NOTE 4. LAND AND SUBSURFACE INTERESTS

During the three months ended March 31, 2016, a total of approximately 7.46 acres of land was sold for approximately $2.2 million as described below:

On February 12, 2016, the Company sold approximately 3.06 acres of land located in Daytona Beach, Florida at a sales price of $190,000, or approximately $62,000 per acre, for a gain of approximately $145,000.

On March 30, 2016, the Company sold approximately 4.40 acres of land located within the 235-acre Tomoka Town Center located in Daytona Beach, Florida east of Interstate 95 and south of LPGA Boulevard (the “Town Center”) at a sales price of approximately $2.0 million, or approximately $455,000 per acre, for a gain of approximately $1.25 million recognized at closing, with the remaining estimated gain of approximately $683,000 to be recognized as related infrastructure work is completed.

NOTE 4. LAND AND SUBSURFACE INTERESTS (continued)

In addition, the gain recognized on the percentage-of-completion basis for the sales within the Town Center, of which approximately 180 of the total 235 acres are developable, is described below. The Town Center infrastructure work was approximately 66% complete as of March 31, 2016. The gain consists of revenue from a portion of the sales price and revenue from expected infrastructure reimbursement of infrastructure costs, less the allocated cost basis of the infrastructure costs, as the infrastructure work is completed:

Land Tract	Date Closed	No. of Acres		Sales Price		Avg. Sales Price per Acre		Gain Recognized in 2015		Gain Recognized in Q1 2016		Deferred Revenue as of March 31, 2016⁽¹⁾
Tanger Outlet	11/12/2015		38.93	$	9,700,000	$	249,165	$	2,793,419	$	2,791,549	$	3,223,855
Sam's Club	12/23/2015		18.10		4,500,000		248,619		1,278,747		1,462,727		1,443,493
NADG - First Parcel	12/29/2015		37.26		5,168,335		138,710		1,421,303		1,555,240		1,791,790
NADG - Outparcel	3/30/2016		4.40		2,000,000		454,545		-		1,251,989		693,371
Total Tomoka Town Center Sales			98.69	$	21,368,335	$	216,520	$	5,493,469	$	7,061,505	$	7,152,509

⁽¹⁾ Deferred revenue to be recognized on the percentage-of-completion basis as remaining infrastructure costs are incurred. The total revenue remaining to be recognized for the above land transactions includes the approximately $7.2 million of deferred revenue plus an estimated approximately $1.5 million of revenue related to the reimbursement of the infrastructure costs to be incurred through completion of the work, less the estimated remaining cost basis of approximately $1.8 million. See Note 17, "Commitments and Contingencies" for a description of the commitments related to the remaining infrastructure costs to be incurred

The NADG First Parcel and Outparcel sales represent the first two of multiple transactions contemplated under a single purchase and sale agreement with an affiliate of North American Development Group ( “NADG”). The NADG Agreement provides NADG (the “NADG Agreement”) with the ability to acquire portions of the remaining acreage under contract (the “Option Parcels”) in multiple, separate transactions through 2018 (the “Option Period”). The Option Parcels represent a total of approximately 81.55 acres and total potential proceeds to the Company of approximately $20.2 million. Pursuant to the NADG Agreement, NADG can close on any and all of the Option Parcels at any time during the Option Period. The NADG Agreement also establishes a price escalation that would be applied to any of the Option Parcels that are acquired after January 2017, and an additional higher price escalation that would be applied to any Option Parcels acquired in 2018.

Pursuant to the agreements with Tanger, Sam’s Club, and NADG (the “Town Center Sales Agreements”), which together represent the potential sale of the developable acreage in the Town Center, the Company is responsible for the completion of certain infrastructure improvements (the “Infrastructure Work”) at the 235-acre Town Center. The Infrastructure Work is currently estimated to cost between $12.5 million and $13.0 million and is expected to be completed in or around October 2016. In connection with the transaction with Tanger, the Company expects to receive approximately $4.5 million for the portion of the Infrastructure Work attributable to the Tanger property from the Tomoka Town Center Community Development District (the “Town Center District”), a special purpose governmental entity, based upon the achievement of certain milestones related to the Infrastructure Work and the Tanger project, and based upon when the Company dedicates the Infrastructure Work to the Town Center District. The payment of the $4.5 million will be recognized into revenue when earned. The Company expects to receive payments, in addition to the sales proceeds from each of the Town Center Sales Agreements (the “Incremental Payments”), including certain fixed annual payments, over the next ten years from Tanger and Sam’s, which annual amounts are included in the estimated gains from the transactions. In aggregate, the majority of the Incremental Payments and the payment received from the Town Center District are expected to largely offset the cost of the Infrastructure Work. As a result of our responsibility for completing the Infrastructure Work, we have applied the percentage of completion basis of accounting to the Tanger Outlet, Sam’s Club and NADG transactions whereby we will recognize the revenue deferred for each transaction as the Infrastructure Work is completed. The Incremental Payments recorded as receivables as of March 31, 2016 and December 31, 2015 totaled approximately $2.8 million and $1.3 million, respectively, and are included as a part of other assets on the consolidated balance sheets.

NOTE 4. LAND AND SUBSURFACE INTERESTS (continued)

The following table provides a reconciliation of the land transactions closed (as of March 31, 2016) or under contract for all the developable parcels of the Town Center (Sales price and estimated infrastructure reimbursement presented in $000’s) and the reimbursement amounts for the Infrastructure Work from each buyer:

Land Tract	No. of Acres		Sales Price (In $000's)		Sales Price per Acre		Infrastructure Reimbursement (in $000s)
Tanger Outlet [Closed] ⁽¹⁾		38.93	$	9,700	$	249,165	$	5,500
Sam's Club [Closed] ⁽²⁾		18.10		4,500		248,619		1,100
NADG - First Parcel [Closed]⁽³⁾		37.26		5,168		138,710		1,800
NADG - Outparcel [Closed]⁽³⁾		4.40		2,000		454,545		211
NADG - Option Parcels ⁽⁴⁾		81.55		20,195		247,645		3,889
Total Developable Area		180.24		41,564		230,602		12,500
Common Area ⁽⁵⁾		54.32	N/A		N/A			(12,800	)
Total Town Center		234.56	$	41,564	$	177,199	$	(300	)

⁽¹⁾ Includes $4.5 million in incentives from the Town Center District, with remainder to be paid in equal installments over 10 years;

⁽²⁾ Infrastructure reimbursement, pursuant to contract, paid in equal installments over 10 years;

⁽³⁾ Infrastructure reimbursement due upon the later of i) Infrastructure Work completion or, ii) August 31, 2016;

⁽⁴⁾ Under Contract. Sales price reflects current contract price; price escalations would occur should any of the transactions close in 2017 and 2018. Infrastructure reimbursements for each Option Parcel occurs upon later of i) transaction closing, ii) Infrastructure Work completion, or iii) August 31, 2016; and

⁽⁵⁾ Includes common area for the Town Center association and land dedicated for public use, both to be conveyed by the Company.

There were no land sales during the three months ended March 31, 2015.

During the year ended December 31, 2015, the Company acquired, through a real estate venture with an unaffiliated third party institutional investor, an interest in approximately six acres of vacant beachfront property located in Daytona Beach, Florida as more fully described in Note 20, “Variable Interest Entity.”

The Company owns full or fractional subsurface oil, gas, and mineral interests in approximately 500,000 “surface” acres of land owned by others in 20 counties in Florida. The Company leases its interests to mineral exploration firms for exploration. Our subsurface operations consist of revenue from the leasing of exploration rights and in some instances additional revenues from royalties applicable to production from the leased acreage.

During November 2015, the Company hired Lantana Advisors, a subsidiary of SunTrust, to evaluate the possible sale of its subsurface interests. On April 13, 2016 the Company entered into a purchase and sale agreement with Land Venture Partners, LLC for the sale of its 500,000 acres of subsurface interests, all located in the state of Florida, including the royalty interests in two operating oil wells in Lee County, Florida and its interests in the oil exploration lease with Kerogen Florida Energy Company LP, for a sales price of approximately $24 million (the “Subsurface Sale”). The purchase and sale agreement contemplates a closing of the Subsurface Sale prior to year-end 2016. The Subsurface Sale, if completed, would result in an estimated gain of approximately $22.6 million, or approximately $2.40 per share, after tax. The Company intends to use the proceeds from this sale as part of a Section 1031 like-kind exchange. The closing of the Subsurface Sale is subject to customary closing conditions. There can be no assurances regarding the likelihood or timing of the Subsurface Sale being completed or the final terms thereof, including the sales price.

During 2011, an eight-year oil exploration lease was executed. The lease calls for annual lease payments which are recognized as revenue ratably over the respective twelve month lease periods. In addition, non-refundable drilling penalty payments are made as required by the drilling requirements in the lease which are recognized as revenue when received. Cash payments for both the annual lease payment and the drilling penalty, if applicable, are received in full on or before the first day of the respective lease year.

NOTE 4. LAND AND SUBSURFACE INTERESTS (continued)

Lease payments on the respective acreages and drilling penalties received through lease year five are as follows:

Lease Year	Acreage (Approximate)		Florida County	Lease Payment ⁽¹⁾		Drilling Penalty ⁽¹⁾
Lease Year 1 - 9/23/2011 - 9/22/2012		136,000	Lee and Hendry	$	913,657	$	-
Lease Year 2 - 9/23/2012 - 9/22/2013		136,000	Lee and Hendry		922,114		-
Lease Year 3 - 9/23/2013 - 9/22/2014		82,000	Hendry		3,293,000		1,000,000
Lease Year 4 - 9/23/2014 - 9/22/2015		42,000	Hendry		1,866,146		600,000
Lease Year 5 - 9/23/2015 - 9/22/2016		25,000	Hendry		1,218,838		175,000
Total Payments Received to Date				$	8,213,755	$	1,775,000

⁽¹⁾Cash payment for the Lease Payment and Drilling Penalty is received on or before the first day of the lease year. The Drilling Penalty is recorded as revenue when received, while the Lease Payment is recognized on a straight-line basis over the respective lease term. See separate disclosure of the revenue per year below.

The terms of the lease state the Company will receive royalty payments if production occurs, and may receive additional annual rental payments if the lease is continued in years six through eight. The lease is effectively eight one-year terms as the lessee has the option to terminate the lease.

Lease income generated by the annual lease payments is recognized on a straight-line basis over the guaranteed lease term. For the three months ended March 31, 2016 and 2015, lease income of approximately $303,000 and $460,000 was recognized, respectively. There can be no assurance that the oil exploration lease will be extended beyond the expiration of the current term of September 22, 2016 or, if renewed, on similar terms or conditions.

The Company also received oil royalties from operating oil wells on 800 acres under a separate lease with a separate operator. Revenues received from oil royalties totaled approximately $5,000 and $21,000, during the three months ended March 31, 2016 and 2015, respectively.

The Company may release surface entry rights or other rights upon request of a surface owner for a negotiated release fee based on a percentage of the surface value. No releases occurred during the three months ended March 31, 2016, while cash payments for the release of surface entry rights totaled approximately $2,000 during the three months ended March 31, 2015, which is included in revenue from real estate operations.