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 – 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.

Effective January 1, 2017, we moved the Seaport District NYC assets under construction and related activities to the Strategic Developments segment from the Operating Assets segment. Seaport District NYC operating properties and related operating results remain presented within the Operating Assets segment. The respective segment earnings and total segment assets presented in our financial statements and elsewhere in this Annual Report have been adjusted in all periods reported to reflect this change.

Segment operating results for the years ended December 31, 2017, 2016 and 2015 are as follows:


	Year Ended December 31,
(In thousands)	2017		2016		2015
Master Planned Communities
Land sales	$	248,595	$	215,318	$	187,399
Builder price participation		22,835		21,386		26,846
Minimum rents		(8)		384		797
Other land revenues		28,124		16,192		14,778
Other rental and property revenues		(3)		24		45
Total revenues		299,543		253,304		229,865

Cost of sales – land		121,116		95,727		88,065
Land sales operations		38,777		42,371		44,907
Provision for doubtful accounts		2		—		—
Depreciation and amortization		323		311		640
Other income, net		(3,500)		—		—
Interest income		(4)		(59)		(60)
Interest expense (*)		(24,288)		(21,026)		(18,053)
Equity in (earnings) loss in Real Estate and Other Affiliates		(23,234)		(43,501)		—
Total expenses		109,192		73,823		115,499
MPC segment EBT		190,351		179,481		114,366

Operating Assets
Minimum rents		182,468		172,437		149,064
Tenant recoveries		45,366		44,306		39,415
Hospitality revenues		76,020		62,252		45,374
Other rental and property revenues		23,701		16,170		25,453
Total revenues		327,555		295,165		259,306

Other property operating costs		71,748		60,506		68,078
Rental property real estate taxes		26,523		24,439		21,856
Rental property maintenance costs		12,872		12,033		10,236
Hospitality operating costs		56,362		49,359		34,839
Provision for doubtful accounts		2,710		5,601		3,998
Demolition costs		1,605		194		2,412
Provision for impairment		—		35,734		—
Development-related marketing costs		3,346		947		7,934
Depreciation and amortization		122,421		86,313		89,075
Other income, net		315		(4,601)		(524)
Interest income		(22)		(19)		(37)
Interest expense (*)		61,606		50,446		32,968
Equity in (earnings) loss in Real Estate and Other Affiliates		(3,267)		(2,802)		(1,883)
Total expenses		356,219		318,150		268,952
Operating Assets segment EBT		(28,664)		(22,985)		(9,646)

Strategic Developments
Minimum rents		565		447		899
Tenant recoveries		448		24		127
Condominium rights and unit sales		464,251		485,634		305,284
Other land revenues		42		40		25
Other rental and property revenues		7,716		391		1,582
Total revenues		473,022		486,536		307,917

Condominium rights and unit cost of sales		338,361		319,325		191,606
Other property operating costs		19,981		5,472		4,673
Rental property real estate taxes		2,662		2,408		2,282
Rental property maintenance costs		560		359		476
Provision for (recovery of) doubtful accounts		(2)		63		32
Demolition costs		318		2,018		885
Development-related marketing costs		17,158		21,237		17,532
Depreciation and amortization		1,210		2,744		3,240
Other income, net		(108)		(611)		104
Interest income		(187)		(500)		(202)
Interest expense (*)		(25,280)		(16,937)		(8,453)
Equity in (earnings) loss in Real Estate and Other Affiliates		550		(10,515)		(1,838)
Gains on sales of properties		(51,242)		(140,549)		—
Total expenses		303,981		184,514		210,337
Strategic Developments segment EBT		169,041		302,022		97,580
Total consolidated segment EBT	$	330,728	$	458,518	$	202,300

(*) 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 income before taxes	Year Ended December 31,
(In thousands)	2017		2016		2015
MPC segment EBT	$	190,351	$	179,481	$	114,366
Operating Assets segment EBT		(28,664)		(22,985)		(9,646)
Strategic Developments segment EBT		169,041		302,022		97,580
Total consolidated segment EBT		330,728		458,518		202,300
Corporate and other items:
General and administrative		(89,882)		(86,588)		(81,345)
Corporate interest expense, net		(48,700)		(52,460)		(52,995)
Warrant liability (loss) gain		(43,443)		(24,410)		58,320
Gain on acquisition of joint venture partner's interest		23,332		27,088		—
Gain (loss) on disposal of operating assets		3,868		(1,117)		29,073
Corporate Gains on sales of properties		125		—		—
Equity in earnings in Real Estate and Other Affiliates		(453)		—		—
Loss on redemption of senior notes due 2021		(46,410)		—		—
Corporate other (expense) income, net		(45)		6,241		1,409
Corporate depreciation and amortization		(8,298)		(6,496)		(6,042)
Total Corporate and other items		(209,906)		(137,742)		(51,580)
Income before taxes	$	120,822	$	320,776	$	150,720

The following reconciles segment revenues to GAAP consolidated revenues:


Reconciliation of Segment Basis Revenues to Revenues	Year Ended December 31,
(In thousands)	2017		2016		2015
Master Planned Communities	$	299,543	$	253,304	$	229,865
Operating Assets		327,555		295,165		259,306
Strategic Developments		473,022		486,536		307,917
Total revenues	$	1,100,120	$	1,035,005	$	797,088

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


	December 31,
(In thousands)	2017		2016
Master Planned Communities	$	1,999,090	$	1,982,639
Operating Assets		2,489,177		2,344,949
Strategic Developments		1,511,612		1,451,460
Total segment assets		5,999,879		5,779,048
Corporate and other		729,185		588,334
Total assets	$	6,729,064	$	6,367,382

The increase in the Operating Assets segment asset balance as of December 31, 2017 compared to 2016 is primarily due to placing One and Two Merriweather, HHC 242 and HHC 2978 Self-Storage in service as well as the acquisitions of our joint venture partners’ 50% interests in the Las Vegas 51s and Constellation, respectively, partially offset by the transfers of Landmark Mall, a portion of Ward Village Retail and our investment in 33 Peck Slip to Strategic Developments in 2017.

The increase in the Strategic Developments segment asset balance as of December 31, 2017 compared to December 31, 2016 relates to transfers of Landmark Mall and 33 Peck Slip into the segment along with increased development expenditures primarily in the Seaport District and at our Ward condominium projects under construction. Ongoing predevelopment activities at various other projects also contributed to the increase, partially offset by the partial sale of The Elk Grove Collection and placing various assets in service.

The increase in the Corporate and other asset balance as of December 31, 2017 compared to December 31, 2016 is primarily due to net proceeds received from the issuance of the 2025 Notes in March 2017.