REAL ESTATE AND OTHER AFFILIATES

The Company's investments in Real Estate and Other Affiliates that are reported in accordance with the equity and cost methods are as follows:



	Economic/Legal Ownership				Carrying Value				Share of Earnings/Dividends
	March 31,		December 31,		March 31,		December 31,		Three Months Ended March 31,
($ in thousands)	2018		2017		2018		2017		2018			2017
Equity Method Investments
Master Planned Communities:
The Summit (a)	—	%	—	%	$	57,015	$	45,886	$	11,128		$	5,280
Operating Assets:
Las Vegas 51s, LLC (b)	100	%	100	%	—		—		—			(152		)
Constellation (b)	100	%	100	%	—		—		—			64
The Metropolitan Downtown Columbia (c)	50	%	50	%	—		—		80			57
Stewart Title of Montgomery County, TX	50	%	50	%	3,579		3,673		82			26
Woodlands Sarofim #1	20	%	20	%	2,697		2,696		20			7
m.flats/TEN.M (d)	50	%	50	%	5,648		6,521		(937		)	—
Strategic Developments:
Circle T Ranch and Power Center	50	%	50	%	4,456		4,455		—			—
HHMK Development	50	%	50	%	10		10		—			—
KR Holdings	50	%	50	%	—		749		672			11
33 Peck Slip	35	%	35	%	8,651		8,651		—			(156		)
					82,056		72,641		11,045			5,137
Cost method investments					3,855		3,952		3,341			3,383
Investment in Real Estate and Other Affiliates					$	85,911	$	76,593	$	14,386		$	8,520


(a)	Please refer to the schedules below and elsewhere in this Quarterly Report for relevant financial statement information.


(b)	HHC acquired this joint venture partner’s interest in 2017 and has fully consolidated the assets and liabilities of the entity.


(c)	The Metropolitan Downtown Columbia was in a deficit position of $3.1 million and $2.6 million at March 31, 2018 and December 31, 2017, respectively, due to distributions from operating cash flows in excess of basis. This deficit balance is presented in Accounts payable and accrued expenses at March 31, 2018 and December 31, 2017.


(d)	Property was transferred from Strategic Developments to Operating Assets during the three months ended March 31, 2018.

As of March 31, 2018, HHC is not the primary beneficiary of any of the joint ventures listed above because it does not have the power to direct activities that most significantly impact the economic performance of the joint ventures, and therefore, the Company reports its interests in accordance with the equity method. As of March 31, 2018, approximately $187.6 million of indebtedness was secured by the properties owned by HHC's Real Estate and Other Affiliates of which HHC's share was approximately $86.8 million based upon economic ownership. All of this indebtedness is without recourse to HHC.

HHC is the primary beneficiary of three variable interest entities ("VIEs") which are consolidated in the financial statements. The creditors of the consolidated VIEs do not have recourse to the Company. As of March 31, 2018, the carrying values of the assets and liabilities associated with the operations of the consolidated VIEs were $22.8 million and $1.2 million, respectively. As of December 31, 2017, the carrying values of the assets and liabilities associated with the operations of the consolidated VIEs were $24.8 million and $2.7 million, respectively. The assets of the VIEs are restricted for use only by the particular VIEs and are not available for the Company's general operations.

During the first quarter of 2015, HHC formed DLV/HHPI Summerlin, LLC (“The Summit”), a joint venture with Discovery Land Company (“Discovery”), contributed land with a book basis of $13.4 million and transferred Special Improvement District ("SID") bonds related to such land with a carrying value of $1.3 million to the joint venture at the agreed upon capital contribution value of $125.4 million, or $226,000 per acre. Discovery is required to fund up to a maximum of $30.0 million of cash as its capital contribution, and the Company has no further capital obligations. The gains on the contributed land will be recognized in Equity in earnings from Real Estate and Other Affiliates as the joint venture sells lots.

After the Company receives its capital contribution of $125.4 million and a 5.0% preferred return on such capital contribution, Discovery is entitled to cash distributions by the joint venture until it has received two times its equity contribution. Any further cash distributions are shared equally. Given the nature of the venture’s capital structure and the provisions for the liquidation of assets, the Company's share of the venture’s income-producing activities is recognized based on the Hypothetical Liquidation Book Value ("HLBV") method. Under this method, HHC recognizes income or loss based on the change in its underlying share of the venture's net assets on a hypothetical liquidation basis as of the reporting date.

Relevant financial statement information for The Summit is summarized as follows:



	March 31,		December 31,
(In millions)	2018		2017
Total Assets	$	189.8	$	166.9
Total Liabilities	131.9		118.9
Total Equity	57.9		48.0



	Three Months Ended March 31,
(In millions)	2018		2017
Revenues (a)	$	23.4	$	11.5
Net income	11.1		5.3
Gross Margin	13.3		6.5


(a)	Revenues related to land sales at the joint venture are recognized on a percentage of completion basis as The Summit follows the private company timeline for implementation of the New Revenue Standard of January 1, 2019. The Company has evaluated this impact and concluded that it is not material to HHC's consolidated financial statements.