SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES þ NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	þ ¨	Accelerated filer	¨
			þ
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO þ

As of ~~November 2, 2015,~~October 31, 2016, there were ~~75,329,557~~74,342,826 shares of common stock, no par value, outstanding.

~~Table of Contents~~

THE ST. JOE COMPANY

INDEX



	Page No.
PART I
Item 1. Financial Statements	3
Condensed Consolidated Balance Sheets - September 30, ~~2015~~2016 and December 31, ~~2014~~2015	3
Condensed Consolidated Statements of ~~Operations~~Income - Three and Nine Months Ended September 30, ~~2015~~2016 and ~~2014~~2015	5
Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ - Three and Nine Months Ended September 30, ~~2015~~2016 and ~~2014~~2015	6
Condensed Consolidated Statement of ~~Stockholders'~~Changes in Stockholders’ Equity - Nine Months Ended September 30, ~~2015~~2016	7
Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, ~~2015~~2016 and ~~2014~~2015	8
Notes to the Condensed Consolidated Financial Statements	10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	3830
Item 3. Quantitative and Qualitative Disclosures About Market Risk	6453
Item 4. Controls and Procedures	6453
PART II
Item 1. Legal Proceedings	6554
Item ~~2. Unregistered Sales of Equity Securities and Use of Proceeds~~1A. Risk Factors	6554
Item 5. Other Information	55
Item 6. Exhibits	6655
Signatures	6756

~~Table of Contents~~

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

THE ST. JOE COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)


	September 30, 2015			December 31, 2014			September 30, 2016		December 31, 2015
ASSETS
Investment in real estate, net	$	315,537		$	321,812		$	313,008	$	313,599
Cash and cash equivalents	157,887			34,515			165,286		212,773
Investments	252,025			636,878			236,656		191,240
Restricted investments (Note 15)	7,156			7,940
Restricted investments							5,640		7,072
Notes receivable, net	2,893			24,270			2,041		2,555
Pledged cash and treasury securities	25,324			25,670
Property and equipment, net of accumulated depreciation of $61.3 million and $60.3 million at September 30, 2015 and December 31, 2014, respectively	10,267			10,203
Property and equipment, net of accumulated depreciation of $57.2 million and $57.1 million at September 30, 2016 and December 31, 2015, respectively							9,166		10,145
Claim settlement receivable							12,746		—
Other assets	32,647			31,990			33,343		36,573
Investments held by special purpose entities (Note 5)	208,720			209,857
Investments held by special purpose entities							208,543		208,785
Total assets	$	1,012,456		$	1,303,135		$	986,429	$	982,742
LIABILITIES AND EQUITY
LIABILITIES:
Debt	$	69,726		$	63,804		$	54,233	$	54,474
Accounts payable	6,469			12,554
Accrued liabilities and deferred credits	44,139			34,911
Other liabilities							43,405		41,880
Deferred tax liabilities	37,542			34,824			39,375		36,847
Senior Notes held by special purpose entity (Note 5)	177,418			177,341
Senior Notes held by special purpose entity							176,255		176,094
Total liabilities	335,294			323,434			313,268		309,295
EQUITY:
Common stock, no par value; 180,000,000 shares authorized; 92,332,565 and 92,322,905 issued at September 30, 2015 and December 31, 2014, respectively; and 75,329,557 and 92,302,636 outstanding at September 30, 2015 and December 31, 2014, respectively	892,387			892,237
Common stock, no par value; 180,000,000 shares authorized; 74,342,826 and 92,332,565 issued at September 30, 2016 and December 31, 2015, respectively; and 74,342,826 and 75,329,557 outstanding at September 30, 2016 and December 31, 2015, respectively							572,002		892,387
Retained earnings	81,392			80,582			92,037		78,851
Accumulated other comprehensive income (loss)	139			(1,325		)	1,294		(686		)
Treasury stock at cost, 17,003,008 and 20,269 held at September 30, 2015 and December 31, 2014, respectively	(305,209		)	(285		)
Treasury stock at cost, 0 and 17,003,008 shares held at September 30, 2016 and December 31, 2015, respectively							—		(305,289		)
Total stockholders’ equity	668,709			971,209			665,333		665,263
Non-controlling interest	8,453			8,492			7,828		8,184
Total equity	677,162			979,701			673,161		673,447
Total liabilities and equity	$	1,012,456		$	1,303,135		$	986,429	$	982,742

See notes to the condensed consolidated financial statements.

~~Table of Contents~~

THE ST. JOE COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)

The following presents the portion of the consolidated balances presented above attributable to the Company’s consolidated variable interest entities. The Company’s consolidated variable interest entities include the Pier Park North joint venture, Artisan Park, L.L.C., Panama City Timber Finance Company, L.L.C. and Northwest Florida Timber Finance Company ~~L.L.C.~~L.L.C as discussed in Note 1, Nature of Operations. Basis of Presentation. The following assets may only be used to settle obligations of the consolidated variable interest entities and the following liabilities are only obligations of the variable interest entities and do not have recourse to the general credit of the Company, except for the guarantees and covenants discussed in Note 8,10, ~~Real Estate Joint Ventures~~Debt.


	September 30, 2015		December 31, 2014		September 30, 2016		December 31, 2015
ASSETS
Investment in real estate, net	$	46,370	$	43,709	$	46,146	$	46,156
Cash and cash equivalents	3,580		3,455		4,087		4,067
Other assets	9,540		8,781		9,947		12,853
Investments held by special purpose entities (Note 5)	208,720		209,857
Investments held by special purpose entities					208,543		208,785
Total assets	$	268,210	$	265,802	$	268,723	$	271,861
LIABILITIES
Long-term debt	$	37,625	$	31,618
Accounts payable	232		1,511
Accrued liabilities and deferred credits	2,209		4,142
Senior Notes held by special purpose entity (Note 5)	177,418		177,341
Debt					$	47,565	$	47,480
Other liabilities					2,411		4,416
Senior Notes held by special purpose entity					176,255		176,094
Total liabilities	$	217,484	$	214,612	$	226,231	$	227,990

See notes to the condensed consolidated financial statements.

~~Table of Contents~~

THE ST. JOE COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~INCOME

(Dollars in thousands except per share amounts)

(Unaudited)

Three Months Ended
September 30, Nine Months Ended
September 30,
2015
2014 2015 2014
Revenues:
Real estate sales $ 4,880
$ 3,919
$ 24,337
$ 630,574
Resorts and leisure revenues 18,537
16,913
45,657
40,392
Leasing revenues 2,528
2,054
6,741
4,931
Timber sales 1,885
1,061
6,033
10,300
Total revenues 27,830
23,947
82,768
686,197
Expenses:
Cost of real estate sales 2,480
2,068
12,204
84,592
Cost of resorts and leisure revenues 14,720
13,743
38,220
34,424
Cost of leasing revenues 734
585
1,996
1,435
Cost of timber sales 201
243
643
4,337
Other operating and corporate expenses 9,847
6,469
24,696
22,255
Administrative costs associated with special purpose entities —
—
—
3,746
Depreciation, depletion and amortization 2,231
2,174
7,281
6,213
Total expenses 30,213
25,282
85,040
157,002
Operating (loss) income (2,383 ) (1,335 )
(2,272 )
529,195
Other income (expense):
Investment income, net 9,125
3,367
19,776
7,592
Interest expense (2,875 ) (2,950 ) (8,397 ) (5,839 )
Other, net 135
387
(6,302 ) 1,734
Total other income 6,385
804
5,077
3,487
Income (loss) before equity in loss from unconsolidated affiliates and income taxes 4,002
(531 )
2,805

532,682
Equity in loss from unconsolidated affiliates —
(11 ) —
(32 )
Income tax (expense) benefit (1,244 ) 386
(2,034 ) (115,209 )
Net income (loss) 2,758

(156 )
771

417,441
Net loss attributable to non-controlling interest 14
106
39
112
Net income (loss) attributable to the Company $ 2,772
$ (50 )
$ 810

$ 417,553

NET INCOME (LOSS) PER SHARE
Basic and Diluted
Weighted average shares outstanding 92,026,894
92,295,213
92,088,253
92,297,467
Net income (loss) per share attributable to the Company $ 0.03
$ —
$ 0.01
$ 4.52



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Revenue:
Real estate revenue	$	4,163		$	4,880		$	17,988		$	24,337
Resorts and leisure revenue	19,046			18,537			47,590			45,657
Leasing revenue	2,685			2,528			7,366			6,741
Timber revenue	1,298			1,885			4,053			6,033
Total revenue	27,192			27,830			76,997			82,768
Expenses:
Cost of real estate revenue	1,949			2,480			6,688			12,204
Cost of resorts and leisure revenue	15,438			14,720			40,402			38,220
Cost of leasing revenue	710			734			2,219			1,996
Cost of timber revenue	213			201			626			643
Other operating and corporate expenses	5,193			9,847			17,736			24,696
Depreciation, depletion and amortization	2,094			2,231			6,484			7,281
Total expenses	25,597			30,213			74,155			85,040
Operating income (loss)	1,595			(2,383		)	2,842			(2,272		)
Other income (expense):
Investment income, net	4,689			9,125			10,378			19,776
Interest expense	(3,075		)	(2,875		)	(9,255		)	(8,397		)
Claim settlement	—			—			12,548			—
Other, net	435			135			1,487			(6,302		)
Total other income	2,049			6,385			15,158			5,077
Income before income taxes	3,644			4,002			18,000			2,805
Income tax expense	(948		)	(1,244		)	(5,170		)	(2,034		)
Net income	2,696			2,758			12,830			771
Net loss attributable to non-controlling interest	15			14			356			39
Net income attributable to the Company	$	2,711		$	2,772		$	13,186		$	810

NET INCOME PER SHARE
Basic and Diluted
Weighted average shares outstanding	74,342,826			92,026,894			74,496,058			92,088,253
Net income per share attributable to the Company	$	0.04		$	0.03		$	0.18		$	0.01

See notes to the condensed consolidated financial statements.

~~Table of Contents~~

THE ST. JOE COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ~~(LOSS)~~

(Dollars in thousands)

(Unaudited)

Three Months Ended
September 30, Nine Months Ended
September 30,
2015
2014 2015 2014
Net income (loss): $ 2,758
$ (156 ) $ 771
$ 417,441
Other comprehensive (loss) income:
Net unrealized gains (loss) related to available-for-sale securities 3,710
(3,202 ) 6,956
(3,480 )
Reclassification of other-than-temporary impairment losses included in earnings —
1,295
—
1,295
Reclassification of realized (gains) losses included in earnings (5,276 ) —
(5,276 ) 833
Income tax 1,057
734
(216 ) 519
Total (509 ) (1,173 ) 1,464

(833 )
Defined benefit pension items:
Net loss (gain) arising during the period —
94
—
(502 )
Settlement included in net periodic cost —
529
—
969
Amortization of loss included in net periodic cost —
115
—
373
Income tax —
(284 ) —
(324 )
Total —
454

—

516
Total other comprehensive (loss) income, net of tax (509 ) (719 )
1,464

(317 )
Total comprehensive income (loss), net of tax $ 2,249
$ (875 )
$ 2,235

$ 417,124



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Net income:	$	2,696		$	2,758		$	12,830		$	771
Other comprehensive income, net of tax:
Available-for-sale investment items:
Net unrealized gains on available-for-sale investments	3,257			3,710			3,259			6,956
Reclassification of realized gains included in earnings	(40		)	(5,276		)	(40		)	(5,276		)
Total before income taxes	3,217			(1,566		)	3,219			1,680
Income tax (expense) benefit	(1,238		)	1,057			(1,239		)	(216		)
Total other comprehensive income (loss), net of tax	1,979			(509		)	1,980			1,464
Total comprehensive income, net of tax	$	4,675		$	2,249		$	14,810		$	2,235

See notes to the condensed consolidated financial statements.

~~Table of Contents~~

THE ST. JOE COMPANY

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands)

(Unaudited)


	Common Stock				Retained Earnings		Accumulated Other Comprehensive (Loss) Income												Common Stock					Retained Earnings		Accumulated Other Comprehensive (Loss) Income
	Outstanding Shares		Amount		Retained Earnings		Accumulated Other Comprehensive (Loss) Income			Treasury Stock			Non-controlling Interest			Total			Outstanding Shares		Amount			Retained Earnings		Accumulated Other Comprehensive (Loss) Income			Treasury Stock			Non-controlling Interest			Total
Balance at December 31, 2014	92,302,636		$	892,237	$	80,582	$	(1,325	)	$	(285	)	$	8,492		$	979,701
Balance at December 31, 2015																			75,329,557		$	892,387		$	78,851	$	(686	)	$	(305,289	)	$	8,184		$	673,447
Issuance of common stock for director’s fees																			8,919		93			—		—			—			—			93
Reduction in excess tax benefits on stock options																			—		(369		)	—		—			—			—			(369		)
Repurchase of common shares																			(995,650	)	—			—		—			(14,820		)	—			(14,820		)
Retirement of treasury stock																			—		(320,109		)	—		—			320,109			—			—
Other comprehensive income																			—		—			—		1,980			—			—			1,980
Net income (loss)	—		—		810		—			—			(39		)	771			—		—			13,186		—			—			(356		)	12,830
Other comprehensive income	—		—		—		1,464			—			—			1,464
Repurchase of common shares	(16,982,739	)	—		—		—			(304,924		)	—			(304,924		)
Issuance of common stock for director’s fees	9,660		150		—		—			—			—			150
Balance at September 30, 2015	75,329,557		$	892,387	$	81,392	$	139		$	(305,209	)	$	8,453		$	677,162
Balance at September 30, 2016																			74,342,826		$	572,002		$	92,037	$	1,294		$	—		$	7,828		$	673,161

See notes to the condensed consolidated financial statements.

~~Table of Contents~~

THE ST. JOE COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2016			2015
Cash flows from operating activities:
Net income	$	771		$	417,441		$	12,830		$	771
Adjustments to reconcile net income to net cash from operating activities:
Depreciation, depletion and amortization	7,281			6,213			6,484			7,281
Stock based compensation	150			210			93			150
(Gain) loss on sale of investments	(5,276		)	833
Other-than-temporary impairment losses	—			1,295
Equity in loss in from unconsolidated affiliates	—			32
Deferred income tax	2,502			51,037
Gain on sale of investments							(40		)	(5,276		)
Deferred income tax expense							920			2,502
Cost of real estate sold	10,932			73,424			5,091			10,932
Expenditures for and acquisition of real estate to be sold	(5,445		)	(6,059		)	(5,397		)	(5,445		)
Notes receivable financed by the Company for operating properties sold	—			(19,600		)
Timber Note (Note 5)	—			(200,000		)
Deferred revenue	(64		)	(13,562		)
Accretion income and other	(1,658		)	(1,530		)	(1,544		)	(1,658		)
Impairment losses							357			—
Changes in operating assets and liabilities:
Payments received on notes receivables	21,441			2,292
Notes receivable							518			21,441
Claim settlement receivable							(12,746		)	—
Other assets	883			(4,333		)	1,646			883
Accounts payable and accrued liabilities	4,543			4,812
Income taxes	(469		)	10,392
Other liabilities							412			4,479
Income taxes receivable							1,948			(469		)
Net cash provided by operating activities	35,591			322,897			10,572			35,591
Cash flows from investing activities:
Expenditures for Pier Park North joint venture (Note 8)	(5,462		)	(20,402		)
Expenditures for Pier Park North joint venture							(1,365		)	(5,462		)
Purchases of property and equipment	(2,287		)	(1,869		)	(2,413		)	(2,287		)
Proceeds from the disposition of assets							3			—
Purchases of investments	(239,740		)	(634,754		)	(308,174		)	(239,740		)
Maturities of investments	310,000			100,000			185,000			310,000
Sales of investments	322,847			83,239			83,307			323,724
Sales of restricted investments (Note 15)	877			—
Investment and maturities of assets held by special purpose entities (Note 5)	787			(6,921		)
Contributions to unconsolidated affiliates	—			(148		)
Net cash provided by (used in) investing activities	387,022			(480,855		)
Maturities of assets held by special purpose entities							787			787
Net cash (used in) provided by investing activities							(42,855		)	387,022
Cash flows from financing activities:
Repurchase of common shares	(304,924		)	—			(14,820		)	(304,924		)
Borrowings on construction loan in Pier Park joint venture (Note 8)	6,007			22,477
Principal payments for long term debt	(324		)	(571		)
Issuance of Senior Notes by special purpose entity net of discount and issuance costs of $4.3 million for 2014 (Note 5)	—			175,740
Net cash (used in) provided by financing activities	(299,241		)	197,646
Net increase in cash and cash equivalents	123,372			39,688
Borrowings on construction/refinanced loan in Pier Park joint venture							—			6,007
Principal payments for debt							(384		)	(324		)
Net cash used in financing activities							(15,204		)	(299,241		)
Net (decrease) increase in cash and cash equivalents							(47,487		)	123,372
Cash and cash equivalents at beginning of the period	34,515			21,894			212,773			34,515
Cash and cash equivalents at end of the period	$	157,887		$	61,582		$	165,286		$	157,887

See notes to the condensed consolidated financial statements.

~~Table of Contents~~

THE ST. JOE COMPANY

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

(Dollars in thousands)

(Unaudited)


	Nine Months Ended September 30,					Nine Months Ended September 30,
	2015		2014			2016		2015
Cash paid during the period for:
Interest expense	$	9,991	$	5,206		$	10,921	$	9,991
Income taxes	$	—	$	53,780		$	2,302	$	—

Non-cash financing and investing activities:
Increase (decrease) in Community Development District debt	$	586	$	(5,007	)
Increase in Community Development District debt						$	21	$	586
Decrease in pledged treasury securities related to defeased debt	$	346	$	438		$	—	$	346
Expenditures for investing properties and property and equipment financed through accounts payable	$	1,394	$	5,289
Exchange of Timber Note for investments held by special purpose entity (Note 5)	$	—	$	200,000
Capital contributions to special purpose entity from non-controlling interest (Note 5)	$	—	$	3,492
Expenditures for operating properties and property and equipment financed through accounts payable						$	147	$	1,394

See notes to the condensed consolidated financial statements.

~~Table of Contents~~

THE ST. JOE COMPANY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, unless otherwise stated)

(Unaudited)

1. Nature of Operations

The St. Joe Company together with its consolidated subsidiaries (the “Company”) is a real estate development, asset management and operating company with real estate assets and operations currently concentrated primarily between Tallahassee and Destin, Florida.

The Company conducts primarily all of its business in the following five reportable operating segments: 1) residential real estate, 2) commercial real estate, 3) resorts and leisure, 4) leasing operations and 5) forestry. In prior periods, the Company’s reportable operating segments were 1) residential real estate, 2) commercial real estate, 3) resorts, leisure and leasing operations and 4) forestry. The Company’s leasing operations segment currently meets the quantitative and qualitative factors as a reportable operating segment; therefore, the Company has changed its segment presentation to include leasing operations as a reportable operating segment. Leasing operations were historically included with the Company’s resorts, leisure and leasing operating segment. All prior year segment information has been reclassified to conform to the 2015 presentation. The change in reporting segments had no effect on the Company’s condensed consolidated financial position, results of operations or cash flows for the periods presented. See Note 17, ~~Segment Information~~.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements are not included herein. The unaudited interim condensed consolidated financial statements include the accounts of the Company and all of its majority-owned and controlled ~~subsidiaries and variable interest entities where the Company is the primary beneficiary.~~subsidiaries. The equity method of accounting is used for investments in which the Company has significant influence, but not a controlling financial interest. All significant intercompany accounts and transactions have been eliminated in consolidation. The December 31, ~~2014~~2015 balance sheet amounts have been derived from the Company’s December 31, ~~2014~~2015 audited consolidated financial statements. Certain prior period amounts in the accompanying condensed consolidated financial statements have been reclassified to conform to the current year presentation. These reclassifications had no effect on the Company’s previously reported stockholders’ equity or net income. Operating results for the nine months ended September 30, 2016 are not necessarily indicative of the results of the Company that may be expected for the year ending December 31, 2016.

A variable interest entity (“VIE”) is an entity in which a controlling financial interest may be achieved through arrangements that do not involve voting interests. A VIE is required to be consolidated by its primary beneficiary, which is the entity that possesses the power to direct the activities of the VIE that most significantly impact its economic performance and has the obligation to absorb losses or the right to receive benefits from the VIE that are significant to it. The Company consolidates VIEs when it is the primary beneficiary of the VIE, including real estate joint ventures determined to be VIEs (see Note 9, Real Estate Joint Ventures) and VIEs involved in a 2014 real estate sale.

The statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for fair presentation of the information contained herein. The interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015. The Company adheres to the same accounting policies in preparation of its unaudited interim condensed consolidated financial statements as the Company’s December 31, 2015 annual financial statements. As required under GAAP, interim accounting for certain expenses, including income taxes, are based on full year assumptions. For interim financial reporting purposes, income taxes are recorded based upon estimated annual income tax rates.

Recently Adopted Accounting Pronouncements

~~Discontinued operations~~

In April 2014, the Financial Accounting Standard Board (“FASB”) issued an accounting standards update (“ASU”) that changes the criteria for reporting discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations that have a major effect on the organization’s operations and financial results should be presented as discontinued operations. In addition, this ASU mandates expanded disclosures about the discontinued operation and requires disclosures about certain disposals that do not qualify as discontinued operations. This guidance is applied prospectively and the Company adopted it as of January 1, 2015. The adoption of this guidance had no impact on the Company’~~s Condensed Consolidated Statements of Operations, Balance Sheets or Statements of Cash Flows.~~

~~Table of Contents~~

~~Recently Issued Accounting Pronouncements~~

~~Revenue recognition~~

In May 2014, the FASB issued an ASU that establishes the principles used to recognize revenue for all entities. The new guidance will be effective for annual and interim periods beginning after December 15, 2017. Early application will be permitted, but not before annual reporting periods beginning after December 15, 2016. The Company is currently evaluating the impact that the adoption of this guidance will have on its financial position, results of operations and cash flows. The Company has not adopted this ASU as of September 30, 2015.

Consolidation

In February 2015, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ~~an ASU~~Accounting Standards Update (“ASU”) 2015-02 that amends the existing consolidation guidance related to (i) limited partnerships and similar legal entities, (ii) the evaluation of variable interests for fees paid to decision makers or service providers, (iii) the effect of fee arrangements and related parties on the primary beneficiary determination and (iv) certain investment funds. These changes are expected to limit the number of consolidation models and place more emphasis on risk of loss when determining a controlling financial interest. The Company adopted the new guidance ~~will be effective for the Company~~ as of January 1, 2016. ~~Early adoption is permitted, including early adoption in an interim period.~~ The ~~Company is evaluating the impact the~~ adoption of this guidance ~~will have~~had no impact on the Company’s condensed consolidated balance sheets, statements of income, statements of comprehensive income, statements of cash flows or notes to the condensed consolidated financial statements. ~~The Company has not adopted this ASU as of September 30, 2015.~~

Debt issuance costs

In April 2015, the FASB issued an ASU 2015-03 that requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The amendment does not affect the recognition and measurement guidance for debt issuance costs. As of January 1, 2016, the Company adopted this ASU, which required retrospective application and resulted in the reclassification of debt issuance costs of $2.1 million from other assets to a reduction of $0.7 million in debt and a reduction of $1.4 million in Senior Notes held by special purpose entity in the Company’s condensed consolidated balance sheet as of December 31, 2015. Other than this change in presentation, this ASU did not have an impact on the Company’s condensed consolidated financial condition, results of operations or cash flows. See Note 10, Debt for more information.

Recently Issued Accounting Pronouncements

Revenue recognition

In May 2014, the FASB issued an ASU that establishes the principles used to recognize revenue for all entities. In March 2016, the FASB issued ASU 2016-08 that further clarifies the implementation guidance on principal versus agent considerations. The new guidance ~~should~~will be ~~applied on a retrospective basis and is~~ effective for ~~the Company as of January 1,~~annual and interim periods beginning after December 15, 2017. Early application will be permitted, but not before annual reporting periods beginning after December 15, 2016. ~~Early adoption is permitted for financial statements that have not been previously issued.~~ The Company ~~does not expect~~is currently evaluating the impact that the adoption of this guidance will have ~~a material impact~~ on its financial ~~position.~~condition, results of operations and cash flows.

Financial Instruments

In January 2016, the FASB issued ASU 2016-01 that amends existing guidance to address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The new guidance will require equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in results of operations. Additionally, certain disclosure requirements and other aspects of accounting for financial instruments may change as a result of the new guidance, which is effective for interim and annual reporting periods beginning after December 15, 2017. The Company ~~has not adopted~~is currently evaluating the impact that the adoption of the new guidance will have on its financial condition, results of operations and cash flows.

Leases

In February 2016, the FASB issued ASU 2016-02 that amends the existing accounting standards for lease accounting, including requiring lessees to recognize both finance and operating leases with terms of more than 12 months on the balance sheet. The accounting applied by a lessor is largely unchanged from existing guidance. The amendments also require certain quantitative and qualitative disclosures about leasing arrangements. The new guidance will be effective for annual and interim periods beginning after December 15, 2018 and requires a modified retrospective adoption. The Company is currently evaluating the impact that the adoption of this guidance will have on its financial condition, results of operations and cash flows.

Financial Instruments - Credit Losses

In June 2016, the FASB issued ASU 2016-13 that requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected and requires that credit losses from available-for-sale debt securities be presented as an allowance for credit losses. This new guidance will be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted for annual and interim periods beginning after December 15, 2018. The Company is currently evaluating the impact that the adoption of ~~September 30, 2015.~~the new guidance will have on its financial condition, results of operations and cash flows.

Statement of Cash Flows

In August 2016, the FASB issued ASU 2016-15 that amends the classificationof certain cash receipts and cash payments, to reduce the diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The new standard is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted, including adoption in an interim period. The Company is currently evaluating the impact that the adoption of the new guidance will have on its financial condition, results of operations and cash flows.

~~Table of Contents~~

2. Investment in Real Estate

Real estate by property type and segment includes the following:


	September 30, 2015		December 31, 2014		September 30, 2016		December 31, 2015
Development property:
Residential real estate	$	101,671	$	102,408	$	99,545	$	99,413
Commercial real estate	55,188		59,405		57,248		56,587
Resorts and leisure					214		—
Leasing operations	268		3,680		1,119		360
Forestry	3,069		3,278		2,509		2,681
Corporate	2,171		2,019		2,389		2,211
Total development property	162,367		170,790		163,024		161,252

Operating property:
Residential real estate	$	8,089	$	8,084	8,091		8,091
Resorts and leisure	109,342		110,136		109,346		109,425
Leasing operations	79,368		72,045		81,307		79,550
Forestry	18,911		18,839		19,517		19,300
Other	50		50		50		50
Total operating property	215,760		209,154		218,311		216,416
Less: Accumulated depreciation	62,590		58,132		68,327		64,069
Total operating property, net	153,170		151,022		149,984		152,347
Investment in real estate, net	$	315,537	$	321,812	$	313,008	$	313,599

Development property consists of land the Company is developing or intends to develop for sale or future operations. Residential real estate includes mixed-use resort, primary and seasonal residential communities and includes costs directly associated with the land, development and construction of these communities, including common development costs such as roads, ~~sewers,~~utilities and amenities and indirect costs such as development overhead, capitalized interest, marketing and project administration. Commercial real estate includes land for commercial and industrial uses, including land holdings near the Northwest Florida Beaches International Airport and Port of Port St. Joe, and includes costs directly associated with the land and development costs for these properties, which also include common development costs such as roads and ~~sewers.~~utilities. Resorts and leisure development property consists of improvements and expansion of existing beach club property. Leasing development property primarily includes the land development and construction ~~under development~~ for the consolidated joint venture at Pier Park North. ~~This development~~Development property ~~is being~~in the leasing operations and resorts and leisure segments will be reclassified as operating property as ~~the operations continue to commence at Pier Park North.~~it is placed into service.

Operating property includes property that the Company uses for ~~daily~~ operations and activities. Residential real estate operating property consists primarily of residential utility assets. The resorts and leisure operating property includes the WaterColor Inn, golf courses, a beach club and marinas. Leasing operating property includes property developed or purchased by the Company and used for retail and commercial rental purposes, including property in ~~our~~the consolidated joint venture at Pier Park North. Forestry operating property includes the Company’s timberlands. Operating property may be sold in the future as part of the Company’s principal real estate business. ~~Forestry operating property includes the Company’s timberlands.~~

The Company had no capitalized indirect development costs during the three and nine months ended September 30, 2016, and $0.1 million and $0.2 million during the three and nine months ended September 30, 2015, respectively, primarily related to the consolidated joint venture at Pier Park North, of less than $0.1 million and $0.2 million, during the three months ended September 30, 2015 and 2014, respectively, and $0.2 million and $0.6 million, during the nine months ended September 30, 2015 and 2014, respectively.North.

~~Table of Contents~~

3. Impairment of Long Lived Assets

The Company reviews its long-lived assets for impairment quarterly to determine whether events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Long-lived assets include the Company’s investments in operating and development property and property and ~~equipment, net.~~equipment. As part of the Company’s review for impairment of its long-lived assets, the Company reviews ~~each~~ long-lived asset’s carrying value, current period actual financial results as compared to prior period and forecast contained in the Company’s business plan and any other ~~event~~events or changes in circumstances to identify whether an indicator of potential impairment may exist. Some of the events or changes in circumstances that are considered by the Company as indicators of potential impairment include:

a prolonged decrease in the fair value or demand for the Company’s properties;

a change in the expected use or development plans for the Company’s properties;

a material change in strategy that would affect the fair value of the Company’s properties;

continuing operating or cash flow losses for an operating property;

an accumulation of costs in excess of the projected costs for a development property; and

any other adverse change that may affect the fair value of the property.

The Company uses varying methods to determine if an impairment exists, such as (i) considering indicators of potential impairment, (ii) analyzing expected future cash flows and comparing the expected future undiscounted cash flows of the property to its carrying value or (iii) determining market resale values.

~~There were no events or changes in circumstances that would indicate that~~

During the ~~carrying value of the Company’s long-lived assets would not be recoverable,~~three and ~~therefore,~~nine months ended September 30, 2016, the Company ~~did not record any~~recorded an impairment ~~charges during~~charge of $0.4 million, included in cost of real estate revenue, related to a commerce park. During the three and nine months ended September 30, 2015, ~~and 2014.~~there were no impairments.

4. Investments

Investments and restricted investments consist of available-for-sale securities and are recorded at fair value, which is based on ~~observable~~quoted market ~~inputs.~~prices and pricing data from external pricing services that use prices observed for recently executed market transactions. Unrealized gains and temporary losses on investments, net of tax, are recorded in ~~Other~~other comprehensive income (loss) ~~income.~~. Realized gains and losses are determined using the specific identification method. The amortized cost of debt securities are adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest method. Such amortization and accretion is included in ~~Investment~~investment income, net. In addition, at September 30, ~~2015,~~2016, the Company had investments in short term commercial paper that are classified as cash equivalents, since they had maturity dates of ninety days or less from the date of purchase.

At September 30, ~~2015~~2016, investments and restricted investments classified as available-for-sale securities were as follows:

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
Debt securities:
Commercial paper ⁽¹⁾
$ 98,962
$ 22
$ —
$ 98,984
U.S. Treasury securities 234,674
187
—
234,861
Corporate debt securities 5,269
—
—
5,269
Preferred stock 11,858
37
—
11,895
$ 350,763
$ 246
$ —
$ 351,009



~~(1)~~	~~Recorded in Cash and cash equivalents on the Company’s Condensed Consolidated Balance Sheets.~~



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities:
U.S. Treasury securities	$	99,659	$	75	$	—	$	99,734
Corporate debt securities	111,963		2,349		622		113,690
Preferred stock	22,930		397		95		23,232
	234,552		2,821		717		236,656
Restricted investments:
Money market fund	5,640		—		—		5,640
	$	240,192	$	2,821	$	717	$	242,296

~~Table of Contents~~

At December 31, ~~2014~~2015, investments and restricted investments classified as available-for-sale securities were as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt securities:
U.S. Treasury securities	$	509,783	$	32	$	—	$	509,815	$	184,819	$	—	$	79	$	184,740
Corporate debt securities	101,587		—		1,482		100,105		7,273		—		981		6,292
Preferred stock	26,963		—		5		26,958		265		—		57		208
	$	638,333	$	32	$	1,487	$	636,878	192,357		—		1,117		191,240
Restricted investments:
Guaranteed income fund									7,072		—		—		7,072
									$	199,429	$	—	$	1,117	$	198,312

Fairholme ~~Capital Management, L.L.C.,~~Trust Company, LLC, or one of its affiliates (“~~Fairholme Capital”~~Fairholme”), has served as an investment advisor to the Company since April 2013. As of September 30, ~~2015,~~2016, funds managed by Fairholme ~~Capital~~ beneficially owned approximately ~~32.5%~~32.3% of the Company’s common stock. Mr. Bruce Berkowitz is the ~~Managing Member~~Chief Investment Officer of Fairholme Capital Management, L.L.C., a director of Fairholme Trust Company, LLC and the Chairman of ~~the Company’s~~our Board of Directors. Mr. Cesar Alvarez also serves as a director of Fairholme ~~Capital~~Trust Company, LLC and is a member of our Board of Directors. Fairholme does not receive any compensation for services as the Company’s investment advisor.

Pursuant to the terms of the ~~Company’s~~ Investment Management Agreement with Fairholme, as amended (the “Agreement”) ~~with~~, Fairholme ~~Capital, Fairholme Capital~~ agreed to supervise and direct the investments of an investment account established by the Company in accordance with the investment guidelines and restrictions approved by the Investment Committee of the Company’s Board of Directors. The investment guidelines are set forth in the Agreement and require that, as of the date of any investment: (i) ~~at least~~ ~~50%~~ ~~of the investment account be held in cash or cash equivalents, as defined in the Agreement, (ii)~~ no more than 15% of the investment account may be invested in securities of any one issuer (excluding the U.S. Government) and ~~(iii)~~(ii) any investment in any one issuer (excluding the U.S. Government) that exceeds 10%, but not 15%, requires the consent of at least two members of the Investment Committee. ~~The~~Effective November 1, 2016, the Company and Fairholme entered into an Amendment (the “Amendment”) to the Agreement, pursuant to which the Company modified the investment guidelines and restrictions described in the Agreement to (i) decrease from at least 50% to 25% the amount of the investment account ~~may not~~that must be held in cash and cash equivalents, (ii) permit the investment account to be invested in common equity securities; however, common stock ~~securities.~~investments shall be limited to exchange-traded common equities, shall not exceed 5% ownership of a single issuer and, cumulatively, the common stock held in the Company’s investment portfolio shall not exceed $100.0 million market value, and (iii) provide that the aggregate market value of investments in common stock, preferred stock or other equity investments cannot exceed 25% of the market value of the Company’s investment portfolio at the time of purchase. All other material investment guidelines remain the same.

As of September 30, ~~2015~~,2016, the investment account included $30.9 million of money market funds and $99.0 million of commercial paper (all of which are classified within cash and cash equivalents on the Company’s Condensed Consolidated Balance Sheets), $234.9$99.7 million of U.S. Treasury securities, ~~$5.3~~$113.7 million of corporate debt securities ~~in an issuer that is a national retail chain that is non-investment grade~~ and ~~$11.9~~$23.2 million of preferred stock investments (all of which are classified within investments on the Company’s ~~Condensed Consolidated Balance Sheets)~~condensed consolidated balance sheets). $9.1 million of the $113.7 million corporate debt securities and $0.2 million of the $23.2 million preferred stock are issued by Sears Holdings Corp or affiliates, which may be deemed an affiliate of Fairholme.

During the three months ended September 30, ~~2015,~~2016, realized gains from the sale of available-for-sale securities were ~~$5.3~~less than $0.1 million, ~~and~~ proceeds from the sale of available-for-sale securities were ~~$182.7 million.~~$74.9 million and there were no proceeds from the maturity of available-for-sale securities. During the nine months ended September 30, 2016, realized gains from the sale of available for-sale securities were less than $0.1 million, proceeds from the sale of available-for-sale securities were $83.3 million and proceeds from the maturity of available-for-sale securities were $185.0 million.

During the three months ended September 30, 2015, realized gains from the sale of available-for-sale securities were $5.3 million, proceeds from the sale of available-for-sale securities were ~~$322.8~~$182.7 million and there were no proceeds from the maturity of available-for-sale securities. During the nine months ended September 30, 2015, realized gains from the sale of available for-sale securities were $5.3 million, proceeds from the sale of available-for-sale securities were $323.7 million and proceeds from the maturity of available-for-sale securities were $310.0 million.

During the three months ended September 30, 2014, proceeds from the sale of available-for-sale securities were $75.0 million and proceeds from the maturity of U.S. Treasury securities were $40.0 million. During the nine months ended September 30, 2014, realized losses from the sale of available-for-sale securities were $0.8 million, proceeds from the sale of available-for-sale securities were $83.2 million and proceeds from the maturity of available-for-sale securities were $100.0 million.

~~Table of Contents~~

As of September 30, ~~2015, there were no unrealized losses related to commercial paper, U.S. Treasury securities, corporate debt securities or preferred stock investments. As of~~2016 and December 31, ~~2014,~~2015, certain of the Company’s ~~U.S. Treasuries~~debt securities and preferred stock had ~~immaterial unrealized losses. The Company previously reported in its Annual Report on Form 10-K that it had no continuous~~ unrealized losses ~~greater than twelve months as a result~~ of ~~recognizing a portion of the unrealized loss~~$0.7 million and $1.1 million, respectively, that were deemed temporary and included in ~~earnings as of September 30, 2014.~~accumulated other comprehensive income (loss). The ~~Company has revised this disclosure in the~~ following table ~~that~~ provides the ~~corporate~~ debt securities ~~continuous~~and preferred stock unrealized loss position and ~~its~~ related fair values:

As of September 30, 2015 As of December 31, 2014
Less Than 12 Months 12 Months or Greater Less Than 12 Months 12 Months or Greater
Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses
Corporate debt securities $ —
$ —
$ —
$ —
$ 85,845
$ 1,294
$ 14,260
$ 188



	As of September 30, 2016								As of December 31, 2015
	Less Than 12 Months				12 Months or Greater				Less Than 12 Months				12 Months or Greater
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Debt securities:
U.S. Treasury securities	$	—	$	—	$	—	$	—	$	184,740	$	79	$	—	$	—
Corporate debt securities	14,367		232		4,912		390		6,292		981		—		—
Preferred stock	169		95		—		—		208		57		—		—
	$	14,536	$	327	$	4,912	$	390	$	191,240	$	1,117	$	—	$	—

~~The Company had no unrealized losses as~~As of September 30, ~~2015. The Company’s unrealized losses as of~~2016 and December 31, 2014 relate to investments in senior secured debt securities in one issuer that is a national retail chain that is non-investment grade. The Company purchased these investments between the second quarter of 2013 through the second quarter of 2014. During the third quarter of 2014, the Company determined that these investments were other-than-temporarily impaired and recorded $1.3 million related to credit-related losses in Investment income, net on the Company's Condensed Consolidated Statements of Operations. The credit-losses were measured as the difference between the present value of the expected cash flows of the corporate debt securities discounted using the effective interest rate at the date of purchase and the amortized cost of the corporate debt securities. The Company sold these investments during the three months ended September 30, 2015, ~~and recorded a realized gain of $5.3 million.~~

~~As of December 31, 2014,~~ the Company did not intend to sell the investments with unrealized losses and it ~~was not~~is more likely than not that the Company ~~would have been~~will not be required to sell ~~the security~~any of these securities prior to ~~its~~their anticipated recovery, which could ~~have been~~be maturity; therefore, the Company does not believe that its investment in the ~~corporate~~ debt securities and preferred stock was other-than-temporarily impaired at September 30, 2016 and December 31, ~~2014.~~2015.

The net carrying value and estimated fair value of investments and restricted investments classified as available-for-sale at September 30, ~~2015~~,2016, by contractual maturity are shown in the following table. Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations.

Amortized Cost Fair Value
Due in one year or less $ 333,636
$ 333,845
Due after one year through five years 5,269
5,269
338,905
339,114
Preferred stock 11,858
11,895
$ 350,763
$ 351,009

~~Table of Contents~~

~~5. Real Estate Sales~~

~~The Company’s Condensed Consolidated Financial Statements are not necessarily comparable from period to period due to the impact of the AgReserves Sale and the RiverTown Sale during 2014.~~

~~AgReserves Sale~~

Real estate sales for the nine months ended September 30, 2014, includes the sale to AgReserves, Inc. of approximately 380,000 acres of land located in Northwest Florida, along with certain other assets and inventory and rights under certain continuing leases and contracts (the “AgReserves Sale”). On March 5, 2014, the Company completed the AgReserves Sale for $562 million and recorded pre-tax income of $511.1 million for the AgReserves Sale, which includes $1.2 million of severance costs recorded in Other operating expenses. As a result of certain adjustments to the purchase price, consideration received for the AgReserves Sale was (1) $358.5 million in cash, (2) a $200 million fifteen year installment note (the “Timber Note”) issued by Panama City Timber Finance Company, LLC, a buyer-sponsored special purpose entity (the “AgReserves SPE”), and (3) an Irrevocable Standby Letter of Credit issued by JPMorgan Chase Bank, N.A. (the “Letter of Credit”) at the request of the AgReserves SPE, in favor of the Company. The AgReserves SPE was created by AgReserves with financial instruments having an aggregate principal balance of $203.5 million that secure the Letter of Credit.

In April 2014, the Company contributed the Timber Note and assigned its rights as a beneficiary under the Letter of Credit to Northwest Florida Timber Finance, LLC, a bankruptcy-remote, qualified special purpose entity wholly owned by the Company (“NFTF”). NFTF monetized the Timber Note by issuing $180 million aggregate principal amount of its 4.750% Senior Secured Notes due 2029 (the “Senior Notes”) at an issue price of 98.483% of the face value to third party investors. The Senior Notes are payable solely by the property of NFTF and the investors holding the Senior Notes of NFTF have no recourse against the Company for payment of the Senior Notes or the related interest expense.

~~The Company received $165.0 million in cash, net of $15.0 million in costs, from the monetization and~~ ~~expects to receive the remaining $20.0 million upon maturity of the Timber Note and after payment of the Senior Notes and any other liabilities of NFTF~~. The $15.0 million of costs from the monetization include (1) a total of $4.3 million for the discount and issuance costs for the Senior Notes, which will be amortized over the term of the Senior Notes, (2) $7.0 million for U.S. Treasury securities and cash that the Company contributed to NFTF to be used for interest and operating expenses over the fifteen year period of the Timber Note and which are recorded in Investments held by special purpose entities on the Company’s Condensed Consolidated Balance Sheets and (3) $3.7 million of costs related to the monetization that were expensed during the nine months ended September 30, 2014 and are recorded in Administrative costs associated with special purpose entities on the Company’s Condensed Consolidated Statements of Operations.

The Company owns the equity interest in NFTF, but no equity interest in the AgReserves SPE. Both the AgReserves SPE and NFTF are distinct legal entities and the assets of the AgReserves SPE and NFTF are not available to satisfy the Company's liabilities or obligations and the liabilities of the AgReserves SPE and NFTF are not the Company's liabilities or obligations. In the event that proceeds from the financial instruments are insufficient to settle all of the liabilities of the AgReserves SPE or NFTF, the Company is not obligated to contribute any funds to either the AgReserves SPE~~or NFTF.~~

The Company has determined that it was the primary beneficiary of the AgReserves SPE and NFTF as of September 30, 2015 and December 31, 2014, and therefore, the AgReserves SPE’s and NFTF’s assets and liabilities are consolidated in the Company's financial statements as of September 30, 2015 and December 31, 2014. The carrying amounts of the AgReserves SPE’s and NFTF’s assets and non-recourse liabilities were $211.4 million and $178.1 million, respectively, as of September 30, 2015. The consolidated assets of the AgReserves SPE and NFTF consist of a $200 million time deposit that subsequent to April 2, 2014 pays interest at 4.006% and matures in March 2029, accrued interest of $1.3 million on the time deposit, U.S. Treasuries of $8.5 million, cash of $0.2 million and deferred issuance costs of $1.4 million for the Senior Notes. The consolidated liabilities include Senior Notes issued by NFTF totaling $177.4 million net of the $2.6 million discount and $0.7 million of accrued interest expense on the Senior Notes.

~~Table of Contents~~

The Company’s Condensed Consolidated Statements of Operations includes the following amounts related to the Buyer SPE and NFTF for (i) interest income on the time deposit and amortization of the discounts on the U.S. Treasuries and (ii) interest expense for the Senior Notes, amortization of the discount and issuance costs:

Three Months Ended
September 30, Nine Months Ended
September 30,
2015 2014 2015 2014
Investment income, net $ 2,050
$ 2,050
$ 6,150
$ 4,067
Interest expense $ (2,189 ) $ (2,185 ) $ (6,566 ) $ (4,397 )

The Company has classified the U.S. Treasury securities held by the AgReserves SPE and NFTF as held-to-maturity based on their intent and ability to hold these securities to maturity. Accordingly, the debt securities are recorded at amortized cost, which approximates fair value as of September 30, 2015. The U.S. Treasuries mature over the fifteen year period of the Timber Note or $0.8 million within one year, $3.6 million after one year through five years, $3.0 million after five years through ten years and $1.1 million after ten years.

~~RiverTown Sale~~

~~On April 2, 2014, the Company completed the sale to an affiliate of Mattamy (Jacksonville) Partnership d/b/a Mattamy Homes (~~“~~Mattamy~~”), of approximately 4,057 acres of real property, which constitutes the RiverTown community in St. Johns County, Florida, along with all of the Company’s related development or developer rights, founder’s rights and certain tangible and intangible personal property in exchange for (1) $24.0 million in cash, (2) $19.6 million in the form of a purchase money note, (3) the assumption of the Company’s Rivers Edge Community Development District assessments and (4) the obligation to purchase certain RiverTown community related impact fee credits from the Company as the RiverTown community is developed. The $19.6 million purchase money note was paid in full as of June 30, 2015.

Based on Mattamy’s current development plans and St. Johns County’s current costs for impact fees, the Company estimates that it may receive $20 million to $26 million for the impact fees over the five-year period following the closing (most of which, the Company expects to receive at the end of that five-year period). However, the actual additional consideration received for the impact fees, will be based on Mattamy’s actual development of the RiverTown community, the timing of Mattamy’s development of the RiverTown community and the impact fee rates at the time of such development (as determined by St. Johns County’s then current impact fee rate schedule), which are all factors beyond the Company’s control. The Company cannot provide any assurance as to the amount or timing of any payments it may receive for the impact fees. The Company has not recorded a receivable for the estimated impact fees to be received and will record any revenues related to the receipt of the impact fees at the time of receipt. The Company received no impact fees during the three months ended September 30, 2015 and received $0.1 million during the nine months ended September 30, 2015 and the Company has received a total of approximately $0.2 million through September 30, 2015.

The Company recorded net earnings of $26.0 million before income taxes for the RiverTown Sale during the nine months ended September 30, 2014. Mattamy also assumed the Company’s total outstanding Rivers Edge CDD assessments, which were $11.0 million, of which $5.4 million was recorded on the Company’s Consolidated Balance Sheets as of March 31, 2014.



	Amortized Cost		Fair Value
Due in one year or less	$	113,393	$	113,944
Due after one year through five years	98,130		99,398
Due after ten years through fifteen years	99		82
	211,622		213,424
Preferred stock	22,930		23,232
Restricted investments	5,640		5,640
	$	240,192	$	242,296

~~Table of Contents~~

~~6. Other Income (Expense)~~

~~Other income (expense) consists of the following:~~

Three Months Ended September 30, Nine Months Ended September 30,
2015 2014 2015 2014
Investment income, net
Net investment income from available-for-sale securities
Interest and dividend income $ 1,120
$ 1,859
$ 5,509
$ 3,987
Accretion income 639
440
2,184
961
Realized gains (losses) on the sale of investments 5,276
—
5,276
(833 )
Other-than-temporary impairment losses —
(1,295 ) —
(1,295 )
Total net investment income from available-for-sale securities 7,035
1,004

12,969
2,820
Interest income from investments in special purpose entities (Note 5) 2,050
2,050
6,150
4,067
Interest accrued on notes receivable and other interest 40
313
657
705
Total investment income, net 9,125
3,367

19,776
7,592
Interest expense
Interest expense and amortization of discount and issuance costs for Senior Notes issued by special purpose entity (Note 5) (2,189 ) (2,185 ) (6,566 ) (4,397 )
Interest expense (686 ) (765 ) (1,831 ) (1,442 )
Total interest expense (2,875 ) (2,950 )
(8,397 )
(5,839 )
Other, net
Fees and expenses for the SEC investigation (438 ) —
(7,869 ) —
Accretion income from retained interest investments 237
226
674
656
Hunting lease income 172
138
551
623
Other income, net 164
23
342
455
Other, net 135
387

(6,302 )
1,734

Total other income $ 6,385
$ 804

$ 5,077

$ 3,487

~~Investment income, net~~

Interest and dividend income includes interest income accrued or received on the Company’s corporate debt securities and dividend income received from the Company’s preferred stock investments. Accretion income includes the amortization of the premium or discount related to the Company’s available-for-sale securities, which is amortized based on an effective interest rate method over the term of the available-for-sale security. Realized gains (losses) on the sale of investments include the gain or loss recognized on the sale of an available-for-sale security prior to maturity. During the third quarter of 2014, the Company determined that its investments in corporate debt securities were other-than-temporarily impaired and recorded $1.3 million related to credit-related losses in Investment income, net on the Company's Condensed Consolidated Statements of Operations. See Note 4, ~~Investments.~~

Interest income from investments in special purpose entities primarily includes interest accrued or received on the Timber Note, which is used to pay the interest expense for the Senior Notes issued by special purpose entity. See Note 5, ~~Real Estate Sales~~.

~~Table of Contents~~

~~Interest expense~~

Interest expense includes interest expense related to the Company’s Community Development District debt and the construction loan in the Pier Park North joint venture. Borrowing costs, including the discount and issuance costs for the Senior Notes issued by the special purpose entity, are amortized based on the effective interest method at an effective rate of 4.9%.

~~Other, net~~

During the three and nine months ended September 30, 2015, the Company expensed a total of $0.5 million and $7.9 million, respectively, related to the SEC investigation. This amount was included in Other, net in the Condensed Consolidated Financial Statements. The $7.9 million of fees and expenses for the SEC investigation consisted of (i) an accrual of $3.5 million for penalties, disgorgements and interest relating to the SEC investigation and (ii) legal expenses associated with the SEC investigation. On October 27, 2015, the Company fully resolved the SEC investigation and entered into a settlement with the SEC. Without admitting or denying any factual allegations, the Company consented to the SEC’s issuance of an administrative order pursuant to which the Company agreed to pay penalties, disgorgements and interest of approximately $3.5 million, including a civil penalty assessed on the Company of $2.75 million and other disgorgements and interest subject to indemnification by the Company. During the nine months ended September 30, 2015, the Company received correspondence from an insurance carrier related to non-coverage of certain fees and expenses incurred in the SEC investigation and, as a result of this correspondence, the Company recorded $0.5 million and $4.4 million, respectively, in legal costs during the three and nine months ended September 30, 2015. See Note 18, ~~Commitments and Contingencies~~.

The Company records the accretion of investment income from its retained interest investment over the life of the retained interest using the effective yield method with rates ranging from 3.7% to 11.6%. Hunting lease income is recognized as income over the term of the lease.

7.5. Financial Instruments and Fair Value Measurements

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

Level 1. Quoted prices in active markets for identical assets or liabilities;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, such as internally-developed valuation models which require the reporting entity to develop its own assumptions.

~~Table of Contents~~

The financial instruments measured at fair value on a recurring basis at September 30, ~~2015~~2016 were as follows:


	Level 1		Level 2		Level 3		Total Fair Value		Level 1		Level 2		Level 3		Total Fair Value
Cash equivalents:
Money market funds	$	30,903	$	—	$	—	$	30,903	$	9,795	$	—	$	—	$	9,795
Commercial paper	98,984		—		—		98,984		139,463		—		—		139,463
Debt securities:
U.S. Treasury securities	234,861		—		—		234,861		99,734		—		—		99,734
Corporate debt securities	—		5,269		—		5,269		62,606		51,084		—		113,690
Preferred stock	—		11,895		—		11,895		19,185		4,047		—		23,232
Restricted investments:
Guaranteed income fund	—		7,156		—		7,156
Money market fund									5,640		—		—		5,640
	$	364,748	$	24,320	$	—	$	389,068	$	336,423	$	55,131	$	—	$	391,554

The financial instruments measured at fair value on a recurring basis at December 31, ~~2014~~2015 were as follows:


	Level 1		Level 2		Level 3		Total Fair Value		Level 1		Level 2		Level 3		Total Fair Value
Cash equivalents:
Money market funds	$	19,971	$	—	$	—	$	19,971	$	18,233	$	—	$	—	$	18,233
Commercial paper									174,973		—		—		174,973
Debt securities:
U.S. Treasury securities	509,815		—		—		509,815		184,740		—		—		184,740
Corporate debt securities	—		100,105		—		100,105		—		6,292		—		6,292
Preferred stock	—		26,958		—		26,958		—		208		—		208
Restricted investments:
Guaranteed income fund	—		7,940		—		7,940		—		7,072		—		7,072
	$	529,786	$	135,003	$	—	$	664,789	$	377,946	$	13,572	$	—	$	391,518

Money market funds, U.S. Treasury securities, ~~and~~ commercial paper, certain corporate debt securities and certain preferred stock are measured based on quoted market prices in an active market and categorized within level 1 of the fair value hierarchy. Money market funds and commercial paper with a maturity date of ninety days or less from the date of purchase are classified as cash equivalents in the Company’s ~~Condensed Consolidated Balance Sheets.~~condensed consolidated balance sheets.

~~Corporate~~Certain corporate debt securities and certain preferred stock are not traded on a nationally recognized exchange but rather are traded in the U.S. over-the-counter market where there is less trading activity and these are measured primarily using pricing data from external pricing services that use prices observed for recently executed market transactions for the corporate debt security or the preferred stock that the Company owns. Corporate debt securities and preferred stock are not traded on a nationally recognized exchange but rather are traded in the U.S. over the counter market where there is less trading activity.transactions. For these reasons, the Company has determined that ~~the~~certain corporate debt securities and certain preferred stock are categorized as level 2 financial instruments since their fair values were determined from market inputs in an inactive market.

~~Table of Contents~~

Restricted investments include certain of the surplus assets that were transferred from the Company’s Pension Plan to a suspense account in the Company’s 401(k) Plan in December 2014. The Company has retained the risks and rewards of ownership of these assets; therefore, the assets held in the suspense account are included in the Company’s condensed consolidated financial statements until they are allocated to participants. As of ~~September 30, 2015 and~~ December 31, ~~2014,~~2015, the assets held in the suspense account were invested in the Prudential Guaranteed Income Fund, which is a stable value fund designed to provide safety of principal, liquidity and a rate of return. The Prudential Guaranteed Income Fund iswas valued based upon the contributions made to the fund, plus earnings at guaranteed crediting rates, less withdrawals and fees and ~~are~~was categorized as a level 2 financial ~~instruments.~~instrument. During the nine months ended September 30, 2016 the assets were transferred to a Vanguard Money Market Fund, which invests in U.S. government securities and seeks to provide current income and preserve shareholders’ principal investment. The Vanguard Money Market Fund is measured based on quoted market prices in an active market and categorized within level 1 of the fair value hierarchy. The Company’s Retirement Plan Investment Committee is responsible for investing decisions and allocation decisions of the suspense account. Refer to Note 15, Employee Benefit ~~Plans.~~Plans.

Fair Value of Financial Instruments

~~The fair value of the Company’s pledged treasury securities is based on quoted market prices in an active market.~~

The fair value of the Company’s retained interest investments is based on the present value of the expected future cash flows at the effective yield.

The fair value of the Investments held by special purpose entities - Time deposit is based on the present value of future cash flows at the current market rate. ~~See Note 5,~~ ~~Real Estate Sales~~.

The fair value of the Investments held by special purpose entities - U.S. Treasury securities are measured based on quoted market prices in an active market. ~~See Note 5,~~ ~~Real Estate Sales~~.

The fair value of the Senior Notes held by special purpose entity is based on the present value of future cash flows at the current market rate. ~~See Note 5,~~ ~~Real Estate Sales~~.

The carrying amount and fair value of the Company’s financial instruments were as follows:

September 30, 2015 December 31, 2014

Carrying
value
Fair value Level
Carrying
value
Fair value Level
Assets
Pledged treasury securities $ —
$ —
N/A $ 25,670
$ 26,501
1
Retained interest investments $ 10,137
$ 13,147
3 $ 9,932
$ 13,026
3
Investments held by special purpose entities (Note 5) $ 208,720
$ 209,144
3 $ 209,857
$ 209,679
3
Liabilities
Senior Notes held by special purpose entity (Note 5) $ 177,418
$ 177,982
3 $ 177,341
$ 177,940
3

~~Pledged Treasury Securities~~

In connection with a sale of the Company’s office portfolio in 2007, the Company completed an in-substance defeasance of approximately $29.3 million of mortgage debt that was collateralized by one of the commercial buildings. The Company assigned the mortgage debt and deposited sufficient funds with a trustee solely to satisfy the principal and remaining interest obligations on the mortgage debt when due. The interest yield on the pledged securities and the interest expense on the debt are closely related. The transaction did not qualify as an extinguishment of debt, since the Company was responsible if there had been a shortfall in the funds deposited into the trust, which were invested in government backed securities. The trust was not in the Company’s control and the trustee could not sell the securities prior to maturity. As such, the government backed securities or cash and the related debt (see Note 11, ~~Debt~~) remained on the Company’s Condensed Consolidated Balance Sheets at September 30, 2015 and December 31, 2014. The government backed securities or cash were recorded as Pledged cash and treasury securities on the Company’s Condensed Consolidated Balance Sheets.

~~Table of Contents~~

In August 2015, the remaining pledged treasury securities matured and were held as restricted cash at September 30, 2015. In October 2015, the trustee made the final balloon payment on the mortgage debt in the amount of $25.3 million, utilizing the pledged treasury securities and cash. There was no shortfall on the payment.



	September 30, 2016					December 31, 2015
	Carrying value		Fair value		Level	Carrying value		Fair value		Level
Assets
Retained interest investments	$	10,494	$	13,386	3	$	10,246	$	13,333	3
Investments held by special purpose entities:
Time deposit	$	200,000	$	200,000	3	$	200,000	$	200,000	3
U.S. Treasury securities and cash equivalents	$	8,543	$	8,759	1	$	8,785	$	9,033	1
Liabilities
Senior Notes held by special purpose entity	$	176,255	$	215,725	3	$	176,094	$	178,035	3

Retained Interest Investments

The Company has a beneficial interest in certain bankruptcy remote qualified special purpose entities (the ~~“2008 SPEs”~~“SPEs”) used in the installment sale monetization of certain sales of timberlands in 2007 and 2008. The ~~2008~~ SPEs’ assets are not available to satisfy the Company’s liabilities or obligations and the liabilities of the ~~2008~~ SPEs are not the Company’s liabilities or obligations. In the event that proceeds from the financial instruments are insufficient to settle all of the liabilities of the ~~2008~~SPEs,, the Company is not obligated to contribute any funds to the ~~2008~~ SPEs. The Company has determined that it is not the primary beneficiary of the ~~2008~~ SPEs, since the Company is not the primary decision maker with respect to activities that could significantly impact the economic performance of the ~~2008~~ SPEs, nor does the Company perform any service activity related to the ~~2008~~ SPEs. Therefore, the ~~2008~~ SPEs’ assets and liabilities are not consolidated in the Company’s condensed consolidated financial statements as of September 30, ~~2015~~2016 and December 31, ~~2014.~~2015.

At the time of monetization the initial retained interest recorded was an estimate based on the present value of future excess cash flows expected to be received over the life of the retained interest, using management’s best estimate of underlying assumptions, including credit risk and discount rates. The Company’s continuing involvement with the ~~2008~~ SPEs is the receipt of the net interest payments and the remaining principal of approximately ~~$15.2~~$15.0 million to be received at the end of the installment notes’ fifteen year maturity period, in 2022 through 2024.

The Company has a beneficial or retained interest investment related to ~~the 2008~~these SPEs of ~~$10.1~~$10.5 million and ~~$9.9~~$10.2 million as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively, recorded in ~~Other~~other assets on the Company’s ~~Condensed Consolidated Balance Sheets.~~condensed consolidated balance sheets. The Company has classified its retained interest investment as held-to-maturity because the Company has both the intent and the ability to hold its interest in the ~~2008~~ SPEs to maturity. Accordingly, the Company has recorded the retained interest investment at cost, adjusted for the accretion of investment income over the life of the retained interest using the effective yield method with rates ranging from 3.7% to ~~11.6%~~11.3%. The Company continues to update ~~its~~the expectation of cash flows to be collected over the term of the retained interest. Changes to the previously projected cash flows are accounted for prospectively, unless based on management’s assessment of current information and events, it is determined that there is an other-than-temporary impairment. The Company has not recorded an other-than-temporary impairment related to its retained interest investments during the three and nine months ended September 30, ~~2015~~2016 and ~~2014.~~2015.

In the event of a failure and liquidation of the counterparties involved in the installment sales, the Company could be required to write-off the remaining retained interest recorded on its ~~Condensed Consolidated Balance Sheets.~~condensed consolidated balance sheets in connection with the installment sale monetization transactions in 2007 and 2008.

Investments and Senior Notes Held by Special Purpose Entities

In connection with a real estate sale in 2014, the Company received consideration consisting of (i) cash, (ii) a $200.0 million fifteen-year installment note (the “Timber Note”) issued by Panama City Timber Finance Company, LLC, a buyer-sponsored special purpose entity (“AgReserves SPE”) and (iii) an Irrevocable Standby Letter of Credit issued by JPMorgan Chase Bank, N.A. (the “Letter of Credit”) at the request of AgReserves SPE, in favor of the Company. In 2014, the Company contributed the Timber Note and assigned its rights as a beneficiary under the Letter of Credit to Northwest Florida Timber Finance, LLC (“NFTF”), a bankruptcy-remote, qualified special purpose entity wholly-owned by the Company. NFTF monetized the Timber Note by issuing $180.0 million aggregate principal amount of its 4.8% Senior Secured Notes due in 2029 (the “Senior Notes”) at an issue price of 98.5% of face value to third party investors. AgReserves SPE and NFTF are VIEs, which the Company consolidates as the primary beneficiary of each entity. The investments held by the SPEs consist of a $200.0 million time deposit that, subsequent to April 2, 2014, pays interest at 4.0% and matures in March 2029, U.S. Treasuries of $8.1 million and cash of $0.4 million. The Senior Notes issued by NFTF consist of $176.3 million net of the $3.7 million discount and debt issuance costs.

6. Notes Receivable, Net

Notes receivable, net consists of the following:



	September 30, 2016		December 31, 2015
Pier Park Community Development District notes, non-interest bearing, due September 2022, net of unamortized discount of $0.1 million, effective rates 5.93% — 6.50%	$	1,792	$	1,985
Interest bearing homebuilder notes, secured by the real estate sold — 4.0% interest rate, any remaining payments outstanding are due December 2016	33		90
Various mortgage notes, secured by certain real estate, bearing interest at various rates	216		480
Total notes receivable, net	$	2,041	$	2,555

The Company evaluates the carrying value of the notes receivable and the need for an allowance for doubtful notes receivable at each reporting date.

7. Claim Settlement Receivable

On March 24, 2016, the Company entered into a full and final release agreement with BP p.l.c. and various related entities pursuant to which the Company, on its own behalf and on behalf of certain wholly owned subsidiaries, released any and all claims related to the Deepwater Horizon oil spill which occurred on April 20, 2010. In exchange for this release, the Company will receive the amount of $13.2 million from BP Exploration & Production Inc., a large portion of which will reimburse the Company for expenses incurred. Payment of the settlement amount is to be made pursuant to the following schedule: the amount of $5.0 million due in October of 2016 followed by payments of $2.7 million due in October of 2017, 2018 and 2019. On October 3, 2016, the Company received the $5.0 million payment. The Company also received a guaranty of payments from BP North America Corporation Inc. As of March 24, 2016, the Company recorded the claim settlement receivable using an imputed interest rate of 3.0%, based on its best estimate of the prevailing market rates for the source of credit, resulting in an initial present value of $12.5 million and a discount of $0.7 million. $12.5 million of the claim settlement was recognized as other income in the Company’s condensed consolidated statements of income for the nine months ended September 30, 2016. The discount is being accreted over the term of the receivable using the effective interest method. Interest income for the three months ended September 30, 2016 and the period from March 24, 2016 to September 30, 2016 was $0.1 million and $0.2 million, respectively.

8. Other Assets

Other assets consist of the following:



	September 30, 2016		December 31, 2015
Retained interest investments	$	10,494	$	10,246
Accounts receivable, net	4,134		4,382
Prepaid expenses	5,823		5,849
Straight line rent	3,848		3,732
Income tax receivable	327		2,275
Other assets	7,782		6,751
Accrued interest receivable for Senior Notes held by special purpose entity	935		3,338
Total other assets	$	33,343	$	36,573

9. Real Estate Joint Ventures

The Company enters into real estate joint ventures, from time to time, for the purpose of developing real estate in which the Company may or may not have a controlling financial interest. GAAP requires consolidation of VIEs in which an enterprise has a controlling financial interest and is the primary beneficiary. A controlling financial interest will have both of the following characteristics: (a) the power to direct the VIE activities that most significantly impact economic performance and (b) the obligation to absorb the VIE losses and right to receive benefits that are significant to the VIE. The Company examines specific criteria and uses judgment when determining whether the Company is the primary beneficiary and must consolidate a VIE. The Company continues to assess whether it is the primary beneficiary on an ongoing basis.

~~Table of Contents~~

Consolidated Real Estate Joint Ventures

During 2012, the Company entered into a joint venture agreement with a partner to develop a retail ~~lifestyle~~ center at Pier Park North. ~~During 2013,~~The Company’s partner is responsible for the day-to-day activities of the joint venture. However, the Company has significant involvement in the design of the development and ~~its partner contributed total cash of approximately $14.4 million to~~approves all major decisions, including project development, annual budgets and financing. The Company determined the joint venture ~~of which~~is a VIE and that the Company ~~contributed $9.5 million, or 66%, and~~is the Company’s partner contributed $4.9 million, or 34%. Additionally, during 2013 the Company contributed land with an agreed upon value of $6.0 million to the joint venture. During 2013, the Company received a cash distribution of $2.3 millionVIE’s primary beneficiary as ~~the result of a sale of a portion of the property in the joint venture.~~

In February 2013, the Pier Park North joint venture entered into a $41.0 million construction loan agreement that would have matured in February 2016 with the possibility of an option for a two year extension (the “Construction Loan”). As of September 30, ~~2015~~2016 and December 31, 2014, $37.6 million and $31.6 million, respectively, were outstanding on the Construction Loan. In connection with the Construction Loan agreement the Company had entered into certain limited guarantees. In addition, the Company had agreed to maintain minimum liquidity of $25 million and net worth of $350 million under the Construction Loan.2015.

In October 2015, the Pier Park North joint venture refinanced ~~the Construction Loan and entered~~a construction loan by entering into a $48.2 million ~~loan. The refinanced~~ loan ~~will accrue interest at a rate of 4.1% per annum and matures in November 2025~~ (the “Refinanced Loan”)~~. The Refinanced Loan provides for interest only payments during the first twelve months and principal and interest payments thereafter with a final balloon payment at maturity. The Refinanced Loan~~, which is secured by a first lien on, and security interest in, a majority of the Pier Park North joint venture’s property and a ~~$6.62~~$6.6 million short term letter of credit.

~~Upon refinancing~~ In October 2016, the letter of credit was reduced to $1.3 million based on the Construction Loan, $6.3 million was distributed to the Company, including $3.7 million as the remaining return for contributed land. As contemplated by the Pier Park North joint venture’s operating agreement, the remaining distribution was used to rebalance the equity ownership in the joint venture, such that the ownership percentage of the Company and its partner was adjusted to 60% and 40%, respectively.

~~In connection with the closing~~terms of the Refinanced Loan agreement. Additionally, in connection with this refinancing, each of the Pier Park North joint venture partners executed a limited guarantee in favor of the lender, based on their percentage ownership of the joint venture. The limited guarantee covers losses arising out of certain events, including (i) tenant security deposits; (ii) tenant rents; (iii) costs and expenses related to any environmental clean-up; (iv) liability for fraud or material breach of warranty with respect to the financing; (v) unpaid real estate taxes assessed against the property; (vi) failure to maintain required insurance; (vii) foreclosure of the security instrument; or (viii) failure of the joint venture to comply with certain covenants in the security instrument. In addition, the guarantee can become full recourse in the case of any fraud or intentional misrepresentation by the Pier Park North joint venture; any voluntary transfer or encumbrance of the property in violation of the due-on-sale clause in the security instrument; upon commencement of voluntary or insolvency proceedings; and upon breach of covenants in the security instrument. Pursuant to the guarantee, the Pier Park North joint venture partners are required to maintain a minimum of $36 million in combined net worth, not including the value of each partner’s respective equity in the Pier Park North property.

~~As of September 30, 2015, the Company’s capital account represents over 73% of the total equity~~ in the joint venture. The Company’s partner is responsible for the day-to-day activities; however, the Company has significant involvement in the design of the related development plan and approves all major decisions including the project development, annual budgets and loan refinancing. The Company has evaluated the VIE consolidation requirements with respect to this transaction and has determined that the Company is the primary beneficiary as the Company has both the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses and the right to receive benefits that are significant to the VIE; therefore, the results of the VIE have been consolidated within the financial results of the Company as of September 30, 2015.See Note 10, Debt.

~~Table of Contents~~

In addition, the Company is the primary beneficiary of another real estate joint venture, Artisan Park, L.L.C, that is consolidated within the financial results of the Company. The Company is entitled to 74% of the profits or losses of this ~~VIE.~~VIE and is responsible for the day-to-day activities of the joint venture. The Company has determined that the Company is the primary beneficiary as it has ~~both~~ the power to direct the activities that most significantly impact the joint venture’s economic ~~performance and the obligation to absorb losses and the right to receive benefits that could potentially be significant to the VIE;~~performance; therefore, the results of the VIE have been consolidated within the financial results of the Company. If it is determined by the joint venture’s executive committee that an additional capital contribution is needed, the partners shall be afforded the right, but shall not have the obligation, to make a capital contribution based on the partner’s respective percentage interest.

As of September 30, 2015, the carrying amounts of the real estate VIEs’ assets that are consolidated were $56.8 million and non-recourse liabilities $39.4 million, including debt of $37.6 million, of which the Company has a principal repayment guarantee limited to 33% of the outstanding balance. Each VIE’s assets can only be used to settle obligations of that VIE. Those assets are owned by, and those liabilities are obligations of, that VIE, and not the Company, except for the above described guarantees and covenants.

Unconsolidated Real Estate VIE

As of September 30, ~~2015,~~2016, the Company is a partner in ALP Liquidating Trust (“~~ALP~~”(“ALP”) that is accounted for using the equity method. The joint venture was entered into to develop and sell certain mixed use residential and commercial projects. The Company has evaluated the VIE consolidation requirements with respect to this joint venture and has determined that the Company is not the primary beneficiary, since the Company does not have the power to direct the activities that most significantly impact the economic performance of the VIE. The Company is not required to contribute additional funds to ALP.

Summarized financial information for ALP is as follows:


	September 30, 2015		December 31, 2014		September 30, 2016		December 31, 2015
BALANCE SHEETS:

Cash and cash equivalents	$	14,362	$	15,461	$	12,796	$	13,760
Other assets	58		57		59		58
Total assets	$	14,420	$	15,518	$	12,855	$	13,818

Accounts payable and other liabilities	$	1,103	$	605	$	1,535	$	1,978
Equity⁽¹⁾	13,317		14,913		11,320		11,840
Total liabilities and equity	$	14,420	$	15,518	$	12,855	$	13,818

(1) In 2008 the Company wrote-off its investment in ALP as a result of ALP reserving its assets to satisfy potential claims and obligations in accordance with its publicly reported liquidation basis of accounting. Subsequently, ALP changed its method of accounting to a going concern basis and reinstated its equity and stated it would report certain expenses as they are incurred. The Company has not recorded any additional equity income as a result of ~~the~~ ALP’s change in accounting.

For the three months ended September 30, ~~2015~~2016 and ~~2014,~~2015, ALP reported a net loss of ~~$0.4~~$0.2 million and ~~$0.2~~$0.4 million, respectively. For the nine months ended September 30, ~~2015~~2016 and ~~2014,~~2015, ALP reported a net loss of ~~$1.6~~$0.5 million and ~~$1.2~~$1.6 million, respectively.

~~Table of Contents~~

~~9. Notes Receivable, net~~

~~Notes receivable, net consists of the following:~~

September 30,
2015 December 31,
2014
Interest bearing homebuilder note for the RiverTown Sale, secured by the real estate sold — 5.25% interest rate, all accrued interest and remaining principal and interest payment due and paid in June 2015 $ —
$ 19,600
Pier Park Community Development District notes, non-interest bearing, due December 2024, net of unamortized discount of $0.1 million, effective rates 5.73% — 8.0% 2,147
2,147
Interest bearing homebuilder notes, secured by the real estate sold — 4.0% interest rate, any remaining payments outstanding are due August 2016 256
2,011
Various mortgage notes, secured by certain real estate bearing interest at various rates 490
512
Total notes receivable, net $ 2,893
$ 24,270

~~The Company evaluates the carrying value of the notes receivable and the need for an allowance for doubtful notes receivable at each reporting date.~~

10. ~~Other Assets~~

~~Other assets consist of the following:~~

September 30,
2015 December 31,
2014
Retained interest investments $ 10,137
$ 9,932
Accounts receivable, net 4,401
4,385
Prepaid expenses 6,326
4,783
Straight line rent 3,716
2,869
Income tax receivable 1,247
778
Other assets 5,485
6,305
Accrued interest receivable for Senior Notes held by special purpose entity (Note 5) 1,335
2,938
Total other assets $ 32,647
$ 31,990

~~Table of Contents~~

~~11.~~ Debt

Debt consists of the ~~following:~~following at September 30, 2016:

September 30,
2015 December 31,
2014
In-substance defeased debt, interest payable at 5.62%, secured and paid by pledged cash and treasury securities, due October 1, 2015 $ 25,324
$ 25,670
Community Development District debt, secured by certain real estate and standby note purchase agreements, due through May 2039, interest payable at 2.25% to 7.0% 6,777
6,516
Construction loan in the Pier Park North joint venture, due February 2016, bearing interest at LIBOR plus 210 basis points, or 2.30% and 2.26% at September 30, 2015 and December 31, 2014, respectively 37,625
31,618
Total debt $ 69,726
$ 63,804



	Principal		Unamortized Discount and Debt Issuance Costs		Net
Refinanced Loan in the Pier Park North joint venture, due November 2025, bearing interest at 4.1%	$	48,200	$	635	$	47,565
Community Development District debt, secured by certain real estate and standby note purchase agreements, due May 2031 - May 2039, bearing interest at 3.09% to 7.0% at September 30, 2016	6,668		—		6,668
Total debt	$	54,868	$	635	$	54,233

Debt consists of the following at December 31, 2015:



	Principal		Unamortized Discount and Debt Issuance Costs		Net
Refinanced Loan in the Pier Park North joint venture, due November 2025, bearing interest at 4.1%	$	48,200	$	720	$	47,480
Community Development District debt, secured by certain real estate and standby note purchase agreements, due May 2016 - May 2039, bearing interest at 2.8% to 7.0% at December 31, 2015	6,994		—		6,994
Total debt	$	55,194	$	720	$	54,474

The Refinanced Loan accrues interest at a rate of 4.1% per annum and matures in November 2025. In connection with the ~~sale~~Refinanced Loan, the Company entered into a limited guarantee in favor of the ~~Company’s office building portfolio in 2007,~~lender, based on its percentage ownership of the ~~Company completed an in-substance defeasance of debt of approximately~~ ~~$29.3 million~~ ~~of mortgage debt, which has a final balloon payment that was made in October~~ ~~2015. The Company assigned~~joint venture. In addition, the mortgage debt and deposited sufficient funds with a trustee solely to satisfy the principal and remaining interest obligations on the mortgage debt when due. The indebtedness remained on the Company’s Condensed Consolidated Balance Sheets at September 30, 2015 and December 31, 2014 since the transaction was not considered to be an extinguishment of debt because the Company is liable if, for any reason, the government securities were insufficient to repay the debt. In October 2015, the trustee made the final balloon payment on the mortgage debtguarantee can become full recourse in the ~~amount~~case of ~~$25.3 million, utilizing~~any fraud or intentional misrepresentation by the ~~pledged treasury securities~~Pier Park North joint venture; any voluntary transfer or encumbrance of the property in violation of the due-on-sale clause in the security instrument; upon commencement of voluntary or insolvency proceedings and ~~cash. There was no shortfall on~~upon breach of covenants in the ~~payment.~~security instrument.

Community Development District (“CDD”) bonds financed the construction of infrastructure improvements at several of the Company’s projects. The principal and interest payments on the bonds are paid by assessments on, or from sales proceeds of, the properties benefited by the improvements financed by the bonds. The Company has recorded a liability for CDD assessments that are associated with platted property, which is the point at which the assessments become fixed or determinable. Additionally, the Company has recorded a liability for the balance of the CDD assessment that is associated with unplatted property if it is probable and reasonably estimable that the Company will ultimately be responsible for repaying. The Company has recorded debt of ~~$6.8~~$6.7 million and ~~$6.5~~$7.0 million related to CDD assessments as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. The Company’s total outstanding CDD assessments were ~~$22.2~~$21.9 million and ~~$22.7~~$22.5 million at September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. The Company pays interest on the total outstanding CDD assessments.

In February 2013, the Company’s Pier Park North joint venture entered into a Construction Loan agreement for $41.0 million that matures in February 2016 with the possibility of an option for a two year extension. As of ~~September 30, 2015~~ ~~and December 31, 2014, $37.6 million and $31.6 million, respectively were outstanding on the Construction Loan. See Note 8,~~ ~~Real Estate Joint Ventures~~. In October 2015, the Pier Park North joint venture refinanced its February 2013 Construction Loan and entered into a $48.2 million loan. The Refinanced Loan will accrue interest at a rate of 4.1% per annum and will mature on November 1, 2025. See Note 8, ~~Real Estate Joint Ventures~~ ~~for details on the Refinanced Loan.~~

~~Table of Contents~~

The aggregate maturities of debt subsequent to September 30, ~~2015~~2016 are:


	September 30, 2015		September 30, 2016

2015	25,324
2016 ⁽¹⁾	37,742
2016			$	96
2017	121		991
2018	126		1,032
2019	130		1,075
2020			1,119
Thereafter	6,283		50,555
	$	69,726	$	54,868



(1	)	In October 2015, the Company’s Pier Park North joint venture refinanced its Construction Loan that would have matured in 2016. As a result, $37.6 million will no longer be due in 2016. The Refinanced Loan will mature in November 2025. See Note 8, ~~Real Estate Joint Ventures~~.

~~12. Accrued Liabilities and Deferred Credits~~

~~Accrued~~11. Other Liabilities

Other liabilities ~~and deferred credits~~ consist of the following:

September 30,
2015 December 31,
2014
Accrued compensation $ 4,983
$ 2,673
Deferred revenue 15,484
15,309
Membership deposits 7,731
8,426
Accruals for fees and expenses for the SEC investigation 5,781
—
Other accrued liabilities 9,447
5,651
Accrued interest expense for Senior Notes held by special purpose entity (Note 5) 713
2,852
Total accrued liabilities and deferred credits $ 44,139
$ 34,911



	September 30, 2016		December 31, 2015
Accounts payable	$	2,724	$	2,585
Accrued compensation	2,541		3,366
Deferred revenue	15,493		15,584
Membership deposits and initiation fees	7,305		7,416
Advance deposits	3,291		3,574
Other accrued liabilities	11,339		6,505
Accrued interest expense for Senior Notes held by special purpose entity	712		2,850
Total other liabilities	$	43,405	$	41,880

Deferred revenue at September 30, ~~2015~~2016 and December 31, ~~2014~~2015 includes $12.5 million related to a 2006 agreement pursuant to which the Company agreed to sell ~~approximately 3,900 acres of~~ rural land to the Florida Department of ~~Transportation (the “FDOT”).~~Transportation. Revenue is recognized when title to a specific parcel is legally transferred.

~~Table~~Membership deposits and initiation fees consist of ~~Contents~~deposits and fees received for club memberships. Initiation fees are recognized as revenue over the estimated average duration of membership.

Advance deposits consist of deposits received on hotel rooms and vacation rentals. Advance deposits are recorded as other liabilities in the condensed consolidated balance sheets without regard to whether they are refundable and are recognized as income at the time the service is provided for the related deposit.

AsOther accrued liabilities include $3.8 million of accrued property taxes as of September 30, 2016, which are generally paid annually in November. As of December 31, 2015 the Company had $5.8 million in accruals for fees and expenses related to the SEC investigation. The amount of $5.8 million includes (i) an accrual of $3.5 million for penalties, disgorgements and interest relating to the SEC investigation and (ii) legal fees related to the SEC investigation. During the nine months ended September 30, 2015, the Company received correspondence from an insurance carrier related to non-coverage of certain expenses incurred in the SEC investigation and, as a result of this correspondence, the Company recorded $0.5 million and $4.4 million, respectively, in legal costs during the three and nine months ended September 30, 2015 of which $2.3 million had not been paid and wasno accrued at September 30, 2015. On October 27, 2015, the Company fully resolved the SEC investigation and entered into a settlement pursuant to which the Company agreed to pay penalties, disgorgements and interest of approximately $3.5 million, including a civil penalty assessed on the Company of $2.75 million and other disgorgements and interest subject to indemnification by the Company. See Note 18, ~~Commitments and Contingencies~~.property taxes.

~~13.~~12. Income Taxes

Income tax expense differed from the amount computed by applying the federal statutory rate of 35% to pre-tax ~~loss~~income or ~~income~~loss as a result of the following:

Three Months Ended
September 30, Nine Months Ended September 30,
2015
2014 2015 2014
Tax expense (benefit) at the statutory federal rate $ 1,415
$ (180 ) $ 996
$ 186,428
State income tax expense (benefit) (net of federal benefit) 142
(18 ) 100
18,643
Decrease in valuation allowance (87 ) 81
(245 ) (90,083 )
Costs for the SEC investigation (256 ) —
1,092
—
Other 30
(269 ) 91
221
Income tax expense (benefit) $ 1,244
$ (386 ) $ 2,034
$ 115,209



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Tax expense at the federal statutory rate	$	1,280		$	1,415		$	6,424		$	996
State income tax expense (net of federal benefit)	128			142			642			100
Tax effect of timber at the federal statutory rate of 23.8%	(121		)	—			(381		)	—
Decrease in valuation allowance	(350		)	(87		)	(713		)	(245		)
Fees and expenses for the SEC investigation	—			(256		)	—			1,092
Other	11			30			(802		)	91
Total income tax expense	$	948		$	1,244		$	5,170		$	2,034

As of September 30, ~~2015,~~2016, the Company had no federal net operating loss carryforwards and had ~~$325.7~~$313.1 million of state net operating loss carryforwards, which are available to offset future taxable income through 2031.

In general, a valuation allowance is recorded if, based on the available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. Realization of the Company’s deferred tax assets is dependent upon the Company generating sufficient taxable income in future years in the appropriate tax jurisdictions to obtain a benefit from the reversal of deductible temporary differences and from loss carryforwards. As of December 31, ~~2013,~~2015, based on the timing of reversal of future taxable amounts and the Company’s history of losses, management did not believe it met the requirements to realize the benefits of certain of its deferred tax assets; therefore, the Company had maintained a valuation allowance of ~~$93.1~~$6.0 million. During the nine months ended September 30, ~~2014,~~2016, the Company reversed ~~$90.1~~$0.7 million of the valuation allowance that was recorded as of December 31, ~~2013.~~2015. As of September 30, ~~2015,~~2016, management believes it has not met the requirements to realize the benefits for a portion of its deferred tax assets for state net operating loss carryforwards; therefore, the Company has maintained a valuation allowance of ~~$6.0~~$5.3 million for these deferred tax assets.

~~Table of Contents~~

The Company had approximately $1.7 million of total unrecognized tax benefits as of each September 30, 2016 and December 31, 2015. Of this total, there are no amounts of unrecognized tax benefits that, if recognized, would affect the effective income tax rate. There were no decreases or increases related to prior year or current year tax positions.

13. Accumulated Other Comprehensive Income (Loss)

Following is a summary of the changes in the accumulated balances of accumulated other comprehensive income (loss), which is presented net of tax, as of September 30, 2016:



	Unrealized Gains on Available-for-Sale Securities
Accumulated other comprehensive loss at December 31, 2015	$	(686	)
Other comprehensive income before reclassifications	2,005
Amounts reclassified from accumulated other comprehensive income	(25		)
Other comprehensive income	1,980
Accumulated other comprehensive income at September 30, 2016	$	1,294

Following is a summary of the tax effects allocated to other comprehensive income (loss) for the three months ended September 30, 2016 and 2015:



	Three Months Ended September 30, 2016
	Before-Tax Amount			Tax Benefit or (Expense)			Net-of-Tax Amount
Unrealized gains on debt securities:
Unrealized gains on available-for-sale investments	$	3,257		$	(1,253	)	$	2,004
Less: reclassification adjustment for gains included in earnings	(40		)	15			(25		)
Net unrealized gains	3,217			(1,238		)	1,979
Other comprehensive income	$	3,217		$	(1,238	)	$	1,979



	Three Months Ended September 30, 2015
	Before-Tax Amount			Tax Benefit or (Expense)			Net-of-Tax Amount
Unrealized gains on debt securities:
Unrealized gains on available-for-sale investments	$	3,710		$	(1,465	)	$	2,245
Less: reclassification adjustment for gains included in earnings	(5,276		)	2,522			(2,754		)
Net unrealized gains	(1,566		)	1,057			(509		)
Other comprehensive loss	$	(1,566	)	$	1,057		$	(509	)

Following is a summary of the tax effects allocated to other comprehensive income for the nine months ended September 30, 2016 and 2015:



	Nine Months Ended September 30, 2016
	Before-Tax Amount			Tax Benefit or (Expense)			Net-of-Tax Amount
Unrealized gains on debt securities:
Unrealized gains on available-for-sale investments	$	3,259		$	(1,254	)	$	2,005
Less: reclassification adjustment for gains included in earnings	(40		)	15			(25		)
Net unrealized gains	3,219			(1,239		)	1,980
Other comprehensive income	$	3,219		$	(1,239	)	$	1,980



	Nine Months Ended September 30, 2015
	Before-Tax Amount			Tax Benefit or (Expense)			Net-of-Tax Amount
Unrealized gains on debt securities:
Unrealized gains on available-for-sale investments	$	6,956		$	(2,738	)	$	4,218
Less: reclassification adjustment for gains included in earnings	(5,276		)	2,522			(2,754		)
Net unrealized gains	1,680			(216		)	1,464
Other comprehensive income	$	1,680		$	(216	)	$	1,464

14. Stockholders’ Equity

Stock Repurchase Program

On August 15, 2015 the Company’s Board of Directors, approved an increase in the number of shares available for repurchase under its stock repurchase program (“Stock Repurchase Program”) of up to $300.0 million (including $93.6 million shares that were remaining and unused from a previous authorization). In addition, the Board of Directors authorized the Company to commence a tender offer for up to $300.0 million at a price of $18.00 per share, pursuant to Rule 10b-18. During the nine months ended September 30, ~~2015,~~2016, the Company repurchased a total of 16,982,739 shares of its common stock outstanding. This amount included 16,348,143 shares purchased pursuant to a tender offer the Company announced on August 21, 2015, and which expired on September 22, 2015. Pursuant to the tender offer, in September 2015, the Company accepted for purchase 16,348,143995,650 shares of its common stock at aan average purchase price of ~~$18.00~~$14.88 per share, for ~~a total~~an aggregate purchase price of $294.3 million. The 16,348,143 shares of common stock repurchased included approximately 100,000 shares which were held in accounts managed by Fairholme Capital. The respective account holders directed that the shares be tendered into the tender offer, and such shares were repurchased under the same terms as all other shares of common stock repurchased$14.8 million, pursuant to the tender offer. No shares in which Fairholme has a pecuniary interest, or for which Fairholme holds sole dispositive power, were tendered into the tender offer. In addition, prior to the commencementits stock repurchase program (the “Stock Repurchase Program”). As of ~~the tender offer,~~September 30, 2016, the Company ~~purchased 634,596~~had a total authority of $190.9 million available for purchase of shares of its common stock ~~under~~pursuant to its ~~previous~~ Stock Repurchase ~~Program at a weighted average purchase price of $16.03. As of September 30, 2015, there was $5.7 million remaining for purchase of shares under the Company’s Stock Repurchase~~ Program.

~~In October 2015, the Company’s Board of Directors authorized an additional $200.0 million for share repurchases.~~ The Company may repurchase its ~~outstanding~~ common stock in open market purchases from time to time, ~~pursuant to Rule 10b-18,~~ in privately negotiated transactions or ~~otherwise. As~~otherwise, pursuant to Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The timing and amount of any additional shares to be repurchased will depend upon a ~~result~~variety of factors, including market and business conditions and other factors. Repurchases may be commenced or suspended at any time or from time to time without prior notice. The Stock Repurchase Program will continue until otherwise modified or terminated by the ~~additional authorization,~~Company’s Board of Directors at any time in its sole discretion. In July 2016, the Company ~~has~~retired 17,998,658 shares of treasury stock at a ~~total~~value of ~~$205.7 million available~~$320.1 million.

Issuance of Common Stock for ~~purchase~~Director’s Fees

On May 17, 2016, the Board approved the issuance of ~~shares under its Stock Repurchase Program.~~

~~15. Employee Benefit Plans~~

~~The Company previously sponsored a cash balance defined benefit pension plan that covered substantially all~~8,919 restricted stock awards to three members of ~~its salaried employees (the “Pension Plan”). In November 2012,~~ the Board of Directors ~~approved the termination~~as part of the Pension Plan. The Pension Plan was frozen in March 2013 pending regulatory approvals, which were received in August 2014. As of December 31, 2014, the Pension Plan assets have been distributed to Pension Plan participantstheir compensation package and ~~$7.9 million was distributed~~pursuant to the ~~Company’s 401(k) Plan to pay additional future benefits to current~~2015 Performance and ~~future 401(k) plan participants for up to~~Equity Incentive Plan. These restricted stock awards vested 25% on the ~~next seven years. Subsequent to these distributions,~~date of issue and 25% on August 17, 2016, with the remaining ~~Pension Plan assets of $23.8 million were reverted to the Company in December 2014.~~

~~A summary of the net periodic pension cost related to the Pension Plan for~~balance vesting 25% on November 17, 2016 and February 17, 2017. For the three and nine months ended September 30, ~~2014 are as follows:~~2016, the Company recorded expense of less than $0.1 million, related to restricted stock awards to the Company’s directors.

Three Months Ended September 30, 2014 Nine Months Ended September 30, 2014
Interest cost $ 149
$ 496
Expected loss on assets 137
412
Settlement charges 529
969
Amortization of loss 115
373
Net periodic pension cost $ 930
$ 2,250

~~As of September 30, 2014, the assumptions used to develop net periodic pension cost and benefit obligations were the discount rate of 3.75% and expected long-term rate on plan assets of 0%.~~

~~Table of Contents~~

~~Deferred Compensation Plan~~15. Employee Benefit Plans

The Company maintains a 401(k) retirement plan covering substantially all officers and employees of the Company, which permits participants to defer up to the maximum allowable amount determined by the IRS of their eligible compensation.

As part of the Pension Plan termination ~~described above,~~in 2014, the Company directed the Pension Plan to transfer $7.9 million of the Pension Plan’s surplus assets into a suspense account in the Company’s 401(k) Plan. The Company has retained the risks and rewards of ownership of these assets; therefore, the assets held in the suspense account are included in the Company’s condensed consolidated financial statements until they are allocated to participants. At September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, the fair ~~values~~value of these assets ~~were~~was recorded in ~~Restricted~~restricted investments on the Company’s ~~Condensed Consolidated Balance Sheets~~condensed consolidated balance sheets and were ~~$7.2~~$5.6 million and ~~$7.9~~$7.1 million, respectively.

The Company expenses the fair value of the assets at the time the assets are allocated to participants, which is expected to be up to the next ~~seven~~five years. During the nine months ended September 30, 2016 and 2015, the Company recorded an expense of $1.4 million and $0.9 million, respectively, for the fair value of the assets, less expenses, that were allocated to participants during that period. In addition, any gains and losses on these assets are reflected in the Company’s condensed consolidated financial statements and were less than a $0.1 million gain for both the three and nine months ended September 30, 2016 and 2015. Refer to Note 7,5, Financial Instruments and Fair Value Measurements.

16. ~~Accumulated~~ Other ~~Comprehensive~~ Income ~~(Loss)~~(Expense)

~~Following is a summary~~Other income (expense) consists of the ~~changes~~following:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Investment income, net
Net investment income from available-for-sale securities
Interest and dividend income	$	1,528		$	1,120		$	1,969		$	5,509
Accretion income	960			639			2,002			2,184
Realized gains on the sale of investments	40			5,276			40			5,276
Total net investment income from available-for-sale securities	2,528			7,035			4,011			12,969
Interest income from investments in special purpose entities	2,051			2,050			6,151			6,150
Interest accrued on notes receivable and other interest	110			40			216			657
Total investment income, net	4,689			9,125			10,378			19,776
Interest expense
Interest expense and amortization of discount and issuance costs for Senior Notes issued by special purpose entity	(2,259		)	(2,189		)	(6,640		)	(6,566		)
Interest expense	(816		)	(686		)	(2,615		)	(1,831		)
Total interest expense	(3,075		)	(2,875		)	(9,255		)	(8,397		)
Claim settlement	—			—			12,548			—
Other, net
Fees and expenses for the SEC investigation	—			(438		)	—			(7,869		)
Accretion income from retained interest investments	249			237			733			674
Hunting lease income	138			135			415			425
Other income, net	48			201			339			468
Other, net	435			135			1,487			(6,302		)

Total other income	$	2,049		$	6,385		$	15,158		$	5,077

Investment income, net

Interest income from investments in SPEs primarily includes interest accrued or received on the Timber Note, which is used to pay the interest expense for the Senior Notes issued by NFTF.

Interest expense

Interest expense includes interest expense related to the Company’s CDD debt and the construction loan and Refinanced Loan in the ~~accumulated balances~~Pier Park North joint venture. Borrowing costs, including the discount and issuance costs for ~~each component~~the Senior Notes issued by the special purpose entity, are amortized based on the effective interest method at an effective rate of ~~accumulated other comprehensive income (loss), which is presented~~4.9%.

Claim settlement

Claim settlement during the nine months ended September 30, 2016 includes $12.5 million for a settlement related to the Deepwater Horizon oil spill. See Note 7, Claim Settlement Receivable for further discussion.

Other, net ~~of tax, for~~

During the three and nine months ended September 30, 2015, the Company expensed a total of $0.4 million and ~~2014:~~$7.9 million, respectively, related to the SEC investigation, which was resolved in October 2015. This amount was included in Other, net in the condensed consolidated statements of income.

Defined Benefit Pension Items Unrealized Gains and (Losses) on Available-for-Sale Securities Total
Accumulated other comprehensive income at June 30, 2015 $ —
$ 648
$ 648
Other comprehensive income before reclassifications —
2,245
2,245
Amounts reclassified from accumulated other comprehensive income —
(2,754 ) (2,754 )
Other comprehensive loss —

(509 )
(509 )
Accumulated other comprehensive income at September 30, 2015 $ —

$ 139

$ 139
The Company records the accretion of investment income from its retained interest investment over the life of the retained interest using the effective yield method with rates ranging from 3.7% to 11.3%. Hunting lease income is recognized as income over the term of the lease.

Defined Benefit Pension Items Unrealized Gains and (Losses) on Available-for-Sale Securities Total
Accumulated other comprehensive loss at December 31, 2014 $ —
$ (1,325 ) $ (1,325 )
Other comprehensive income before reclassifications —
4,218
4,218
Amounts reclassified from accumulated other comprehensive loss —
(2,754 ) (2,754 )
Other comprehensive income —
1,464
1,464
Accumulated other comprehensive income at September 30, 2015 $ —
$ 139
$ 139

~~Table of Contents~~

Defined Benefit Pension Items Unrealized Gains and (Losses) on Available-for-Sale Securities Total
Accumulated other comprehensive loss at June 30, 2014 $ (5,330 ) $ (1,785 ) $ (7,115 )
Other comprehensive loss before reclassifications 58
(1,969 ) (1,911 )
Amounts reclassified from accumulated other comprehensive loss 396
796
1,192
Other comprehensive income 454
(1,173 ) (719 )
Accumulated other comprehensive loss at September 30, 2014 $ (4,876 ) $ (2,958 ) $ (7,834 )

Defined Benefit Pension Items Unrealized Gains and (Losses) on Available-for-Sale Securities Total
Accumulated other comprehensive loss at December 31, 2013 $ (5,392 ) $ (2,125 ) $ (7,517 )
Other comprehensive loss before reclassifications (309 ) (2,142 ) (2,451 )
Amounts reclassified from accumulated other comprehensive loss 825
1,309
2,134
Other comprehensive income (loss) 516
(833 ) (317 )
Accumulated other comprehensive loss at September 30, 2014 $ (4,876 ) $ (2,958 ) $ (7,834 )

~~Table of Contents~~

Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
Three Months Ended
September 30, Nine Months Ended
September 30,
Details about Accumulated Other Comprehensive Income (Loss) Components 2015
2014 2015 2014 Affected Line in the Condensed Consolidated Statements of Operations
Defined benefit pension items
Amortization of loss $ —
$ 115
$ —
$ 373

Net periodic pension costs, Note 15, Employee Benefit Plans
Settlement cost —
529
—
969

Net periodic pension costs, Note 15, Employee Benefit Plans
Total before tax —
644
—
1,342

Income tax —
(248 ) —
(517 )
Net of tax —
396
—
825

Items related to available-for-sale securities
Other-than-temporary impairment losses —
1,295
—
1,295
Investment income, net, Note 4, Investments
Realized (gain) loss on sale (5,276 ) —
(5,276 ) 833

Investment income, net, Note 4, Investments
Income tax �� 2,522
(499 ) 2,522
(819 )
Net of tax (2,754 ) 796
(2,754 ) 1,309

Total reclassifications for the period, net of tax $ (2,754 ) $ 1,192
$ (2,754 ) $ 2,134

~~Table of Contents~~

17. Segment Information

The Company conducts primarily all of its business in the following five reportable operating segments: 1) residential real estate, 2) commercial real estate, 3) resorts and leisure, 4) leasing and 5) forestry. In prior periods the Company’s reportable operating segments were 1) residential real estate, 2) commercial real estate, 3) resorts, leisure and leasing operations and 4) forestry. The Company’s leasing operations segment currently meets the quantitative and qualitative factors as a reportable operating segment; therefore, the Company has changed its segment presentation to include leasing operations as a reportable operating segment. Leasing operations were historically included with the Company’s resorts, leisure and leasing operating segment. All prior year segment information has been reclassified to conform to the 2015 presentation. The change in reporting segments had no effect on the Company’s condensed consolidated financial position, results of operations or cash flows for the periods presented.

The residential real estate segment generates ~~revenues~~revenue from the development and sale of homes and ~~homesites.~~homesites and the sale of parcels of entitled, undeveloped lots. The commercial real estate segment sells undeveloped or developed land and commercial operating property. The resort and leisure segment generates ~~revenues~~revenue and incurs costs from the WaterColor Inn and Resort, vacation rental ~~programs,~~program, management of The Pearl Hotel, four golf courses, a beach club, marina operations and other related resort activities. The leasing segment generates ~~revenues~~revenue and costs from retail and commercial leasing operations, including the Company’s consolidated joint venture at Pier Park North. The forestry segment produces and sells woodfiber, sawtimber and other forest products and may sell the Company’s timber or rural land holdings.

The Company’s reportable segments are strategic business units that offer different products and services. They are each managed separately and decisions about allocations of resources are determined by management based on these strategic business units.

The Company uses income ~~from operations~~ before ~~equity in loss from unconsolidated affiliates,~~ income taxes and non-controlling interest for purposes of making decisions about allocating resources to each segment and assessing each segment’s performance, which the Company believes represents current performance measures.

The accounting policies of the segments are set forth in Note 2 to the Company’s consolidated financial statements contained in Item 15 of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015. Total ~~revenues~~revenue represent sales to unaffiliated customers, as reported in the Company’s ~~Condensed Consolidated Statements~~condensed consolidated statements of ~~Operations.~~income. All significant intercompany accounts and transactions have been ~~eliminated.~~eliminated in consolidation. The caption entitled “Other” consists of mitigation credit revenue and non-allocated corporate general and administrative expenses, net of investment income.

~~Table of Contents~~

Information by business segment is as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014			2016			2015			2016			2015
Operating Revenues
Operating Revenue
Residential real estate	$	4,880		$	3,660		$	14,355		$	57,128		$	3,122		$	4,861		$	15,905		$	14,291
Commercial real estate	—			—			4,660			3,265			631			—			631			4,660
Resorts and leisure	18,537			16,913			45,657			40,392			19,046			18,537			47,590			45,657
Leasing operations	2,528			2,054			6,741			4,931			2,655			2,528			7,336			6,741
Forestry	1,885			1,061			11,355			580,236			1,509			1,885			5,233			11,355
Other	—			259			—			245			229			19			302			64
Consolidated operating revenues	$	27,830		$	23,947		$	82,768		$	686,197
Total operating revenue													$	27,192		$	27,830		$	76,997		$	82,768

Income (loss) before equity in loss from unconsolidated affiliates and income taxes:
Income (loss) before income taxes:
Residential real estate	$	(1,603	)	$	(233	)	$	(1,553	)	$	25,901		$	237		$	(1,622	)	$	4,676		$	(1,617	)
Commercial real estate	(654		)	(552		)	(1,265		)	413			(496		)	(654		)	(1,644		)	(1,265		)
Resorts and leisure	2,607			2,051			3,142			2,554			2,420			2,607			3,414			3,142
Leasing operations	517			147			1,001			1,034			454			517			75			1,001
Forestry	1,759			1,034			10,167			516,144			1,282			1,759			4,376			10,167
Other	1,376			(2,978		)	(8,687		)	(13,364		)	(253		)	1,395			7,103			(8,623		)
Consolidated income (loss) before equity in loss from unconsolidated affiliates and income taxes	$	4,002		$	(531	)	$	2,805		$	532,682
Total income before income taxes													$	3,644		$	4,002		$	18,000		$	2,805


	September 30, 2015		December 31, 2014		September 30, 2016		December 31, 2015
Total Assets:
Residential real estate	$	112,081	$	135,317	$	108,514	$	109,791
Commercial real estate	58,802		62,931		60,484		62,649
Resorts and leisure	76,403		79,021		72,720		75,441
Leasing operations	78,802		74,800		81,188		81,400
Forestry	21,860		20,521		20,213		20,244
Other	664,508		930,545		643,310		633,217
Total assets	$	1,012,456	$	1,303,135	$	986,429	$	982,742

18. Commitments and Contingencies

The Company establishes an accrued liability when it believes it is both probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company will evaluate the range of reasonably estimated losses and record an accrued liability based on what it believes to be the minimum amount in the range, unless it believes an amount within the range is a better estimate than any other amount. In such cases, there may be an exposure to loss in excess of the amounts accrued. The Company evaluates quarterly whether further developments could affect the amount of the accrued liability previously established or would make a loss contingency both probable and reasonably estimable.

The Company also provides disclosure when it believes it is reasonably possible that a loss will be incurred or when it believes it is reasonably possible that the amount of a loss will exceed the recorded liability. The Company reviews loss contingencies at least quarterly to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or range of loss can be made. This estimated range of possible loss is based upon currently available information and is subject to significant judgment and a variety of assumptions, and known and unknown uncertainties. The matters underlying the estimated range will change from time to time, and actual results may vary significantly from the current estimate.

The Company is subject to a variety of litigation, claims, other disputes and governmental proceedings that arise from time to time in the ordinary course of its business, including litigation related to its prior homebuilding activities and those described herein. The Company cannot assure that it will be successful in defending these matters. Based on current knowledge, the Company does not believe that loss contingencies arising from pending litigation, claims, other disputes and governmental proceedings, including those described herein, will have a material adverse effect on the consolidated financial position or liquidity of the Company. However, in light of the inherent uncertainties involved in these matters, an adverse outcome in one or more of these matters could be material to the Company’s results of operations or cash flows for any particular reporting period.

The Company is subject to costs arising out of environmental laws and regulations, which include obligations to remove or limit the effects on the environment of the disposal or release of certain wastes or substances at various sites, including sites which have been previously sold. It is the Company’s policy to accrue and charge against earnings environmental cleanup costs when it is probable that a liability has been incurred or range of loss can be reasonably estimated. As assessments and cleanups proceed, these accruals are reviewed and adjusted, if necessary, as additional information becomes available.

The Company’s former paper mill site in Gulf County and certain adjacent properties are subject to various Consent Agreements and Brownfield Site Rehabilitation Agreements with the Florida Department of Environmental ~~Protection.~~Protection (“FDEP”). The paper mill site has been rehabilitated by Smurfit-Stone Container Corporation in accordance with these ~~agreements.~~agreements and a final Site Rehabilitation Completion Order (“SRCO”) issued by the FDEP has been received. The Company is in the process of assessing certain ~~adjacent~~neighboring properties. Management is unable to quantify future rehabilitation costs above present accruals at this time or provide a reasonably estimated range of loss.

Other litigation, claims, ~~other~~ disputes and governmental proceedings, including environmental matters, are pending against the Company. Accrued aggregate liabilities related to the matters described above and other litigation matters were ~~$1.4~~$2.3 million ~~excluding the $3.5~~and $2.5 million ~~accrual related to the SEC investigation discussed below, at~~as of September 30, ~~2015~~2016 and December 31, ~~2014.~~2015, respectively. Significant judgment is required in both the determination of probability and the determination as to whether the amount of an exposure is reasonably estimable. Due to uncertainties related to these matters, accruals are based only on the information available at the time. As additional information becomes available, management reassesses potential liabilities related to pending claims and litigation and may revise its previous estimates, which could materially affect the Company's results of operations in a given period.

On January 4, 2011 the Company received notice from the Staff (the “Staff”) of the SEC of the initiation of an inquiry into the Company’s policies and practices concerning impairment of investment in real estate assets. In January 2015, the Company received a Wells Notice from the Staff related to historical accounting and disclosure practices and real estate asset valuations principally as reflected in the Company’s financial results for 2010, 2009 and prior periods. In June 2015, the Company established a reserve of $3.5 million for penalties, disgorgements and interest relating to the SEC investigation. On October 27, 2015, the Company fully resolved the SEC investigation and entered into a settlement with the SEC. Without admitting or denying any factual allegations, the Company consented to the SEC’s issuance of an administrative order pursuant to which the Company agreed to pay penalties, disgorgements and interest of approximately $3.5 million, including a civil penalty assessed on the Company of $2.75 million and other disgorgements and interest subject to indemnification by the Company.

The Company has retained certain self-insurance risks with respect to losses for third party liability and property damage, including ~~our~~its timber assets.

At September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, the Company was required to provide surety bonds that guarantee completion of certain infrastructure in certain development projects and mitigation banks of ~~$8.4~~$6.2 million and ~~$8.3~~$7.1 million, ~~respectively.~~respectively, and standby letters of credit in the amount of $0.4 million and $0.5 million, respectively, which may potentially result in liability to the Company if certain obligations of the Company are not met.

At September 30, ~~2015,~~2016, the Company has a total of ~~$3.1~~$4.8 million in contractual obligations, of which ~~$1.3~~$4.1 million are for the remainder of ~~2015, $0.9 million are for~~ 2016, ~~and $0.9~~$0.3 million are for 2017 and ~~thereafter.~~$0.4 million are for 2018.

~~The Construction~~In connection with the Refinanced Loan, ~~entered into by the Pier Park North joint venture required~~ the Company guaranteed the joint venture’s obligations under a short term $6.6 million letter of credit which is securing a portion of the joint venture’s obligations under the Refinanced Loan. In October 2016, the letter of credit was reduced to ~~enter into guarantees and comply with covenants as described in~~$1.3 million based on the terms of the Refinanced Loan agreement. See Note 8,9, Real Estate Joint Ventures~~. In October 2015, the Company’s Pier Park North joint venture refinanced its Construction Loan and entered into~~ for a ~~$48.2 million loan. In connection with the closing of~~further discussion on the Refinanced Loan, the Company entered into a limited guarantee in favor of the lender, based on its percentage ownership of the joint venture. The limited guarantee covers losses arising out of certain events, including (i) tenant security deposits; (ii) tenant rents; (iii) costs and expenses related to any environmental clean-up; (iv) liability for fraud or material breach of warranty with respect to the financing; (v) unpaid real estate taxes assessed against the property; (vi) failure to maintain required insurance; (vii) foreclosure of the security instrument; or (viii) failure of the joint venture to comply with certain covenants in the security instrument. In addition, the guarantee can become full recourse in the case of any fraud or intentional misrepresentation by the Pier Park North joint venture; any voluntary transfer or encumbrance of the property in violation of the due-on-sale clause in the security instrument; upon commencement of voluntary or insolvency proceedings; and upon breach of covenants in the security instrument. Pursuant to the guarantee, the Pier Park North joint venture partners are required to maintain a minimum of $36 million in combined net worth, not including the value of each partner’s respective equity in the Pier Park North property.Loan.

As part of the AgReserves Sale in 2014 and certain sales of timberlands in 2007 and 2008, the Company generated significant tax gains. The installment notes structure allowed the Company to defer the resulting tax liability of $61.8 million until 2022 - 2024 and $69.3 million until 2029, respectively, the maturity dates for the installment notes. The Company has a deferred tax liability related to the gains in connection with these sales.

19. Concentration of Risks and Uncertainties

The Company’s real estate investments are concentrated in Northwest Florida in a number of specific development projects. Uncertain economic conditions could have an adverse impact on the Company’s real estate values and could cause the Company to sell assets at depressed values in order to pay ongoing expenses. Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents, investments, notes receivable, other receivables, investments held by ~~special purpose entities,~~SPEs and investments in retained ~~interests and pledged cash and securities held as collateral for payment of the in-substance defeased debt.~~interests. The Company deposits and invests cash with ~~a major~~regional financial ~~institution in the United States,~~institutions, which balances exceed the amount of F.D.I.C. insurance provided on such deposits. In addition, as of September 30, ~~2015,~~2016, the Company had ~~$234.9~~$99.7 million invested in U.S. Treasury securities, ~~$5.3~~$113.7 million invested in ~~one issuer~~eight issuers of corporate debt securities that isare non-investment grade and ~~$11.9~~$23.2 million ~~was~~ invested in ~~one issuer~~three issuers of preferred stock that ~~is a financial services firm that is~~are non-investment grade. In addition, as of September 30, ~~2015,~~2016, the Company had investments in short term commercial paper from ~~five~~seven issuers of ~~$99.0~~$139.5 million.

We are a real estate development, asset management and operating company with real estate assets currently concentrated primarily between Tallahassee and Destin, Florida, which we predominantly use, or intend to use, for or in connection with, our various residential or commercial real estate developments, resorts and leisure operations, leasing operations or forestry ~~operations.~~operations on a limited basis. We have significant residential and commercial land-use entitlements in hand or in process. We seek higher and better uses for our real estate ~~investments~~assets through a range of activities from strategic land planning and ~~liquid assets.~~development, infrastructure improvements and promoting economic development in the regions where we operate. We may explore the sale of such assets opportunistically or when we believe ~~they have reached their highest and best use.~~

We received significant liquid assets as a result of the AgReserves Sale and RiverTown Sale. On August 15, 2015 our Board of Directors authorized us to repurchase from time to time up to $300.0 million of our outstanding common stock through open market purchases pursuant to Rule 10b-18, in privately negotiated transactions or otherwise. During the nine months ended September 30, 2015, we repurchased a total of 16,982,739 shares of our common stock outstanding for a total price of $304.9 million, including costs. In October 2015, the Board of Directors authorized an additional $200.0 million for share repurchases. We may repurchase our outstanding common stock in open market purchases from time to time pursuant to Rule 10b-18, in privately negotiated transactions or otherwise. We will continue to seek additional opportunities to invest the remaining funds that could increase our returns. These investments may include longer term commercial or residential real estate or real estate related investments (in which we may play an active or passive role), investments in real estate investments trusts, and other investments in illiquid securities where we believe we can ~~increase our returns.~~better deploy those resources.

We conduct primarily all of our business in the following five reportable operating segments: 1) residential real estate, 2) commercial real estate, 3) resorts and leisure, 4) leasing operations and 5) forestry. In prior periods our reportable operating segments were 1) residential real estate, 2) commercial real estate, 3) resorts, leisure and leasing operations and 4) forestry. Our leasing operations segment currently meets the quantitative and qualitative factors as a reportable operating segment; therefore, we have changed its segment presentation to include leasing operations as a reportable operating segment. Leasing operations were historically included with our resorts, leisure and leasing operating segment. All prior year segment information has been reclassified to conform to the 2015 presentation. The change in reporting segments has no effect on our condensed consolidated financial position, results of operations or cash flows for the periods presented.

The following table sets forth the relative contribution of these operating segments to our consolidated operating ~~revenues, excluding revenues of $570.9 million related to~~revenue during the ~~AgReserves Sale~~three and ~~revenues of $43.6 million related to the RiverTown Sales during the~~ nine months ended September 30, ~~2014. Refer to Note 5,~~ ~~Real Estate Sales,~~ ~~for further information on the AgReserves Sale~~2016 and ~~RiverTown Sale.~~2015.

For more information regarding our operating segments, see Note 17, Segment Information of our ~~unaudited~~ condensed consolidated financial statements included in this quarterly report.

Residential Real Estate

Our residential real estate segment typically plans and develops mixed-use resort, primary residential and seasonal residential communities of various sizes, primarily on our existing land. The following is a description of some of our major residential development communities in Florida that we are currently in the process of planning ~~and~~or developing:

The ~~WaterSound~~Watersound Origins community is a residential community in South Walton County, Florida, with direct access to Lake Powell. The project has received government approval for ~~approximately 1,164 single family~~1,074 single-family units with an additional multi-family component, however, the actual ~~amount~~number of units that we ultimately approve for development will depend on our development strategy, the extent to which the anticipated returns of the project meets our ~~risk-adjusted~~ investment return criteria and the availability of capital resources to fund such development. The ~~WaterSound~~Watersound Origins community includes a six-hole golf course that is operated by our ~~Resorts~~resorts and ~~Leisure~~leisure segment.

The Breakfast Point community is a residential community in Panama City Beach, ~~Florida near the Pier Park shopping center.~~Florida. The project has received government approval for 368 single family ~~units, however,~~units. However, the actual ~~amount~~number of units that we ultimately approve for development will depend on our development strategy, the extent to which the anticipated returns of the project ~~meets~~meet our ~~risk-adjusted~~ investment return criteria and the availability of capital resources to fund such development.

The SouthWood community is a large scale, mixed use ~~development~~ community located in the southeastern section of Tallahassee. The project has received government approval for 4,770 residential units, including 2,074 single family residences and 2,696 multi-family units, however, the actual ~~amount~~number of units that we ultimately approve for development will depend on our development strategy, the extent to which the anticipated returns of the project ~~meets~~meet our ~~risk-adjusted~~ investment return criteria and the availability of capital resources to fund such development. SouthWood also includes ana golf clubhouse, 18-hole golf course ~~and club~~ and a town center with restaurants, retail shops and offices. The SouthWood Golf Club is operated by our ~~Resorts~~resorts and ~~Leisure~~leisure segment and a portion of the ~~towncenter~~town center is leased and operated by our ~~Leasing~~leasing segment.

We have other residential communities, such as the SummerCamp Beach, RiverCamps and WindMark Beach communities that have homesites available for sale. In addition, we have residential communities, such as the WaterColor, WaterSound Beach and WaterSound West Beach ~~and other~~ communities that are substantially ~~developed. The~~developed and the remaining developed and available ~~units~~homesites in ~~those other~~these communities are available for sale.

In addition, we believe that there is a growing retirement demographic in Northwest Florida and that our development experience and the location, size and contiguous nature of our Florida land holdings provide us with strategic opportunities in this demographic. Specifically, the Bay-Walton County Sector Plan (the “Sector Plan”) was officially adopted by Bay County and Walton County in June 2015 and our Sector Plan was found in compliance with state law and is therefore in effect. The Sector Plan is a master plan that includes entitlements, or legal rights, to develop over 170,000 residential units and over 22 million square feet of retail, commercial, and industrial uses on 110,500 acres of our land holdings. We anticipate a wide range of residential and commercial uses on these land holdings, including some portion of these entitlements serving the active adult retirement market. As is true with all of our projects, what will actually be developed will be a function of more detailed planning, analysis, and market conditions, which will occur over time.

Our residential real estate segment generates ~~revenues~~revenue primarily from the sale of developed homesites; the sale of parcels of entitled, undeveloped ~~lots;~~land; a lot residual on homebuilder sales that provides us a percentage of the sale price of the completed home if the home price exceeds a negotiated threshold; the sale of impact fee credits; marketing fees and other fees on certain transactions. The results of our residential real estate revenue may vary from period to period depending on the communities where lots are sold, as prices vary significantly by community.

Our customer base for the sale of developed homesites is primarily focused on homebuilders. Homebuilders generally buy more homesites in a single transaction but tend to buy on a more sporadic basis. As a result, we may experience volatility in the consistency and pace of our residential real estate sales. In addition, the mix of homesites that we currently sell consists mostly of homesites in our primary communities which typically have a lower price and gross profit margin than homesites in our resort communities.

Our residential real estate segment incurs cost of ~~revenues~~revenue primarily from costs directly associated with the land, development and construction of real estate sold and indirect costs such as development overhead, capitalized interest, marketing, project administration and selling costs.

The Bay-Walton Sector Plan is a long term master plan that includes entitlements, or legal rights, to develop over 170,000 residential units and over 22 million square feet of retail, commercial and industrial uses on approximately 110,500 acres of our land holdings. We anticipate a wide range of residential and commercial uses on these land holdings, including some portion of these entitlements serving the active adult retirement market. We believe that there is a growing retirement demographic and that our development experience and the location, size and contiguous nature of our Florida land holdings provide us with strategic opportunities in this demographic. As is true with all of our projects, what will actually be developed will be a function of more detailed planning, analysis and market conditions, which will occur over time.

As part of the April 2014 RiverTown real estate sale, the buyer, Mattamy, is obligated to pay impact fees. Based on Mattamy’s current development plans and St. Johns County’s current costs for impact fees, we estimate that we may receive $20.0 million to $26.0 million for the impact fees over the five-year period following the closing (most of which, we expect to receive at the end of that five-year period). However, the actual additional consideration received for the impact fees will be based on a variety of factors outside our control. We received $0.1 million and $0.2 million during the three and nine months ended September 30, 2016, respectively, and we have received a total of approximately $0.5 million from April 2014 through September 30, 2016.

Commercial Real Estate

In our commercial real estate segment, we plan, develop and entitle our land holdings for a variety of uses including a broad range of retail, office, hotel and industrial uses. We sell land for commercial and light industrial uses. From time to time, our commercial real estate segment ~~may~~ also ~~sell certain properties in~~evaluates opportunities to maximize value by selling some of our resorts, ~~and~~ leisure or ~~leasing operations segments.~~operating properties.

Our commercial real estate segment generates ~~revenues~~revenue from the sale of developed and undeveloped land for retail, office, hotel and industrial uses, from the sale of undeveloped land or land with limited development and easements and the sale of commercial operating properties. Our commercial real estate segment incurs costs of ~~revenues~~revenue from costs directly associated with the land, development, construction and selling costs.

Our resorts and leisure segment ~~generates revenues primarily from the WaterColor Inn~~features a diverse portfolio of vacation rentals and ~~vacation rental programs, four~~a hotel, as well as golf courses, ~~marina operations~~a beach club, marinas and other related resort ~~activities.~~amenities.

WaterColor Inn, Vacation Rentals and Other Management Services -– Our WaterColor Inn and vacation rentals ~~include~~generate revenue from (1) the WaterColor Inn and Resort ~~our restaurants, vacation rental businesses~~ and other management services, (2) our management of The Pearl ~~Hotel.~~Hotel, (3) our vacation rental business and (4) our restaurants. The WaterColor Inn incurs expenses from the cost of services and goods provided, personnel costs and third party management fees. Revenue generated for our management services of The Pearl Hotel include a management fee, fifty percent of certain resort fees and a percentage of The Pearl Hotel’s gross operating profit. Expenses include primarily internal administrative costs. Our vacation rental business generates ~~revenues~~revenue from the rental of private homes and other services, which includes the entire rental fee collected from the customer, including the homeowner’s portion. A percentage of the fee is remitted to the homeowner and presented in the cost of resorts and leisure ~~revenues.~~revenue. The vacation rental business also incurs expenses from ~~marketing,~~standard lodging personnel, such as front desk, reservations and general maintenance for the homeowner. Revenues generated from our management services of The Pearl Hotel include a management fee, fifty percent of certain resort fees and a percentage of The Pearl Hotel’s gross operating profit. Expenses include primarily internal administrative costs.marketing.

Clubs ~~and Resorts –~~- Our ~~clubs and resorts~~club operations include our golf courses, beach club and ~~resort~~ facilities that generate ~~revenues~~revenue from memberships, daily play at ~~those~~our golf courses, ~~that are not part of our St. Joe Club & Resorts,~~ merchandise sales and food and beverage sales and incur expenses from the services provided, maintenance of the golf course and beach club facilities, personnel costs and third party management fees.

St. Joe Club & Resorts isincludes our private membership club that provides members, participating homeowners and their rental guests access to our ~~clubs.~~facilities. The focus is on creating a world class membership experience combined with the all-inclusive aspects of a four star/four diamond resort.

Marinas –- Our marinas generate ~~revenues~~revenue from boat slip rentals and fuel sales, and incur expenses from cost of services provided, maintenance of the marina facilities, personnel costs and third party management fees.

Our leasing operations generate ~~revenues~~revenue from leasing retail and commercial property, including properties located in our consolidated joint venture at Pier Park North, commerce parks and our industrial park, ~~Venture Crossings,~~VentureCrossings, and incur expenses primarily from maintenance and management of these properties and personnel costs. Our Pier Park North joint venture also ~~incurred~~incurs interest and financing expenses related to its ~~Construction Loan. In October 2015, our Pier Park North joint venture refinanced its Construction Loan and entered into a $48.2 million~~ loan ~~and will incur interest and financing expenses related to the Refinanced Loan~~ as described in Note 8,9, Real Estate Joint Ventures.

Our forestry segment focuses on the management of our timber holdings in Northwest Florida. We grow and sell sawtimber, wood fiber and forest ~~products and provide land management services for conservation properties. Subsequent to the AgReserves Sale, we have sold and plan to continue to~~products. We generate revenue from our forestry segment primarily from open market sales of timber. We sell product on site without the associated delivery costs. Our forestry segment generates revenue from the sale of wood fiber, sawtimber, standing timber and forest products. Our forestry segment incurs costs of revenue from internal costs of forestry management and property taxes.

Our forestry segment may also generate ~~revenues~~revenue from the sale of our timber holdings, undeveloped land or land with limited development and easements. Costs incurred as part of a sale of these lands may include the cost of timber, land, minimal development costs and selling costs.

Critical Accounting Estimates

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, ~~revenues~~revenue and expenses and related disclosures of contingent assets and liabilities. We base these estimates on historical experience, available current market information and on various other assumptions that management believes are reasonable under the circumstances. Additionally, we evaluate the results of these estimates on an on-going basis. Management’s estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and our accounting estimates are subject to change.

Critical accounting policies that we believe reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements are set forth in Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015. There have been no significant changes in these policies during the first nine months of ~~2015,~~2016, however we cannot assure you that these policies will not change in the future.

Recently Adopted and Issued Accounting Pronouncements

See Note 1 to our ~~unaudited~~ condensed consolidated financial statements included in this report for recently issued or adopted accounting standards, including the date of adoption and effect on our condensed consolidated financial statements.

~~Some of our~~Our businesses may be affected by seasonal fluctuations. For example, ~~revenues~~revenue from our resorts and leisure ~~segment~~operations are typically higher in the second and third quarters; however, they can vary depending on the timing of holidays and school breaks, including spring break.

In addition to the seasonality effect described above, ~~variability in our results of operations is further heightened by the change in our customer mix in~~ our residential real estate business from ~~some~~ retail sales, which have a more consistent flow of ~~revenues, to~~revenue, are predominantly sales to homebuilders, who tend to buy multiple lots in sporadic ~~bulk purchases.~~transactions which impacts the variability in our results of operations. In addition, the results of our residential real estate revenue may vary from period to period depending on the communities where lots are sold, as prices vary significantly by community. Our commercial real estate projects are likewise subject to one-off sales and the development of specific projects depending on demand. These variables have caused, and may continue to cause, our operating results to vary significantly from period to period.

~~Table of Contents~~

Results of Operations

Consolidated Results

The following table sets forth a comparison of the results of our operations for the three and nine months ended September 30, ~~2015~~2016 and ~~2014~~2015.~~Our consolidated results of operations are not necessarily comparable from period to period due to the impact of the AgReserves Sale and the RiverTown Sale in 2014.~~Included in the results for the nine months ended September 30, 2014, is pre-tax income of $511.1 million, which includes $1.2 million of severance costs recorded in Other operating and corporate expenses, for the AgReserves Sale and pre-tax income of $26.0 million for the RiverTown Sale. Refer to Note 5, ~~Real Estate Sales,~~ ~~for further information on the AgReserves Sale and the RiverTown Sale.~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2015
2014 2015 2014
In millions
Revenues:
Real estate sales $ 4.9
$ 3.9
$ 24.3
$ 630.6
Resorts and leisure revenues 18.5
16.9
45.7
40.4
Leasing revenues 2.5
2.1
6.8
4.9
Timber sales 1.9
1.1
6.0
10.3
Total 27.8
24.0
82.8
686.2
Expenses:
Cost of real estate sales 2.5
2.1
12.3
84.6
Cost of resorts and leisure revenues 14.7
13.7
38.2
34.4
Cost of leasing revenues 0.7
0.6
2.0
1.5
Cost of timber sales 0.2
0.2
0.6
4.3
Other operating and corporate expenses 9.9
6.5
24.7
22.3
Administrative costs associated with special purpose entities —
—
—
3.7
Depreciation, depletion and amortization 2.2
2.2
7.3
6.2
Total 30.2
25.3
85.1
157.0
Operating (loss) income (2.4 ) (1.3 )
(2.3 )
529.2
Other (expense) income:

Investment income, net 9.1

3.4
19.8
7.6
Interest expense (2.9 )
(3.0 ) (8.4 ) (5.8 )
Other, net 0.2

0.4
(6.3 ) 1.7
Total other income 6.4

0.8
5.1
3.5
Income (loss) before equity in loss from unconsolidated affiliates and income taxes 4.0
(0.5 )
2.8

532.7
Income tax (expense) benefit (1.2 ) 0.4
(2.0 ) (115.2 )
Net income (loss) $ 2.8
$ (0.1 ) $ 0.8
$ 417.5



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	In millions
Revenue:
Real estate revenue	$	4.2		$	4.9		$	18.0		$	24.3
Resorts and leisure revenue	19.0			18.5			47.6			45.7
Leasing revenue	2.7			2.5			7.4			6.8
Timber revenue	1.3			1.9			4.0			6.0
Total	27.2			27.8			77.0			82.8
Expenses:
Cost of real estate revenue	2.0			2.5			6.7			12.3
Cost of resorts and leisure revenue	15.4			14.7			40.4			38.2
Cost of leasing revenue	0.7			0.7			2.2			2.0
Cost of timber revenue	0.2			0.2			0.6			0.6
Other operating and corporate expenses	5.2			9.9			17.7			24.7
Depreciation, depletion and amortization	2.1			2.2			6.5			7.3
Total expenses	25.6			30.2			74.1			85.1
Operating income (loss)	1.6			(2.4		)	2.9			(2.3		)
Other income (expense):
Investment income, net	4.7			9.1			10.4			19.8
Interest expense	(3.1		)	(2.9		)	(9.3		)	(8.4		)
Claim settlement	—			—			12.5			—
Other, net	0.4			0.2			1.5			(6.3		)
Total other income	2.0			6.4			15.1			5.1
Income before income taxes	3.6			4.0			18.0			2.8
Income tax expense	(0.9		)	(1.2		)	(5.2		)	(2.0		)
Net income	$	2.7		$	2.8		$	12.8		$	0.8

~~Table of Contents~~

Real Estate ~~Sales~~Revenue and Gross Profit.

Three Months Ended September 30, Nine Months Ended September 30,
2015
% ⁽¹⁾
2014
% ⁽¹⁾
2015
% ⁽¹⁾
2014
% ⁽¹⁾
Dollars in millions Dollars in millions
Revenues:
Residential real estate sales $ 4.9
100.0 % $ 3.7
94.9 % $ 14.3
58.9 % $ 13.6
2.2 %
RiverTown Sale —
— % —
— % —
— % 43.6
6.9 %
Commercial real estate sales —
— % —
— % 4.7
19.3 % 3.3
0.5 %
AgReserves and other rural land sales —
— % 0.2
5.1 % 5.3
21.8 % 570.1
90.4 %
Real estate sales $ 4.9
100.0 % $ 3.9
100.0 % $ 24.3
100.0 % $ 630.6
100.0 %

Gross profit:
Residential real estate sales $ 2.4
49.0 % $ 1.6
43.2 % $ 6.8
47.6 % $ 6.0
44.1 %
RiverTown Sale —
— % —
— % —
— % 26.0
59.6 %
Commercial real estate sales —
— % —
— % 0.5
10.6 % 2.2
66.7 %
AgReserves and other rural land sales —
— % 0.2
100.0 % 4.7
88.7 % 511.7
89.8 %
Gross profit $ 2.4
49.0 % $ 1.8
46.2 % $ 12.0
49.4 % $ 545.9
86.6 %



	Three Months Ended September 30,								Nine Months Ended September 30,
	2016		% ⁽¹⁾		2015		% ⁽¹⁾		2016		% ⁽¹⁾		2015		% ⁽¹⁾
	Dollars in millions								Dollars in millions
Revenue:
Residential real estate revenue	$	3.1	73.8	%	$	4.9	100.0	%	$	15.9	88.4	%	$	14.3	58.9	%
Commercial real estate revenue	0.6		14.3	%	—		—	%	0.6		3.3	%	4.7		19.3	%
Rural land and other revenue	0.5		11.9	%	—		—	%	1.5		8.3	%	5.3		21.8	%
Real estate revenue	$	4.2	100.0	%	$	4.9	100.0	%	$	18.0	100.0	%	$	24.3	100.0	%

Gross profit:
Residential real estate revenue	$	1.8	58.1	%	$	2.4	49.0	%	$	10.1	63.5	%	$	6.8	47.6	%
Commercial real estate revenue	—		—	%	—		—	%	—		—	%	0.5		10.6	%
Rural land and other revenue	0.4		80.0	%	—		—	%	1.2		80.0	%	4.7		88.7	%
Gross profit	$	2.2	52.4	%	$	2.4	49.0	%	$	11.3	62.8	%	$	12.0	49.4	%



⁽¹⁾	Calculated percentage of total real estate ~~sales~~revenue and the respective gross ~~profit~~margin percentage.

Real Estate ~~Sales.~~Revenue. During the three months ended September 30, ~~2015,~~2016, residential real estate ~~sales increased $1.2~~revenue decreased $1.8 million, or 36.7%, as compared to the same period in ~~2014. Excluding~~2015, primarily due to the ~~RiverTown Sale, residential real estate~~mix of homesites sold in our primary home communities. During both the three months ended September 30, 2016 and 2015, we sold 34 lots. The revenue for each period was impacted by the volume of sales ~~increased $0.7 million during~~within each of the communities and variance in pricing among the communities. During the nine months ended September 30, ~~2015,~~2016, residential real estate revenue increased $1.6 million, or 11.2%, as compared to the same period in ~~2014.~~2015, primarily due to a $3.4 million unimproved land sale and the mix of homesites sold in our communities. During the nine months ended September 30, 2016, we sold 79 lots compared to 122 lots during the same period in 2015, due to the timing of builder contractual closing obligations.

During the three and nine months ended September 30, 2016 there were three commercial real estate sales totaling approximately 4 acres for $0.6 million. During the three months ended September 30, 2015, ~~and September 30, 2014,~~ there ~~were~~was no commercial real estate ~~sales.~~revenue. During the nine months ended September 30, 2015, there were two sales of commercial real estate totaling approximately 11 acres for $4.7 million.

During the three months ended September 30, 2016, we sold approximately 90 acres of rural and timber land for $0.2 million and approximately 3 acres of mitigation bank credits for less than $0.3 million. During the three months ended September 30, 2015 there was no rural land and other revenue. During the nine months ended September 30, 2016, we sold approximately 696 acres of rural and timber land for $1.2 million and approximately 4 acres of mitigation bank credits for $0.3 million. During the nine months ended September 30, 2015, we had a total of two sales of commercial real estate totaling 10.5 acres for $4.7 million. During the nine months ended September 30, 2014, we had three sales of commercial real estate totaling four acres for $3.3 million.

As our customer base for residential real estate sales has shifted from primarily retail based to being more weighted towards homebuilders who generally buy more homesites in a single transaction but who tend to buy on a more sporadic basis, we believe we will continue to experience greater volatility in the consistency and pace of our residential real estate sales in at least the near future term. In addition, as the mix of homesites that we sell has shifted to homesites in our primary communities, which typically have a lower price and gross profit margin than homesites in our resort communities, we may experience a decrease in our gross profit margin from residential real estate sales.

Included in revenues from real estate sales during the nine months ended September 30, 2014, was revenue of $43.6 million for the RiverTown Sale. In addition, revenues from real estate sales included $5.3 million for the sale ofsold approximately 3,330 acres of rural and timber land ~~during the nine months ended September 30, 2015.~~for $5.3 million and approximately 1 acre of mitigation bank credits for less than $0.1 million. Revenue from rural land and commercial real estate can vary drastically from period to period.

~~Table of Contents~~

~~In addition, included in revenues from real estate sales during~~For additional information see the ~~nine months ended September 30, 2014, was revenue of $569.7 million~~Segment Results sections for the AgReserves Sale. Real estate sales for the AgReserves Sale, included the recognition of $11.0 million of revenue, which had been previously recorded as deferred revenue in connection with a 2006 agreement with the Florida Department of Transportation (the “FDOT”) pursuant to which we agreed to sell approximately ~~3,900~~ acres of rural land to the FDOT. As part of the AgReserves Sale, we transferred approximately 800 acres that are subject to the 2006 agreement to AgReserves who has agreed to transfer title to the FDOT.Residential Real Estate, Commercial Real Estate and Forestry.

Real Estate ~~Sales~~Revenue Gross Profit. During the three months ended September 30, ~~2015,~~2016, residential real estate gross profit was $1.8 million, or 58.1%, as compared to $2.4 million, or 49.0%, ~~as compared to 46.2%~~ during the same period in ~~2014. In addition,~~2015. During the nine months ended September 30, 2016, residential real estate gross profit was $10.1 million, or 63.5%, as compared to $6.8 million, or 47.6%, during the same period in 2015. Included in the residential real estate revenue for the nine months ended September 30, 2016, is a $3.4 million unimproved land sale with a gross profit of $3.3 million due to a low historical basis.

During the three and nine months ended September 30, 2016, cost of commercial real estate revenue included $0.2 million on the sale of commercial real estate and $0.4 million of impairment charges related to a commerce park, which resulted in no commercial real estate gross profit. During the three months ended September 30, 2015, there were no commercial real estate sales or gross profit. During the nine months ended September 30, 2015, the commercial real estate gross profit was ~~$12.0~~$0.5 million, or ~~49.4%~~10.6%.

During the three months ended September 30, 2016, rural land and other revenue gross profit was $0.4 million, or 80.0%. During the three months ended September 30, 2015, there was no rural land and other revenue or gross profit. During the nine months ended September 30, 2016, rural land and other revenue gross profit was $1.2 million, or 80.0%, as compared to ~~86.6%~~$4.7 million, or 88.7%, during the same period in ~~2014.~~ 2015.

Our gross profit margin can vary significantly from period to period depending on the type of property sold. Sales of rural and timber land typically have a lower basis than residential and commercial real estate sales. In addition, our basis in residential and commercial real estate can vary depending on the amount of development or other costs spent on the property.

As a result of the AgReserves Sale, we do not expect to have continuing substantial revenues from sales of our timber or rural lands in the future, which typically yield higher gross profit margins than residential and commercial real estate sales, thus also potentially decreasing future gross profit margins.

Resorts and Leisure ~~Revenues~~Revenue and Gross Profit.

Three Months Ended September 30, Nine Months Ended September 30,
2015
2014 2015 2014
Dollars in millions
Resorts and leisure revenues $ 18.5
$ 16.9
$ 45.7
$ 40.4
Gross profit $ 3.8
$ 3.2
$ 7.5
$ 6.0
Gross profit margin 20.5 % 18.9 % 16.4 % 14.9 %



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	Dollars in millions
Resorts and leisure revenue	$	19.0		$	18.5		$	47.6		$	45.7
Gross profit	$	3.6		$	3.8		$	7.2		$	7.5
Gross margin	18.9		%	20.5		%	15.1		%	16.4		%

Resorts and leisure ~~revenues~~revenue increased ~~$1.6~~$0.5 million, or 9%2.7%, during the three months ended September 30, ~~2015,~~2016, as compared to the same period in ~~2014,~~2015, due to an increase in average room ~~nights rented, higher average~~ rates at both the WaterColor Inn and in ~~our~~the vacation rental ~~programs~~program, along with an increase in average home size managed in the vacation rental program and ~~ancillary spend.~~increased membership revenue. Revenue from our resorts and leisure operations are typically higher in the second and third quarters; however, they can vary depending on the timing of holidays and school breaks, including spring break. Our gross ~~profit~~ margin ~~has increased~~decreased during the three months ended September 30, ~~2015,~~2016, primarily due to increased ~~membership,~~cost of revenue in our vacation rental business, higher ~~average lodging~~contract labor rates and ~~ancillary revenues~~hours worked as compared to the same period in ~~2014.~~2015.

Resorts and leisure ~~revenues~~revenue increased ~~$5.3~~$1.9 million, or ~~13%~~4.2%, during the nine months ended September 30, ~~2015,~~2016, as compared to the same period in ~~2014,~~2015, due to ~~an increase in room nights, higher average rates in our~~additional vacation rental ~~programs~~revenue from renting larger homes, higher room rates and ~~ancillary spend.~~increased membership revenue. Our gross ~~profit~~ margin has ~~increased~~decreased during the nine months ended September 30, ~~2015,~~2016, primarily due to increased ~~membership,~~cost of revenue in our vacation rental business, higher ~~average lodging~~contract labor rates and ~~ancillary revenues~~hours worked as compared to the same period in ~~2014.~~2015.

~~Table of Contents~~

Leasing ~~Revenues~~Revenue and Gross Profit.

Three Months Ended September 30, Nine Months Ended September 30,
2015
2014 2015 2014
Dollars in millions
Leasing revenues $ 2.5
$ 2.1
$ 6.8
$ 4.9
Gross profit $ 1.8
$ 1.5
$ 4.8
$ 3.4
Gross profit margin 72.0 % 71.4 % 70.6 % 69.4 %



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	Dollars in millions
Leasing revenue	$	2.7		$	2.5		$	7.4		$	6.8
Gross profit	$	2.0		$	1.8		$	5.2		$	4.8
Gross margin	74.1		%	72.0		%	70.3		%	70.6		%

Leasing ~~revenues~~revenue increased ~~$0.4~~$0.2 million, or ~~approximately 19%~~8.0%, during the three months ended September 30, ~~2015,~~2016, as compared to the same period in ~~2014.~~2015. Leasing ~~revenues~~revenue increased ~~$1.9~~$0.6 million, or ~~39%~~8.8%, during the nine months ended September 30, ~~2015,~~2016, as compared to the same period in ~~2014.~~2015. The increase in ~~revenues~~revenue for both the three and nine months ended September 30, 2016, is primarily ~~attributable~~due to ~~an increase in revenues~~the continued commencement of revenue from ~~leases~~new store openings in our Pier Park North joint venture, ~~during 2014 and 2015.~~as well as other new leases.

Timber ~~Sales~~Revenue and Gross Profit.

Three Months Ended September 30, Nine Months Ended September 30,
2015
2014 2015 2014
Dollars in millions
Timber sales $ 1.9
$ 1.1
$ 6.0
$ 10.3
Gross profit $ 1.7
$ 0.9
$ 5.4
$ 6.0
Gross profit margin 89.5 % 81.8 % 90.0 % 58.3 %



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	Dollars in millions
Timber revenue	$	1.3		$	1.9		$	4.0		$	6.0
Gross profit	$	1.1		$	1.7		$	3.4		$	5.4
Gross margin	84.6		%	89.5		%	85.0		%	90.0		%

Timber ~~sales increased $0.8~~revenue decreased $0.6 million, or ~~73%~~31.6%, during the three months ended September 30, ~~2015~~2016 as compared to the same period in ~~2014,~~2015, primarily due to ~~an increase~~a decrease in the amount of tons ~~sold. Tons~~ sold due to fluctuations in market supply. There were ~~109,050~~84,000 tons sold during the three months ended September 30, ~~2015,~~2016, as compared to 109,000 tons sold ~~of 76,186~~ during the three months ended September 30, ~~2014.~~2015.

Timber ~~sales~~revenue decreased ~~$4.3~~$2.0 million, or ~~42%~~33.3%, during the nine months ended September 30, ~~2015,~~2016 as compared to the same period in ~~2014,~~2015, primarily due to the AgReserves Sale, which closed on March 5, 2014. In addition, timber sales for the nine months ended September 30, 2014, included $1.1 million of deferred revenue related to an imputed land lease that was to be recognized over the life of the timber deeds sold in March 2011. We sold substantially all the land includeda decrease in the ~~imputed lease as part~~amount of ~~the AgReserves Sale and recognized the remaining deferred revenue~~tons sold due to fluctuations in market supply. There were 229,000 tons sold during the nine months ended September 30, ~~2014. As expected, our timber sales and related costs decreased following~~2016, as compared to 338,000 tons sold during the ~~AgReserves Sale. In addition, subsequent to the AgReserves Sale, we have primarily sold product on site without the associated delivery costs, which has increased our timber sales gross profit margin.~~nine months ended September 30, 2015.

Other operating and corporate expenses.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
	In millions
Employee costs	$	1.8	$	4.5	$	5.3	$	10.0
401(k) contribution / pension costs	—		—		1.4		1.1
Non-cash stock compensation costs	—		—		0.1		0.2
Property taxes and insurance	1.4		1.4		4.2		4.4
Professional fees	1.2		2.8		3.8		5.6
Marketing and owner association costs	0.3		0.3		1.0		1.0
Occupancy, repairs and maintenance	0.2		0.2		0.5		0.7
Other	0.3		0.7		1.4		1.7
Total other operating and corporate expense	$	5.2	$	9.9	$	17.7	$	24.7

Other operating and corporate expenses ~~increased~~decreased by ~~$3.4~~$4.7 million, or ~~52%~~47.5%, during the three months ended September 30, ~~2015,~~2016, as compared to the same period in ~~2014, primarily due to increased employee costs and spending strategic to our mixed-use and active adult communities, including non-recurring expenses related to the approval of the Sector Plan.~~

~~Table of Contents~~

2015. Other operating and corporate expenses ~~increased~~decreased by ~~$2.4~~$7.0 million, or ~~11%~~28.3%, during the nine months ended September 30, ~~2015,~~2016, as compared to the same period in ~~2014.~~2015. The ~~increase~~decrease in other operating and corporate expenses is primarily due to ~~increased spending strategic~~our continued focus on a low expense structure, which has led to ~~our mixed-use~~decreases in personnel costs, professional fees and active adult communities, including non-recurring expenses related to the approval of the Sector Plan. These increases are partially offset by $1.2 million of severance costs associated with the AgReserves Sale that were recorded during the nine months ended September 30, 2014 and lower real estate carrying costs.other expenses.

~~Administrative costs associated with special purpose entities.~~ Administrative costs associated with special purpose entities of $3.7 million for the nine months ended September 30, 2014, include one-time administrative costs associated with the monetization of the Timber Note. See Note 5, ~~Real Estate Sales.~~

Investment income, net. Investment income, net primarily includes (i) interest and dividends earned, ~~realized gains and losses and the~~(ii) accretion of the net discount, (iii) realized gains from our ~~available-for-sale investments, (ii) interest earned on mortgage notes receivable and (iii)~~available for-sale-investments, (iv) interest income earned on the time deposit held by the ~~AgReserves SPE. See Note 5,~~ ~~Real Estate Sales,~~ ~~for further information~~Buyer SPE and (v) interest earned on ~~the AgReserves Sale.~~mortgage notes receivable.


											Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended September 30,					Nine Months Ended September 30,					2016		2015		2016		2015
	2015		2014			2015		2014			In millions
Net investment income from available-for-sale securities
Interest and dividend income	$	1.1	$	1.9		$	5.5	$	4.0		$	1.5	$	1.1	$	2.0	$	5.5
Accretion income	0.6		0.4			2.1		1.0			1.0		0.6		2.0		2.1
Realized gains (losses) on the sale of investments	5.3		—			5.3		(0.8		)
Other-than-temporary impairment losses	—		(1.3		)	—		(1.3		)
Realized gains on the sale of investments											—		5.3		—		5.3
Total net investment income from available-for-sale securities	7.0		1.0			12.9		2.9			2.5		7.0		4.0		12.9
Interest income from investments in special purpose entities	2.1		2.1			6.2		4.1			2.1		2.1		6.2		6.2
Interest accrued on notes receivable	—		0.3			0.7		0.6
Interest accrued on notes receivable and other interest											0.1		—		0.2		0.7
Total investment income, net	$	9.1	$	3.4		$	19.8	$	7.6		$	4.7	$	9.1	$	10.4	$	19.8

Investment income, net, ~~increased $5.7~~decreased $4.4 million, ~~during~~or 48.4%, to $4.7 million for the three months ended September 30, ~~2015~~,2016 as compared to $9.1 million for the ~~same period in 2014, due to an increase of $6.0 million from our available-for-sale securities, primarily due to the sale of certain corporate debt securities at a realized gain of $5.3 million.~~

~~Investment income, net increased $12.2 million during the nine~~three months ended September 30, 2015, ~~as compared to the same period in 2014,~~ due ~~to (i) an increase of $10.0 million from our available-for-sale securities,~~ primarily ~~due~~ to the sale of certain corporate debt securities at a realized gain of $5.3 million ~~(ii) $2.1 million from interest earned on~~during the ~~time deposit held~~three months ended September 30, 2015, which was partially offset by ~~the AgReserves SPE. See Note 5,~~ ~~Real Estate Sales,~~ ~~for further information on the AgReserves Sale and (iii) $1.5 million~~an increase in interest and ~~dividends~~dividend income and accretion income on available-for-sale securities for the three months ended September 30, 2016.

Investment income, net decreased $9.4 million, or 47.5%, to $10.4 million for the nine months ended September 30, 2016 as compared to $19.8 million for the nine months ended September 30, 2015, due primarily ~~due~~ to the ~~increased investment balances since~~sale of certain corporate debt securities at a realized gain of $5.3 million during the ~~AgReserves Sale~~nine months ended September 30, 2015 and ~~RiverTown Sale.~~

~~Table~~a decrease in interest and dividend income on available-for-sale securities during the nine months ended September 30, 2016. The decrease in interest and dividend income was due primarily to the reduction in investments held during the period. During the nine months ended September 30, 2016, the average balance of ~~Contents~~investments was approximately $209.4 million compared to an average of approximately $412.5 million for the nine months ended September 30, 2015. The decrease in investments during these periods is primarily related to the repurchase of common stock during 2015 and 2016 under our Stock Repurchase Program.

Interest expense. Interest expense primarily includes interest expense on our CDD assessments, the Senior Notes issued by NFTF in April 2014 in connection with the AgReserves Sale and the ~~Construction~~construction loan and Refinanced Loan for our consolidated Pier Park North joint venture. ~~See Note 5,~~ ~~Real Estate Sales,~~ ~~for further information on the AgReserves Sale.~~


													Three Months Ended September 30,				Nine Months Ended September 30,
	Three Months Ended September 30,						Nine Months Ended September 30,						2016		2015		2016		2015
	2015			2014			2015			2014			In millions
Interest expense and amortization of discount and issuance costs for Senior Notes issued by special purpose entity	$	(2.2	)	$	(2.2	)	$	(6.6	)	$	(4.4	)	$	2.3	$	2.2	$	6.7	$	6.6
Interest expense	(0.7		)	(0.8		)	(1.8		)	(1.4		)	0.8		0.7		2.6		1.8
Total interest expense	$	(2.9	)	$	(3.0	)	$	(8.4	)	$	(5.8	)	$	3.1	$	2.9	$	9.3	$	8.4

~~Interest expense decreased $0.1 million during the three months ended September 30, 2015, as compared to the same period in 2014.~~ Interest expense increased $2.6 million during the nine months ended September 30, 2015, as compared to the same period in 2014, primarily due to an increase in interest expense of $2.2 million for the Senior Notes issued by NFTF and interest expense on the Construction Loan for our Pier Park North joint venture.

~~Other, net.~~ ~~Other, net decreased~~ $0.2 million, or 6.9%, and ~~$8.0~~$0.9 million, ~~respectively,~~or 10.7%, during the three and nine months ended September 30, ~~2015~~2016, respectively, as compared to the same periods in ~~2014,~~2015. The increase in interest expense is primarily related to the Refinanced Loan for our consolidated Pier Park North joint venture.

Claim settlement. Claim settlement consists of $12.5 million for the nine months ended September 30, 2016 due to a ~~total of $7.9 million of expenses recorded~~settlement related to the ~~SEC investigation.~~ Deepwater Horizon oil spill.

Other, net. During the three and nine months ended September 30, 2015, wethe Company expensed a total of ~~$0.5~~$0.4 million and $7.9 million, respectively, related to the SEC ~~investigation. The $7.9 million of fees and expenses for the SEC~~ investigation, ~~consisted of (i) an accrual of $3.5 million for penalties, disgorgements and interest relating to the SEC investigation and (ii) legal expenses associated with the SEC investigation. On~~which was resolved in October 27, 2015, we fully resolved the SEC investigation and entered into a settlement with the SEC. Without admitting or denying any factual allegations, we consented to the SEC’s issuance of an administrative order pursuant to which we agreed to pay penalties, disgorgements and interest of approximately $3.5 million, including a civil penalty assessed on us of $2.75 million and other disgorgements and interest subject to indemnification by us. During the nine months ended September 30, 2015, we received correspondence from an insurance carrier related to non-coverage of certain fees and expenses incurred in the SEC investigation and, as a result of this correspondence, we recorded $0.5 million and $4.4 million, respectively, in legal costs during the three and nine months ended September 30, 2015. ~~See Note 18,~~ ~~Commitments and Contingencies~~.

~~Income tax expense.~~

Income tax expense. We recorded income tax expense of ~~$1.2~~$0.9 million during the three months ended September 30, ~~2015,~~2016, as compared to income tax ~~benefit~~expense of ~~$0.4~~$1.2 million during the same period in ~~2014.~~2015. Our effective tax rate was ~~31.1%~~25.9% for the three months ended September 30, ~~2015,~~2016, as compared to ~~71.2%~~31.1% during the same period in ~~2014.~~2015.

We recorded income tax expense of $5.2 million during the nine months ended September 30, 2016, as compared to income tax expense of $2.0 million during the ~~nine months ended September 30, 2015, as compared to tax expense of $115.2 million during the~~ same period in ~~2014.~~2015. Our effective tax rate was ~~72.5%~~28.2% for the nine months ended September 30, ~~2015,~~2016, as compared to ~~21.6%~~71.5% during the same period in ~~2014.~~2015.

These effective tax rates differ from the U.S. Federal statutory rate of 35% primarily due to the effect of the lower timber rate of 23.8%, impact of state taxes, changes in the valuation allowance and changes in permanent book to tax differences. Our effective rate forfor the ~~three and~~ nine months ended September 30, 2015, reflected our expectation that ~~approximately $2.8 million of the settlements~~settlement costs related to the SEC investigation may not be deductible for income tax ~~purposes.~~purposes, which increased our effective rate in 2015.

Our residential real estate segment typically plans and develops mixed-use resort, primary and seasonal residential communities of various sizes, primarily on our existing land. We own land in Northwest Florida, including Gulf of Mexico beach frontage and waterfront properties, concentrated primarily between Tallahassee and Destin, Florida.

The table below sets forth the results of operations of our residential real estate segment for the three and nine months ended September 30, ~~2015~~2016 and ~~2014~~2015:

Three Months Ended September 30, Nine Months Ended September 30,
2015
2014 2015 2014
In millions
Revenues:
Real estate sales $ 4.4
$ 3.4
$ 13.0
$ 12.7
RiverTown sale —
—
—
43.6
Other revenues 0.5
0.3
1.3
0.9
Total revenues 4.9
3.7
14.3
57.2
Expenses:
Cost of real estate sales and other revenues 2.5
2.0
7.5
7.5
Cost of real estate sales - RiverTown sale —
—
—
17.6
Other operating expenses 3.6
1.6
8.0
5.6
Depreciation and amortization 0.1
0.2
0.4
0.5
Total expenses 6.2
3.8
15.9
31.2
Operating (loss) income (1.3 ) (0.1 ) (1.6 ) 26.0
Other expense (0.3 ) (0.1 ) —
(0.1 )
Net (loss) income before income taxes $ (1.6 ) $ (0.2 ) $ (1.6 ) $ 25.9



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	In millions
Revenue:
Real estate revenue	$	2.7		$	4.4		$	14.4		$	13.0
Other revenue	0.4			0.5			1.5			1.3
Total revenue	3.1			4.9			15.9			14.3
Expenses:
Cost of real estate and other revenue	1.3			2.5			5.8			7.5
Other operating expenses	1.3			3.6			4.2			8.0
Depreciation and amortization	—			0.1			0.3			0.4
Total expenses	2.6			6.2			10.3			15.9
Operating income (loss)	0.5			(1.3		)	5.6			(1.6		)
Other expense	(0.3		)	(0.3		)	(0.9		)	—
Net income (loss) before income taxes	$	0.2		$	(1.6	)	$	4.7		$	(1.6	)

Real estate ~~sales~~revenue include sales of homes, homesites and ~~homesites,~~ other residential land and certain lot residuals from homebuilder sales that provide us a percentage of the sale price of the completed home if the home price exceeds a negotiated threshold. Other revenue includes brokerage fees, marketing fees and impact fee credits sold. Cost of real estate ~~sales~~revenue includes direct costs (e.g., development and construction costs), selling costs and other indirect costs (e.g., development overhead, capitalized interest and project administration costs). ~~Other revenues~~For the three and nine months ended September 30, 2015, other operating expenses include ~~brokerage fees and impact fee credits sold.~~non-recurring expenses related to the Bay-Walton Sector Plan.

Three Months Ended September 30, ~~2015~~2016 Compared to the Three Months Ended September 30, ~~2014~~2015

The following table sets forth our residential real estate ~~sales~~revenue and cost of ~~sales~~revenue activity by property type:

Primary homesites. ~~Revenues~~Revenue from ~~real estate~~ primary homesite sales ~~increased $2.5~~decreased $1.5 million, or 50.0%, during the three months ended September 30, ~~2015,~~2016, as compared to the same period in ~~2014,~~2015, due to the ~~timing~~mix of sales, which were primarily in our ~~WaterSound~~Watersound Origins, ~~community.~~Breakfast Point and Southwood communities. During the three months ended September 30, 2016, the average revenue per primary homesite sold was less than $0.1 million, as compared to approximately $0.1 million during the same period in 2015. Gross profit margin increased to ~~43.3%~~53.3% during the three months ended September 30, ~~2015,~~2016, as compared to ~~40.0%~~43.3% during the same period in ~~2014,~~2015, primarily due to the mix of homesites sold during each respective period and the timing of the receipt of lot residuals that have no related costs at the time of recognition.

Other operating expenses include salaries and benefits, property taxes, marketing, project administration, support personnel and other administrative expenses. Other operating expenses ~~increased $2.0~~decreased $2.3 million, or 63.9%, during the three months ended September 30, ~~2015,~~2016, as compared to the same period in ~~2014,~~2015, primarily due to ~~increased spending related~~decreases in personnel costs and professional fees, due to our ~~mixed-use and active adult communities, including non-recurring expenses related to the approval of the Sector Plan.~~continued focus on a low expense structure.

During the three months ended September 30, ~~2015~~2016 and ~~2014,~~2015, we capitalized less than $0.1 million of indirect development costs related to our residential development projects.

~~Other income~~For the three months ended September 30, 2016 and 2015, other expense primarily ~~includes~~consists of interest expense on CDD assessments and other miscellaneous expenses, partially offset by interest earned on our mortgage notes ~~receivable and interest expense on our CDD assessments.~~receivable.

Nine Months Ended September 30, ~~2015~~2016 Compared to the Nine Months Ended September 30, ~~2014~~2015

The following table sets forth our residential real estate ~~sales~~revenue and cost of ~~sales~~revenue activity by property type:

Resort homesites and resort home. ~~Revenues~~Revenue from ~~real estate~~resort homesite sales decreased ~~$2.3~~$0.1 million, or ~~28%~~1.7%, during the nine months ended September 30, ~~2015,~~2016, as compared to the same period in ~~2014, due a decrease of available homesites.~~2015. During the nine months ended September 30, 2016, the average revenue per resort homesite sold was approximately $0.5 million, as compared to approximately $0.4 million during the same period in 2015. Gross profit margins ~~increased~~decreased to ~~64.4%~~62.1% during the nine months ended September 30, ~~2015,~~2016, as compared to ~~48.8%~~64.4% during the same period in ~~2014,~~2015, primarily due to the mix of homesites sold during each respective period.

Primary homesites. Revenue from primary homesite sales decreased $1.1 million, or 17.5%, during the nine months ended September 30, 2016, as compared to the same period in 2015, due to the mix and timing of sales, which were primarily in our Watersound Origins, Breakfast Point and Southwood communities. During both the nine months ended September 30, 2016 and 2015, the average revenue per primary homesite sold was approximately $0.1 million. Gross profit margin increased to 50.0% during the nine months ended September 30, 2016, as compared to 42.9% during the same period in 2015, primarily due to the mix of homesites sold during each respective period and the timing of the receipt of lot residuals that have no related costs at the time of recognition.

~~Primary homesites.~~ Land sales. D~~Gross profit margin increased to 42.9% during~~uring the nine months ended September 30, 2015, as compared to 35.7% during the same period in 2014, primarily due to increased prices, the mix of homesites sold during each respective period and the receipt of lot residuals that have no related costs at the time of recognition.

~~RiverTown community.~~ ~~We completed the~~2016, we had a sale of ~~our RiverTown community during the second quarter~~approximately 111 acres of ~~2014.~~unimproved residential land for $3.4 million resulting in a gross margin of $3.3 million.

Other operating expenses include salaries and benefits, property taxes, marketing, project administration, support personnel and other administrative expenses. Other operating expenses ~~increased $2.4~~decreased $3.8 million, or 47.5%, during the nine months ended September 30, ~~2015,~~2016, as compared to the same period in ~~2014,~~2015, primarily due to ~~increased spending related~~decreases in personnel costs and professional fees, due to our ~~mixed-use and active adult communities, including non-recurring expenses related to the approval of the Sector Plan.~~continued focus on a low expense structure.

During the nine months ended September 30, ~~2015~~2016 and ~~2014,~~2015, we capitalized less than $0.1 million of indirect development costs related to our residential development projects.

~~Other~~For the nine months ended September 30, 2016, other expense primarily ~~includes~~consists of interest expense on CDD assessments and other miscellaneous expenses, partially offset by interest earned on our mortgage notes ~~receivable and interest expense on our CDD assessments.~~receivable.

The table below sets forth the results of operations of our commercial real estate segment for the three and nine months ended September 30, ~~2015~~2016 and ~~2014~~2015:

Three Months Ended September 30, Nine Months Ended September 30,
2015
2014 2015 2014
In millions
Revenues:
Real estate sales $ —
$ —
$ 4.7
$ 3.3
Expenses:
Cost of real estate sales —
—
4.2
1.1
Other operating expenses 0.6
0.5
1.7
1.7
Total expenses 0.6
0.5
5.9
2.8
Operating (loss) income (0.6 ) (0.5 ) (1.2 ) 0.5
Other expense (0.1 ) —
(0.1 ) (0.1 )
Net (loss) income before income taxes $ (0.7 ) $ (0.5 ) $ (1.3 ) $ 0.4



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
	In millions
Revenue:
Real estate revenue	$	0.6		$	—		$	0.6		$	4.7
Expenses:
Cost of real estate revenue	0.6			—			0.6			4.2
Other operating expenses	0.5			0.6			1.6			1.7
Total expenses	1.1			0.6			2.2			5.9
Operating loss	(0.5		)	(0.6		)	(1.6		)	(1.2		)
Other expense	—			(0.1		)	—			(0.1		)
Net loss before income taxes	$	(0.5	)	$	(0.7	)	$	(1.6	)	$	(1.3	)

During the three months ended September 30, 2014 and September 30, 2015, there were no commercial real estate sales. During the nine months ended September 30, 2015, we had a total of two sales of commercial real estate totaling 10.5 acres for $4.7 million. During the nine months ended September 30, 2014, we had three sales of commercial real estate totaling four acres for $3.3 million. Commercial land sales can vary depending on the mix of commercial land sold in each period, with varying compositions of retail, office, light industrial and other commercial uses. During the three and nine months ended September 30, 2016, there were three commercial real estate sales totaling approximately 4 acres for $0.6 million. During the three and nine months ended September 30, 2016, impairment charges of $0.4 million were included in cost of real estate revenue, related to a commerce park. During the three months ended September 30, 2015, there was no commercial real estate revenue. During the nine months ended September 30, 2015, there were two sales of commercial real estate totaling approximately 11 acres for $4.7 million.

Other operating expenses include salaries and benefits, property taxes, professional fees and other administrative expenses.

Our resorts and leisure segment includes ~~revenues~~recurring revenue from our resorts and leisure operations. Resorts and leisure revenue and cost of ~~resort~~resorts and leisure ~~revenues~~revenue include results of operations from the WaterColor Inn and vacation rental ~~programs,~~program, four golf courses, a beach club, marina operations, membership fees, other management services, including management of The Pearl Hotel and other related resort activities.

The table below sets forth the results of operations of our resorts and leisure segment for the three and nine months ended September 30, ~~2015~~2016 and ~~2014~~2015:

The following table sets forth the detail of our resorts and leisure ~~revenues~~revenue and cost of ~~revenues:~~revenue:

Revenue from resorts, vacation rentals and other management services increased ~~$1.1~~$0.5 million, or 8%3.5%, during the three months ended September 30, ~~2015,~~2016, as compared to the same period in ~~2014, primarily~~2015, due to an increase in average room ~~nights rented, higher average~~ rates at both the WaterColor Inn and in ~~our~~the vacation rental ~~programs and ancillary spend. Revenues~~program, along with an increase in average home size managed in the vacation rental program. Revenue from our clubs increased ~~$0.5~~$0.2 million, or ~~17%~~5.9%, during the three months ended September 30, ~~2015,~~2016, as compared to the same period in ~~2014,~~2015, primarily due to a continued increase in total members, growth in rounds played at the golf courses by resort guests, a strong showing by our food and beverage component at the WaterSound Beach Club and increased membership ~~revenues.~~revenue.

Other operating expenses include salaries and benefits, occupancy fees and other administrative expenses.

Nine Months Ended September 30, ~~2015~~2016 Compared to the Nine Months Ended September 30, ~~2014~~2015

Revenue from resorts, vacation rentals and other management services increased ~~$3.7~~$1.5 million, or ~~12%~~4.4%, during the nine months ended September 30, ~~2015,~~2016, as compared to the same period in ~~2014, primarily~~2015, due to an increase in average room ~~nights rented, higher average~~ rates at both the WaterColor Inn and in ~~our~~the vacation rental ~~programs and ancillary spend. Revenues~~program, along with an increase in average home size managed in the vacation rental program. Revenue from our clubs increased ~~$1.6~~$0.7 million, or ~~20%~~7.4%, during the nine months ended September 30, ~~2015,~~2016, as compared to the same period in ~~2014,~~2015, primarily due to a continued increase in total members, growth in rounds played at the golf courses by resort guests, a strong showing by our food and beverage component at the WaterSound Beach Club and increased membership ~~revenues.~~revenue.

Our gross ~~profit~~ margin has ~~increased~~decreased during the nine months ended September 30, ~~2015,~~2016, primarily due to ~~additional homes~~increased cost of revenue in our vacation rental business, higher contract labor rates and ~~increased membership revenues~~hours worked as compared to the same period in ~~2014.~~2015.

Other operating expenses include salaries and benefits, occupancy fees and other administrative expenses.

Our leasing operations segment includes recurring ~~revenues~~revenue from our retail and commercial leasing operations, including our consolidated joint venture at Pier Park North.

The table below sets forth the results of operations of our leasing operations segment for the three and nine months ended September 30, ~~2015~~2016 and ~~2014~~2015:

Other expense increased $0.2 million and $0.8 million for the three and nine months ended September 30, 2016, respectively, as compared to the same periods in 2015. The increase is primarily due to interest expense from the Pier Park North joint venture Refinanced Loan.

Our forestry segment focuses on the management of our timber holdings. We grow and sell timber and wood fiber and provide land management services for conservation properties. Our forestry segment may also sell our timber holdings, undeveloped land or land with limited development and easements.

The total tons sold and relative percentage of total tons sold by major ~~item for~~type of timber ~~sales~~sale for the three and nine months ended September 30, ~~2015~~2016 and ~~2014~~2015 are as follows:

During the three months ended September 30, ~~2014. Gross margin increased during three months ended September 30, 2015, to 89.5%, as compared to 81.8% during the same period in 2014.~~

2016, we sold approximately 90 acres of rural and timber land for $0.2 million. Other operating expenses include salaries and benefits, professional fees and other administrative expenses. Other income consists primarily of income from hunting ~~leases.~~leases and fill dirt sales.

On March 5, 2014, we completed the AgReserves Sale and recorded $569.7 million in revenues from real estate sales, which included the recognition of $11.0 million of revenue, which had been previously recorded as deferred revenue in connection with a 2006 agreement with the FDOT pursuant to which we agreed to sell approximately 3,900 acres of rural land to the FDOT. As part of the AgReserves Sale, we transferred approximately 800 acres that are subject to the 2006 agreement to AgReserves who has agreed to transfer title to the FDOT. As a result, we recognized $11.0 million of revenue during the three months ended March 31, 2014. In addition, we recorded cost of sales of $58.4 million related to the AgReserves Sale, which included our carrying value for land, timber and property of $48.7 million and closing costs of $9.8 million.

~~Revenues~~Revenue from timber sales decreased by approximately ~~$4.3~~$2.0 million, or ~~42%~~33.3%, ~~to $6.0 million~~ during the nine months ended September 30, ~~2015,~~2016, as compared to ~~$10.3 million in~~ the same period in ~~2014,~~2015, primarily due to a decrease in the ~~AgReserves Sale which closed on March 5, 2014. Tons~~amount of tons sold ~~were 337,589~~due to fluctuations in market supply. Gross margin decreased during nine months ended September 30, 2016, to 85.0%, as compared to 90.0% during the same period in 2015, primarily due to fluctuations in market supply.

During the nine months ended September 30, ~~2015, as compared to 368,973 during the nine months ended September 30, 2014.~~

~~For the nine months ended September 30, 2014,~~2016, we sold approximately 696 acres of rural and timber ~~sales also include $1.1 million of deferred revenue related to an imputed~~ land lease that was to be recognized over the life of the timber deeds sold in March 2011. We sold substantially all the land included in the imputed lease as part of the AgReserves Sale and recognized the remaining deferred revenue during the nine months ended September 30, 2014.

Gross margin, excluding the recognition of the deferred revenue from the imputed lease, increased during nine months ended September 30, 2015, to 90.0%, as compared to 58.3% during the same period in 2014. Subsequent to the AgReserves Sale, we have primarily sold product on site without the associated delivery costs, which has increased our gross profit margin.

~~In addition, during~~for $1.2 million. During the nine months ended September 30, 2015, we sold approximately 3,330 acres of rural and timber land for $5.3 million.

Other operating expenses include salaries and benefits, professional fees and other administrative expenses. Other income consists primarily of income from hunting ~~leases.~~leases and fill dirt sales.

Liquidity and Capital Resources

As of September 30, ~~2015,~~2016, we had cash and cash equivalents of ~~$157.9~~$165.3 million, compared to ~~$34.5~~$212.8 million as of December 31, ~~2014.~~2015. Our cash and cash equivalents at September 30, ~~2015~~2016 includes commercial paper of ~~$99.0 million.~~$139.5 million and $9.8 million of money market funds. In addition to cash and cash equivalents, we consider our investments classified as available-for-sale securities, especially our investments in U.S. Treasury securities, as being generally available to meet our liquidity needs. Securities classified as available-for-sale securities are not as liquid as cash and cash equivalents, but they are generally convertible into cash within a relatively short period of time.

Fairholme Capital Management, L.L.C., or one of its affiliates (“Fairholme Capital”) has served as our investment advisor since April 2013. Fairholme Capital receives no compensation for services to us. As of September 30, 2016, we had investments in U.S. Treasuries of $99.7 million, investments in corporate debt securities of $113.7 million and preferred stock investments of $23.2 million. As of December 31, 2015, we had investments in U.S. Treasuries of $184.7 million, investments in corporate debt securities of $6.3 million and preferred stock investments of $0.2 million. As of September 30, 2016, $9.1 million of the $113.7 million corporate debt securities and $0.2 million of the $23.2 million preferred stock are issued by Sears Holdings Corp or affiliates, which may be deemed an affiliate of Fairholme.

Fairholme has served as an investment advisor to the Company since April 2013. As of September 30, 2016, the funds managed by Fairholme ~~Capital~~ beneficially owned approximately ~~32.5%~~32.3% of our common stock. Mr. Bruce Berkowitz is the ~~Managing Member~~Chief Investment Officer of Fairholme Capital Management, L.L.C., a director of Fairholme Trust Company, LLC and the Chairman of our Board of Directors. Mr. Cesar Alvarez also serves as a director of Fairholme Trust Company, LLC and is a member of our Board of Directors. Fairholme does not receive any compensation for services as our investment advisor.

Pursuant to the terms of the ~~Investment Management~~ Agreement, ~~as amended (the “Agreement”), with~~ Fairholme ~~Capital, Fairholme Capital~~ agreed to supervise and direct the investments of an investment account established by us in accordance with the investment guidelines and restrictions approved by the Investment Committee of our Board of Directors. The investment guidelines are set forth in the Agreement and require that, as of the date of any investment: (i) ~~at least 50% of the investment account be held in cash or cash equivalents, as defined in the Agreement, (ii)~~ no more than 15% of the investment account may be invested in securities of any one issuer (excluding the U.S. Government) and ~~(iii)~~(ii) any investment in any one issuer (excluding the U.S. Government) that exceeds 10%, but not 15%, requires the consent of at least two members of the Investment Committee. ~~The~~Effective November 1, 2016, we entered into an Amendment to the Agreement, pursuant to which we modified the investment guidelines and restrictions described in the Agreement to (i) decrease from at least 50% to 25% the amount of the investment account ~~may not~~that must be held in cash and cash equivalents, (ii) permit the investment account to be invested in common equity securities; however, common stock ~~securities.~~

Asinvestments shall be limited to exchange-traded common equities, shall not exceed 5% ownership of ~~September 30, 2015,~~a single issuer and, cumulatively, the common stock held in our investment ~~account included $30.9~~portfolio shall not exceed $100.0 million market value, and (iii) provide that the aggregate market value of money market funds and commercial paper of $99.0 million (all of which are classified within cash and cash equivalents on our Condensed Consolidated Balance Sheets), $234.9 million of U.S. Treasury securities, $5.3 million of corporate debt securities and $11.9 million ofinvestments in common stock, preferred stock or other equity investments ~~(all of which are classified within investments on our Condensed Consolidated Balance Sheets). The issuer~~cannot exceed 25% of the ~~corporate debt securities is a national retail chain that is non-investment grade and the issuer~~market value of our ~~preferred stock~~ investment ~~is a financial services firm that is non-investment grade.~~portfolio at the time of purchase. All other material investment guidelines remain the same.

We believe that our current cash position and our anticipated cash flows from cash equivalents, short term investments and cash generated from operations will provide us with sufficient liquidity to satisfy our anticipated working capital needs, ~~future~~expected capital expenditures and principal and interest payments on our long term debt for the next twelve months.

~~Our real estate investment strategy focuses on projects that meet our risk adjusted investment return criteria.~~ During the nine months ended September 30, ~~2015,~~2016, we incurred a total of ~~$13.2~~$9.2 million for capital expenditures, which includes ~~$5.5~~$1.4 million related to the Pier Park North joint venture, which is included in our leasing operations segment, ~~$2.0~~$4.6 million related ~~primarily~~to the acquisition and development of our residential and commercial real estate projects, $1.3 million for our leasing segment, $0.9 million related to our resorts and leisure segment ~~$1.3~~and $1.0 million related primarily to our forestry and ~~corporate segments and $4.4 million related to the development of our residential real estate projects, which includes $0.4 million in planning costs for our mixed-use and active adult communities.~~other segments.

Our remaining budgeted capital expenditures for ~~2015~~2016 are estimated to be ~~$4.1~~$11.6 million, which includes ~~$3.5~~$9.6 million primarily for the development and acquisition of land for our residential and commercial real estate projects, ~~of which $0.7~~$0.3 million is for our ~~mixed-use~~leasing segment, $1.2 million for our resorts and ~~active adult communities~~leisure segment and ~~$0.6~~$0.5 million for our forestry and other segments. A portion of this spending is discretionary and will only be spent if we believe the risk adjusted return ~~warrants. We anticipate that these future capital commitments will be funded through our cash and cash equivalents, short term investments and cash generated from operations.~~

~~In February 2013,~~warrants the Pier Park North joint venture entered into a $41.0 million construction loan agreement that would have matured in February 2016 at which time there would have been an option for a two year extension (the “Construction Loan”). As of September 30, 2015, $37.6 million was outstanding on the Construction Loan. Interest on the Construction Loan was based on LIBOR plus 210 basis points, or 2.30% at September 30, 2015. The Construction Loan required us to enter into guarantees and comply with covenants as described in Note 8, ~~Real Estate Joint Ventures~~.expenditures.

In October 2015, the Pier Park North joint venture refinanced its ~~Construction Loan~~construction loan and entered into a $48.2 million ~~loan (the “Refinanced Loan”).~~loan. The Refinanced Loan ~~will accrue~~accrues interest at a rate of 4.1% per annum and matures in November 2025. The Refinanced Loan provides for interest only payments during the first twelve months and principal and interest payments on the Refinanced Loan thereafter with a final balloon payment at maturity. The Refinanced Loan is secured by a first lien on, and security interest in, a majority of the Pier Park North joint venture’s property and a $6.62 million letter of credit. In connection with the Refinanced Loan, we entered into a limited guarantee in favor of the lender, based on our percentage ownership of the joint venture. The limited guarantee covers losses arising out of certain events, including (i) tenant security deposits; (ii) tenant rents; (iii) costs and expenses related to any environmental clean-up; (iv) liability for fraud or material breach of warranty with respect to the financing; (v) unpaid real estate taxes assessed against the Property; (vi) failure to maintain required insurance; (vii) foreclosure of the security instrument; or (viii) failure of the joint venture to comply with certain covenants in the security instrument. In addition, the guarantee can become full recourse in the case of any fraud or intentional misrepresentation by the Pier Park North joint venture; any voluntary transfer or encumbrance of the property in violation of the due-on-sale clause in the security instrument; upon commencement of voluntary or insolvency ~~proceedings;~~proceedings and upon breach of covenants in the security instrument. Pursuant to the guarantee, the Pier Park North joint venture partners are required to maintain a minimum of $36 million in combined net worth, not including the value of each partner’s respective equity in the Pier Park North property. See Note 8,9, Real Estate Joint Ventures.

CDD bonds financed the construction of infrastructure improvements ~~at several~~in some of our projects. The principal and interest payments on the bonds are paid by assessments on, or from sales proceeds of, the properties benefited by the improvements financed by the bonds. We have recorded a liability for CDD assessments that are associated with platted property, which is the point at which the assessments become fixed or determinable. Additionally, we have recorded a liability for the balance of the CDD assessment that is associated with unplatted property if it is probable and reasonably estimable that we will ultimately be responsible for repaying. We have recorded debt of ~~$6.8~~$6.7 million related to CDD debt as of September 30, ~~2015.~~2016. Our total outstanding CDD assessments were ~~$22.2~~$21.9 million at September 30, ~~2015,~~2016, which was comprised of ~~$18.4~~$18.0 million at SouthWood, ~~$3.1~~$3.0 million at the existing Pier Park ~~mall and~~retail center, $0.7 million at Wild ~~Heron.~~Heron, $0.1 million at Rivercrest and less than $0.1 million at NatureWalk.

As part of the Pension Plan termination in December 2014, $7.9 million of the Pension Plan’s surplus assets were transferred into a suspense account in our 401(k) Plan. We have retained the risk and rewards of ownership of these assets; therefore, assets held in the suspense account are included in our condensed consolidated financial statements until they are allocated to participants. At September 30, 2015 and December 31, 2014, the fair values of these assets were recorded in Restricted investments on our Condensed Consolidated Balance Sheets and were $7.2 million and $7.9 million, respectively. These assets are expected to fund future benefits to 401(k) Plan participants for up to the next seven years and will be expensed when allocated to participants.

As part of the AgReserves Sale and certain sales of timberlands in 2007 and 2008, we generated significant tax gains. The installment notes structure we used in connection with these sales has allowed us to defer the resulting tax liability of $61.8 million until 2022 through 2024 and $69.3 million until 2029, which is when the installment notes mature. As a result, we have recorded a deferred tax liability related to the gains in connection with these sales.

We may repurchase our shares of common stock from time to time after considering market conditions and in accordance with repurchase limits authorized by our Board of Directors. Through June 30, 2015, the Board of Directors had authorized a total of $950.0 million for the repurchase of outstanding common stock from shareholders. During the ~~three~~nine months ended September 30, ~~2015,~~2016, we purchased 634,596 shares of our common stock under our Stock Repurchase Program at an average weighted price of $16.03. On August 15, 2015 our Board of Directors authorized a total of $300.0 million (including $93.6 million shares that were remaining and unused from the previous authorization). On August 21, 2015, we announced a tender offer which expired on September 22, 2015. Pursuant to the tender offer, in September 2015, we accepted for purchase 16,348,143repurchased 995,650 shares of our common stock at aan average stock price of $14.88 per share, for an aggregate purchase price of $18.00 per share, for a total purchase price of $294.3 million. The 16,348,143 shares of common stock repurchased included approximately 100000 shares (which were deemed to be beneficially owned by Fairholme Capital$14.8 million pursuant to Securities Exchange Act) that the ultimate beneficiary of the shares directed be tendered under the same terms as all other shares of common stock repurchased pursuant to the tender offer. No shares in which Fairholme has a pecuniary interest, or for which Fairholme holds sole dispositive power, were tendered into the tender offer.our Stock Repurchase Program. As of September 30, ~~2015, the remaining authorization would have allowed us to repurchase up to $5.7~~2016, we had a total authority of $190.9 million available for purchase of shares of our common stock ~~under the~~pursuant to our Stock Repurchase Program. ~~There is no expiration date on the Stock Repurchase Program.~~

~~In addition, in October 2015, our Board of Directors authorized an additional $200.0 million for share repurchases.~~ We may repurchase our common stock in open market purchases from time to time, ~~pursuant to Rule 10b-18,~~ in privately negotiated transactions or ~~otherwise.~~otherwise, pursuant to Rule 10b-18 under the Exchange Act. The timing and amount of any additional shares to be repurchased will depend upon a variety of factors, including market and business conditions ~~applicable legal requirements~~ and other factors. Repurchases may be commenced or suspended at any time or from time to time without prior notice. The Stock Repurchase Program will continue until otherwise modified or terminated by our Board of Directors at any time in ~~our~~its sole discretion. In July 2016, we retired 17,998,658 shares of treasury stock at a value of $320.1 million.

Summary of Cash Flows

A summary of our cash flows from operating, investing and financing for the nine months ended September 30, ~~2015~~2016 and ~~2014~~2015 are as follows:

Cash Flows from Operating Activities

Cash flows from operating activities include costs related to assets ultimately planned to be sold, including residential real estate development and related amenities, sales of timberlands or undeveloped and developed land, our forestry operations and land developed by the commercial real estate segment. Net cash provided by operations was ~~$35.6~~$10.6 million during the nine months ended September 30, ~~2015,~~2016, as compared to ~~$322.9~~$35.6 million during the same period in ~~2014,~~2015, primarily ~~as a result of the AgReserves Sale. In addition, we received~~due to receiving $19.6 million from the RiverTown ~~Note~~note during the nine months ended September 30, 2015.

Cash Flows from Investing Activities

Cash flows (used in) provided by investing activities primarily includes purchases and sales of investments, investments in assets held by ~~special purpose entities,~~SPEs, capital expenditures incurred by our Pier Park North joint venture for property to be held and used in the joint venture’s operations and capital expenditures for property and equipment used in our operations. During the nine months ended September 30, 2016, net cash used in investing activities was $42.9 million, which includes purchases of investments of $308.2 million, maturities of investments of $185.0 million and sales of investments of $83.3 million. During the nine months ended September 30, 2015, net cash ~~flows~~ provided by investing activities ~~were~~was $387.0 million, which includes ~~our total net sales, maturities and~~ purchases of investments of ~~$394.0~~$239.7 million, maturities of investments of $310.0 million and sales of investments of $323.7 million.

~~In addition, during~~During the nine months ended September 30, 2016, capital expenditures incurred by our Pier Park North joint venture were $1.4 million, which were reported in our leasing operations segment and capital expenditures for other property and equipment were $2.4 million, which were primarily for our leasing operations and resorts and leisure segments. During the nine months ended September 30, 2015, capital expenditures incurred by our Pier Park North joint venture were $5.5 million, which were reported in our leasing operations segment and capital expenditures for other property and equipment were $2.3 million, which were primarily for our resorts and leisure segment.

Net cash used in financing activities ~~were $299.2~~was $15.2 million during the nine months ended September 30, 2016 compared to net cash used in financing activities of $299.2 million for the nine months ended September 30, 2015, primarily a result of ~~which~~the repurchase of common stock in 2016 and 2015, offset by borrowings on the Pier Park North construction loan in 2015. During the nine months ended September 30, 2016 and 2015, $14.8 million and $304.9 million, respectively, were used for the repurchase of our common stock. ~~The remaining cash used in financing activities were for borrowings on the Pier Park North joint venture Construction Loan and principal payments for CDD assessments.~~

In October 2015, the Pier Park North joint venture refinanced its ~~Construction Loan~~construction loan and entered into a $48.2 million loan. The Refinanced Loan ~~will accrue~~accrues interest at a rate of 4.1% per annum and matures in November 2025. The Refinanced Loan provides for interest only payments during the first twelve months and principal and interest payments thereafter with a final balloon principal payment at maturity of the Refinanced Loan. The Refinanced Loan is secured by a first lien on, and security interest in, a majority of Pier Park North joint venture’s property and a short term $6.6 million letter of credit. In October 2016 the letter of credit was reduced to $1.3 million based on the terms of the Refinanced Loan agreement. In connection with the Refinanced Loan, we entered into a limited guarantee and are required to comply with a financial covenant as described in Note 8,9, Real Estate Joint Ventures.

During 2008 and 2007, we ~~received a~~sold 132,055 acres of timberland in exchange for fifteen year installment notes receivable in the aggregate amount of $183.3 ~~million for the sales of certain timberland (the “2008 installment notes”).~~million. The ~~2008~~ installment notes are fully backed by irrevocable letters of credit issued by Wachovia Bank, N.A. (now a subsidiary of Wells Fargo & Company). We contributed the ~~2008~~ installment notes to bankruptcy remote qualified ~~special purpose entities (the “2008 SPEs”).~~SPEs. The entities’ financial condition and financial results are not consolidated in our financial statements.

During 2008 and 2007, the ~~2008 SPEs~~entities monetized ~~the~~$183.3 million of installment notes by issuing debt securities to third party ~~investors.~~investors equal to approximately 90% of the value of the installment notes. Approximately $163.0 million in net proceeds were distributed to us during 2008 and 2007. The debt securities are payable solely out of the assets of the entities and proceeds from the letters of credit. The investors in the ~~2008 SPEs~~entities have no recourse against us for payment of the debt securities or related interest expense. We have determined that we are not the primary beneficiary of the 2008 SPEs, since we are not the primary decision maker with respect to activities that could significantly impact the economic performance of the 2008 SPEs’, nor do we perform any service activity related to the 2008 SPEs’. Therefore, the 2008 SPEs’ assets and liabilities are not consolidated in our financial statements as of September 30, 2015 and December 31, 2014.

At September 30, 2016 and December 31, 2015, the Company was required to provide surety bonds that guarantee completion of certain infrastructure in certain development projects and mitigation banks of $6.2 million and $7.1 million, respectively and standby letters of credit in the amount of $0.4 million and $0.5 million, respectively, which may potentially result in liability to the Company if certain obligations of the Company are not met.

~~Table~~

Contractual Obligations

There were no material changes outside the ordinary course of ~~Contents~~our business in our contractual obligations during the third quarter of 2016.

~~Contractual Obligations at September 30, 2015~~

Payments due by Calendar Period
Total
Less Than
1 Year
1-3 Years 3-5 Years
More Than
5 Years
In millions
Debt^(1)(2)(6)
$ 69.7
$ 25.3
$ 38.0
$ 0.1
$ 6.3
Interest related to debt, including community development district debt ⁽²⁾
2.9
0.7
0.4
0.4
1.4
Contractual obligations ⁽³⁾
3.1
1.6
1.5
—
—
Other long term obligations ⁽⁴⁾
131.1
—
—
—
131.1
Senior Notes held by special purpose entity ⁽⁵⁾
180.0
—
—
—
180.0
Interest related to Senior Notes held by special purpose entity ⁽⁵⁾
115.3
8.6
17.1
17.1
72.5
Total contractual obligations $ 502.1
$ 36.2
$ 57.0
$ 17.6
$ 391.3



~~(1)~~	~~Includes debt defeased in connection with the sale of our office building portfolio in the amount of $25.3 million, which was later paid by pledged cash and treasury securities in October 2015.~~
~~(2)~~	~~These amounts do not include additional CDD obligations associated with unplatted properties that are not yet fixed and determinable or that are not yet probable or reasonably estimable.~~
~~(3)~~	~~These aggregate amounts include individual contracts in excess of $0.1 million.~~
~~(4)~~	~~Other long term liabilities include certain of our deferred tax liabilities related to our installment note monetization transactions.~~
~~(5)~~	~~Senior Notes held by a consolidated special purpose entity that is not our liability or obligation. See Note 5,~~ ~~Real Estate Sales, of our unaudited condensed consolidated financial statements included in this quarterly report.~~
~~(6)~~	In October 2015, our Pier Park North joint venture refinanced its Construction Loan that would have matured in 2016. As a result, $37.6 million will no longer be due in 2016. The Refinanced Loan will mature in November 2025. See Note 8, ~~Real Estate Joint Ventures~~.

~~Table of Contents~~

Forward-Looking Statements

This quarterly report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Specifically, this quarterly report contains forward-looking statements regarding:

our expectations concerning our future business strategy and ~~the impact of this strategy on our financial condition and results of operations;~~

~~our expectations concerning~~ our intent to seek ~~additional opportunities to invest~~higher and better uses for our ~~liquid assets, including our intent to seek opportunities that could increase our returns;~~real estate assets;

our ~~expectation~~beliefs regarding growth in the retirement demographic and the strategic opportunities provided to ~~repurchase our shares through our Stock Repurchase Program;~~

~~our expectations concerning the benefits of our recent repurchase of shares, including our recent tender offer;~~

~~our expectations concerning demand for residential real estate, including mixed-use and active adult communities, in Northwest Florida and our ability to develop projects that meet that demand;~~us by such growing retirement demographic;

our expectations regarding the wide range of residential and commercial uses of our Bay-Walton Sector Plan land holdings, including to serve the active adult retirement market;

our beliefs concerning the volatility in the consistency and pace of our residential real estate sales, the type of buyers interested in our residential real estate, and the mix of homesites that will be available for sale and the related effect on our gross profit margins;

~~our beliefs concerning the seasonality of our revenues;~~

our expectations regarding the amount and timing of the impact fees which we will receive in connection with the RiverTown Sale;

our expectations regarding the costs and benefits of the Timber Note monetization structure, including the timing and amount of the expenses that NFTF will incur during the life of the Timber Note and the amount of the remaining principal balance;

~~our expectation regarding the lack of substantial revenues from sales of our timber or rural lands in the future;~~

~~our~~ expectation regarding our liquidity or ability to satisfy our working capital needs, expected capital expenditures and principal and interest payments on our ~~debt and deferred tax liabilities;~~long term debt;

our ~~expectation~~estimates and assumptions regarding ~~cash flows to be received over~~ the ~~term and at the maturity of the 2008~~ installment notes and ~~our intent to hold such notes until maturity;~~the Timber Note;

our expectation regarding the impact of pending litigation, claims, other disputes or governmental proceedings, ~~and the completed SEC investigation,~~ on our cash flows, financial ~~position~~condition or results of ~~operations, and our belief regarding the defenses to pending litigation claims against us;~~

~~our expectations with respect to the accounting treatment for the AgReserves Sale and RiverTown Sale;~~

our estimates regarding certain tax matters and accounting valuations, including our ability to use our tax assets to mitigate any tax liabilities that arise from the AgReserves Sale and the timing and amount we expect to pay in future income taxes;

~~our expectations regarding the sufficiency of the Pension Plan’s surplus assets to fund future benefits to 401(k) Plan participants;~~operations; and

~~our expectations regarding the impact of new accounting pronouncements.~~

~~Table of Contents~~

These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from those expressed in any forward-looking statement. The most important factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, those risk factors and disclosures set forth in our Form 10-K for the year ended December 31, ~~2014,~~2015, and subsequent, Form 10-Qs and other current reports, and the following:

any changes in our strategic objectives and our ability to successfully implement such strategic objectives;

any potential negative impact of our longer-term property development strategy, including losses and negative cash flows for an extended period of time if we continue with the self-development of recently granted entitlements;

our ability and the ability of our investment advisor to identify and acquire suitable investments for our investment portfolio that meet our risk and return criteria;

significant decreases in the market value of our investments in securities or any other investments;

our ~~use of our share repurchase authorization and our~~ ability to ~~carry~~capitalize on ~~the Stock Repurchase Program in accordance with applicable securities laws;~~strategic opportunities presented by a growing retirement demographic;

our ability to ~~capitalize on opportunities relating to a mixed use~~accurately predict market demand for the range of potential residential and ~~active adult community or communities~~commercial uses of our real estate, including our Bay-Walton Sector holdings;

volatility in ~~Northwest Florida;~~

~~changes in our customer base~~the consistency and ~~the mix~~pace of ~~homesites available for sale in~~ our residential real ~~estate;~~estate revenue;

any ~~further~~ downturns in real estate markets in Florida or across the nation;

~~a slowing of the population growth in Florida, including a decrease of the migration of Baby Boomers to Florida;~~

our dependence on the real estate industry and the cyclical nature of our real estate operations;

our ability to successfully and timely obtain ~~land-use~~land use entitlements and construction financing, maintain compliance with state law requirements and address issues that arise in connection with the use and development of our land, including the permits required for ~~the launch of our planned~~ mixed-use and active adult communities;

changes in laws, regulations or the regulatory environment affecting the development of real estate;

our ability to effectively deploy and invest our assets, including our available-for-sale securities;

our ability to effectively manage our real estate assets, as well as the ability of our joint venture partner to effectively manage the day-to-day activities of the Pier Park North joint venture;

our ability to successfully estimate the amount and timing of the impact fees we will receive in connection with the RiverTown Sale;

~~our ability to successfully estimate the costs and benefits of the Timber Note monetization structure;~~

increases in operating costs, including costs related to real estate taxes, owner association fees, construction materials, labor and insurance and our ability to manage our cost structure;

the sufficiency of our current cash position, anticipated cash flows from cash equivalents and short term investments and cash generated from operations to satisfy our anticipated working capital needs, capital expenditures and principal and interest payments;

our ability to anticipate the impact of pending environmental litigation matters or governmental proceedings on our financial ~~position~~condition or results of operations;

the expense, management distraction and possible liability associated with litigation, claims, other disputes or governmental ~~proceedings and the completed SEC investigation;~~proceedings;

potential liability under environmental or construction laws, or other laws or regulations;

our ability to receive payments of settlement amounts due under our claims settlement receivable;

our ability to successfully estimate the impact of certain accounting and tax matters that arise from the ~~AgReserves Sale~~installment notes and ~~RiverTown Sale;~~

~~significant tax payments arising from any acceleration of deferred taxes that arise from~~ the ~~AgReserves Sale and other transactions;~~Timber Note; and

the performance of the surplus assets in the Pension Plan may not be what we expected.

~~Table of Contents~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks primarily from interest rate risk fluctuations. We have investments in corporate debt securities and U.S. Treasury securities that have fixed interest rates for which changes in interest rates generally affect the fair value of the investment, but not the earnings or cash flows. A hypothetical 100 basis point increase in interest rates would result in a decrease of approximately $6.3 million in the market value of our available-for-sale securities as of September 30, 2016. Any realized gains or losses resulting from such interest rate changes would only occur if we sold the investments prior to maturity. In addition, our investments in corporate debt securities are non-investment grade, which could affect their fair value and could materially impact our results of operations if a decline in their value is determined to be other-than-temporary. A hypothetical 100 basis point increase in interest rates would result in a decrease of approximately $1.5 million in the market value of our available-for-sale securities as of September 30, 2015. Any realized gains or losses resulting from such interest rate changes would only occur if we sold the investments prior to maturity.

Our cash and cash equivalents are invested in ~~demand deposit~~commercial paper and money market instruments. Changes in interest rates related to these investments would not significantly impact our results of operations. The amount of interest earned on one of our retained interest investments is based on LIBOR. A 1%100 basis point change in the interest rate may result in an insignificant change in interest earned on the investment. ~~Our treasury securities are invested in U.S. government treasury securities and do not bear market risk.~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting. During the quarter ended September 30, ~~2015~~2016 there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

~~Table of Contents~~

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

~~On January 4, 2011~~We are subject to a variety of litigation, claims, other disputes and governmental proceedings that arise from time to time in the ordinary course of our business, none of which we ~~received notice from~~believe will have a material adverse effect on our consolidated financial position, results of operations or liquidity.

In addition, we are subject to environmental laws and regulations, which include obligations to remove or limit the ~~Staff~~effects on the environment of the ~~SEC~~disposal or release of ~~the initiation of an inquiry into our policies~~certain wastes or substances at various sites, including sites which have been previously sold. Refer to Note 18, Commitments and practices concerning impairment of investment in real estate assets and on June 24, 2011 the SEC issued to us a related order of private investigation. On January 20, 2015, we received a Wells Notice from the Staff related to historical accounting and disclosure practices and real estate asset valuations principally as reflected in our financial resultsContingencies, for 2010, 2009 and prior periods. On February 20, 2015, we submitted to the Staff a Wells submission and subsequently engaged in discussions with the Staff concerning a settlement of its investigation, with which we cooperated.

On October 27, 2015, we fully resolved the SEC investigation and entered into a settlement with the SEC. Without admitting or denying any factual allegations, we consented to the SEC’s issuance of an administrative order pursuant to which we agreed to pay penalties, disgorgements and interest of approximately $3.5 million, including a civil penalty assessed on us of $2.75 million and other disgorgements and interest subject to indemnification by us. The settlement and all allegations relate to actions taken prior to the 2011 replacement of the Board of Directors, the Chief Executive Officer and the Chief Financial Officer. None of the SEC's allegations, findings, sanctions, remedies or orders relate to any of our current directors or controlling shareholders.

~~Item 2.~~ ~~Unregistered Sales of Equity Securities and Use of Proceeds~~further discussion.

~~The following table provides information~~

Item 1A. Risk Factors

As discussed in our Risk Factors contained in our Form 10-K for the year ended December 31, 2015, we have a significant investment portfolio managed by our investment advisor, Fairholme. Losses in the fair value of our available-for-sale investments, and the concentration of our investment portfolio in any particular issuer, industry, group of related industries or geographic sector, could have an adverse impact on our ~~repurchases~~results of operations, cash flows and financial condition. In addition, our equity investments may fail to appreciate and may decline in value or become worthless.

As of September 30, 2016, we had $385.9 million in our investment accounts. Of this amount, we hold $149.3 million in cash equivalents, $99.7 million in U.S. Treasury securities, $113.7 million in corporate debt securities and $23.2 million in preferred stock investments. In addition, on November 1, 2016, we entered into an Amendment to our Investment Management Agreement which permits us to begin investing in common equity securities. The market value of these investments is subject to change from period to period. Our available-for-sale securities currently include investments in non-investment grade corporate debt securities and investments in non-investment grade preferred stock of three issuers. Pursuant to our Investment Management Agreement with Fairholme, we could invest up to a total of fifteen percent of the investment account in any one issuer as of the date of purchase.

We have exposure to credit risk associated with our available-for-sale investments, which include U.S. Treasury securities, corporate debt securities, preferred stock investments and retained interest investments. These instruments are also subject to price fluctuations as a result of changes in the financial market’s assessment of issuer credit quality, increases in delinquency and default rates, changes in prevailing interest rates and other economic factors. A downgrade of the U.S. government’s credit rating could also decrease the value of our available-for-sale investments. Losses in the fair value of our available-for-sale investments can negatively affect earnings if management determines that such securities are other-than-temporary impaired. The evaluation of other-than-temporary impairment is based on various factors, including the financial condition, business prospects, industry and creditworthiness of the issuer, severity and length of time the securities were in a loss position, our ability and intent to hold investments until unrealized losses are recovered or until maturity. If a decline in fair value is considered other-than-temporary, the carrying amount of the security is written down and the amount of the credit-related component is recognized in earnings. Based on these factors, the unrealized losses related to the Company's debt securities of $0.7 million were determined to be temporary at September 30, 2016.

Any losses in the fair value of our available-for-sale investments that are deemed to be other-than-temporary due to credit deterioration will result in us being required to record credit-related losses in our Condensed Consolidated Statements of Income. In addition, as a result of the concentration of our corporate debt securities and preferred stock investments, the performance of our investments may be disproportionately affected by any adverse change in the financial condition of these issuers or the market value of any of the securities in our portfolio, which could have a material adverse effect on our results of operations, cash flows and financial condition.

Furthermore, although common equity securities have historically generated higher average total returns than other types of securities over the long term, common equity securities also have experienced significantly more volatility in those returns. The market price of common stock ~~during~~is subject to significant fluctuations due to a number of factors including the ~~three months ended~~operating performance of companies and other risks that may affect specific economic sectors, industries or segments of the market, as well as adverse economic conditions generally, all of which are outside of our control. Our equity investments may fail to appreciate and may decline in value or become worthless. A substantial decline in the value of our equity investments would have a material adverse effect on our results of operations, cash flows and financial condition.

Item 5. Other Information

Item 1.01 Entry into a Material Definitive Agreement

Amendment to Investment Management Agreement

Effective November 1, 2016, we and Fairholme entered into an Amendment to the Investment Management Agreement, as amended. Pursuant to the Agreement, we engaged Fairholme to serve as our investment advisor for our cash and cash equivalents held in an investment account. Pursuant to the Amendment, we modified the investment guidelines and restrictions described in the Agreement to (i) decrease from at least 50% to 25% the amount of the investment account that must be held in cash and cash equivalents, (ii) permit the investment account to be invested in common equity securities; however, common stock investments shall be limited to exchange-traded common equities, shall not exceed 5% ownership of a single issuer and, cumulatively, the common stock held in our investment portfolio shall not exceed $100.0 million market value, and (iii) provide that the aggregate market value of investments in common stock, preferred stock or other equity investments cannot exceed 25% of the market value of our investment portfolio at the time of purchase. All other material investment guidelines remain the same.

As of September 30, ~~2015:~~

Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
In Millions
July 1-31, 2015 226,934
$ 16.13
226,934
$ 100.1
August 1-31, 2015 407,662
15.98
407,662
$ 300.0
September 1-30, 2015 16,348,143
(2) 18.00
16,348,143
$ 5.7
Total 16,982,739
$ 17.93
16,982,739
$ 5.7



~~(1)~~	Through June 30, 2015, the Board of Directors authorized a total of $950.0 million for the repurchase of outstanding common stock on the open market from shareholders under our Stock Repurchase Program. On August 15, 2015 the Board of Directors authorized the repurchase of additional shares for up to $300.0 million (including $93.6 million unused from the previous authorization). As of September 30, 2015, there was remaining $5.7 million for purchase of shares under the program. The Stock Repurchase Program has no expiration date.



~~(2)~~	Shares were purchased in connection with our tender offer, announced August 21, 2015, in which shareholders were given the opportunity to purchase for cash up to 16,666,666 shares of our common stock at a price of $18.00 per share, net to the seller in cash, less any applicable withholding taxes and without interest. The tender offer expired on September 22, 2015.

~~Table~~2016, funds managed by Fairholme beneficially owned approximately 32.3% of ~~Contents~~our common stock. Mr. Bruce Berkowitz is the Chief Investment Officer of Fairholme Capital Management, L.L.C., a director of Fairholme Trust Company, LLC and the Chairman of our Board of Directors. Mr. Cesar Alvarez also serves as a director of Fairholme Trust Company, LLC and is a member of our Board of Directors.

Item 6. Exhibits

Exhibit Index



Exhibit Number		Description
10.6010.49c		~~Separate Guaranty of Retained Liability Matters,~~Amendment to Investment Management Agreement, dated, ~~October 19, 2015, among the~~November 1, 2016, between Fairholme Trust Company, LLC and The St. Joe ~~Company, Don M. Casto, III and Kensington Gardens Builders Corporation, in favor of Keybank National Association.~~Company.
*31.1		Certification by ~~Jeffrey C. Keil,~~Jorge Gonzalez, President, ~~and Interim~~ Chief Executive Officer and Director, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2		Certification by Marek Bakun, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1		Certification by ~~Jeffrey C. Keil,~~Jorge Gonzalez, President, ~~and Interim~~ Chief Executive Officer and Director, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2		Certification by Marek Bakun, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
**101.INS		XBRL Instance Document.
**101.SCH		XBRL Taxonomy Extension Schema Document.
**101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.
**101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.
**101.LAB		XBRL Taxonomy Extension Label Linkbase Document.
**101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.



*	Filed herewith.



**	Furnished herewith.

~~Table of Contents~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		THE ST. JOE COMPANY

Date:	November ~~5, 2015~~3, 2016	/s/ ~~Jeffrey C. Keil~~Jorge Gonzalez
		~~Jeffrey C. Keil~~Jorge Gonzalez
		President and ~~Interim~~ Chief Executive Officer
		~~(Duly Authorized Officer)~~

Date:	November 3, 2016	/s/ Marek Bakun
		Marek Bakun
		Chief Financial Officer

6756



Florida		59-0432511
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

133 South ~~WaterSound~~Watersound Parkway ~~WaterSound,~~Watersound, Florida		~~32413~~32461
(Address of principal executive offices)		(Zip Code)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	As of September 30, 2015								As of December 31, 2014
	Less Than 12 Months				12 Months or Greater				Less Than 12 Months				12 Months or Greater
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Corporate debt securities	$	—	$	—	$	—	$	—	$	85,845	$	1,294	$	14,260	$	188



	September 30, 2015					December 31, 2014
	Carrying value		Fair value		Level	Carrying value		Fair value		Level
Assets
Pledged treasury securities	$	—	$	—	N/A	$	25,670	$	26,501	1
Retained interest investments	$	10,137	$	13,147	3	$	9,932	$	13,026	3
Investments held by special purpose entities (Note 5)	$	208,720	$	209,144	3	$	209,857	$	209,679	3
Liabilities
Senior Notes held by special purpose entity (Note 5)	$	177,418	$	177,982	3	$	177,341	$	177,940	3



	September 30, 2015		December 31, 2014
Interest bearing homebuilder note for the RiverTown Sale, secured by the real estate sold — 5.25% interest rate, all accrued interest and remaining principal and interest payment due and paid in June 2015	$	—	$	19,600
Pier Park Community Development District notes, non-interest bearing, due December 2024, net of unamortized discount of $0.1 million, effective rates 5.73% — 8.0%	2,147		2,147
Interest bearing homebuilder notes, secured by the real estate sold — 4.0% interest rate, any remaining payments outstanding are due August 2016	256		2,011
Various mortgage notes, secured by certain real estate bearing interest at various rates	490		512
Total notes receivable, net	$	2,893	$	24,270



	September 30, 2015		December 31, 2014
In-substance defeased debt, interest payable at 5.62%, secured and paid by pledged cash and treasury securities, due October 1, 2015	$	25,324	$	25,670
Community Development District debt, secured by certain real estate and standby note purchase agreements, due through May 2039, interest payable at 2.25% to 7.0%	6,777		6,516
Construction loan in the Pier Park North joint venture, due February 2016, bearing interest at LIBOR plus 210 basis points, or 2.30% and 2.26% at September 30, 2015 and December 31, 2014, respectively	37,625		31,618
Total debt	$	69,726	$	63,804



	Three Months Ended September 30, 2014		Nine Months Ended September 30, 2014
Interest cost	$	149	$	496
Expected loss on assets	137		412
Settlement charges	529		969
Amortization of loss	115		373
Net periodic pension cost	$	930	$	2,250



	Defined Benefit Pension Items		Unrealized Gains and (Losses) on Available-for-Sale Securities			Total
Accumulated other comprehensive income at June 30, 2015	$	—	$	648		$	648
Other comprehensive income before reclassifications	—		2,245			2,245
Amounts reclassified from accumulated other comprehensive income	—		(2,754		)	(2,754		)
Other comprehensive loss	—		(509		)	(509		)
Accumulated other comprehensive income at September 30, 2015	$	—	$	139		$	139



	Payments due by Calendar Period
	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
	In millions
Debt^(1)(2)(6)	$	69.7	$	25.3	$	38.0	$	0.1	$	6.3
Interest related to debt, including community development district debt ⁽²⁾	2.9		0.7		0.4		0.4		1.4
Contractual obligations ⁽³⁾	3.1		1.6		1.5		—		—
Other long term obligations ⁽⁴⁾	131.1		—		—		—		131.1
Senior Notes held by special purpose entity ⁽⁵⁾	180.0		—		—		—		180.0
Interest related to Senior Notes held by special purpose entity ⁽⁵⁾	115.3		8.6		17.1		17.1		72.5
Total contractual obligations	$	502.1	$	36.2	$	57.0	$	17.6	$	391.3



Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)
						In Millions
July 1-31, 2015	226,934		$	16.13	226,934	$	100.1
August 1-31, 2015	407,662		15.98		407,662	$	300.0
September 1-30, 2015	16,348,143	(2)	18.00		16,348,143	$	5.7
Total	16,982,739		$	17.93	16,982,739	$	5.7