerlin, $10.0 million for Hughes Landing multi-family and $16.7 million for Ward Village.