News Column

ST JOE CO - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

August 8, 2014

Business Overview We are a Florida real estate development and operating company with real estate assets 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 or our resorts, leisure and leasing operations or our forestry 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 assets through a range of activities from strategic land planning and development, infrastructure improvements and promoting economic development in the regions where we operate. We may explore the sale of assets opportunistically or when we believe they have reached their highest and best use. AgReserves Sale On March 5, 2014, we completed our previously announced sale to AgReserves, Inc. ("AgReserves") of approximately 380,000 acres of land located in Northwest Florida along with certain other assets, inventory and rights under certain continuing leases and contracts (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, during the six months ended June 30, 2014. 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 "Buyer 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 Buyer SPE, in favor of us. The Buyer SPE was created by AgReserves with financial instruments with an aggregate principal balance of $203.5 million that secure the Letter of Credit. In April 2014, we contributed the Timber Note and assigned our 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 us ("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 only from the property of NFTF, which consists solely of (i) the Timber Note, (ii) the Letter of Credit, (iii) any cash, securities and other property in certain NFTF accounts, (iv) the rights of NFTF under the contribution agreement with us (which was solely to contribute the Timber Note and the Letter of Credit), and (v) any proceeds relating to the property listed in (i) through (iv) above. The investors holding the Senior Notes of NFTF have no recourse against us for payment of the Senior Notes or the related interest expense. We received $165.0 million in cash, net of $15.0 million in costs, from the monetization and expect to receive the remaining $20.0 million in fifteen years 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 we contributed to NFTF to be used for interest and operating expenses over the fifteen year period and which are recorded in Investments held by special purpose entities on our Condensed Consolidated Balance Sheets and (3) $3.7 million of costs related to the monetization that were expensed during the three and six months ended June 30, 2014 and are recorded in Administrative costs associated with special purpose entities on our Condensed Consolidated Statements of Operations. We own the equity interest in NFTF, but no equity interest in the Buyer SPE. Both the Buyer SPE and NFTF are distinct legal entities and the assets of the Buyer SPE and NFTF are not available to satisfy our liabilities or obligations and the liabilities of the Buyer SPE and NFTF are not our liabilities or obligations. In the event that proceeds from the financial instruments are insufficient to settle all of the liabilities of the Buyer SPE or NFTF, we are not obligated to contribute any funds to either the Buyer SPE or NFTF. 33



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We have determined that we are the primary beneficiary of the Buyer SPE and NFTF, and therefore, the Buyer SPE's and NFTF's assets and liabilities are consolidated in our financial statements as of June 30, 2014. The carrying amounts of the Buyer SPE's and NFTF's assets and non-recourse liabilities were $213.9 million and $179.5 million, respectively, as of June 30, 2014. The consolidated assets of the Buyer 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 $2.0 million on the time deposit, U.S. Treasuries of $9.6 million, cash of $0.8 million and deferred issuance costs of $1.5 million for the Senior Notes. The consolidated liabilities include the Senior Notes issued by NFTF of $177.3 million, net of the $2.8 million discount and $2.2 million accrued interest expense on the Senior Notes. We have recorded $2.0 million of interest income on the time deposit and amortization of the discount on the U.S. Treasuries in Investment income, net on our Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2014. We recorded $2.1 million of interest expense for the Senior Notes, amortization of the discount and issuance costs during the three and six months ended June 30, 2014. RiverTown Sale On April 2, 2014, we completed the previously announced 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 (the "RiverTown Note"), (3) the assumption of our Rivers Edge Community Development District ("Rivers Edge CDD") assessments and (4) the obligation to purchase certain RiverTown community related impact fee credits from us as the RiverTown community is developed (the "RiverTown Sale"). The RiverTown Note bears interest at 5.25% per annum, matures on June 30, 2015 and is payable as follows: (i) accrued interest on September 30, 2014, (ii) accrued interest plus $1.0 million of principal on March 30, 2015 and (iii) all accrued interest and remaining principal on June 30, 2015. The RiverTown Note is secured by a mortgage imposing a first priority security lien on the real property included the RiverTown Sale. Based on Mattamy's current development plans and St. Johns County's current costs for impact fees, we may receive approximately $20 million to $26 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 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 our control. We cannot provide any assurance as to the amount or timing of any payments it may receive for the impact fees. We recorded net earnings of $26.0 million before income taxes for the RiverTown Sale during the second quarter of 2014. Mattamy also assumed our total outstanding Rivers Edge CDD assessments, which were $11.0 million, of which $5.4 million was recorded on our Condensed Consolidated Balance Sheets as of March 31, 2014. 34



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Segments

We currently conduct primarily all of our business in the following four reportable operating segments: 1) residential real estate, 2) commercial real estate, 3) resorts, leisure and leasing operations and 4) forestry. 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 the AgReserves Sale, during the six months ended June 30, 2014 and excluding revenue of $43.6 million related to the RiverTown Sale, during the three and six months ended June 30, 2014. Three Months Ended Six Months Ended June 30, June 30, 2014 2013 2014 2013 Segment Operating Revenues Residential real estate 16.8 % 16.3 % 20.6 % 22.0 % Commercial real estate 4.2 % 3.5 % 6.9 % 2.2 % Resorts, leisure and leasing operations 74.1 % 50.5 % 55.3 % 43.1 % Forestry 4.5 % 29.0 % 17.0 % 32.1 % Other 0.4 % 0.7 % 0.2 % 0.6 % Consolidated operating revenues 100.0 % 100.0 % 100.0



% 100.0 %

For more information regarding our operating segments, see Note 15, 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 and seasonal residential communities of various sizes, primarily on our existing land. Our residential real estate segment generates revenues primarily from: the sale of developed homesites and homes;



the sale of parcels of entitled, undeveloped lots;

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; and

other fees on certain transactions.

Our residential real estate segment incurs cost of revenues 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. 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 also sells certain resorts, leisure and operating properties. Our commercial real estate segment generates revenues 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 from costs directly associated with the land, development, construction and selling costs. 35



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Resorts, Leisure and Leasing Operations Our resorts, leisure and leasing operations segment generates revenues from our recurring revenue streams, which primarily include the WaterColor Inn and vacation rentals, golf courses, marinas and leasing operations. WaterColor Inn and Vacation Rentals - Our resorts and leisure operations generate revenues from the WaterColor Inn and Resort, the WaterSound Beach club, our restaurants and our vacation rental businesses in WaterColor, WaterSound Beach and surrounding communities. The WaterColor Inn incurs expenses from the cost of services and goods provided, personnel costs and third party management fees. Our vacation rental business generates revenues from the rental of private homes. The vacation rental business incurs expenses from marketing, personnel and general maintenance for the homeowner. Also included in the vacations rental business' costs are amounts owed to the homeowner for their percentage of rental revenue. Clubs and Resorts - Our clubs and resorts include our golf courses and resort facilities that generate revenues from memberships, daily play at those 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 facilities, personnel costs and third party management fees. St. Joe Club & Resorts is our private membership club that provides participating homeowners and their rental guests access to our clubs. We launched St. Joe Club & Resorts in January 2014, and as a result of this initiative, certain of our clubs are no longer available to the public. While we expect revenues generated from these facilities to decline, we expect that revenues from our higher margin vacation rental business will increase in the future as we believe that the St. Joe Club & Resorts will provide us a competitive advantage in this business. In May 2014, St. Joe Club & Resorts began managing The Pearl, a fifty-five room resort hotel in Rosemary Beach, Florida. Revenues generated for our management services of The Pearl include a management fee, fifty percent of resort fees and a percentage of The Pearl's gross operating profit. Expenses incurred include primarily internal personnel costs. Marinas - Our marinas generate revenues 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. Leasing Operations - Our leasing operations generate revenues from leasing retail and commercial property, including properties located in our consolidated joint venture at Pier Park North, and incur expenses primarily from maintenance of these properties and personnel costs.



Forestry

Our forestry segment focuses on the management and harvesting of our timber holdings. We grow, harvest and sell sawtimber, wood fiber and forest products and provide land management services for conservation properties. Our forestry segment generates revenues from the sale of wood fiber, sawtimber, standing timber and forest products and conservation land management services. Our forestry segment incurs costs of revenues from internal costs of forestry management, external logging costs, and property taxes. Our forestry segment may also generate revenues 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. Prior to the AgReserves Sale, a significant portion of the revenue from our forestry segment was generated pursuant to our RockTenn Supply Agreement, under which we sold delivered wood (trees that we cut and deliver). As part of the AgReserves Sale, the RockTenn Supply Agreement was assumed by AgReserves. Subsequent to the AgReserves Sale, revenue from our forestry segment has decreased substantially and be primarily from open market sales of timber. 36



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Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our 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 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. The 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, 2013. There have been no significant changes in these policies during the first six months of 2014, 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.



Seasonality

Our residential real estate business and our resorts, leisure and leasing operations businesses are affected by seasonal fluctuations. Revenues from our resorts, leisure and leasing operations businesses 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. Historically, our residential real estate business revenues have been higher in the second and third quarters due to increased customer traffic and sales; however, we have begun to see a shift away from seasonality as we sell more lots directly to homebuilders. Following the AgReserves Sale, our business is more dependent upon the real estate industry and resorts, leisure and leasing businesses as income from our forestry operations has been reduced. Therefore, the cyclical nature of our real estate operations could become more apparent in our quarterly or annual results of operations and cash flows. 37



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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 six months ended June 30, 2014 and 2013. 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. Three Months Ended Six Months Ended June 30, June 30, 2014 2013 2014 2013 In millions Revenues: Real estate sales $ 48.9$ 7.0$ 626.6$ 15.0 Resorts, leisure and leasing revenues 18.2 17.0 26.4 26.1 Timber sales 1.1 9.8 9.2 19.5 Total 68.2 33.8 662.2 60.6 Expenses: Cost of real estate sales 20.4 3.7 82.4 8.7 Cost of resorts, leisure and leasing revenues 13.6 12.7 21.8 20.9 Cost of timber sales 0.2 5.8 4.1 11.8 Other operating expenses 2.8 3.2 7.2 6.1 Corporate expenses 4.4 4.5 8.5 9.0 Administrative costs associated with special purpose entities (Note 4) 3.7 - 3.7 - Depreciation, depletion and amortization 2.0 2.3 4.0 4.7 Total 47.1 32.2 131.7 61.2 Operating income (loss) 21.1 1.6 530.5 (0.6 ) Other income (expense): Investment income, net 3.9 0.3 4.2 0.4 Interest expense (2.2 ) (0.3 ) (2.9 ) (0.9 ) Other, net 0.5 1.1 1.4 1.3 Total other income 2.2 1.1 2.7 0.8 Income before equity in loss from unconsolidated affiliates and income taxes 23.3 2.7 533.2 0.2 Income tax expense (8.7 ) - (115.6 ) - Net income $ 14.6$ 2.7$ 417.6$ 0.2 38



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Real Estate Sales and Gross Margin.

Three Months Ended June 30, Six Months Ended June 30, 2014 % (1) 2013 % (1) 2014 % (1) 2013 % (1) Dollars in millions



Revenues:

Residential real estate sales $ 4.2 8.6 % $ 5.5 78.6 % $ 9.9 1.6 % $ 13.3 88.7 % RiverTown Sale

43.6 89.2 % - - % 43.6 7.0 % - - % Commercial real estate sales 1.0 2.0 % 1.2 17.1 % 3.4 0.5 % 1.4 9.3 % AgReserves Sale and other 0.1 0.2 % 0.3 4.3 % 569.7 90.9 % 0.3 2.0 % Real estate sales $ 48.9 100.0 % $ 7.0 100.0 % $ 626.6 100.0 % $ 15.0 100.0 % Gross profit: Residential real estate sales $ 1.7 40.5 % $ 2.4 43.6 % $ 4.7 47.5 % $ 5.4 40.6 % RiverTown Sale 26.0 59.6 % - - % 26.0 59.6 % - - % Commercial real estate sales 0.7 70.0 % 0.6 50.0 % 2.3 67.6 % 0.6 42.9 % AgReserves Sale and other 0.1 100.0 % 0.3 100.0 % 511.2 89.7 % 0.3 100.0 % Gross profit $ 28.5 58.3 % $ 3.3 47.1 % $ 544.2 86.8 % $ 6.3 42.0 %



Calculated percentage of total real estate sales and the respective gross

(1 ) profit percentage. Real Estate Sales. During the three months ended June 30, 2014, real estate sales increased $41.9 million primarily due to the RiverTown Sale. As a result of the RiverTown Sale, we recorded $43.6 million in revenues from residential real estate sales. Excluding the RiverTown Sale, residential real estate sales decreased $1.3 million, or 24%, to $4.2 million during the three months ended June 30, 2014, as compared to $5.5 million during the same period in 2013. This decrease is primarily due to a decrease in available homesites for sale in our resort communities during the three months ended June 30, 2014, as compared to the same period in 2013. Commercial real estate sales decreased $0.2 million during the three months ended June 30, 2014, as compared to the same period in 2013. During the six months ended June 30, 2014, real estate sales increased $611.6 million primarily due to the AgReserves Sale and the RiverTown Sale. As part of the AgReserves Sale and the RiverTown Sale, we recorded $569.7 million and $43.6 million, respectively, in revenues from real estate sales. Real estate sales for the AgReserves Sales, 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. Excluding the RiverTown Sale, residential real estate sales decreased $3.4 million, or 26%, to $9.9 million during the six months ended June 30, 2014, as compared to $13.3 million during the same period in 2013. This decrease is primarily due to a decrease in available homesites for sale in our resort communities during the six months ended June 30, 2014, as compared to the same period in 2013. The decrease in residential sales is partially offset by an increase of $2.0 million in commercial real estate sales during the six months ended June 30, 2014, as compared to the same period in 2013. Real Estate Sales Gross Profit. During the three months ended June 30, 2014, we recorded gross profit of $26.0 million, or 59.6%, for the RiverTown Sale. Excluding the RiverTown Sale, gross profit was $2.5 million, or 47.2%, during the three months ended June 30, 2014, as compared to $3.3 million, or 47.1%, during the same period in 2013. 39



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During the six months ended June 30, 2014, we recorded gross profit of $511.2 million, or 89.7%, for the AgReserves Sale and $26.0 million, or 59.6%, for the RiverTown Sale. Excluding the AgReserves Sale and the RiverTown Sale, gross profit was $7.0 million, or 52.6%, during the six months ended June 30, 2014, as compared to $6.3 million or 42.0% during the same period in 2013. The increase in gross profit, excluding the AgReserves Sale and the RiverTown Sale, is primarily due to the increase in commercial sales, which typically have higher gross profit margins as compared to residential real estate sales, and increases in prices in our residential resort communities and the lot residual received which has no related cost. As a result of the AgReserves Sale, we do not expect to have 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, Leisure and Leasing Revenues and Gross Profit. Six Months Ended Three Months Ended June 30, June 30, 2014 2013 2014 2013 Dollars in millions Resorts, leisure and leasing revenues $ 18.2$ 17.0$ 26.4$ 26.1 Gross profit $ 4.6 $ 4.3 $ 4.6$ 5.2 Gross profit margin 25.3 % 25.3 % 17.4 % 19.9 % Resorts, leisure and leasing revenues increased $1.2 million, or 7%, during the three months ended June 30, 2014, as compared to the same period in 2013. The increase in revenues includes an increase of $0.6 million of resorts and leisure revenues primarily due to an increase in room nights rented and an increase of $0.6 million of leasing revenues from leases in our Pier Park North joint venture. Beginning in early 2014, we commenced recognizing leasing revenue from our Pier Park North joint venture as retail stores became occupied by tenants. As a result, we recognized $0.6 million of leasing revenues during the three months ended June 30, 2014. Resorts, leisure and leasing revenues increased $0.3 million, or 1%, during the six months ended June 30, 2014, as compared to the same period in 2013. The increase in revenues is primarily due to an increase of $0.8 million for leasing revenues, which now includes leasing revenue from our Pier Park North joint venture as retail stores became occupied by tenants. The increase from our leasing revenues is partially offset by a decrease from our resorts and leisure revenues primarily due to the harsh weather during the first few months of 2014. 40



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Timber Sales and Gross Profit.

Six Months Ended Three Months Ended June 30, June 30, 2014 2013 2014 2013 Dollars in millions Timber sales $ 1.1$ 9.8$ 9.2$ 19.5 Gross profit $ 0.9$ 4.0$ 5.1$ 7.7 Gross profit margin 81.8 % 40.8 % 55.4 % 39.5 % The decrease in timber sales of $8.7 million, or 89%, during the three months ended June 30, 2014, and $10.3 million, or 53%, during the six months ended June 30, 2014, as compared to the same periods in 2013, are primarily due to the AgReserves Sale, which closed on March 5, 2014. In addition, timber sales for the six months ended June 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 included in the imputed lease as part of the AgReserves Sale and recognized the remaining deferred revenue during the six months ended June 30, 2014. We expect our timber sales and related costs to substantially decrease in the future as a result of the AgReserves Sale. In addition, subsequent to the AgReserves Sale, we have primarily sold product on site without delivery costs, which has increased our gross profit margin. Other operating and corporate expenses. Other operating and corporate expenses decreased by $0.5 million, or 7%, during the three months ended June 30, 2014, as compared to the same period in 2013, primarily due to a decrease in professional fees and property taxes. Other operating and corporate expenses increased by $0.6 million, or 4%, during the six months ended June 30, 2014, as compared to the same period in 2013, primarily due to $1.2 million of severance costs associated with the AgReserves Sale, partially offset by a decrease in property taxes and professional fees. Administrative costs associated with special purpose entities. Administrative costs associated with special purpose entities of $3.7 million for the three and six months ended June 30, 2014, include one-time administrative costs associated with the monetization of the Timber Note. See Note 4, Real Estate Sales. Other income (expense). Other income (expense) consists of the following: Three Months Ended Six Months Ended June 30, June 30, 2014 2013 2014 2013 Net investment income from available-for-sale securities $ 1.6$ 0.3$ 1.8$ 0.3 Interest income from investments in special purpose entities 2.0 - 2.0 - Interest accrued on notes receivable 0.3 - 0.4 0.1 Total investment income, net 3.9 0.3 4.2 0.4 Interest expense (0.1 ) (0.3 ) (0.8 ) (0.9 ) Interest expense and amortization of discount and issuance costs for Senior Notes issued by special purpose entity (2.1 ) - (2.1 ) - Total interest expense (2.2 ) (0.3 ) (2.9 ) (0.9 ) Other, net 0.5 1.1 1.4 1.3 Total other income $ 2.2$ 1.1$ 2.7$ 0.8 41



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Investment income. Investment income primarily includes (i) interest earned, realized gains and losses and accretion of the net discount from our available-for-sale investments, (ii) interest earned on mortgage notes receivable and (iii) interest income earned on the time deposit held by the Buyer SPE. See "AgReserves Sale" in the Business Overview section for additional information. Investment income increased $3.6 million during the three months ended June 30, 2014, as compared to the same period in 2013, due to an increase of $1.3 million from our available-for-sale securities (which includes an increase of $1.7 million for interest, partially offset by realized losses of $0.4 million), $0.3 million for interest earned on mortgage notes receivables and $2.0 million for interest earned on the time deposit held by the Buyer SPE. Investment income increased $3.8 million during the six months ended June 30, 2014, as compared to the same period in 2013, due to an increase of $1.5 million for our available-for-sale securities (which includes an increase of $2.3 million for interest, offset by realized losses of $0.8 million), an increase of $0.3 million for interest earned on mortgage notes receivables and $2.0 million for interest income primarily for interest income earned on the time deposit held by the Buyer SPE. Interest expense. Interest expense increased $2.0 million during the three and six months ended June 30, 2014, as compared to the same period in 2013, primarily due to interest expense of $2.1 million for the Senior Notes issued by NFTF in April 2014 in connection with the AgReserves Sale. See "AgReserves Sale" in the Business Overview section for additional information. Other income. Other income decreased by $0.6 million during the three months ended June 30, 2014, as compared to the same period in 2013, primarily due to the sale of hunting leases that were included in the AgReserves Sale. Income tax expense. We recorded income tax expense of $8.7 million and $115.6 million during the three and six months ended June 30, 2014, respectively, as compared to no tax expense during the same periods in 2013. Our effective tax rates for the three and six months ended June 30, 2014, were approximately 37.3% and 21.7%, respectively, as compared to 0% during the same periods in 2013. During the six months ended June 30, 2014, we reversed $90.2 million of the valuation allowances established on our net deferred tax assets of $12.9 million as of December 31, 2013, which reduced our effective rate for the six months ended June 30, 2014. Subsequent to the reversal of the valuation allowance on the net deferred tax assets in 2014, we expect our effective rate to be closer to the statutory rate. 42



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Table of Contents Segment Results Residential Real Estate 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 six months ended June 30, 2014 and 2013: Six Months Ended Three Months Ended June 30, June 30, 2014 2013 2014 2013 In millions Revenues: RiverTown Sale $ 43.6 $ - $ 43.6 $ - Real estate sales 3.8 5.4 9.4 13.0 Other revenues 0.4 0.1 0.5 0.3 Total revenues 47.8 5.5 53.5 13.3 Expenses: Cost of real estate sales - RiverTown Sale 17.6 - 17.6 - Cost of real estate sales and other revenues 2.5 3.1 5.2 7.9 Other operating expenses 1.9 2.1 4.0 4.1 Depreciation and amortization 0.1 0.2 0.3 0.4 Total expenses 22.1 5.4 27.1 12.4 Operating income 25.7 0.1 26.4 0.9 Other income (expense) 0.3 (0.2 ) - (0.7 ) Net income (loss) before income taxes $ 26.0$ (0.1 )$ 26.4$ 0.2 Real estate sales include sales of homes 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. Cost of real estate sales 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 include brokerage fees and impact fee credits sold. As discussed above in the Business Overview section, in April 2014, we completed the RiverTown Sale and as a result recognized revenue of $43.6 million during the three and six months ended June 30, 2014. 43



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Three Months Ended June 30, 2014 Compared to the Three Months Ended June 30, 2013 The following table sets forth our residential real estate sales and cost of sales activity by geographic region and property type, excluding the RiverTown Sale: Three Months Ended June 30, 2014 Three Months Ended June 30, 2013 Gross Gross Units Cost of Gross Profit Units Cost of Gross Profit Sold Revenues Sales Profit Margin Sold Revenues Sales Profit Margin (Dollars in millions) Northwest Florida: Resort homesites 5 $ 1.6$ 1.1$ 0.5 31.3 % 16 $ 3.5$ 1.9$ 1.6 45.7 % Primary homesites 20 2.2 1.3 0.9 40.9 % 22 1.3 0.8 0.5 38.5 % RiverTown community - - - - - % 14 0.6 0.4 0.2 33.3 % Total 25 $ 3.8$ 2.4$ 1.4 36.8 % 52 $ 5.4$ 3.1$ 2.3 42.6 % Northwest Florida resort homesites. Real estate sales decreased $1.9 million, or 54%, during the three months ended June 30, 2014, as compared the same period in 2013, due to a decrease in homesite sales in our WaterColor and WaterSound West Beach communities, slightly offset by an increase in homesite sales in our WaterSound Beach community. Gross profit margins decreased to 31.3% during the three months ended June 30, 2014, as compared to 45.7% during the same period in 2013, primarily due to mix of homesites sold during each respective period. Northwest Florida primary homesites. Real estate sales increased $0.9 million, or 69%, and gross profit margin increased to 40.9% during the three months ended June 30, 2014, as compared to 38.5% during the same period in 2013. During the three months ended June 30, 2014, sales of homesites were primarily in our WaterSound Origins community as compared to sales in our SouthWood and Breakfast Point communities during the same period in 2013. Homesite sales in our WaterSound Origins community typically have higher margins than our SouthWood and Breakfast Point communities. RiverTown community. As discussed above in the Business Overview section, in April 2014, we completed the sale of our RiverTown community during the three months ended June 30, 2014. Other operating expenses include salaries and benefits, property taxes, marketing, project administration, support personnel and other administrative expenses. Other operating expenses decreased $0.2 million during the three months ended June 30, 2014, as compared to the same period in 2013, primarily due to a decrease in property taxes. During the three months ended June 30, 2014 and 2013, we capitalized less than $0.1 million of indirect development costs related to our residential development projects. Other income (expense) primarily includes interest earned on our mortgage notes receivable and interest expense on our CDD assessments. During the three months ended June 30, 2014, we recorded $0.3 million of interest earned primarily from the RiverTown Note combined with minimal interest expense for our CDD assessments due to the RiverTown Sale. During the three months ended June 30, 2013, we recorded interest expense of $0.2 million related to the Rivers Edge CDD assessments and minimal interest earned on our mortgage notes receivable. 44



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Six Months Ended June 30, 2014 Compared to the Six Months Ended June 30, 2013 The following table sets forth our residential real estate sales and cost of sales activity by geographic region and property type, excluding the RiverTown Sale: Six Months Ended June 30, 2014 Six Months Ended June 30, 2013 Gross Gross Units Cost of Gross Profit Cost of Gross Profit Sold Revenues Sales Profit Margin Units Sold Revenues Sales Profit Margin (Dollars in millions) Northwest Florida: Resort homesites 18 $ 5.4$ 2.6$ 2.8 51.9 % 57 $ 9.2$ 5.3$ 3.9 42.4 % Primary homesites 39 3.7 2.4 1.3 35.1 % 47 2.7 1.8 0.9 33.3 % RiverTown community 7 0.3 0.2 0.1 33.3 % 28 1.1 0.8 0.3 27.3 % Total 64 $ 9.4$ 5.2$ 4.2 44.7 % 132 $ 13.0$ 7.9$ 5.1 39.2 % Northwest Florida resort homesites. Real estate sales decreased $3.8 million, or 41%, during the six months ended June 30, 2014, as compared the same period in 2013, due to a decrease in homesites sales in our WaterColor community and our WaterSound West Beach community, slightly offset by an increase in homesite sales in our WaterSound Beach community. Gross profit margins increased to 51.9% during the six months ended June 30, 2014, as compared to 42.4% during the same period in 2013, primarily due to an increase in pricing in our WaterColor, WaterSound Beach and WaterSound West Beach communities, an increase in the lot residual received and the recognition of deferred profit in our WaterSound West Beach community, given that both the lot residual and the recognition of deferred profit have no related costs. Northwest Florida primary homesites. Real estate sales increased $1.0 million, or 37%, and gross profit margin increased to 35.1% during the six months ended June 30, 2014, as compared to 33.3% during the same period in 2013. During the six months ended June 30, 2014, sales of homesites were primarily in our WaterSound Origins community as compared to sales in our SouthWood and Breakfast Point communities during the same period in 2013. Homesite sales in our WaterSound Origins community typically have higher prices and margins than our SouthWood and Breakfast Point communities.



RiverTown Community primary homesites. As discussed above in the Business Overview section, in April 2014, we completed the sale of our RiverTown community during the six months ended June 30, 2014.

Other operating expenses include salaries and benefits, property taxes, marketing, project administration, support personnel and other administrative expenses. Other operating expenses decreased $0.1 million during the six months ended June 30, 2014, as compared to the same period in 2013, primarily due to a decrease in property taxes slightly offset by increased professional fees and repairs and maintenance. During the six months ended June 30, 2014 and 2013, we capitalized less than $0.1 million of indirect development costs related to our residential development projects. Other income (expense) primarily includes interest earned on our mortgage notes receivables and interest expense on our CDD assessments. During the six months ended June 30, 2014, we recorded $0.4 million of interest earned primarily from the RiverTown Note, slightly offset by interest expense for our CDD assessments. During the six months ended June 30, 2013, we recorded interest expense of $0.7 million related to the Rivers Edge CDD assessments and minimal interest earned on our mortgage notes receivable. 45



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Commercial Real Estate Our commercial real estate segment plans, develops, entitles and sells our land holdings, often in conjunction with strategic partners, for a broad range of retail, office, hotel and industrial uses. From time to time, our commercial real estate segment may sell our resort, leisure and operating properties. The timing of commercial real estate revenues can vary depending on the demand, size and location of the property.



The table below sets forth the results of operations of our residential real estate segment for the three and six months ended June 30, 2014 and 2013:

Three Months Ended June Six Months Ended 30, June 30, 2014 2013 2014 2013 In millions Revenues: Real estate sales $ 1.0$ 1.2$ 3.4$ 1.4 Expenses: Cost of real estate sales 0.3 0.6 1.1 0.8 Other operating expenses 0.6 0.7 1.2 1.4 Total expenses 0.9 1.3 2.3 2.2 Operating income (loss) 0.1 (0.1 ) 1.1 (0.8 ) Other expense - (0.1 ) (0.1 ) (0.1 ) Net Income (loss) before income taxes $ 0.1$ (0.2 )$ 1.0$ (0.9 )



Three Months Ended June 30, 2014 Compared to the Three Months Ended June 30, 2013

Commercial real estate sales decreased $0.2 million to $1.0 million during the three months ended June 30, 2014, as compared to $1.2 million for the same period in 2013. 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. Other operating expenses include salaries and benefits, property taxes, professional fees and other administrative expenses. Other operating expenses decreased $0.1 million during the three months ended June 30, 2014, as compared to the same period in 2013, primarily due to professional fees.



Six Months Ended June 30, 2014 Compared to the Six Months Ended June 30, 2013

Commercial real estate sales increased $2.0 million to $3.4 million during the six months ended June 30, 2014, as compared to $1.4 million for the same period in 2013. 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. Other operating expenses include salaries and benefits, property taxes, professional fees and other administrative expenses. Other operating expenses decreased $0.2 million during the six months ended June 30, 2014, as compared to the same period in 2013, primarily due to employee costs and property taxes. 46



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Resorts, Leisure and Leasing Operations Our resorts, leisure and leasing operations segment includes recurring revenues from our resort and leisure activities. Resort, leisure and leasing revenues and cost of resort, leisure and leasing revenues include results of operations from the WaterColor Inn and vacation rental programs, four golf courses, marina operations and other related resort activities. In addition, this segment also includes 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 resorts, leisure and leasing operations segment for the three and six months ended June 30, 2014 and 2013: Six Months Ended Three Months Ended June 30, June 30, 2014 2013 2014 2013 In millions Revenues: Resorts and leisure operations $ 16.4 $ 15.8$ 23.4$ 23.9 Leasing operations 1.8 1.2 3.0 2.2 Total revenues 18.2 17.0 26.4 26.1 Expenses: Cost of resorts and leisure operations 13.1 12.2 20.7 20.0 Cost of leasing operations 0.6 0.5 1.2 1.0 Operating expenses 0.2 0.1 0.4 0.2 Depreciation 1.7 1.6 3.2 3.2 Total expenses 15.6 14.4 25.5 24.4 Operating income 2.6 2.6 0.9 1.7 Other income - 0.4 $ - 0.4



Net income before income taxes $ 2.6 $ 3.0 $

0.9 $ 2.1

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

Three Months Ended June 30, 2014 Three Months Ended June 30, 2013 Gross Gross Gross Gross Revenues Profit Profit Margin Revenues Profit Profit Margin Dollars in millions Inn and vacation rentals $ 12.5$ 2.9 23.2 % $ 11.5$ 2.8 24.3 % Clubs 3.0 0.2 6.7 % 3.4 0.5 14.7 % Marinas 0.9 0.2 22.2 % 0.9 0.3 33.3 % Leasing 1.8 1.2 66.7 % 1.2 0.7 58.3 % Total $ 18.2$ 4.5 24.7 % $ 17.0$ 4.3 25.3 % 47



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Three Months Ended June 30, 2014 Compared to the Three Months Ended June 30, 2013 Revenues from inn and vacation rentals increased $1.0 million, or 9%, during the three months ended June 30, 2014, as compared to the same period in 2013, primarily due to an increase in room nights rented. Our gross profit margin has decreased during the three months ended June 30, 2014, as compared to the same period in 2013, as we adjust our business model and launch St. Joe Club & Resorts to increase our market share. Revenues from our clubs decreased $0.4 million, or 11%, and gross profit margin decreased 8% due to the launch of St Joe Club & Resorts on January 1, 2014. In connection with the launch of St. Joe Club & Resorts in January 2014, we limited the use of our golf courses and resort facilities to the public; therefore, the loss of revenues from the public access to the golf courses and resort facilities have contributed to the decrease in revenues during the three months ended June 30, 2014, as compared to the same period in 2013. Revenues and gross profit from our leasing operations increased $0.6 million due to the commencement of recognition of revenue from leases in our Pier Park North joint venture as retail stores became occupied by tenants in early 2014. As a result, we recognized $0.6 million of leasing revenues during the three months ended June 30, 2014. During the three months ended June 30, 2014 and 2013, we capitalized $0.2 million and $0.3 million, respectively, of indirect development costs related to Pier Park North, which construction began in early 2013. Six Months Ended June 30, 2014 Compared to the Six Months Ended June 30, 2013 Six Months Ended June 30, 2014 Six Months Ended June 30, 2013 Gross Gross Gross Gross Revenues Profit Profit Margin Revenues Profit Profit Margin Dollars in millions Inn and vacation rentals $ 16.9$ 2.3 13.6 % $ 16.9$ 2.9 17.2 % Clubs 5.1 0.1 2.0 % 5.7 0.7 12.3 % Marinas 1.4 0.3 21.4 % 1.3 0.4 30.8 % Leasing 3.0 1.8 60.0 % 2.2 1.2 54.5 % Total $ 26.4$ 4.5 17.0 % $ 26.1$ 5.2 19.9 % Revenues from inn and vacation rentals were flat and gross profit margin decreased 3.6% during the six months ended June 30, 2014, as compared to the same period in 2013, as we adjust our business model and launch St. Joe Club & Resorts to increase our market share. Revenues from our clubs decreased $0.6 million, or 11%, and gross profit margin decreased 10.3% due to the launch of St Joe Club & Resorts on January 1, 2014. In connection with the launch of St. Joe Club & Resorts in January 2014, we limited the use of our golf courses and resort facilities to the public; therefore, the loss of revenues from the public access to the golf courses and resort facilities have contributed to the decrease in revenues during the six months ended June 30, 2014, as compared to the same period in 2013. Revenues and gross profit from our leasing operations increased $0.8 million due to the commencement of recognition of leasing revenue in our Pier Park North joint venture as retail stores are occupied by tenants. As a result, we recognized $0.7 million of leasing revenues during the six months ended June 30, 2014. During the six months ended June 30, 2014 and 2013, we capitalized $0.5 million and $0.3 million, respectively, of indirect development costs related to Pier Park North, which construction began in early 2013. 48



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Table of Contents Forestry



Our forestry segment focuses on the management and harvesting of our timber holdings. We grow, harvest and sell timber and wood fiber and provide land management services for conservation properties. In addition, our forestry segment may sell our timber or rural land holdings.

The table below sets forth the results of operations of our forestry segment, including revenues and expenses associated with the AgReserves Sale, for the three and six months ended June 30, 2014 and 2013: Six Months Ended Three Months Ended June 30, June 30, 2014 2013 2014 2013 In millions Revenues: AgReserves - Real estate sales $ - $ - $ 569.7 $ - Timber sales 1.1 9.8 9.2 19.5 Total revenues 1.1 9.8 578.9 19.5 Expenses: AgReserves - Cost of real estate sales - - 58.5 - Cost of timber sales 0.2 5.8 4.1 11.8 Other operating expenses 0.1 0.2 1.5 0.4 Depreciation and depletion 0.1 0.5 0.5 1.0 Total expenses 0.4 6.5 64.6 13.2 Operating income 0.7 3.3 514.3 6.3 Other income 0.3 0.5 0.8 1.0 Net income before income taxes $ 1.0 $ 3.8



$ 515.1$ 7.3

The relative contribution to our timber sales by major item for the three and six months ended June 30, 2014 and 2013 are as follows:

Six Months Ended Three Months Ended June 30, June 30, 2014 2013 2014 2013 Percent of total tons sold: Pine pulpwood 87 % 67 % 69 % 68 % Pine sawtimber 9 % 28 % 22 % 27 % Pine grade logs 4 % 5 % 7 % 5 % Other - % - % 2 % - % Total 100 % 100 % 100 % 100 % 49



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Three Months Ended June 30, 2014 Compared to the Three Months Ended June 30, 2013

Timber sales decreased by approximately $8.7 million to $1.1 million during the three months ended June 30, 2014, as compared to $9.8 million in the same period in 2013, due to the AgReserves Sale which closed on March 5, 2014. Tons delivered were less than 60,000 during the three months ended June 30, 2014, as compared to 340,000 during the three months ended June 30, 2013. The gross margin increased during the three months ended June 30, 2014, to 81.8%, as compared to 40.8% during the same period in 2013. Subsequent to the AgReserves Sale, we have primarily sold product on site without delivery costs, which has increased our gross profit margin. Other income consists primarily of income from hunting leases, which decreased $0.2 million during the three months ended June 30, 2014, as compared to the same period in 2013, primarily due to hunting leases that were sold as part of the AgReserves Sale.



Six Months Ended June 30, 2014 Compared to the Six Months Ended June 30, 2013

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 June 30, 2014. In addition, we recorded cost of sales of $58.5 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. Timber sales decreased by approximately $10.3 million during the six months ended June 30, 2014, as compared to the same period in 2013, due to the AgReserves Sale which closed on March 5, 2014. Tons delivered were 293,000 during the six months ended June 30, 2014, as compared to 665,000 tons during the six months ended June 30, 2013. In addition, for the six months ended June 30, 2014, timber sales also 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 included in the imputed lease as part of the AgReserves Sale and recognized the remaining deferred revenue during the six months ended June 30, 2014. The gross margin, excluding the recognition of the deferred revenue from the imputed lease, increased during 2014, to 49.4%, as compared to 39.5% during the same period in 2013. Subsequent to the AgReserves Sale, we have primarily sold product at a lower price, with less delivery costs, which has increased our gross profit margin. Other operating expenses increased $1.1 million during the six months ended June 30, 2014, as compared to the same period in 2013, due to severance costs that were paid in the first quarter of 2014, related to the reduction in our forestry operations due to the AgReserves Sale. Other income consists primarily of income from hunting leases, which decreased $0.2 million during the six months ended June 30, 2014, as compared to the same period in 2013, primarily due to hunting leases that were sold as part of the AgReserves Sale. 50



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Liquidity and Capital Resources As of June 30, 2014, we had cash and cash equivalents of $50.9 million, compared to $21.9 million as of December 31, 2013. In addition, subsequent to the monetization of the Timber Note and the closing of the RiverTown Sale, we had available-for-sale investments of $628.5 million as of June 30, 2014, as compared to $147.0 million as of December 31, 2013. In April 2013, we engaged Fairholme Capital Management, L.L.C. ("Fairholme Capital") to serve as our investment advisor. Fairholme Capital receives no compensation for their services to us. As of June 30, 2014, the funds managed by Fairholme Capital beneficially owned approximately 27.1% of our common stock. Mr. Bruce Berkowitz is the Managing Member of Fairholme Capital and the Chairman of our Board of Directors. 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) 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 investment account may not be invested in common stock securities. As of June 30, 2014, the investment account included $34.2 million of money market funds (all of which are classified within cash and cash equivalents), $524.8 million of U.S. Treasury securities (all of which are classified within investments), $100.2 million of corporate debt securities and $3.5 million of preferred stock. The issuer of the corporate debt securities is a national retail chain and is non-investment grade. In November 2012, the Board of Directors approved the termination of our pension plan. We anticipate receiving between $17 million to $20 million in cash in late 2014 or 2015 upon the termination of our pension plan, which is overfunded. However, we cannot provide any assurance as to this timing as regulatory approval for the termination of the pension plan is required before the cash will be released to us. In addition, we currently expect to recognize future estimated losses before income taxes of approximately $19 million to $22 million as a result of terminating our pension plan. The construction loan entered into by the Pier Park North joint venture requires us to provide certain guarantees and covenants as described in Note 8, Real Estate Joint Ventures. These covenants include that we maintain minimum liquidity, which is defined as unencumbered and unrestricted cash, cash equivalents or U.S. Treasury securities of $25 million. We believe that our current cash position and our anticipated cash flows will provide us with sufficient liquidity to satisfy our anticipated working capital needs, expected capital expenditures and principal and interest payments on our long term debt for the next twelve months. 51



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Our real estate investment strategy focuses on projects that meet our risk adjusted investment return criteria. During the six months ended June 30, 2014, we incurred a total of $18.0 million for capital expenditures, which includes $13.0 million related to the Pier Park North joint venture and $5.0 million, which was primarily for our resorts and leisure operations, the development of our residential real estate projects and includes $0.9 million in planning costs for our mixed-use and active adult community. We expect to incur an additional estimated total of $36.0 million in future capital expenditures during the remaining six months of 2014, which includes $26.4 million primarily for the development of our residential and commercial real estate projects, $1.0 million for our forestry and other segments, and $8.6 million related to the Pier Park North joint venture, which we expect will be funded by the joint venture's construction loan proceeds. A portion of this spending is discretionary and will only be spent if the risk adjusted return warrants. We anticipate that future capital commitments will be funded through our cash balances and operations. In February 2013, the Pier Park North joint venture entered into a $41.0 million construction loan agreement that matures in February 2016 at which time there is an option for a two year extension. As of June 30, 2014, $22.4 million was outstanding on the construction loan. Interest on the construction loan was based on LIBOR plus 210 basis points, or 2.25% at June 30, 2014. CDD bonds financed the construction of infrastructure improvements at several 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 $5.9 million related to CDD debt as of June 30, 2014. Our total outstanding CDD assessments were $22.1 million at June 30, 2014, which was comprised of $18.3 million at SouthWood, $3.2 million at the existing Pier Park mall and $0.6 million at Wild Heron. We currently expect to pay approximately $70 million in federal income taxes for 2014 and we made an estimated tax payment of $35.4 million during the six months ended June 30, 2014. We expect to pay federal income taxes on future taxable income. Summary of Cash Flows A summary of our cash flows from operating, investing and financing for the six months ended June 30, 2014 and 2013 are as follows:


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