ST JOE CO Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)


The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the accompanying unaudited
condensed consolidated financial statements and related notes in Item 1 and with
the audited consolidated financial statements and the related notes included in
our annual report on Form 10-K. The statements regarding industry outlook, our
expectations regarding our future performance, liquidity and capital resources
and other non-historical statements in this discussion are forward-looking
statements. These forward-looking statements are subject to risks and
uncertainties, including the risks and uncertainties described in
"Forward-Looking Statements" below and "Risk Factors" on page 6 of our annual
report on Form 10-K. Our actual results may differ materially from those
contained in or implied by any forward-looking statements. We assume no
obligation to revise or publicly release any revision to any forward-looking
statements contained in this quarterly report on Form 10-Q, unless required
by
law.

Business Overview

St. Joe is a real estate development, asset management and operating company
with all of its real estate assets and operations in Northwest Florida. We
intend to use existing assets for residential, hospitality and commercial
ventures. We have significant residential and commercial land-use entitlements.
We actively seek higher and better uses for our real estate assets through a
range of development activities. We may partner with or explore the sale of
discrete assets when we and/or others can better deploy resources. We seek to
enhance the value of our owned real estate assets by developing residential,
commercial and hospitality projects to meet market demand. Approximately 86% of
our real estate is located in Florida's Bay, Gulf, and Walton counties.
Approximately 90% of our real estate land holdings are located within fifteen
miles of the Gulf of Mexico.

We believe our present capital structure, liquidity and land provide us with
years of opportunities to increase recurring revenue and long-term value for our
shareholders. We intend to focus on our core business activity of real estate
development, asset management and operations. We continue to develop a broad
range of asset types that we believe will provide acceptable rates of return,
grow recurring revenues and support future business. Capital commitments will be
funded with cash proceeds from completed projects, existing cash, owned-land,
partner capital and financing arrangements. We do not anticipate immediate
benefits from investments. Timing of projects may be subject to delays caused by
factors beyond our control.

Our real estate investment strategy focuses on projects that meet long-term
risk-adjusted return criteria. Our practice is to only incur such expenditures
when our analysis indicates that a project will generate a return equal to or
greater than the threshold return over its life.

Market conditions

Throughout the first half of 2022, we continued to generate positive financial
results, with revenue exceeding the first six months of 2021 across each
segment. While macro-economic factors such as the COVID-19 pandemic,
geopolitical conflicts, inflation, supply chain disruptions and rising interest
rates have created economic headwinds and impacted buyer sentiment, demand
across our segments remains strong. We believe this is primarily the result of
the continued growth in Northwest Florida, which we attribute to the region's
high quality of life, natural beauty and outstanding amenities, as well as the
evolving flexibility in the workplace.

Despite the strong demand across our segments, we also continue to feel the
impact from the aforementioned macro-economic factors, including supply chain
disruptions and cost increases, which, for example, have extended homesite and
home deliveries in certain residential communities and increased operating
costs. However, these delays generally have not resulted in increased
cancellation rates, and therefore only impact the timing of revenue recognition.
In addition, given our diverse portfolio of residential holdings, the mix of
sales from different communities may impact revenue and margins period over
period, as discussed in more detail below. Across the segment, residential
backlog continues to grow with a record number of homesites and homes under
contract, and demand continues to exceed supply. For further discussion of the
potential impacts on our business from the COVID-19 pandemic and other
macro-economic factors, see Part IA, Risk Factors within our 2021 Annual Report.

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Reportable Segments

We primarily conduct all of our businesses in the following three reportable segments: (1) Residential, (2) Hospitality and (3) Commercial.

The following table presents the relative contribution of these reportable segments to our consolidated operating income:

                                          Three Months Ended June 30,        Six Months Ended June 30,
                                             2022               2021           2022              2021
Segment Operating Revenue
Residential                                      33.7 %             45.1 %         41.9 %            46.8 %
Hospitality                                      43.0 %             31.1 %         34.2 %            31.2 %
Commercial                                       22.5 %             23.3 %         23.1 %            21.2 %
Other                                             0.8 %              0.5 %          0.8 %             0.8 %
Consolidated operating revenue                  100.0 %            100.0 %        100.0 %           100.0 %


For more information on our reportable segments, see Note 18. Segment information.

Residential sector

Our residential segment generally plans and develops residential communities of various sizes in a wide price range and sells residential land to homebuilders or retail consumers. Our residential segment also evaluates opportunities to enter into joint venture agreements for specific communities such as Latitude Margaritaville Watersound.

Watersound Origins, Watersound Origins West, Watersound Camp Stream,
Breakfast point is, Titus Park, Ward Creek, College Station, park square,
Mexico Beach, WindMark Beach, and SouthWood are large-scale, multi-phase communities with ongoing development activities, sales activities, or future phases. Residential lots in these communities are developed based on market demand and sold primarily to homebuilders and, to a lesser extent, retail customers.

The stream of the lake isEast Lake Powell, Lake Powell, the Teachee and West Laird communities received local county government approvals for the rights. These communities have phases of residential sites in preliminary planning. Residential land in these communities will be developed based on market demand and sold primarily to homebuilders and, to a lesser extent, retail customers.

The SummerCamp Beach community has land available for sale and, along with the RiverCamps community, both have additional land for future development.

The Latitude Margaritaville Watersound community is a planned 55+ active adult
residential community in Bay County, Florida. The community is located near the
Intracoastal Waterway with convenient access to the Northwest Florida Beaches
International Airport. The community is being developed through an
unconsolidated JV with our partner Minto Communities USA, a homebuilder and
community developer, and is estimated to include approximately 3,500 residential
homes, which will be developed in smaller increments of discrete neighborhoods.
As of June 30, 2022, the unconsolidated Latitude Margaritaville Watersound JV
had 605 homes under contract, which are expected to result in a sales value of
approximately $292.7 million at closing of the homes. See Note 4. Joint Ventures
for additional information.

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The pipeline of residential sites by community/project is as follows:

Residential pipeline (a)

                                                                                              Additional
                                                         Platted or       Engineering or   Entitlements with
Community/Project             Location                Under Development     Permitting       Concept Plan        Total
Breakfast Point East (b)      Bay County, FL                        261              266                 104         631
College Station               Bay County, FL                          -               58                 265         323
East Lake Creek (b)           Bay County, FL                          -                -                 200         200
East Lake Powell (c)          Bay County, FL                          -                -                 360         360
Lake Powell (d)               Bay County, FL                          -                -               1,352       1,352
Latitude Margaritaville
Watersound (d) (e)            Bay County, FL                      1,008              340               2,022       3,370
Mexico Beach (b)              Bay County, FL                         32               60                 275         367
Mexico Beach Townhomes (b)    Bay County, FL                         42               36                  82         160
Park Place                    Bay County, FL                        110                -                 191         301
RiverCamps (c)                Bay County, FL                          -                -                 149         149
SouthWood (f)                 Leon County, FL                        24              176                 977       1,177
SummerCamp Beach (b)          Franklin County, FL                    39                -                 273         312
Teachee (d)                   Bay County, FL                          -                -               1,750       1,750
Titus Park                    Bay County, FL                        278              144                 560         982
Ward Creek (d)                Bay County, FL                        938              263                 399       1,600
Watersound Camp Creek (f)     Walton County, FL                     109                -                   -         109
Watersound Origins (f)        Walton County, FL                     610                -                   -         610
Watersound Origins West (d)   Walton County, FL                     103              249               1,679       2,031
West Laird (d)                Bay County, FL                          -            1,068               1,117       2,185
WindMark Beach (f)            Gulf County, FL                       144              549                 317       1,010
Total Homesites                                                   3,698            3,209              12,072      18,979

The number of residential pitches is preliminary and subject to change. Includes (a) residential sites developed or currently under planning, engineering, permitting

or development. We have important additional rights for the future

residential sites on our land holdings.

(b) Planned unit development (“POUD”).

(c) Development Agreement (“DA”).

(d) Detailed Specific Area Plan (“DSAP”).

(e) The unconsolidated joint venture Latitude Margaritaville Watersound builds and sells

houses in this town.

(f) Regional Impact Development (“RID”).

In addition to the communities listed above, we have a number of other residential project concepts in various stages of planning and evaluation.

As of June 30, 2022, we had 18 different homebuilders within our residential
communities. As of June 30, 2022, we had 2,172 residential homesites under
contract, which are expected to result in revenue of approximately $167.8
million at closing of the homesites over the next several years. By comparison,
as of June 30, 2021, we had 1,349 residential homesites under contract, with an
expected revenue of approximately $129.0 million. The increase in homesites
under contract is due to the development of additional homesites and increased
homebuilder contracts for residential homesites. The number of homesites under
contract are subject to change based on homesite closings and homebuilder
interest in each community. As of June 30, 2022, in addition to the 2,172
homesites under contract in other residential communities, our unconsolidated
Latitude Margaritaville Watersound JV had 605 homes under contract, which
together with the 2,172 homesites are expected to result in a sales value of
approximately $460.5 million at closing of the homesites and homes.

Hotel sector

Our hospitality segment features a private membership club, (the "Watersound
Club"), hotel operations, food and beverage operations, golf courses, beach
clubs, retail outlets, gulf-front vacation rentals, management services, marinas
and other entertainment assets. The hospitality segment generates revenue and
incurs costs from membership sales, membership reservations, golf courses,
lodging, short-term vacation rentals, management of The Pearl Hotel, food and

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beverage operations, merchandise sales, marina operations, charter flights,
other resort and entertainment activities and beach clubs, which includes
operation of the WaterColor Beach Club. Hospitality revenue is generally
recognized at the point in time services are provided and represent a single
performance obligation with a fixed transaction price. Hospitality revenue
recognized over time includes non-refundable club membership initiation fees,
club membership dues, management fees and other membership fees. From time to
time, we may explore the sale of certain hospitality properties, the development
of new hospitality properties, as well as new entertainment and management
opportunities. Some of our JV assets and other assets incur interest and
financing expenses related to the loans as described in Note 10. Debt, Net.

Watersound Club provides club members and guests of some of our hotels access to
our member facilities, which include the Camp Creek golf course, Shark's Tooth
golf course, Watersound Beach Club and a Pilatus PC-12 NG aircraft ("N850J").
Watersound Club offers different types of club memberships, each with different
access rights and associated fee structures. Watersound Club is focused on
creating an outstanding membership experience combined with the luxurious
aspects of a destination resort. Club operations include our golf courses, beach
club and facilities that generate revenue from membership sales, membership
reservations, daily play at the golf courses, merchandise sales, charter flights
and food and beverage sales and incur expenses from the services provided,
maintenance of the golf courses, aircraft, beach club and facilities and
personnel costs. Watersound Origins includes an executive golf course,
resort-style pool, fitness center, two tennis courts and a private dock located
in the community. Access to amenities is reserved to Watersound Origins members
consisting of the community residents. The golf course is available for public
play.

Watersound Club has a private beach club located on Scenic Highway 30A, which
includes over one mile of Gulf of Mexico frontage, two resort-style pools, two
restaurants, three bars, kid's room and a recreation area. Shark's Tooth
includes an 18-hole golf course, a full club house, a pro shop, as well as two
food and beverage operations. In addition to the golf course, Watersound Club's
tennis center is located in the Wild Heron community near the Shark's Tooth golf
course. Camp Creek is an 18-hole golf course located near the new Watersound
Camp Creek residential community and near the Watersound Origins residential
community. We have commenced construction on new club amenities adjacent to the
Camp Creek golf course. Amenities are planned to include a health and wellness
center, restaurants, a tennis and pickle ball center, a resort-style pool
complex with separate adult pool, a golf teaching academy, pro shop and
multi-sport fields. Once complete, these amenities will be available to
Watersound Club members and guests of some of our hotels.

We own and operate the award-winning WaterColor Inn (which includes the Fish Out
of Water restaurant), the Hilton Garden Inn Panama City Airport, the Homewood
Suites by Hilton Panama City Beach, the WaterSound Inn and two gulf-front
vacation rental houses. We own and operate retail and commercial outlets near
our hospitality facilities. We also operate the award-winning The Pearl Hotel
and Havana Beach Bar & Grill restaurant and the WaterColor Beach Club, which
includes food and beverage operations and other hospitality related activities,
such as beach chair rentals. Revenue is generated from (i) lodging, (ii)
operation of the WaterColor Beach Club, (iii) management of The Pearl Hotel,
(iv) short-term vacation rentals, (v) food and beverage operations and (vi)
merchandise sales. Lodging and operation of the WaterColor Beach Club generate
revenue from service and/or daily rental fees and incur expenses from the cost
of services and goods provided, maintenance of the facilities and personnel
costs. Revenue generated from our management services include management fees
and expenses consist primarily of internal administrative costs. Lodging and
short-term vacation rentals generate revenue from rental fees and incur expenses
from the holding cost of assets we own and standard lodging personnel, such as
front desk, reservations and marketing personnel. Our food and beverage
operations generate revenue from food and beverage sales and incur expenses from
the cost of services and goods provided and standard personnel costs. Our retail
outlets generate revenue from merchandise sales and incur expenses from the cost
of goods provided, personnel costs and facility costs.

We are in the process of constructing an Embassy Suites by Hilton hotel, with
our JV partner, in the Pier Park area of Panama City Beach, Florida; the
waterfront Hotel Indigo and Harrison's Kitchen & Bar, a standalone restaurant,
in Panama City, Florida's downtown waterfront district; a Home2 Suites by Hilton
hotel in Santa Rosa Beach, Florida; The Lodge 30A, with our JV partner, a
boutique hotel on Scenic Highway 30A in Seagrove Beach, Florida; and an upscale
boutique inn located adjacent to the Camp Creek golf course near the highly
desirable Scenic Highway 30A corridor. Once complete, we intend to manage the
day-to-day operations of these hotels and restaurant. We are also in the process

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to build a Hostel Residence by Marriott, with our JV partner, in Panama City Beach, Florida. Once completed, the hotel will be operated by our JV partner.

Our hotel portfolio by establishment is as follows:

                                                                                          Rooms (a)
                                                                   Location       Completed  Planned  Total
Operational
WaterColor Inn (b)                                             Walton County, FL         67        -     67
WaterSound Inn                                                 Walton County, FL         11        -     11
Hilton Garden Inn Panama City Airport (c)                      Bay County, FL           143        -    143
Homewood Suites by Hilton Panama City Beach (d)                Bay County, FL           131        -    131
TownePlace Suites by Marriott Panama City Beach Pier Park (e)  Bay County, FL           124        -    124
Total operational rooms                                                                 476        -    476

Managed
The Pearl Hotel (f)                                            Walton County, FL         55        -     55
Total managed rooms                                                                      55        -     55

Under Development/Construction
Embassy Suites by Hilton Panama City Beach (h)                 Bay County, FL             -      255    255
Hotel Indigo                                                   Bay County, FL             -      124    124

Hostel Residence by Marriott, Panama City Beach, Florida (g) Bay County, Florida

             -      121    121
Home2 Suites by Hilton Santa Rosa Beach                        Walton County, FL          -      107    107
The Lodge 30A (h)                                              Walton County, FL          -       85     85
Camp Creek Inn                                                 Walton County, FL          -       75     75
Total rooms under development/construction                                 
              -      767    767
Total rooms                                                                             531      767  1,298

Includes hotels currently in operation, management or development (a) and under construction. We have important additional rights for the future

hotel projects on our land.

(b) Seven additional bedrooms were completed in June 2022.

(c) The hotel opened in July 2021.

(d) The hotel opened on March 24, 2022.

The hotel is operated by our partner JV. The JV Pier Park TPS is (e) non-consolidated and is accounted for using the equity method,

which is included in our commercial segment.

(f) The hotel is owned by a third party but operated by us.

The hotel is under development with our partner JV. Once completed, Hotel (g) will be operated by our JV partner. The JV Pier Park RI is unconsolidated and

is accounted for using the equity method, which is included

within our business segment.

(h) Under development with JV partners.


We own and operate two marinas consisting of the Point South Marina Bay Point in
Bay County, Florida and Point South Marina Port St. Joe in Gulf County, Florida.
We are planning new marinas along the Intracoastal Waterway. Our marinas
generate revenue from boat slip rentals, boat storage fees and fuel sales, and
incur expenses from cost of services provided, maintenance of the marina
facilities and personnel costs. At present, we are reconstructing the Point
South Marina Port St. Joe and expect a portion to be open in summer 2022. The
Point South Marina Bay Point partially reopened in the second quarter of 2022.
See Note 7. Hurricane Michael for additional information.

We own and operate the WaterColor and WaterColor Kids retail stores that
generate revenue from merchandise sales, which are recognized at the point of
sale, and incur expenses from the cost of goods provided, personnel costs and
facility costs. We own and operate The Powder Room Shooting Range and Training
Center ("The Powder Room") in Panama City Beach, Florida. The approximately
17,000 square feet facility includes a retail store with firearms and
ammunition, as well as training and educational space and 14 shooting lanes. The
Powder Room generates revenue from service fees and merchandise sales, which are
recognized at the point of sale, and incurs expenses from the cost of services
and goods provided, personnel costs and facility costs.

In addition to the properties listed above, we have a number of hospitality projects in various stages of planning.

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Commercial Segment

Our commercial segment includes leasing of commercial property, multi-family,
senior living, self-storage and other assets. The commercial segment also
oversees the planning, development, entitlement, management and sale of our
commercial and rural land holdings for a variety of uses, including a broad
range of retail, office, hotel, senior living, multi-family, self-storage and
industrial properties. We provide development opportunities for national,
regional and local retailers and other strategic partners in Northwest Florida.
We own and manage retail shopping centers and develop commercial parcels. We
have large land holdings near the Pier Park retail center, adjacent to the
Northwest Florida Beaches International Airport, near or within business
districts in the region and along major roadways. We also lease land for
hunting, rock quarrying and other uses. The commercial segment also manages our
timber holdings in Northwest Florida which includes growing and selling
pulpwood, sawtimber and other products, such as fill dirt.

The commercial segment generates leasing revenue and incurs leasing expenses
primarily from maintenance and management of our properties, personnel costs and
asset holding costs. Our commercial segment also generates revenue from the sale
of developed and undeveloped land, timber holdings or land with limited
development and/or entitlements and the sale of commercial operating properties.
Real estate sales in our commercial segment incur costs of revenue directly
associated with the land, development, construction, timber and selling costs.
Our commercial segment generates timber revenue primarily from open market sales
of timber on site without the associated delivery costs. Some of our JV assets
and other assets incur interest and financing expenses related to the loans as
described in Note 10. Debt, Net.

The commercial sector’s portfolio of rental properties continues to expand and diversify. Through wholly-owned subsidiaries and consolidated and unconsolidated joint ventures, we are building 492 multi-family housing units and 148 senior housing units, in addition to the 936 multi-family housing units and 107 senior housing units that have been completed.

The total number of units and percentage rented/occupied for multifamily and seniors’ residences by location are as follows:

                                                          June 30, 2022                   December 31, 2021
                                                                      Percentage                        Percentage
                                                                        Leased                            Leased
                                        Units      Units     Units     of Units      Units     Units     of Units
                       Location        Planned   Completed   Leased   Completed    Completed   Leased   Completed
Multi-family
Pier Park
Crossings          Bay County, FL          240         240      236          98%         240      234          98%
Pier Park
Crossings Phase
II                 Bay County, FL          120         120      118          98%         120      113          94%
Watersound
Origins
Crossings (a)      Walton County, FL       217         217      212          98%         217      207          95%
Sea Sound (b)      Bay County, FL          300         300      291          97%         214      203          95%
North Bay
Landing (c)        Bay County, FL          240           -        -          N/A           -        -          N/A
Mexico Beach
Crossings (d)      Bay County, FL          216           -        -          N/A           -        -          N/A
Origins
Crossings
Townhomes (e)      Walton County, FL        64          28       18          64%           -        -          N/A
WindMark Beach
(f)                Gulf County, FL          31          31       30          97%          31       31         100%
Total multi-family units                 1,428         936      905          97%         822      788          96%

Senior living communities
Watercrest         Walton County, FL       107         107       67          63%         107       47          44%
Watersound
Fountains (g)      Walton County, FL       148           -        -          N/A           -        -          N/A
Total senior living units                  255         107       67          63%         107       47          N/A
Total units                              1,683       1,043      972          93%         929      835          90%

(a) Construction was completed in the fourth quarter of 2021.

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(b) Construction was completed in the first quarter of 2022. The Sea Sound JV is

unconsolidated and is accounted for using the equity method.

(c) Construction started in the fourth quarter of 2020 and is ongoing.

(d) Construction started in the first quarter of 2022 and is ongoing.

(e) Vertical construction started in Q3 2021 and is ongoing.

(f) Includes 19 units for short-term rental under a vacation rental program. We are

in the process of converting these 19 units into long-term rental units.

Construction began in the second quarter of 2021 and is ongoing. The (g) Watersound Fountains Independent Living JV is not consolidated and is accounted for

using the equity method.


Pier Park Crossings, which was developed in two phases, includes 360 completed
apartment units in Panama City Beach, Florida. Watersound Origins Crossings
includes 217 completed apartment units adjacent to the Watersound Town Center.
Sea Sound, an unconsolidated JV, includes 300 completed apartment units in
Panama City Beach, Florida near the Breakfast Point residential community.
WindMark Beach includes 31 completed long-term and short-term rental units in
Port St. Joe, Florida. Watercrest includes 107 completed senior living units in
Santa Rosa Beach, Florida. In addition, we have three multi-family communities
and one senior living community under construction. North Bay Landing, planned
for 240 apartment units, is located in Panama City, Florida. Mexico Beach
Crossings, planned for 216 apartment units, is located in Mexico Beach, Florida.
Origins Crossings Townhomes, planned for 64 units, with 28 units completed as of
June 30, 2022, is located near the Watersound Town Center. Watersound Fountains,
an unconsolidated JV, planned for 148 independent living units, is located near
the Watersound Origins residential community.

Our leasing portfolio consists of approximately 981,000 square feet of leasable
space for mixed-use, retail, industrial, office, self-storage and medical uses.
This includes our consolidated Pier Park North JV. Through separate
unconsolidated JVs, other commercial properties include a 124-room TownePlace
Suites by Marriott operated by our JV partner and a Busy Bee branded fuel
station and convenience store operated by our JV partner, both located in Panama
City Beach, Florida.

The total net leasable square feet and leased percentage of leased properties by location are as follows:

                                                                 June 30, 2022            December 31, 2021
                                                               Net                        Net
                                                             Rentable                   Rentable
                                                              Square     Percentage      Square     Percentage
                                           Location           Feet*        Leased        Feet*        Leased
Pier Park North JV                    Bay County, FL          320,310            97 %    320,310            95 %
VentureCrossings                      Bay County, FL          303,605            92 %    303,605            88 %
Beckrich Office Park (a) (b)          Bay County, FL           77,613           100 %     81,065            85 %
Watersound Self-Storage (c)           Walton County, FL        67,694            85 %     67,694            50 %
WindMark Beach Town Center (a) (d)    Gulf County, FL          44,748      
     71 %     44,748            67 %
Watersound Town Center                Walton County, FL        24,487           100 %     24,764           100 %
WaterColor Town Center (a)            Walton County, FL        22,199           100 %     22,199           100 %
Cedar Grove Commerce Park             Bay County, FL           19,389           100 %     19,389           100 %
Port St. Joe Commercial               Gulf County, FL          16,964           100 %     16,964           100 %
Beach Commerce Park (a)               Bay County, FL           14,800           100 %     14,800           100 %
SummerCamp Commercial                 Franklin County, FL      13,000             0 %     13,000             0 %
South Walton Commerce Park (e)        Walton County, FL        11,570      
    100 %     11,570            88 %
WaterSound Gatehouse (a)              Walton County, FL        10,271           100 %     10,271           100 %
WaterColor Crossings                  Walton County, FL         7,135           100 %      7,135           100 %
395 Office building                   Walton County, FL         6,700           100 %      6,700           100 %
Pier Park outparcel                   Bay County, FL            5,565           100 %      5,565           100 %
Topsail West Commercial               Walton County, FL         3,500           100 %      3,500           100 %
Bank building                         Bay County, FL            3,346           100 %      3,346           100 %
Bank building                         Gulf County, FL           3,346           100 %      3,346           100 %
WaterColor HOA Office                 Walton County, FL         2,520           100 %      2,520           100 %
RiverCamps                            Bay County, FL            2,112           100 %      2,112           100 %
                                                              980,874            93 %    984,603            87 %

Net leasable square feet are designated as the square feet currently available for * the lease as specified in the applicable lease agreements plus the

estimate of the space available for rent based on the construction plans.

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(a) In addition to the net leasable square feet, there is also space that we occupy or

which serves as a common area.

(b) Included in net leasable square feet as of June 30, 2022 and the 31st of December,

2021, is 1,500 square feet leased to a consolidated joint venture.

(c) Construction was completed in the third quarter of 2021.

(d) Included in net leasable square feet as of June 30, 2022 and

December 31, 2021is 13,808 square feet of unfinished space.

(e) Included in net leasable square feet at June 30, 2022 and the 31st of December,

2021, is 1,364 square feet leased to a consolidated joint venture.

We have other commercial projects under development and construction. This
includes a Publix supermarket totaling approximately 50,000 square feet, in-line
space totaling approximately 12,000 square feet and several other buildings at
Watersound Town Center which total approximately 54,000 square feet. We have
also commenced development of Watersound West Bay Center, a lifestyle shopping
center adjacent to Latitude Margaritaville Watersound residential community in
Panama City Beach, Florida. Watersound West Bay Center has potential to include
approximately 350,000 square feet of leasable space at build out, featuring a
mix of retail, restaurant, office and medical space. We have also commenced
development on the second phase of South Walton Commerce Park. In addition to
the properties listed above, we have a number of projects in various stages of
planning, including additional commercial buildings and apartment communities.

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 GAAP. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, 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 condensed consolidated
financial statements are set forth in Item 7 of our Annual Report on Form 10-K
for the year ended December 31, 2021. There have been no significant changes in
these policies during the first six months of 2022, however we cannot assure you
that these policies will not change in the future.

Recently Adopted and Issued Accounting Pronouncements

See Note 2. Summary of Significant Accounting Policies to our 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.

Market seasonality and variability

Our operations may be affected by seasonal fluctuations. Hospitality revenues
have historically been lower in the first and fourth quarters and are normally
higher in the second and third quarters, but may vary period-to-period with the
timing of holidays and extraordinary events such as the COVID-19 pandemic.
Homesites sell in sporadic transactions in various communities that may impact
quarterly results. Commercial sales may vary from period-to-period.

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Results of Operations

Consolidated Results

The following table sets forth a comparison of the results of our operations:

                                               Three Months Ended         Six Months Ended
                                                    June 30,                  June 30,
                                                2022          2021        2022         2021

                                                               In millions
Revenue:
Real estate revenue                          $     28.0     $   41.0    $    64.8    $   62.1
Hospitality revenue                                29.6         22.6         45.9        35.7
Leasing revenue                                     9.3          6.4         18.1        11.9
Timber revenue                                      1.3          2.2          4.3         3.8
Total revenue                                      68.2         72.2        133.1       113.5
Expenses:
Cost of real estate revenue                        12.8         14.1         28.1        24.6
Cost of hospitality revenue                        21.4         15.4         36.3        26.9
Cost of leasing revenue                             4.0          2.5          7.7         5.2
Cost of timber revenue                              0.2          0.2          0.4         0.4
Corporate and other operating expenses              5.5          5.1         11.1        12.1
Depreciation, depletion and amortization            5.5          4.2       
 10.5         8.0
Total expenses                                     49.4         41.5         94.1        77.2
Operating income                                   18.8         30.7         39.0        36.3
Other income (expense):
Investment income, net                              2.5          1.3          4.8         2.5
Interest expense                                  (4.1)        (3.9)        (8.2)       (7.5)
Gain on contributions to unconsolidated
joint ventures                                      0.1          3.2          0.6         3.3
Other income, net                                   4.3          1.0          3.9         2.2
Total other expense, net                            2.8          1.6          1.1         0.5
Income before equity in income (loss)
from unconsolidated joint ventures and
income taxes                                       21.6         32.3         40.1        36.8
Equity in income (loss) from
unconsolidated joint ventures                       1.4        (0.6)       
  0.9       (1.1)
Income tax expense                                (5.9)        (7.7)       (10.5)       (8.7)
Net income                                   $     17.1     $   24.0    $    30.5    $   27.0


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Property income and gross profit

The following table presents a comparison of our total consolidated real estate revenues and our gross margin:

                         Three Months Ended June 30,                  Six Months Ended June 30,
                       2022      % (a)     2021      % (a)        2022      % (a)     2021      % (a)

                                                    Dollars in millions
Revenue:
Residential real
estate revenue       $   23.0     82.1 %  $  32.5     79.3 %     $  55.7     86.0 %  $  53.1     85.5 %
Commercial and
rural real estate
revenue                   4.5     16.1 %      8.2     20.0 %         8.1     12.5 %      8.2     13.2 %
Other revenue             0.5      1.8 %      0.3      0.7 %         1.0      1.5 %      0.8      1.3 %
Real estate
revenue              $   28.0    100.0 %  $  41.0    100.0 %     $  64.8    100.0 %  $  62.1    100.0 %

Gross profit:
Residential real
estate               $   11.1     48.3 %  $  20.3     62.5 %     $  30.0     53.9 %  $  30.6     57.6 %
Commercial and
rural real estate         4.0     88.9 %      6.5     79.3 %         6.5     80.2 %      6.6     80.5 %
Other                     0.1     20.0 %      0.1     33.3 %         0.2     20.0 %      0.3     37.5 %
Gross profit         $   15.2     54.3 %  $  26.9     65.6 %     $  36.7     56.6 %  $  37.5     60.4 %

(a) Calculated percentage of total property income and respective gross amount

margin percentage.


Residential Real Estate Revenue and Gross Profit. During the three months ended
June 30, 2022, residential real estate revenue decreased $9.5 million, or 29.2%,
to $23.0 million, as compared to $32.5 million during the same period in 2021.
During the three months ended June 30, 2022, residential real estate gross
profit decreased $9.2 million to $11.1 million (or gross margin of 48.3%), as
compared to $20.3 million (or gross margin of 62.5%) during the same period in
2021. During the three months ended June 30, 2022, we sold 231 homesites and had
an unimproved residential land sale of $0.1 million, compared to 172 homesites
and no unimproved residential land sales during the same period in 2021. During
the three months ended June 30, 2022 and 2021, the average revenue, excluding
homesite residuals, per homesite sold was approximately $83,000 and $164,000,
respectively. The difference in average revenue per homesite was due to the mix
of sales from different communities, primarily from sales in the Watersound Camp
Creek community during the prior period and the sale of 42 undeveloped homesites
within the SouthWood community during the current period.

During the six months ended June 30, 2022, residential real estate revenue
increased $2.6 million, or 4.9%, to $55.7 million, as compared to $53.1 million
during the same period in 2021. During the six months ended June 30, 2022,
residential real estate gross profit decreased $0.6 million to $30.0 million (or
gross margin of 53.9%), as compared to $30.6 million (or gross margin of 57.6%)
during the same period in 2021. During the six months ended June 30, 2022, we
sold 412 homesites and had unimproved residential land sales of $0.1 million,
compared to 375 homesites, two homes and had unimproved residential land sales
of $0.1 million during the same period in 2021. During the six months ended
June 30, 2022 and 2021, the average revenue, excluding homesite residuals, per
homesite sold was approximately $113,000 and $115,000, respectively, due to the
mix of sales from different communities. The revenue, gross profit and margin
for each period was impacted by the volume of sales within each of the
communities, the difference in pricing among the communities and the difference
in the cost of the homesite development. The number of homesites sold varied
each period due to the timing of homebuilder contractual closing obligations and
the timing of development of completed homesites in our residential communities.

Commercial and Rural Real Estate Revenue and Gross Profit. During the three
months ended June 30, 2022, we had six commercial and rural real estate sales
totaling approximately 163 acres for $4.0 million and land improvement services
of $0.5 million, together resulting in a gross profit of $4.0 million (or gross
margin of 88.9%). During the three months ended June 30, 2021, we had seven
commercial and rural real estate sales totaling approximately 112 acres for $8.2
million, resulting in a gross profit of $6.5 million (or gross margin of 79.3%).

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During the six months ended June 30, 2022, we had twelve commercial and rural
real estate sales totaling approximately 176 acres for $7.3 million and land
improvement services of $0.8 million, together resulting in a gross profit of
$6.5 million (or gross margin of 80.2%). During the six months ended
June 30, 2021, we had eight commercial and rural real estate sales totaling
approximately 113 acres for $8.2 million, resulting in a gross profit of $6.6
million (or gross margin of 80.5%). Revenue from commercial and rural real
estate can vary significantly from period-to-period depending on the proximity
to developed areas and mix of real estate sold in each period, with varying
compositions of retail, office, industrial and other commercial uses.

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

Other income. Other income mainly includes sales of mitigation bank credits and income from securities activities.

Hospitality revenue and gross profit

                                            Three Months Ended June 30,               Six Months Ended June 30,
                                              2022                 2021                2022                2021

                                                                          In millions
Hospitality revenue                      $         29.6       $         22.6       $        45.9       $        35.7
Gross profit                             $          8.2       $          7.2       $         9.6       $         8.8
Gross margin                                       27.7 %               31.9 %              20.9 %              24.6 %


Hospitality revenue increased $7.0 million, or 31.0%, to $29.6 million during
the three months ended June 30, 2022, as compared to $22.6 million in the same
period in 2021. The increase in hospitality revenue was primarily related to
increased popularity of the region and year-round travel that resulted in an
increase of members from new markets, as well as an increase in lodging revenue
from the Hilton Garden Inn Panama City Airport, which opened in July 2021 and
from the Homewood Suites by Hilton Panama City Beach, which opened in March
2022. Hospitality had a gross margin of 27.7% during the three months ended June
30, 2022, compared to 31.9% during the same period in 2021. The decrease in
gross margin was due to pre-opening expenses associated with several hotel and
club amenities scheduled for opening in 2022, onboarding of staff for these
assets and an increase in cost of labor and products in the current period.

Hospitality revenue increased $10.2 million, or 28.6%, to $45.9 million during
the six months ended June 30, 2022, as compared to $35.7 million in the same
period in 2021. The increase in hospitality revenue was primarily related to
increased popularity of the region and year-round travel that resulted in an
increase of members from new markets, as well as an increase in lodging revenue
from the Hilton Garden Inn Panama City Airport, which opened in July 2021 and
from the Homewood Suites by Hilton Panama City Beach, which opened in March
2022. As of June 30, 2022, Watersound Club had 2,488 members, compared with
1,951 members as of June 30, 2021, an increase of 537 members. Hospitality had a
gross margin of 20.9% during the six months ended June 30, 2022, compared to
24.6% during the same period in 2021. The decrease in gross margin was due to
pre-opening expenses associated with several hotel and club amenities scheduled
for opening in 2022, onboarding of staff for these assets and an increase in
cost of labor and products in the current period.

Rental revenue and gross margin

                                            Three Months Ended June 30,               Six Months Ended June 30,
                                              2022                 2021                2022                2021

                                                                          In millions
Leasing revenue                          $          9.3       $          6.4       $        18.1       $        11.9
Gross profit                             $          5.3       $          3.9       $        10.4       $         6.7
Gross margin                                       57.0 %               60.9 %              57.5 %              56.3 %


Leasing revenue increased $2.9 million, or 45.3%, to $9.3 million during the
three months ended June 30, 2022, as compared to $6.4 million in the same period
in 2021. Leasing revenue increased $6.2 million, or 52.1%, to $18.1 million

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during the six months ended June 30, 2022, as compared to $11.9 million in the
same period in 2021. The increase was primarily due to new leases at Watersound
Origins Crossings apartments and Watercrest senior living community, as well as
other new leases. Leasing gross margin decreased during the three months ended
June 30, 2022 to 57.0%, as compared to 60.9% during the same period in 2021,
primarily due to start-up and lease-up expenses for new assets in the current
period. Leasing gross margin was 57.5% during the six months ended
June 30, 2022, as compared to 56.3% during the same period in 2021.

Timber revenue and gross profit

                                            Three Months Ended June 30,               Six Months Ended June 30,
                                              2022                 2021                2022                2021

                                                                          In millions
Timber revenue                           $          1.3       $          2.2       $         4.3       $         3.8
Gross profit                             $          1.1       $          2.0       $         3.9       $         3.4
Gross margin                                       84.6 %               90.9 %              90.7 %              89.5 %

Timber revenue decreased $0.9 million, or 40.9%, to $1.3 million during the
three months ended June 30, 2022, as compared to $2.2 million in the same period
in 2021. The decrease was primarily due to a decrease in the tons of wood
products sold and the sales mix of different wood products, partially offset by
price increases in the current period. There were 46,000 tons of wood products
sold during the three months ended June 30, 2022, as compared to 97,000 tons of
wood products sold during the same period in 2021. Timber gross margin decreased
during the three months ended June 30, 2022 to 84.6%, as compared to 90.9%
during the same period in 2021, primarily due to the decrease in timber revenue
and changes in product mix. The cost of timber revenue is primarily fixed, which
resulted in a decrease to gross margin for the period.

Timber revenue increased $0.5 million, or 13.2%, to $4.3 million during the six
months ended June 30, 2022, as compared to $3.8 million in the same period in
2021. The increase was primarily due to an increase in prices and the sales mix
of different wood products, partially offset by a decrease in the tons of wood
products sold in the current period. There were 153,000 tons of wood products
sold during the six months ended June 30, 2022, as compared to 173,000 tons of
wood products sold during the same period in 2021. Timber gross margin was 90.7%
during the six months ended June 30, 2022, as compared to 89.5% during the same
period in 2021.

Corporate expenses and other operating expenses

                                                   Three Months Ended June 30,           Six Months Ended June 30,
                                                    2022                 2021             2022                2021

                                                                              In millions
Employee costs                                  $         2.4        $         2.0    $         4.7       $         5.8
Property taxes and insurance                              1.3                  1.3              2.6                 2.7
Professional fees                                         0.8                  0.8              1.9                 1.6
Marketing and owner association costs                     0.4                  0.3              0.6                 1.0
Occupancy, repairs and maintenance                        0.2                  0.2              0.4                 0.2
Other miscellaneous                                       0.4                  0.5              0.9                 0.8

Total corporate and other operating expenses $ $5.5

5.1 $11.1 $12.1


Corporate and other operating expenses increased $0.4 million to $5.5 million
for the three months ended June 30, 2022, as compared to $5.1 million in the
same period in 2021. Corporate and other operating expenses decreased $1.0
million during the six months ended June 30, 2022, as compared to the same
period in 2021. The decrease is primarily due to $1.2 million of expense during
the three months ended June 30, 2021 to 401(k) plan participants related to the
final allocation of surplus assets from the pension plan termination in 2014.

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Depreciation, depletion and amortization

Depreciation, depletion and amortization expense increased $1.3 million and $2.5
million during the three and six months ended June 30, 2022, respectively, as
compared to the same periods in 2021, primarily due to new hospitality and
commercial assets placed in service.

Investment income, net

Investment income, net primarily includes (i) interest and dividends earned and
accretion of the net discount (ii) net unrealized gain or loss related to
investments - equity securities, (iii) interest income earned on the time
deposit held by SPE and (iv) interest earned on mortgage notes receivable and
other receivables as detailed in the table below:

                                                 Three Months Ended June 30,           Six Months Ended June 30,
                                                 2022                 2021             2022                2021

                                                                            In millions
Interest, dividend and accretion income       $       0.3       $              -    $       0.4       $             -
Unrealized (loss) gain on investments, net              -                  (0.9)            0.1                 (2.0)
Interest income from investments in
special purpose entities                              2.0                    2.0            4.0                   4.1
Interest earned on notes receivable and
other interest                                        0.2                    0.2            0.3                   0.4
Total investment income, net                  $       2.5       $            1.3    $       4.8       $           2.5

Investment income, net increased $1.2 million to $2.5 million for the three
months ended June 30, 2022, as compared to $1.3 million in the same period in
2021. Investment income, net increased $2.3 million to $4.8 million for the six
months ended June 30, 2022, as compared to $2.5 million in the same period in
2021. The three months ended June 30, 2022 includes unrealized gains related to
preferred stock of less than $0.1 million, compared to unrealized losses related
to preferred stock of $0.9 million during the prior period. The six months ended
June 30, 2022 includes unrealized gains related to preferred stock of less than
$0.1 million, compared to unrealized losses related to preferred stock of $2.0
million during the prior period.

Interest charges

Interest expense primarily includes interest incurred on the Senior Notes issued
by Northwest Florida Timber Finance, LLC, project financing, CDD debt and
finance leases, as well as amortization of debt discount and premium and debt
issuance costs as detailed in the table below:

                                                 Three Months Ended June 30,           Six Months Ended June 30,
                                                  2022                 2021             2022                2021

                                                                           In millions
Interest expense and amortization of
discount and issuance costs for Senior
Notes issued by special purpose entity        $         2.2        $       
 2.2    $        4.4        $        4.4
Other interest expense                                  1.9                  1.7             3.8                 3.1
Total interest expense                        $         4.1        $         3.9    $        8.2        $        7.5


Interest expense for the three months ended June 30, 2022 and 2021 were
comparable. Interest expense increased $0.7 million, or 9.3%, to $8.2 million
during the six months ended June 30, 2022, as compared to $7.5 million in the
same period in 2021. The increase in interest expense is primarily related to
the increase in project financing. See Note 10. Debt, Net for additional
information regarding project financing.

Gain on contributions to Unconsolidated joint ventures

Gain on contributions to unconsolidated joint ventures during the three months
ended June 30, 2022 and 2021, was $0.1 million and $3.2 million, respectively.
Gain on contributions to unconsolidated joint ventures during the six months
ended June 30, 2022 and 2021, was $0.6 million and $3.3 million, respectively.
The six months ended June 30, 2022, includes a gain of $0.4 million on land
contributed to our unconsolidated Electric Cart Watersound JV. The three and six
months ended June 30, 2022, also include a gain of $0.1 million on additional
infrastructure improvements contributed

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to our unconsolidated Latitude Margaritaville Watersound JV. The three and six
months ended June 30, 2021, includes a gain of $3.1 million on land contributed
to our unconsolidated Watersound Fountains Independent Living JV. The three and
six months ended June 30, 2021, also includes a gain of $0.1 million and $0.2
million, respectively, on additional infrastructure improvements contributed to
our unconsolidated Latitude Margaritaville Watersound JV. See Note 4. Joint
Ventures for additional information.

Other income, net

Other income, net, primarily includes income from our investments in retained interests, gain on insurance recovery, loss from hurricane damage and other income and expense items, as disclosed in the table below:

                                                Three Months Ended June 30,           Six Months Ended June 30,
                                                 2022                 2021              2022                2021

                                                                           In millions
Accretion income from retained interest
investments                                  $         0.4        $         0.4    $           0.8       $       0.7
Gain on insurance recovery                             2.6                  0.5                3.3               1.4
Loss from hurricane damage                               -                    -                  -                 -
Miscellaneous income (expense), net                    1.3                 
0.1              (0.2)               0.1
Other income, net                            $         4.3        $         1.0    $           3.9       $       2.2


Other income, net increased $3.3 million to $4.3 million during the three months
ended June 30, 2022, as compared to $1.0 million in the same period in 2021.
Other income, net increased $1.7 million to $3.9 million during the six months
ended June 30, 2022, as compared to $2.2 million in the same period in 2021. The
three months ended June 30, 2022 and 2021, includes a gain on insurance recovery
of $2.5 million and $0.5 million, respectively, and loss from hurricane damage
of less than $0.1 million during each period related to Hurricane Michael. The
six months ended June 30, 2022 and 2021, includes a gain on insurance recovery
of $3.2 million and $1.4 million, respectively, and loss from hurricane damage
of less than $0.1 million during each period related to Hurricane Michael. See
Note 7. Hurricane Michael for additional information. Miscellaneous income
(expense), net during the three and six months ended June 30, 2022, includes
income related to a $0.7 million gain on retained interest investment and $0.6
million and $1.0 million, respectively, received from the Pier Park CDD for
repayment of subordinated notes. Miscellaneous income (expense), net during the
six months ended June 30, 2022, also includes expenses of $1.1 million for
design costs no longer pursued and $0.6 million for a homeowner's association
special assessment.

Income Tax Expense
Income tax expense was $5.9 million during the three months ended June 30, 2022,
as compared to $7.7 million during the same period in 2021. Our effective tax
rate was 25.9% for the three months ended June 30, 2022, as compared to 24.1%
during the same period in 2021.

Income tax expense was $10.5 million during the six months ended June 30, 2022,
as compared to $8.7 million during the same period in 2021. Our effective tax
rate was 25.6% for the six months ended June 30, 2022, as compared to 24.2%
during the same period in 2021.

Our effective rate for the three and six months ended June 30, 2022, differed
from the federal statutory rate of 21.0% primarily due to state income taxes and
other permanent items. Our effective rate for the three and six months ended
June 30, 2021, differed from the federal statutory rate of 21.0% primarily due
to state income taxes, tax credits and other permanent differences. See Note 13.
Income Taxes for additional information.

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Segment Results

Residential

The table below presents the consolidated operating results of our residential segment:

                                                Three Months Ended June 30,          Six Months Ended June 30,
                                                  2022               2021             2022               2021

                                                                          In millions
Revenue:
Real estate revenue                           $        20.8      $        30.9    $        51.2      $        49.7
Leasing revenue                                           -                  -                -                0.1
Other revenue                                           2.2                1.6              4.5                3.3
Total revenue                                          23.0               32.5             55.7               53.1
Expenses:
Cost of real estate and other revenue                  11.9               12.1             25.7               22.4
Other operating expenses                                1.1                1.2              2.0                2.8
Depreciation, depletion and amortization                  -                
 -              0.1                0.1
Total expenses                                         13.0               13.3             27.8               25.3
Operating income                                       10.0               19.2             27.9               27.8
Other income (expense):
Investment income, net                                  0.2                0.2              0.4                0.3
Interest expense                                      (0.1)              (0.2)            (0.2)              (0.3)
Gain on contributions to unconsolidated
joint ventures                                          0.1                0.1              0.1                0.2
Other income (expense), net                             0.3                0.2            (0.6)                0.2
Total other income (expense), net                       0.5                0.3            (0.3)                0.4
Income before equity in income (loss) from
unconsolidated joint ventures and income
taxes                                         $        10.5      $        

19.5 $27.6 $28.2


Real estate revenue includes sales of homesites, homes and other residential
land and certain homesite 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. Leasing revenue includes long-term leases of residential
assets. Other revenue includes tap and impact fee credits sold and marketing
fees. Certain homesite residuals and other revenue related to homebuilder
homesite sales are recognized in revenue at the point in time of the closing of
the sale. For the three months ended June 30, 2022 and 2021, real estate revenue
includes estimated homesite residuals of $0.7 million and $1.1 million,
respectively, and other revenue includes estimated fees related to homebuilder
homesite sales of $0.3 million and $0.6 million, respectively. For the six
months ended June 30, 2022 and 2021, real estate revenue includes estimated
homesite residuals of $2.6 million and $2.2 million, respectively, and other
revenue includes estimated fees related to homebuilder homesite sales of $0.8
million and $1.3 million, respectively. Cost of real estate revenue includes
direct costs (e.g., development and construction costs), selling costs and
other
indirect costs.

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Three months completed June 30, 2022 compared to the three months ended
June 30, 2021

The following table shows our consolidated residential real estate revenues and costs:

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