Real Estate

Real estate consists of:



	Year-End 2015							Year-End 2014
	Carrying Value		Accumulated Depreciation			Net Carrying Value		Carrying Value		Accumulated Depreciation			Net Carrying Value
	(In thousands)
Entitled, developed and under development projects	$	352,141	$	—		$	352,141	$	321,273	$	—		$	321,273
Undeveloped land (includes land in entitlement)	98,181		—			98,181		93,182		—			93,182
Commercial
Radisson Hotel & Suites	62,889		(29,268		)	33,621		59,773		(29,062		)	30,711
Harbor Lakes golf course and country club ^(a)	—		—			—		2,054		(1,508		)	546
Income producing properties
Eleven	53,896		(2,861		)	51,035		53,958		(576		)	53,382
Midtown ^(a)	—		—			—		33,293		(231		)	33,062
Dillon	19,987		—			19,987		15,203		—			15,203
Music Row	9,947		—			9,947		7,675		—			7,675
Downtown Edge	12,706		—			12,706		11,856		—			11,856
West Austin	9,097		—			9,097		8,866		—			8,866
	$	618,844	$	(32,129	)	$	586,715	$	607,133	$	(31,377	)	$	575,756

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^(a)	Sold in 2015.

Our estimated cost of assets for which we expect to be reimbursed by utility and improvement districts were $67,554,000 at year-end 2015 and $65,212,000 at year-end 2014, including $22,302,000 at year-end 2015 and $31,913,000 at year-end 2014 related to our Cibolo Canyons project near San Antonio. In 2015, we collected $14,751,000 in reimbursements that were previously submitted to these districts. At year-end 2015, our inception to-date submitted and approved reimbursements for the Cibolo Canyons project were $54,376,000, of which we have collected $34,703,000. These costs are principally for water, sewer and other infrastructure assets that we have incurred and submitted or will submit to utility or improvement districts for approval and reimbursement. We expect to be reimbursed by utility and improvement districts when these districts achieve adequate tax basis or otherwise have funds available to support payment.

In 2014, we received $50,550,000 from Cibolo Canyons special improvement district (CCSID) under 2007 economic development agreements (EDA) related to development of the JW Marriott^® Hill Country Resort & Spa (Resort) at our Cibolo Canyons project near San Antonio, of which $46,500,000 was related to CCSID's issuance of $48,900,000 Hotel Occupancy Tax (HOT) and Sales and Use Tax Revenue Bonds. These bonds are obligations solely of CCSID and are payable from HOT and sales and use taxes levied on the Resort by CCSID. To facilitate the issuance of the bonds, we provided a $6,846,000 letter of credit to the bond trustee as security for certain debt service fund obligations in the event CCSID tax collections are not sufficient to support payment of the bonds in accordance with their terms. The letter of credit must be maintained until the earlier of redemption of the bonds or scheduled bond maturity in 2034. We also entered into an agreement with San Antonio Real Estate (SARE), owner of the Resort, to assign SARE’s senior rights under the EDA to us in exchange for consideration provided by us, including a surety bond to be drawn if CCSID tax collections are not sufficient to support ad valorem tax rebates payable to SARE. The surety bond will decrease and gain will be recognized as CCSID makes annual ad valorem tax rebate payments to SARE, which obligation is scheduled to be retired in full by 2020. All future receipts are expected to be recognized as gain in the period collected. We recorded gains of $1,160,000 associated with reduction of surety bond and $425,000 associated with collections from CCSID in 2015. In 2014, we recognized a gain of $6,577,000 associated with bond proceeds after recovery of our full resort investment of $24,067,000, which was included in entitled, developed and under development projects. The surety bond has a balance of $7,850,000 at year-end 2015.

In 2015, we sold Midtown Cedar Hill, a 354-unit multifamily property we developed in Cedar, Hill, Texas for $42,880,000, generating segment earnings of $9,265,000 and $18,473,000 in net proceeds after repaying $24,166,000 in outstanding debt.

In 2014, we acquired full ownership in CJUF III, RH Holdings LP partnership (the Eleven venture), owner of a 257-unit multifamily project in Austin in which we previously held a 25 percent interest, for $21,500,000. The acquisition-date fair value was $55,275,000, including debt of $23,936,000. Our investment in the Eleven venture prior to acquiring our partner’s interest was $2,229,000. We accounted for this transaction as a business combination achieved in stages and as a result, we remeasured our equity method investment in the Eleven venture to its acquisition-date fair value of $9,839,000 and recognized the resulting gain of $7,610,000 in real estate segment earnings. At acquisition, we recorded additions to commercial and income producing properties of $53,917,000 and other assets of $992,000 primarily consisting of the estimated fair value of in-place tenant leases of $865,000. In addition, we recorded a working capital deficit of $979,000 and debt of $23,936,000.

As a general contractor on guaranteed maximum price contracts associated with two multifamily venture properties, we recognized charges of $1,543,000 in 2015, $5,111,000 in 2014 and $554,000 in 2013 related to cost overruns.

Depreciation expense related to commercial and income producing properties was $6,810,000 in 2015, $3,319,000 in 2014 and $2,507,000 in 2013 and is included in other operating expense.