The Company has a 51% ownership interest in Bay Holdings, which is the sole member of Kapalua Bay LLC, (Kapalua Bay). The other members of Bay Holdings through their wholly owned affiliates are Marriott International Inc. (Marriott), 34%, and Exclusive Resorts LLC (ER), 15% (see Note 11, Related Party Transactions). Bay Holdings is not a variable interest entity, as defined in GAAP. The Company accounts for its investment in Bay Holdings using the equity method of accounting because, although it has the ability to exercise significant influence over operating and financial policies, it does not control Bay Holdings through a majority voting interest or other means. Under the LLC agreement, major decisions require the approval of either 75% or 100% of the membership interests. The Company has been designated as the managing member of Bay Holdings. Profits and losses of Bay Holdings were allocated in proportion to the members' ownership interests, which approximated the estimated cash distributions to the members.

Bay Holdings constructed a residential development on land that it owns at the site of the former Kapalua Bay Hotel, and a spa on an adjacent parcel of land that is owned by the Company and leased to Bay Holdings. Through December 31, 2011, the sale of 28 (84 total) whole-ownership units and 177 (744 total) fractional units have closed escrow.

As a result of the 2009 losses incurred by Bay Holdings, the Company's carrying value of its investment in Bay Holdings was written down to zero in 2009. The Company does not expect to recover any amounts from its investment in Bay Holdings. The Company will not recognize any additional equity in the earnings (losses) of Bay Holdings until the Company's income attributable to Bay Holdings exceeds its accumulated losses. The Company had made cash contributions to Bay Holdings of $53.2 million and non-monetary contributions of land valued at $25 million.

Kapalua Bay has a construction loan agreement with Lehman Brothers Holdings Inc. and other lenders under which $275.9 million was outstanding at December 31, 2011, and that matured on August 1, 2011. Kapalua Bay is currently working with its lenders to restructure the terms of the loan agreement to extend the maturity and to provide available funding for continued operations. The loan is collateralized by the project assets including the land that is owned by Kapalua Bay that underlies the project. The Company and the other members of Bay Holdings have guaranteed to the lenders completion of the project and recourse with regard to certain acts, but have not guaranteed repayment of the loan. The Company has recorded $4.1 million in accrued contract termination in the consolidated balance sheet as its estimated share of the completion and recourse guarantees. The Company has no other funding commitments to Bay Holdings. The Company will not recognize any additional equity in the earnings (losses) of Bay Holdings until the recognized income attributable to Bay Holdings exceeds the accumulated losses.

Summarized balance sheet and operating information for Bay Holdings as of December 31, 2011 and 2010 (as restated) and for the years then ended are as follows:

	2011			2010 as previously reported			2010 as restated

	(in thousands)
Restricted cash	$	5,264		$	1,074		$	4,692
Real estate inventories		151,034			225,506			157,900
Other assets, net		15,598			22,603			17,997

Total Assets	$	171,896		$	249,183		$	180,589

Construction loan payable and other member loans	$	351,455		$	338,561		$	341,833
Other liabilities		26,991			14,968			15,089

Total Liabilities	$	378,446		$	353,529		$	356,922

Members' Deficiency	$	(206,550	)	$	(104,346	)	$	(176,333	)

	2011			2010 as previously reported			2010 as restated

	(in thousands)
Revenues	$	17,965		$	9,054		$	7,577
Costs and Expenses		49,892			44,023			114,339

Net Loss	$	(31,927	)	$	(34,969	)	$	(106,762	)

Subsequent to the issuance of the Company's 2010 financial statements, management of Bay Holdings determined that real estate inventories and other assets should have been impaired by approximately $70 million. As a result, the amounts in the table above have been restated to reduce real estate inventories, increase costs and expenses, and increase members' deficiency and net loss. Additionally, corrections were made to other liabilities and expenses to accrue for previously unrecorded liabilities. The restatement of Bay Holdings financial information had no impact on the Company's consolidated balance sheet, statement of operations, statement of cash flows, or statement of stockholders' deficiency as the Company's investment in Bay Holdings was impaired to zero in 2009 and the Company is not allocated subsequent losses.