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. 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, hospitality and multi-family properties along with other real estate investments. These assets are currently generating revenues, and are comprised of commercial real estate properties recently developed or acquired by us, and properties where we believe there is an opportunity to redevelop, reposition, or sell to improve segment performance or to recycle capital.

Strategic Developments – includes our residential condominium and commercial property projects currently under development and all other properties held for development which have no substantial operations.

Our segments are managed separately, therefore, we use different operating measures 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 Earnings Before Taxes (“EBT”), which represents the operating revenues of the properties less property operating expenses and adjustments for interest, as further described below. We believe that EBT provides useful information about the operating performance of all of our properties.

EBT, as it relates to each business segment, represents the revenues less expenses of each segment, including interest income, interest expense, and equity in earnings of real estate and other affiliates. EBT excludes corporate expenses and other items that are not allocable to the segments. We present 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 obtain financing. We believe that the inclusion of certain adjustments to net income (loss) to calculate EBT is appropriate to provide additional information to investors.

Segment operating results are as follows:


	Year Ended December 31,
(In thousands)	2016		2015		2014
Master Planned Communities
Land sales	$	215,318	$	187,399	$	325,099
Builder price participation		21,386		26,846		20,908
Minimum rents		384		842		818
Other land revenues		16,192		14,778		16,470
Other rental and property revenues		24		—		—
Total revenues		253,304		229,865		363,295

Cost of sales – land		95,727		88,065		119,672
Land sales operations		42,371		44,907		41,794
Provision for (recovery of) doubtful accounts		—		—		(11)
Depreciation and amortization		311		640		397
Interest income		(59)		(60)		(118)
Interest expense (*)		(21,026)		(18,053)		(19,620)
Equity in earnings in Real Estate and Other Affiliates		(43,501)		—		—
Total expenses		73,823		115,499		142,114
MPC segment EBT		179,481		114,366		221,181

Operating Assets
Minimum rents		172,437		149,064		95,807
Tenant recoveries		44,306		39,415		28,133
Hospitality revenues		62,252		45,374		37,921
Other rental and property revenues		16,170		25,453		24,429
Total revenues		295,165		259,306		186,290

Other property operating costs		60,541		68,078		62,752
Real estate taxes		24,439		21,856		14,860
Rental property maintenance costs		12,033		10,236		8,592
Hospitality operating costs		49,359		34,839		31,829
Provision for doubtful accounts		5,601		3,998		1,399
Demolition costs		1,123		2,675		6,712
Provision for impairment		35,734		—		—
Development-related marketing costs		7,110		9,747		9,770
Depreciation and amortization		86,313		89,075		49,272
Other income, net		(4,601)		(524)		—
Interest income		(19)		(37)		(151)
Interest expense (*)		39,466		31,148		17,081
Equity in earnings from Real Estate and Other Affiliates		(2,802)		(1,883)		(2,025)
Total expenses		314,297		269,208		200,091
Operating Assets segment EBT		(19,132)		(9,902)		(13,801)

Strategic Developments
Minimum rents		447		899		609
Tenant recoveries		24		127		220
Condominium rights and unit sales		485,634		305,284		83,565
Other land revenues		40		25		33
Other rental and property revenues		391		1,582		553
Total revenues		486,536		307,917		84,980

Condominium rights and unit cost of sales		319,325		191,606		49,995
Other property operating costs		5,437		4,673		4,282
Real estate taxes		2,408		2,282		2,547
Rental property maintenance costs		359		476		543
Provision for doubtful accounts		63		32		16
Demolition costs		1,089		622		22
Development-related marketing costs		15,074		15,719		13,013
Depreciation and amortization		2,744		3,240		1,706
Other income, net		(611)		104		(2,373)
Interest income		(500)		(202)		—
Interest expense (*)		(5,957)		(6,633)		(11,918)
Equity in earnings from Real Estate and Other Affiliates		(10,515)		(1,838)		(21,311)
Gain on sale of 80 South Street Assemblage		(140,549)		—		—
Total expenses		188,367		210,081		36,522
Strategic Developments segment EBT		298,169		97,836		48,458
Total consolidated segment EBT	$	458,518	$	202,300	$	255,838

(*) Negative interest expense amounts are due to interest capitalized in our MPC and Strategic Developments segments related to Operating Assets segment debt and the Senior Notes.

The following reconciles EBT to GAAP income (loss) before taxes:


Reconciliation of EBT to GAAP income (loss) before taxes	Year Ended December 31,
(In thousands)	2016		2015		2014
Total consolidated segment EBT	$	458,518	$	202,300	$	255,838
Corporate and other items:
General and administrative		(86,588)		(81,345)		(73,569)
Corporate interest expense, net		(52,460)		(52,995)		(30,819)
Warrant liability (loss) gain		(24,410)		58,320		(60,520)
Gain on acquisition of joint venture partner's interest		27,088		—		—
Increase (reduction) in tax indemnity receivable		—		—		90
Loss on settlement of tax indemnity receivable		—		—		(74,095)
(Loss) gain on disposal of operating assets		(1,117)		29,073		—
Corporate other income, net		6,241		1,409		27,098
Corporate depreciation and amortization		(6,496)		(6,042)		(4,583)
Total Corporate and other items		(137,742)		(51,580)		(216,398)
Income before taxes	$	320,776	$	150,720	$	39,440

The following reconciles segment revenues to GAAP consolidated revenues:


Reconciliation of Segment Basis Revenues to GAAP Revenues	Year Ended December 31,
(In thousands)	2016		2015		2014
Master Planned Communities	$	253,304	$	229,865	$	363,295
Operating Assets		295,165		259,306		186,290
Strategic Developments		486,536		307,917		84,980
Total revenues	$	1,035,005	$	797,088	$	634,565

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,
(In thousands)	2016		2015
Master Planned Communities	$	1,982,639	$	2,022,524
Operating Assets		2,624,505		2,365,724
Strategic Developments		1,171,904		1,138,695
Total segment assets		5,779,048		5,526,943
Corporate and other		588,334		194,639
Total assets	$	6,367,382	$	5,721,582

The $39.9 million decrease in the MPC segment asset balance as of December 31, 2016 compared to 2015 is primarily due to decreased cash held at The Woodlands MPC.

The increase in the Operating Assets segment asset balance as of December 31, 2016 of $258.8 million compared to 2015 is primarily due to placing the Fulton Market Building at the South Street Seaport, The Westin at The Woodlands, and 1725-1735 Hughes Landing Boulevard in service and acquiring Millennium Six Pines Apartments and One Mall North offset with the sale of Park West.

The $33.2 million increase in the Strategic Developments segment asset balance as of December 31, 2016 compared to December 31, 2015 relates to the acquisition of the American City Building; additional development spending at our Ward Village condominium projects, Ae'o, Anaha, Waiea and Ke Kilohana (net of amounts charged to Cost of sales); our new Columbia office towers developments, One and Two Merriweather; and our self storage facility developments. Other ongoing predevelopment activities at various other projects also contributed to the increase, partially offset by the sale of 80 South Street and placing various assets in service.

The $393.7 million increase in the Corporate and other asset balance as of December 31, 2016 compared to December 31, 2015 is primarily due to the proceeds from the 80 South Street sale in March 2016. The asset was reported in the Strategic Developments segment at December 31, 2015, and the cash proceeds from the sale are reported in Corporate and other as of December 31, 2016.