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<SEC-DOCUMENT>0001144204-07-023809.txt : 20070510
<SEC-HEADER>0001144204-07-023809.hdr.sgml : 20070510
<ACCEPTANCE-DATETIME>20070509204401
ACCESSION NUMBER:		0001144204-07-023809
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20070331
FILED AS OF DATE:		20070510
DATE AS OF CHANGE:		20070509

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AMERICAN REAL ESTATE PARTNERS L P
		CENTRAL INDEX KEY:			0000813762
		STANDARD INDUSTRIAL CLASSIFICATION:	OPERATORS OF NONRESIDENTIAL BUILDINGS [6512]
		IRS NUMBER:				133398766
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-09516
		FILM NUMBER:		07834343

	BUSINESS ADDRESS:	
		STREET 1:		767 FIFTH AVENUE
		STREET 2:		SUITE 4700
		CITY:			NEW YORK,
		STATE:			NY
		ZIP:			10153
		BUSINESS PHONE:		(212) 702-4300

	MAIL ADDRESS:	
		STREET 1:		767 FIFTH AVENUE
		STREET 2:		SUITE 4700
		CITY:			NEW YORK,
		STATE:			NY
		ZIP:			10153
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>v07384910q.htm
<TEXT>
<html>
  <head>
    <title>
      Unassociated Document
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<!-- Document Created using EDGARizer HTML 3.0.4.0 -->
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</head>
  <body style="FONT-SIZE: 10pt; COLOR: #000000; LINE-HEIGHT: 12pt; FONT-FAMILY: Times New Roman">
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 1.65pt; PADDING-BOTTOM: 3pt; BORDER-BOTTOM: #000000 12pt double" align="right">&#160;</div>
    <div style="MARGIN: 0pt" align="center"><strong>UNITED STATES<br>SECURITIES AND
      EXCHANGE COMMISSION</strong></div>
    <div style="MARGIN: 0pt" align="center"><strong>Washington, D.C.
      20549</strong></div>
    <div style="MARGIN: 0pt" align="center">______________</div>
    <div style="MARGIN-TOP: 7.35pt; FONT-SIZE: 11pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 13pt" align="center"><strong>FORM
      10-Q</strong></div>
    <div style="MARGIN: 0pt" align="center">______________</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="54">
            </td>
            <td width="377">
            </td>
          </tr>
          <tr>
            <td valign="top" width="54">&#160;</td>
            <td valign="top" width="377">&#160;</td>
          </tr>
          <tr>
            <td valign="top" width="54">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>(Mark&#160;One)</strong></div>
            </td>
            <td valign="top" width="377">&#160;</td>
          </tr>
          <tr>
            <td valign="top" width="54">&#160;</td>
            <td valign="top" width="377">&#160;</td>
          </tr>
          <tr>
            <td valign="top" width="54">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt; FONT-FAMILY: Wingdings" align="center"><font style="FONT-FAMILY: Wingdings"><strong>&#253;</strong></font></div>
            </td>
            <td valign="top" width="377">
              <div style="MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman"><strong>QUARTERLY
                REPORT PURSUANT TO
                SECTION 13 OR 15(d)<br>OF THE SECURITIES EXCHANGE ACT OF
                1934</strong></font></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="54">&#160;</td>
            <td valign="top" width="377">&#160;</td>
          </tr>
          <tr>
            <td colspan="2" valign="top">
              <div style="MARGIN: 0pt" align="center"><strong>For the Quarterly
                Period
                ended March&#160;31, 2007</strong></div>
            </td>
          </tr>
          <tr>
            <td colspan="2" valign="top">&#160;</td>
          </tr>
          <tr>
            <td colspan="2" valign="top">
              <div style="MARGIN: 0pt" align="center">OR</div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="54">&#160;</td>
            <td valign="top" width="377">&#160;</td>
          </tr>
          <tr>
            <td valign="top" width="54">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt; FONT-FAMILY: Wingdings" align="center"><font style="FONT-FAMILY: Wingdings"><strong>&#168;</strong></font></div>
            </td>
            <td valign="top" width="377">
              <div style="MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman"><strong>TRANSITION
                REPORT PURSUANT TO
                SECTION 13 OR 15(d)<br>OF THE SECURITIES EXCHANGE ACT OF
                1934</strong></font></div>
            </td>
          </tr>
          <tr>
            <td colspan="2" valign="top">&#160;</td>
          </tr>
          <tr>
            <td colspan="2" valign="top">
              <div style="MARGIN: 0pt" align="center"><strong>For the transition
                period
                from
                &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;to
                &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</strong></div>
            </td>
          </tr>
          <tr>
            <td colspan="2" valign="top">&#160;</td>
          </tr>
          <tr>
            <td colspan="2" valign="top">
              <div style="MARGIN: 0pt" align="center"><strong>Commission file number
                1-9516</strong></div>
            </td>
          </tr>
          <tr>
            <td colspan="2" valign="top">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt" align="center">______________</div>
    <div style="MARGIN-TOP: 12pt; FONT-SIZE: 18pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 20pt; FONT-FAMILY: Times New Roman Bold" align="center"><font style="FONT-FAMILY: Times New Roman Bold"><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P.</strong></font></div>
    <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><font style="FONT-FAMILY: Times New Roman">(Exact
      Name of Registrant as Specified in
      its Charter)</font></div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 6.65pt" align="center">______________</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="54">
            </td>
            <td width="119">
            </td>
            <td width="119">
            </td>
            <td width="119">
            </td>
            <td width="54">
            </td>
          </tr>
          <tr>
            <td valign="top" width="72">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt" align="center"><strong>&#160;&#160;&#160;&#160;&#160;&#160;</strong></div>
            </td>
            <td valign="bottom" width="159">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt" align="center"><strong>Delaware</strong></div>
            </td>
            <td valign="top" width="159">&#160;</td>
            <td valign="bottom" width="159">
              <div style="MARGIN: 0pt" align="center"><strong>13-3398766</strong></div>
            </td>
            <td valign="top" width="72">
              <div style="MARGIN: 0pt" align="center"><strong>&#160;&#160;&#160;&#160;&#160;&#160;&#160;</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="72">&#160;</td>
            <td valign="bottom" width="159">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(State
                or Other Jurisdiction of<br>Incorporation or
                Organization)</div>
            </td>
            <td valign="top" width="159">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="159">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(IRS
                Employer <br>Identification No.)</div>
            </td>
            <td valign="top" width="72">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 5.35pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: normal" align="center"><strong>767
      Fifth Avenue, Suite 4700<br>New York, NY
      10153<br></strong>(Address of Principal Executive Offices) (Zip Code)</div>
    <div style="MARGIN-TOP: 8pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: normal" align="center"><strong>(212)
      702-4300<br></strong>(Registrant&#8217;s Telephone Number,
      Including Area Code)</div>
    <div style="MARGIN: 0pt" align="center">______________</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. &#160;Yes <font style="FONT-FAMILY: Wingdings">&#253;</font>&#160;No <font style="FONT-FAMILY: Wingdings">&#168;</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Indicate
      by
      check mark whether the registrant is a large accelerated filer, an accelerated
      filer, or a non-accelerated filer. See definition of &#8220;accelerated filer and
      large accelerated filer&#8221; in Rule 12b-2 of the Exchange Act. (Check One).</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="156">
            </td>
            <td width="156">
            </td>
            <td width="155">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="208">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt" align="right">Large
                Accelerated Filer&#160;&#160;<font style="FONT-FAMILY: Wingdings">&#168;</font></div>
            </td>
            <td valign="bottom" width="208">
              <div style="MARGIN: 0pt" align="center">Accelerated Filer&#160;&#160;<font style="FONT-FAMILY: Wingdings">&#253;</font></div>
            </td>
            <td valign="bottom" width="207">
              <div style="MARGIN: 0pt">Non-accelerated Filer&#160;&#160;<font style="FONT-FAMILY: Wingdings">&#168;</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes <font style="FONT-FAMILY: Wingdings">&#168;</font>&#160;No <font style="FONT-FAMILY: Wingdings">&#253;</font></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As of
      May
      7, 2007, there were 61,856,830 depositary units and 11,907,073 preferred units
      outstanding.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; PADDING-BOTTOM: 3pt; BORDER-BOTTOM: #000000 12pt double">&#160;</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">

<div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 10pt; PAGE-BREAK-BEFORE: always" align="center"><strong><a name="index"></a>INDEX</strong></div>
    <div>

  <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">
    <tr>
      <td width="42"> </td>
      <td width="21"> </td>
      <td width="356"> </td>
      <td width="10"> </td>
      <td width="37"> </td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td colspan="2" valign="bottom" width="503">&#160;</td>
      <td valign="top" width="13">&#160;</td>
      <td valign="top" width="50" style="border-bottom: #000000 0.5pt solid;">
        <div style="MARGIN: 0pt" align="center"><strong>Page&#160;No.</strong></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td colspan="2" valign="bottom" width="503">&#160;</td>
      <td valign="top" width="13">&#160;</td>
      <td valign="top" width="50">&#160;</td>
    </tr>
    <tr>
      <td valign="top" width="56"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#1"><strong>Part&#160;I.</strong></a></div></td>
      <td colspan="2" valign="bottom" width="503"> <div style="MARGIN: 0pt"><a href="#1"><strong>FINANCIAL
          INFORMATION</strong></a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#1">1</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#1"><strong>Item&#160;1.</strong></a></div></td>
      <td colspan="2" valign="bottom" width="503"> <div style="MARGIN: 0pt"><a href="#1"><strong>Financial
          Statements</strong></a></div></td>
      <td valign="top" width="13"> <div style="MARGIN: 0pt"><a href="#1"></a></div></td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#1">1</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td colspan="2" valign="bottom" width="503"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#1">Consolidated
          Balance Sheets &#8212; March&#160;31, 2007 and December 31, 2006</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt" align="right"><a href="#1">1</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td colspan="2" valign="bottom" width="503"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#2">Consolidated
          Statements of Operations &#8212; Three Months Ended March&#160;31, 2007
          and 2006</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt" align="right"><a href="#2">2</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td colspan="2" valign="bottom" width="503"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#3">Consolidated
          Statement of Changes in Partners&#8217; Equity and Comprehensive Income
          &#8212; Three Months Ended March&#160;31, 2007</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="bottom" width="50"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt" align="right"><a href="#3">3</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td colspan="2" valign="bottom" width="503"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#4">Consolidated
          Statements of Cash Flows &#8212; Three Months Ended March&#160;31, 2007
          and 2006</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt" align="right"><a href="#4">4</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td colspan="2" valign="bottom" width="503"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong><a href="#5">Notes
          to Consolidated Financial Statements</a></strong></div></td>
      <td valign="top" width="13">&#160;</td>
      <td valign="top" width="50">&#160;</td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#6">1.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#6">General</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#6">6</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#7">2.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#7">Operating
          Units</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#7">9</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#8">3.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#8">Discontinued
          Operations and Assets Held for Sale</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#8">14</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#9">4.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#9">Related
          Party Transactions</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#9">15</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#10">5.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#10">Investments
          and Related Matters</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#10">16</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#11">6.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#11">Inventories,
          Net</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#11">17</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#12">7.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#12">Trade,
          Notes and Other Receivables, Net</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#12">17</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#13">8.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#13">Other
          Current Assets</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#13">18</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#14">9.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#14">Property,
          Plant and Equipment</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#14">18</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#15">10.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#15">Other
          Non Current Assets</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#15">18</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#16">11.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#16">Minority
          Interests</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#16">19</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#17">12.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#17">Long
          Term Debt</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#17">19</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#18">13.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#18">Other
          Income (Expense)</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#18">22</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#19">14.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#19">Unit
          Options</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#19">22</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#20">15.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#20">Preferred
          Units</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#20">22</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#21">16.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#21">Earnings
          Per Limited Partnership Unit</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#21">22</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#22">17.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#22">Segment
          Reporting</a></div></td>
      <td valign="top" width="13"><a href="#22"></a></td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#22">23</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#23">18.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#23">Income
          Taxes</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#23">25</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#24">19.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#24">Commitments
          and Contingencies</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#24">26</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#25">20.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#25">Fair
          Value of Financial Instruments</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#25">27</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#26">21.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#26">Subsequent
          Events</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#26">27</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#27"><strong>Item
          2.</strong></a></div></td>
      <td colspan="2" valign="bottom" width="503"> <div style="MARGIN: 0pt"><a href="#27"><strong>Management&#8217;s
          Discussion and Analysis of Financial Condition and Results of Operations</strong></a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#27">29</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#28">1.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#28">Overview</a></div></td>
      <td valign="top" width="13"><a href="#28"></a></td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#28">29</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#29">2.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#29">Discontinued
          Operations</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#29">30</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#30">3.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#30">Results
          of Operations</a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#30">31</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#31">4.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#31">Liquidity
          and Capital Resources</a></div></td>
      <td valign="top" width="13"><a href="#31"></a></td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#31">38</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td valign="bottom" width="28"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#32">5.</a></div></td>
      <td valign="bottom" width="475"> <div style="MARGIN: 0pt"><a href="#32">Certain
          Trends and Uncertainties</a></div></td>
      <td valign="top" width="13"><a href="#32"></a></td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#32">45</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#33"><strong>Item
          3.</strong></a></div></td>
      <td colspan="2" valign="bottom" width="503"> <div style="MARGIN: 0pt"><a href="#33"><strong>Quantitative
          and Qualitative Disclosures About Market Risk</strong></a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#33">45</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#34"><strong>Item
          4.</strong></a></div></td>
      <td colspan="2" valign="bottom" width="503"> <div style="MARGIN: 0pt"><a href="#34"><strong>Controls
          and Procedures</strong></a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#34">45</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#35"><strong>Part
          II.</strong></a></div></td>
      <td colspan="2" valign="bottom" width="503"> <div style="MARGIN: 0pt"><a href="#35"><strong>OTHER
          INFORMATION</strong></a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#35">46</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#36"><strong>Item
          1.</strong></a></div></td>
      <td colspan="2" valign="bottom" width="503"> <div style="MARGIN: 0pt"><a href="#36"><strong>Legal
          Proceedings</strong></a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#36">46</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#37"><strong>Item&#160;1A.&#160;&#160;</strong></a></div></td>
      <td colspan="2" valign="bottom" width="503"> <div style="MARGIN: 0pt"><a href="#37"><strong>Risk
          Factors</strong></a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#37">47</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#38"><strong>Item
          6.</strong></a></div></td>
      <td colspan="2" valign="bottom" width="503"> <div style="MARGIN: 0pt"><a href="#38"><strong>Exhibits</strong></a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN: 0pt" align="right"><a href="#38">47</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td colspan="2" valign="bottom" width="503"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><a href="#39"><strong>Signatures</strong></a></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt" align="right"><a href="#39">48</a></div></td>
    </tr>
    <tr>
      <td valign="top" width="56">&#160;</td>
      <td colspan="2" valign="bottom" width="503"> <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Certifications</strong></div></td>
      <td valign="top" width="13">&nbsp;</td>
      <td valign="top" width="50">&#160;</td>
    </tr>
  </table>
    </div>
    <div style="MARGIN: 0pt"><br></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><br><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">

<div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
  <p align="left"> <strong><a href="#index">Back to Index</a></strong></p>
  <p><strong><a name="1"></a>PART I. FINANCIAL INFORMATION</strong></p>
</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Item 1. Financial
      Statements</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 10pt" align="center"><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 10pt" align="center"><strong>CONSOLIDATED
      BALANCE SHEETS<br>(in $000s, except unit
      amounts)</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="352">
            </td>
            <td width="10">
            </td>
            <td width="5">
            </td>
            <td width="40">
            </td>
            <td width="10">
            </td>
            <td width="5">
            </td>
            <td width="43">
            </td>
            <td width="1">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="470">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>March&#160;31,<br>2007</strong></div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="65" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December&#160;31,
                2006</strong></div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="470">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="65">&#160;</td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt" align="center"><strong>ASSETS</strong></div>
            </td>
            <td valign="top" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="top" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Current
                assets:</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Cash
                and cash equivalents</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">2,331,521</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">1,912,235</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Investments</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">563,552</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">539,115</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Inventories,
                net</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">235,358</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">245,502</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Trade,
                notes and other receivables, net</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">169,841</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">176,496</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                current assets</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">76,389</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">134,987</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Assets
                of discontinued operations held for sale</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">48,205</div>
            </td>
            <td valign="top" width="13" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">47,503</div>
            </td>
            <td valign="top" width="1" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Total
                current assets</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">3,424,866</div>
            </td>
            <td valign="top" width="13" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">3,055,838</div>
            </td>
            <td valign="top" width="1" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Property,
                plant and equipment, net:</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gaming</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">417,978</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">422,715</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Real
                Estate</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">273,852</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">283,974</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Home
                Fashion</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">206,764</div>
            </td>
            <td valign="top" width="13" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">200,382</div>
            </td>
            <td valign="top" width="1" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Total
                property, plant and equipment, net</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">898,594</div>
            </td>
            <td valign="top" width="13" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">907,071</div>
            </td>
            <td valign="top" width="1" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Investments</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">201,943</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">179,932</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Intangible
                assets</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">25,772</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">25,916</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                assets</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">71,492</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">75,990</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt"><strong>Total
                assets</strong></div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">4,622,667</div>
            </td>
            <td valign="top" width="13" style="border-bottom: white 3pt double;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">4,244,747</div>
            </td>
            <td valign="top" width="1" style="border-bottom: white 3pt double;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 3.35pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt" align="center"><strong>LIABILITIES
                AND PARTNERS&#8217; EQUITY</strong></div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Current
                liabilities:</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Accounts
                payable</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">66,497</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">69,853</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Accrued
                expenses and other current liabilities</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">160,062</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">197,792</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Current
                portion of long-term debt</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">23,620</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">23,970</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Securities
                sold not yet purchased</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">8,682</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">25,398</div>
            </td>
            <td valign="top" width="1" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Total
                current liabilities</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">258,861</div>
            </td>
            <td valign="top" width="13" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">317,013</div>
            </td>
            <td valign="top" width="1" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Long-term
                debt</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">1,675,498</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">1,184,990</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                non current liabilities</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">23,738</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">22,212</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Preferred
                limited partnership units:</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">$10
                liquidation preference, 5% cumulative pay-in-kind; 12,100,000 authorized;
                11,907,073 and 11,340,243 issued and outstanding as of March&#160;31, 2007
                and December 31, 2006, respectively</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">119,073</div>
            </td>
            <td valign="top" width="13" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">117,656</div>
            </td>
            <td valign="top" width="1" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                long-term liabilities</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,818,309</div>
            </td>
            <td valign="top" width="13" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,324,858</div>
            </td>
            <td valign="top" width="1" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Total
                liabilities</strong></div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,077,170</div>
            </td>
            <td valign="top" width="13" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,641,871</div>
            </td>
            <td valign="top" width="1" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Minority
                interests</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">198,019</div>
            </td>
            <td valign="top" width="13" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">292,221</div>
            </td>
            <td valign="top" width="1" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Commitments
                and contingencies (Note 19)</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Partners&#8217;
                equity:</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Limited
                partners:</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Depositary
                units: 67,850,000 authorized; 62,994,030 issued and 61,856,830 outstanding
                as of March&#160;31, 2007 and December 31, 2006</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">2,560,705</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">2,524,615</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">General
                partner</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">(201,306)</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">(202,039)</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Treasury
                units at cost: 1,137,200 depositary units</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(11,921)</div>
            </td>
            <td valign="top" width="13" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(11,921)</div>
            </td>
            <td valign="top" width="1" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Partners&#8217;
                equity</strong></div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,347,478</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,310,655</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="470">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt"><strong>Total
                liabilities and partners&#8217; equity</strong></div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">4,622,667</div>
            </td>
            <td valign="top" width="13" style="border-bottom: white 3pt double;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">4,244,747</div>
            </td>
            <td valign="top" width="1" style="border-bottom: white 3pt double;">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 6.65pt" align="center"><i>See notes
      to
      consolidated financial statements.</i></div>
    <div style="MARGIN: 0pt" align="center">1</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">

<div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
  <p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong><a name="2"></a>AMERICAN
  REAL ESTATE PARTNERS, L.P. AND SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 10pt" align="center"><strong>CONSOLIDATED
      STATEMENTS OF OPERATIONS<br>Three Months Ended
      March&#160;31, 2007 and 2006</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="363">
            </td>
            <td width="10">
            </td>
            <td width="5">
            </td>
            <td width="34">
            </td>
            <td width="10">
            </td>
            <td width="5">
            </td>
            <td width="34">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="484">&#160;</td>
            <td valign="top" width="14">&#160;</td>
            <td colspan="5" valign="bottom" width="121" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three&#160;Months&#160;Ended
                <br>March&#160;31,</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="484">&#160;</td>
            <td valign="top" width="14">&#160;</td>
            <td colspan="2" valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td colspan="2" valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="484">&#160;</td>
            <td valign="top" width="14">&#160;</td>
            <td colspan="5" valign="bottom" width="121">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)<br>(in
                000s, except <br>per unit
                amounts)</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Revenues:</strong></div>
            </td>
            <td valign="top" width="14">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="14">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gaming</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">112,888</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">85,945</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Real
                Estate</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">27,887</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">20,712</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Home
                Fashion</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">210,604</div>
            </td>
            <td valign="bottom" width="14" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">243,490</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">&#160;</td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">351,379</div>
            </td>
            <td valign="bottom" width="14" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">350,147</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Expenses:</strong></div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gaming</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">89,661</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">67,322</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Real
                Estate</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">23,606</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">17,238</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Home
                Fashion</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">249,619</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">281,448</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">General
                and administrative expenses</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">7,679</div>
            </td>
            <td valign="bottom" width="14" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">11,145</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">&#160;</td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">370,565</div>
            </td>
            <td valign="bottom" width="14" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">377,153</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">&#160;</td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Operating
                loss</strong></div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">(19,186</div>
            </td>
            <td valign="bottom" width="14">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">(27,006</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">&#160;</td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                income (expense), net:</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Interest
                expense</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">(32,977</div>
            </td>
            <td valign="bottom" width="14">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">(25,155</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Interest
                income</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">31,458</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">11,554</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                income (expense), net</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">84,781</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">21,309</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Equity
                in earnings of affiliate</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="14" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">24</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Income
                (loss) from continuing operations before income taxes and minority
                interests</strong></div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">64,076</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">(19,274</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                tax expense</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">(6,949</div>
            </td>
            <td valign="bottom" width="14">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">(5,211</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Minority
                interests</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">11,590</div>
            </td>
            <td valign="bottom" width="14" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">15,069</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Income
                (loss) from continuing operations</strong></div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">68,717</div>
            </td>
            <td valign="bottom" width="14" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(9,416</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Discontinued
                operations:</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                from discontinued operations, net of income taxes</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">16,470</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">58,841</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Minority
                interest</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">(1,794</div>
            </td>
            <td valign="bottom" width="14">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">54</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gain
                on sales of assets, net of income taxes</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">13,185</div>
            </td>
            <td valign="bottom" width="14" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">251</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Income
                from discontinued operations, net of income taxes</strong></div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">27,861</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">59,146</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Net
                earnings</strong></div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">96,578</div>
            </td>
            <td valign="bottom" width="14" style="border-bottom: white 3pt double;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">49,730</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 3pt double;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                earnings attributable to:</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Limited
                partners</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">94,656</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">48,741</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">General
                partner</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,922</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">989</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">&#160;</td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">96,578</div>
            </td>
            <td valign="bottom" width="14" style="border-bottom: white 3pt double;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">49,730</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 3pt double;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                earnings per LP unit:</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Basic
                earnings:</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                (loss) from continuing operations</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">1.09</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">(0.15</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                from discontinued operations</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0.44</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0.94</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Basic
                earnings per LP unit</strong></div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">1.53</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.79</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Weighted
                average LP units outstanding:</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">61,857</div>
            </td>
            <td valign="bottom" width="14" style="border-bottom: white 3pt double;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">61,857</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 3pt double;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Diluted
                earnings:</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="46">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                (loss) from continuing operations</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">1.09</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46">
              <div style="MARGIN: 0pt" align="right">(0.15</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                from discontinued operations</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0.44</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0.94</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Diluted
                earnings per LP unit</strong></div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">1.53</div>
            </td>
            <td valign="bottom" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="46" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.79</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="484">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Weighted
                average LP units and equivalent partnership units outstanding</div>
            </td>
            <td valign="top" width="14">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">61,857</div>
            </td>
            <td valign="bottom" width="14" style="border-bottom: #ccffcc 3pt double;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="46" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">61,857</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ccffcc 3pt double;">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 6.65pt" align="center"><i>See notes
      to
      consolidated financial statements.</i></div>
    <div style="MARGIN: 0pt" align="center">2</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">

<div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong><a name="3"></a>AMERICAN
  REAL ESTATE PARTNERS, L.P. AND SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 10pt" align="center"><strong>CONSOLIDATED
      STATEMENT OF CHANGES<br>IN PARTNERS&#8217; EQUITY
      AND COMPREHENSIVE INCOME<br>Three Months Ended March&#160;31,
      2007<br>(Unaudited) (In 000s)</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="202">
            </td>
            <td width="10">
            </td>
            <td width="8">
            </td>
            <td width="37">
            </td>
            <td width="10">
            </td>
            <td width="8">
            </td>
            <td width="41">
            </td>
            <td width="10">
            </td>
            <td width="8">
            </td>
            <td width="32">
            </td>
            <td width="10">
            </td>
            <td width="24">
            </td>
            <td width="10">
            </td>
            <td width="8">
            </td>
            <td width="41">
            </td>
            <td width="6">
            </td>
          </tr>
          <tr>
            <td rowspan="2" valign="bottom" width="270">&#160;</td>
            <td rowspan="2" valign="top" width="13">&#160;</td>
            <td colspan="2" rowspan="2" valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><br><strong>General<br>Partner&#8217;s
<br>Equity
                <br>(Deficit)</strong></div>
            </td>
            <td rowspan="2" valign="bottom" width="13">&#160;</td>
            <td colspan="2" rowspan="2" valign="bottom" width="65" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Limited
<br>Partners&#8217;
<br>Equity
<br>Depositary
                <br>Units</strong></div>
            </td>
            <td rowspan="2" valign="bottom" width="13">&#160;</td>
            <td colspan="4" valign="bottom" width="100" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><br><br><br><strong>Held
                in Treasury</strong></div>
            </td>
            <td rowspan="2" valign="top" width="13">&#160;</td>
            <td colspan="2" rowspan="2" valign="bottom" width="65" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><br><br><strong>Total
<br>Partners&#8217;
                <br>Equity</strong></div>
            </td>
            <td rowspan="2" valign="bottom" width="8">&#160;</td>
          </tr>
          <tr>
            <td colspan="2" valign="bottom" width="54" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Amounts</strong></div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="32" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Units</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="270">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td colspan="13" valign="bottom" width="331">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="270">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Balance,
                December 31, 2006</div>
            </td>
            <td valign="top" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(202,039</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">2,524,615</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">(11,921</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="32">
              <div style="MARGIN: 0pt" align="right">1,137</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">2,310,655</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="270">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Cumulative
                effect of adjustment from adoption of SFAS No. 159</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(840</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">(41,344</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="32">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">(42,184</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="270">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Comprehensive
                income:</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="54">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="32">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="54">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="270">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                earnings</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">1,922</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">94,656</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="32">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="top" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">96,578</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="270">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                unrealized losses on securities available for sale</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(227</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="54" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(11,202</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="32" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="54" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(11,429</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="270">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Comprehensive
                income</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">1,695</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">83,454</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="32">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">85,149</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="270">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Partnership
                distribution</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(125</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">(6,186</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="32">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">(6,311</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="270">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">3</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="54" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">166</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="43" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="32" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="54" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">169</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="270">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Balance,
                March&#160;31, 2007</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(201,306</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ccffcc 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="54" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">2,560,705</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ccffcc 3pt double;">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="43" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(11,921</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ccffcc 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="32" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">1,137</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="54" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">2,347,478</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #ccffcc 3pt double;">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Accumulated
      other comprehensive income at March&#160;31, 2007 was $13.9 million.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 6.65pt" align="center"><i>See notes
      to
      consolidated financial statements.</i></div>
    <div style="MARGIN: 0pt" align="center">3</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">

<div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong><a name="4"></a>AMERICAN
  REAL ESTATE PARTNERS, L.P. AND SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 10pt" align="center"><strong>CONSOLIDATED
      STATEMENTS OF CASH FLOWS<br>Three Months Ended
      March&#160;31, 2007 and 2006</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="344">
            </td>
            <td width="10">
            </td>
            <td width="5">
            </td>
            <td width="45">
            </td>
            <td width="10">
            </td>
            <td width="6">
            </td>
            <td width="43">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="459">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="66" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="66" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td colspan="5" valign="bottom" width="146">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Cash
                Flows from Operating Activities:</strong></div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="66">
              <div style="MARGIN: 0pt" align="right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="66">
              <div style="MARGIN: 0pt" align="right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Cash
                Flows from Continuing Operations:</strong></div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
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          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
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            <td valign="top" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
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            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
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            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">68,717</div>
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            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
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            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">(9,416</div>
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            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
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          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Adjustments
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            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Depreciation
                and amortization</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">16,294</div>
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            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">18,483</div>
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            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Investment
                gains</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">(79,410</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">(13,750</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Preferred
                LP unit interest expense</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">1,417</div>
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            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">1,335</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Minority
                interests</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">(11,590</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">(15,069</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Equity
                in earnings of affiliate</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">(24</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Stock-based
                compensation expense</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">6,248</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Deferred
                income tax expense (benefit)</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">362</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">(384</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Impairment
                loss on fixed assets</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">313</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">7,828</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                cash used in activities on trading securities</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">(14,866</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">(40,671</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other,
                net</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">4,785</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">2,802</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Changes
                in operating assets and liabilities:</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">(Increase)
                decrease in trade notes and other receivables</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">(6,602</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">20,107</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Increase
                in other assets</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">(1,164</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">(32,228</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Decrease
                (increase) in inventory</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">10,144</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">(31,246</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Increase
                (decrease) in accounts payable, accrued expenses and other
                liabilities</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">63</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(2,743</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                cash used in continuing operations</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(11,537</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(88,728</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Cash
                Flows from Discontinued Operations:</strong></div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Income
                from discontinued operations</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">27,861</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">59,146</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Depreciation,
                depletion and amortization</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">194</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">28,124</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Change
                in fair market value of Oil and Gas derivative contracts</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">(37,252</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Changes
                in operating assets and liabilities</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">5,240</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gains
                on sales of assets</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">(13,185</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other,
                net</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(15,471</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">3,708</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                cash (used in) provided by discontinued operations</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(601</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">58,966</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Net
                cash used in operating activities</strong></div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(12,138</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(29,762</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Cash
                Flows from Investing Activities:</strong></div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Cash
                Flows from Continuing Operations:</strong></div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Capital
                expenditures</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">(16,898</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">(5,221</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Purchases
                of marketable equity and debt securities</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">(75,671</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">(72,378</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Proceeds
                from sales of marketable equity and debt securities</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">51,471</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">44,056</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                proceeds from sales and disposition of fixed assets</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">6,786</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">7,094</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(18</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                cash used in investing activities &#8211; continuing operations</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(34,312</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(26,467</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Cash
                Flows from Discontinued Operations:</strong></div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Capital
                expenditures</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">(51,476</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                proceeds from the sales of real estate</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">4,359</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">991</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Purchase
                of minority interest of investment in subsidiary</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">(47,283</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Release
                of escrow funds relating to asset sales</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">50,000</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(7,319</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(387</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                cash used in investing activities &#8211; discontinued operations</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(243</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(50,872</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="459">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Net
                cash used in investing activities</strong></div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(34,555</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(77,339</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt"><br></div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 6.65pt" align="center"><i>See notes
      to
      consolidated financial statements.</i></div>
    <div style="MARGIN: 0pt" align="center">4</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 10pt" align="center"><strong>CONSOLIDATED
      STATEMENTS OF CASH FLOWS &#8211;
(continued)<br>Three Months Ended March&#160;31, 2007 and 2006</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="350">
            </td>
            <td width="7">
            </td>
            <td width="5">
            </td>
            <td width="45">
            </td>
            <td width="6">
            </td>
            <td width="6">
            </td>
            <td width="44">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="467">&#160;</td>
            <td valign="top" width="10">&#160;</td>
            <td colspan="2" valign="bottom" width="66" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td colspan="2" valign="bottom" width="66" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="467">&#160;</td>
            <td valign="top" width="10">&#160;</td>
            <td colspan="5" valign="bottom" width="142">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)<br>(in
                $000s)</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Cash
                Flows from Financing Activities:</strong></div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td colspan="2" valign="bottom" width="66">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td colspan="2" valign="bottom" width="66">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Cash
                Flows Continuing Operations:</strong></div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Partners&#8217;
                equity:</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="60">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Partnership
                distributions</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="top" width="60">
              <div style="MARGIN: 0pt" align="right">(6,311</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="top" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="top" width="58">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Dividend
                paid to minority holders of subsidiary</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6">&#160;</td>
            <td valign="top" width="60">
              <div style="MARGIN: 0pt" align="right">(18,451</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="top" width="8">&#160;</td>
            <td valign="top" width="58">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Debt:</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6">&#160;</td>
            <td valign="top" width="60">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="top" width="8">&#160;</td>
            <td valign="top" width="58">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Proceeds
                from senior notes payable</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6">&#160;</td>
            <td valign="top" width="60">
              <div style="MARGIN: 0pt" align="right">492,130</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="top" width="8">&#160;</td>
            <td valign="top" width="58">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Repayment
                of credit facilities</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6">&#160;</td>
            <td valign="top" width="60">
              <div style="MARGIN: 0pt" align="right">(127</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="top" width="8">&#160;</td>
            <td valign="top" width="58">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Periodic
                principal payments</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="top" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(1,262</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="top" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="top" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(1,098</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 3.35pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                cash provided by (used in) financing activities &#8211; continuing
                operations</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="top" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">465,979</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="top" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="top" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">(1,098</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                cash used in financing activities &#8211; discontinued operations</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="top" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="top" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="top" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(3,075</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Net
                Cash Provided by (used in) Financing Activities</strong></div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="top" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">465,979</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="top" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="top" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(4,173</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                increase (decrease) in cash and cash equivalents</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6">&#160;</td>
            <td valign="top" width="60">
              <div style="MARGIN: 0pt" align="right">419,286</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="top" width="8">&#160;</td>
            <td valign="top" width="58">
              <div style="MARGIN: 0pt" align="right">(111,274</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                change in cash of assets held for sale</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6">&#160;</td>
            <td valign="top" width="60">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="top" width="8">&#160;</td>
            <td valign="top" width="58">
              <div style="MARGIN: 0pt" align="right">37,112</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Cash
                and cash equivalents, beginning of period</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="top" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,912,235</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="top" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="top" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">460,091</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Cash
                and cash equivalents, end of period</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="top" width="60" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">2,331,521</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #ccffcc 3pt double;">&#160;</td>
            <td valign="top" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="top" width="58" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">385,929</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ccffcc 3pt double;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="467">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6">&#160;</td>
            <td valign="top" width="60">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="top" width="8">&#160;</td>
            <td valign="top" width="58">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Supplemental
                information</strong></div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6">&#160;</td>
            <td valign="top" width="60">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="top" width="8">&#160;</td>
            <td valign="top" width="58">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Cash
                payments for interest</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="top" width="60">
              <div style="MARGIN: 0pt" align="right">45,982</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="top" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="top" width="58">
              <div style="MARGIN: 0pt" align="right">26,950</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Cash
                payments for income taxes, net of refunds</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="top" width="60">
              <div style="MARGIN: 0pt" align="right">3,429</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="top" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="top" width="58">
              <div style="MARGIN: 0pt" align="right">798</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="467">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                unrealized losses on securities available for sale</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="top" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="top" width="60">
              <div style="MARGIN: 0pt" align="right">(11,429</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="top" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="top" width="58">
              <div style="MARGIN: 0pt" align="right">(10,751</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 6.65pt" align="center"><i>See notes
      to
      consolidated financial statements.</i></div>
    <div style="MARGIN: 0pt" align="center">5</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">

<div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
<p align="left"> <strong><a href="#index">Back to Index</a></strong></p>
<strong><a name="5"></a>AMERICAN
  REAL ESTATE PARTNERS, L.P. AND SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="6"></a>Note
  1 &#8212; General</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">American
      Real Estate Partners, L.P., or the Company or AREP, is a master limited
      partnership formed in Delaware on February 17, 1987. We are a diversified
      holding company owning subsidiaries engaged in the following continuing
      operating businesses: Gaming, Real Estate and Home Fashion. In November 2006,
      we
      divested our Oil and Gas operating business and our Atlantic City gaming
      properties. Further information regarding our reportable segments is contained
      in Note 17. As described in Note 21, on April 22, 2007 we entered into an
      agreement to sell our remaining gaming operations.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We own
      a
      99% limited partnership interest in American Real Estate Holdings Limited
      Partnership, or AREH. AREH, the operating partnership, holds our investments
      and
      conducts our business operations. Substantially all of our assets and
      liabilities are owned by AREH and substantially all of our operations are
      conducted through AREH and its subsidiaries. American Property Investors, Inc.,
      or API, owns a 1% general partnership interest in both us and AREH, representing
      an aggregate 1.99% general partnership interest in us and AREH. API is owned
      and
      controlled by Mr. Carl C. Icahn.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      accompanying consolidated financial statements and related notes should be
      read
      in conjunction with the consolidated financial statements and related notes
      contained in our Annual Report on Form 10-K, for the year ended December 31,
      2006. The financial statements have been prepared in accordance with the rules
      and regulations of the Securities and Exchange Commission related to interim
      financial statements. The financial information contained herein is unaudited;
      however, management believes all adjustments have been made that are necessary
      to present fairly the results for the interim periods. All such adjustments
      are
      of a normal and recurring nature, except for the adoption of SFAS No. 159,
      as
      described below. Certain prior year amounts have been reclassified in order
      to
      conform to the current year presentation.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      consolidated financial statements include the accounts of the Company and its
      wholly and majority owned subsidiaries in which control can be exercised. The
      Company is considered to have control if it has a direct or indirect ability
      to
      make decisions about an entity&#8217;s activities through voting or similar rights.
      All material intercompany accounts and transactions have been eliminated in
      consolidation.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Because
      of the diversified nature of our business, the results of operations for
      quarterly and other interim periods are not indicative of the results to be
      expected for the full year. Variations in the amount and timing of gains and
      losses on our investments can be significant. The results of our Real Estate
      and
      Home Fashion segments are seasonal.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Gaming Acquisition
      and Pending Divestiture</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      November 28, 2005, AREP Laughlin Corporation entered into an agreement to
      purchase the Flamingo Laughlin Hotel and Casino, now known as the Aquarius
      Casino Resort, or the Aquarius, in Laughlin, Nevada from Harrah&#8217;s Operating
      Company, Inc. AREP Laughlin Corporation was formed by AREH to acquire, own
      and
      operate the Aquarius, and AREH contributed 100% of the stock of AREP Laughlin
      to
      American Casino and Entertainment Properties LLC, or ACEP, our indirect wholly
      owned subsidiary, on April 4, 2006. The transaction was approved by the Nevada
      Gaming Commission upon recommendation of the Nevada Gaming Control Board and
      closed on May 19, 2006. Accordingly, our financial statements include the
      financial position and results of operations of the Aquarius from May 19, 2006
      forward.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As
      discussed in Note 21, on April 22, 2007, we entered into an agreement to sell
      all of the issued and outstanding membership interests of ACEP, which comprise
      all of our current gaming properties. Accordingly, in the second quarter of
      fiscal 2007 the financial position and the results of ACEP&#8217;s operations will be
      presented as assets and liabilities of discontinued operations held for sale
      in
      the consolidated balance sheets and discontinued operations in the consolidated
      statements of operations for all periods in accordance with SFAS No. 144.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">6</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Note 1 &#8212; General &#8211;
(continued)</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Discontinued
      Operations</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      November 17, 2006, our indirect majority owned subsidiary, Atlantic Coast
      Entertainment Holdings, Inc., or Atlantic Coast, completed the sale to Pinnacle
      Entertainment, Inc., or Pinnacle, of the outstanding membership interests in
      ACE
      Gaming LLC or ACE, the owner of The Sands Hotel and Casino, or The Sands, in
      Atlantic City, New Jersey, and 100% of the equity interests in certain
      subsidiaries of AREH that owned parcels of real estate adjacent to The Sands,
      including the Traymore site, to Pinnacle.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      November 21, 2006, our indirect wholly owned subsidiary, AREP O &amp; G Holdings
      LLC, consummated the sale of all of the issued and outstanding membership
      interests of NEG Oil &amp; Gas LLC, or NEG Oil &amp; Gas, to SandRidge Energy,
      Inc. or SandRidge, formerly Riata Energy, Inc.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Operating
      properties of our real estate segment are reclassified to held for sale when
      subject to a contract or letter of intent. The operations of such properties
      are
      classified as discontinued operations. The properties classified as discontinued
      operations have changed during fiscal 2007 and, accordingly, certain amounts
      in
      the statement of operations and cash flows for the three months ended
      March&#160;31, 2007 and 2006 have been reclassified to conform to the current
      classification of properties. During the first quarter of 2007 two properties
      were reclassified to held for sale.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      financial position and results of these operations are presented as assets
      and
      liabilities of discontinued operations held for sale in the consolidated balance
      sheets and discontinued operations in the consolidated statements of
      operations.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Filing Status
      of
      Subsidiaries</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">National
      Energy Group, Inc., or NEGI, and Atlantic Coast are reporting companies under
      the Securities Exchange Act of 1934, as amended, or the, &#8216;34 Act. In addition,
      ACEP voluntarily files annual, quarterly and current reports under the, &#8216;34
      Act.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>New Accounting
      Pronouncements</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>SFAS
      No. 155.</strong> On February 16, 2006, the FASB issued Statement No. 155,
<i>Accounting for Certain Hybrid Instruments &#8211; an Amendment of FASB Statements
      No. 133 and 140</i> (&#8220;SFAS 155&#8221;). The statement amends Statement 133 to permit
      fair value measurement for certain hybrid financial instruments that contain
      an
      embedded derivative, provides additional guidance on the applicability of SFAS
      133 and 140 to certain financial instruments and subordinated concentrations
      of
      credit risk. The new standard is effective for the first fiscal year beginning
      after September 15, 2006. The adoption of SFAS 155 as of January 1, 2007 did
      not
      have any impact on our consolidated financial statements.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>EITF
      06-3.</strong> In June 2006, the Emerging Issues Task Force (&#8220;EITF&#8221;) issued EITF
      06-3, &#8220;How Taxes Collected from Customers and Remitted to Governmental
      Authorities Should Be Presented in the Income Statement (That is, Gross versus
      Net Presentation)&#8221; to clarify diversity in practice on the presentation of
      different types of taxes in the financial statements. The EITF concluded that,
      for taxes within the scope of the issue, a company may adopt a policy of
      presenting taxes either gross within revenue or net. That is, it may include
      charges to customers for taxes within revenues and the charge for the taxes
      from
      the taxing authority within cost of sales, or, alternatively, it may net the
      charge to the customer and the charge from the taxing authority. If taxes are
      reported on a gross basis, and are significant, an entity should disclose the
      amounts of those taxes subject to EITF 06-3. The guidance is effective for
      periods beginning after December 15, 2006. We present sales tax on a net basis
      in our consolidated financial statements, and the adoption of EITF 06-3 did
      not
      have any impact on our financial position, results of operations, or cash
      flows.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">7</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Note 1 &#8212; General &#8211;
(continued)</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>FIN
      No. 48.</strong> In July 2006, the FASB issued FASB Interpretation No. 48,
<i>Accounting for Uncertainty in Income Taxes &#8211; an Interpretation of FASB
      Statement 109</i> (&#8220;FIN 48&#8221;), which clarifies the accounting for uncertainty in
      tax positions taken or expected to be taken in a tax return, including issues
      relating to financial statement recognition and measurement. FIN 48 provides
      that the tax effects from an uncertain tax position can be recognized in the
      financial statements only if the position is &#8220;more-likely-than-not&#8221; to be
      sustained if the position were to be challenged by a taxing authority. The
      assessment of the tax position is based solely on the technical merits of the
      position, without regard to the likelihood that the tax position may be
      challenged. If an uncertain tax position meets the &#8220;more-likely-than-not&#8221;
threshold, the largest amount of tax benefit that is greater than 50 percent
      likely to be recognized upon ultimate settlement with the taxing authority
      is
      recorded. The provisions of FIN 48 are effective for fiscal years beginning
      after December 15, 2006, with the cumulative effect of the change in accounting
      principle recorded as an adjustment to opening retained earnings. We adopted
      FIN
      48 as of January 1, 2007. The adoption of FIN 48 did not have a material impact
      on our consolidated financial statements. See note 18 for additional
      information.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>SFAS
      No. 157.</strong> In September 2006, the FASB issued FASB Statement No. 157,
<i>Fair Value Measurements</i> (&#8220;SFAS 157&#8221;), which defines fair value,
      establishes a framework for measuring fair value in generally accepted
      accounting principles, and expands disclosures about fair value measurements.
      This statement applies under other accounting pronouncements that require or
      permit fair value measurements and, accordingly, SFAS 157 does not require
      any
      new fair value measurements. We adopted SFAS 157 as of January 1, 2007, in
      conjunction with the adoption of SFAS No. 159, as required. The adoption of
      SFAS
      157 did not have any impact on our consolidated financial statements.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>SFAS
      No. 159.</strong> In February 2007, the FASB issued SFAS No. 159, <i>The Fair
      Value Option for Financial Assets and Financial Liabilities &#8211; Including an
      Amendment of FASB Statement No. 115</i> (&#8220;SFAS 159&#8221;), which gives entities the
      option to measure eligible financial assets, financial liabilities and firm
      commitments at fair value (i.e., the fair value option), on an
      instrument-by-instrument basis, that are otherwise not permitted to be accounted
      for at fair value under other accounting standards. The election to use the
      fair
      value option is available when an entity first recognizes a financial asset
      or
      financial liability or upon entering into a firm commitment. Subsequent changes
      in fair value must be recorded in earnings. Additionally, SFAS 159 allows for
      a
      one-time election for existing positions upon adoption, with the transition
      adjustment recorded to beginning partners&#8217; equity.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We adopted
      SFAS 159 as of January 1, 2007 and elected to apply the fair value option to
      our
      investment in ImClone Systems Incorporated, or ImClone. In the fourth quarter
      of
      the fiscal year ended December 31, 2006, we first applied the equity method
      of
      accounting to our investment in ImClone due to changes in ImClone&#8217;s board
      resulting in our having the ability to exercise significant influence over
      ImClone. We believe that the quality of the earnings and the value of the
      investment that we report over time relating to our investment in ImClone is
      more accurately reflected by the market value methodology of SFAS 159 rather
      than the equity method of accounting. The equity method of accounting would
      require an appraisal of the fair values of ImClone&#8217;s assets and liabilities at
      the dates that we acquired shares of common stock of ImClone as well as future
      appraisals should there be any material indications of impairment. We believe
      that such an appraisal would be subjective given the nature of ImClone&#8217;s
      pharmaceutical operations.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As of the
      date of adoption, the carrying value of our investment in ImClone was
      approximately $164.3 million and the fair value of our investment was
      approximately $122.2 million. In accordance with the transition requirements
      of
      SFAS 159, we recorded a cumulative effect adjustment to beginning partners&#8217;
equity for the difference between the fair value and carrying value on the
      date
      of adoption, which reduced partners&#8217; equity by approximately $42.2
      million.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As a result
      of the adoption of SFAS 159, we are required to record unrealized gains or
      losses for the change in fair value of our investment in ImClone. During the
      three-month period ended March&#160;31, 2007, we recorded approximately $63.9
      million of unrealized gains resulting from the change in the market value of
      ImClone&#8217;s stock which is recorded as a component of other income (expense), net
      in the consolidated statement of operations.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">8</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="7"></a>Note
  2 &#8212; Operating Units</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Through
      the second quarter of the fiscal year ended December 31, 2006, or fiscal 2006,
      we had four principal operating businesses: Oil and Gas, Gaming, Real Estate
      and
      Home Fashion. As described in Note 3, in November 2006 we divested our Oil
      and
      Gas operating businesses and our Atlantic City Gaming properties. As a result,
      our Oil and Gas operations and our Atlantic City Gaming properties are now
      classified as discontinued operations and thus are not considered a reportable
      segment of our continuing operations. We now have three principal operating
      businesses: Gaming, Real Estate and Home Fashion.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>a.
      Gaming</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We own
      and operate gaming properties in Nevada. Our properties include the Stratosphere
      Casino Hotel and Tower, Arizona Charlie&#8217;s Decatur, and Arizona Charlie&#8217;s Boulder
      in Las Vegas and the Aquarius Casino Resort in Laughlin. Results for the
      Aquarius are included from the date of acquisition, May 19, 2006. As described
      above, in November 2006, we sold our Atlantic City Gaming properties. As a
      result, such operations are now classified as discontinued operations.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Summary
      balance sheets for the continuing operations of our Gaming segment as of
      March&#160;31, 2007 and December 31, 2006 as included in the consolidated
      balance sheets are as follows (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="259">
            </td>
            <td width="10">
            </td>
            <td width="6">
            </td>
            <td width="40">
            </td>
            <td width="10">
            </td>
            <td width="6">
            </td>
            <td width="40">
            </td>
            <td width="1">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="346">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="62" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>&#160;&#160;&#160;March&#160;31,&#160;&#160;&#160;<br>2007</strong></div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="62" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December&#160;31,<br>2006</strong></div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="346">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="62">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="346">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Current
                assets</div>
            </td>
            <td valign="top" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">98,667</div>
            </td>
            <td valign="top" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">85,583</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="346">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Property,
                plant and equipment, net</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">417,978</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">422,715</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="346">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                non-current assets</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="54" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">44,001</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">44,455</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="346">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                assets</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="54" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">560,646</div>
            </td>
            <td valign="top" width="13" style="border-bottom: white 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">552,753</div>
            </td>
            <td valign="top" width="1" style="border-bottom: white 3pt double;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="346">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Current
                liabilities</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">50,614</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">54,763</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="346">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Long-term
                debt</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="54">
              <div style="MARGIN: 0pt" align="right">257,202</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">257,329</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="346">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                non-current liabilities</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="54" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6,144</div>
            </td>
            <td valign="top" width="13" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">5,993</div>
            </td>
            <td valign="top" width="1" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="346">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                liabilities</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="54" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">313,960</div>
            </td>
            <td valign="top" width="13" style="border-bottom: white 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">318,085</div>
            </td>
            <td valign="top" width="1" style="border-bottom: white 3pt double;">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As
      discussed in Note 21, on April 22, 2007, we entered into an agreement to sell
      all of the issued and outstanding membership interests of ACEP for $1.3 billion,
      plus or minus certain adjustments such as working capital. Accordingly, in
      the
      second quarter of fiscal 2007 the financial position and the results of ACEP&#8217;s
      operations will be presented as assets and liabilities of discontinued
      operations held for sale in the consolidated balance sheets and discontinued
      operations in the consolidated statements of operations for all periods in
      accordance with SFAS No. 144.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">9</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 6.65pt"><strong>Note 2 &#8212; Operating
      Units &#8211; (continued)</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Summarized
      unaudited statements of operations for the continuing operations of our Gaming
      segment for the three months ended March&#160;31, 2007 and 2006 are as follows
      (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="312">
            </td>
            <td width="17">
            </td>
            <td width="8">
            </td>
            <td width="55">
            </td>
            <td width="17">
            </td>
            <td width="8">
            </td>
            <td width="46">
            </td>
            <td width="1">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="417">&#160;</td>
            <td valign="top" width="22">&#160;</td>
            <td colspan="5" valign="bottom" width="181" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three&#160;Months&#160;Ended
                <br>March&#160;31,</strong></div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="417">&#160;</td>
            <td valign="top" width="22">&#160;</td>
            <td colspan="2" valign="bottom" width="85" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td colspan="2" valign="bottom" width="73" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="417">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Revenues:</div>
            </td>
            <td valign="top" width="22">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="74">&#160;</td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="62">&#160;</td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="417">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Casino
                </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="74">
              <div style="MARGIN: 0pt" align="right">67,370</div>
            </td>
            <td valign="top" width="22">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="11">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="62">
              <div style="MARGIN: 0pt" align="right">48,022</div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="417">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Hotel
                </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="74">
              <div style="MARGIN: 0pt" align="right">22,616 </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="62">
              <div style="MARGIN: 0pt" align="right">17,433</div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="417">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Food
                and beverage</div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="74">
              <div style="MARGIN: 0pt" align="right">23,109 </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="62">
              <div style="MARGIN: 0pt" align="right">18,070</div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="417">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Tower,
                retail and other income</div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="74" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">9,311 </div>
            </td>
            <td valign="top" width="22" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="62" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">8,219</div>
            </td>
            <td valign="top" width="2" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="417">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gross
                revenues </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="74">
              <div style="MARGIN: 0pt" align="right">122,406 </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="62">
              <div style="MARGIN: 0pt" align="right">91,744</div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="417">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Less
                promotional allowances</div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="74" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">9,518 </div>
            </td>
            <td valign="top" width="22" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="62" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">5,799</div>
            </td>
            <td valign="top" width="2" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="417">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                revenues </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="74" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">112,888 </div>
            </td>
            <td valign="top" width="22" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="62" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">85,945</div>
            </td>
            <td valign="top" width="2" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="417">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Expenses:</div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="74">&#160;</td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="62">&#160;</td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="417">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Casino
                </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="74">
              <div style="MARGIN: 0pt" align="right">22,566 </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="62">
              <div style="MARGIN: 0pt" align="right">16,488</div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="417">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Hotel
                </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="74">
              <div style="MARGIN: 0pt" align="right">9,063 </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="62">
              <div style="MARGIN: 0pt" align="right">6,843</div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="417">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Food
                and beverage </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="74">
              <div style="MARGIN: 0pt" align="right">15,975 </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="62">
              <div style="MARGIN: 0pt" align="right">13,201</div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="417">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Tower,
                retail and other income </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="74">
              <div style="MARGIN: 0pt" align="right">4,244 </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="62">
              <div style="MARGIN: 0pt" align="right">4,248</div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="417">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Selling,
                general and administrative </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="74">
              <div style="MARGIN: 0pt" align="right">29,472 </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11">&#160;</td>
            <td valign="bottom" width="62">
              <div style="MARGIN: 0pt" align="right">20,782</div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="417">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Depreciation
                and amortization </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="74" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">8,341 </div>
            </td>
            <td valign="top" width="22" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="62" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">5,760</div>
            </td>
            <td valign="top" width="2" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="417">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                costs and expenses </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="74" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">89,661 </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="62" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">67,322</div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="417">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Operating
                income from continuing operations </div>
            </td>
            <td valign="top" width="22">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="74" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">23,227 </div>
            </td>
            <td valign="top" width="22" style="border-bottom: white 3pt double;">&#160;</td>
            <td valign="bottom" width="11" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="62" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">18,623</div>
            </td>
            <td valign="top" width="2" style="border-bottom: white 3pt double;">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>b. Real
      Estate</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Our real
      estate operations consist of three segments: rental real estate, property
      development and associated resort activities.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">A
      summary of real estate property and equipment as of March&#160;31, 2007 and
      December 31, 2006 as included in the consolidated balance sheets is as follows
      (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="335">
            </td>
            <td width="13">
            </td>
            <td width="7">
            </td>
            <td width="47">
            </td>
            <td width="13">
            </td>
            <td width="6">
            </td>
            <td width="43">
            </td>
            <td width="1">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="446">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="2" valign="bottom" width="73" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>&#160;&#160;&#160;&#160;March&#160;31,&#160;&#160;&#160;&#160;<br>2007</strong></div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="2" valign="bottom" width="66" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December&#160;31,
<br>2006</strong></div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="446">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="2" valign="bottom" width="73">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="57">&#160;</td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Rental
                properties:</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="63">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="57">&#160;</td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Finance
                leases, net </div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="63">
              <div style="MARGIN: 0pt" align="right">65,302</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">66,335</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Operating
                leases </div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="63">
              <div style="MARGIN: 0pt" align="right">41,653</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">46,170</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Property
                development </div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="63">
              <div style="MARGIN: 0pt" align="right">122,306</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">126,537</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Resort
                properties </div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="63" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">44,591</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="57" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">44,932</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Total
                real estate </div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="63" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">273,852</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ccffcc 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="57" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">283,974</div>
            </td>
            <td valign="top" width="1" style="border-bottom: #ccffcc 3pt double;">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">10</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Note 2 &#8212; Operating
      Units &#8211; (continued)</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 5pt; TEXT-INDENT: 18pt">Summarized
      unaudited statements of operations attributable to our continuing real estate
      operations are as follows (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="346">
            </td>
            <td width="8">
            </td>
            <td width="44">
            </td>
            <td width="14">
            </td>
            <td width="8">
            </td>
            <td width="44">
            </td>
            <td width="1">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="462">&#160;</td>
            <td colspan="5" valign="bottom" width="160" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three&#160;Months&#160;Ended
                <br>March&#160;31,</strong></div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="462">&#160;</td>
            <td colspan="2" valign="bottom" width="70" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td colspan="2" valign="bottom" width="70" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="462">&#160;</td>
            <td colspan="2" valign="bottom" width="70">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center"><strong>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</strong></div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td colspan="2" valign="bottom" width="70">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center"><strong>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</strong></div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="462">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Revenues:</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="59">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="59">&#160;</td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="462">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Rental
                real estate:</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="59">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="59">&#160;</td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="462">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Interest
                income on financing leases </div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">1,578</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">1,735</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="462">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Rental
                income </div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">1,939</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">1,511</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="462">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Property
                development </div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">18,145</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">11,384</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="462">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Resort
                activities</div>
            </td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6,225</div>
            </td>
            <td valign="bottom" width="19" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6,082</div>
            </td>
            <td valign="top" width="1" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="462">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Total
                revenues </div>
            </td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">27,887</div>
            </td>
            <td valign="bottom" width="19" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">20,712</div>
            </td>
            <td valign="top" width="1" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="462">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Operating
                expenses:</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="59">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="59">&#160;</td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="462">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Rental
                real estate </div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">1,493</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">998</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="462">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Property
                development </div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">15,612</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">9,976</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="462">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Resort
                activities</div>
            </td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6,501</div>
            </td>
            <td valign="bottom" width="19" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6,264</div>
            </td>
            <td valign="top" width="1" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="462">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Total
                expenses </div>
            </td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">23,606</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">17,238</div>
            </td>
            <td valign="top" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="462">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Operating
                income </div>
            </td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="59" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">4,281</div>
            </td>
            <td valign="bottom" width="19" style="border-bottom: #ccffcc 3pt double;">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="59" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">3,474</div>
            </td>
            <td valign="top" width="1" style="border-bottom: #ccffcc 3pt double;">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Rental
      Real Estate</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As of
      March&#160;31, 2007, we owned 36 rental real estate properties. These primarily
      consist of fee and leasehold interests in real estate in 18 states. Most of
      these properties are net-leased to single corporate tenants. Approximately
      89%
      of these properties are currently net-leased, 3% are operating properties and
      8%
      are vacant.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Property
      Held for Sale</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 5pt; TEXT-INDENT: 18pt">The
      following is a summary of property held for sale (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="277">
            </td>
            <td width="7">
            </td>
            <td width="29">
            </td>
            <td width="10">
            </td>
            <td width="9">
            </td>
            <td width="36">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="370">&#160;</td>
            <td colspan="2" valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>March&#160;31,<br>2007</strong></div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="62" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December&#160;31,
<br>2006</strong></div>
            </td>
            <td valign="top" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="370">&#160;</td>
            <td colspan="2" valign="bottom" width="49">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="top" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="370">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Leased
                to others</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="38">
              <div style="MARGIN: 0pt" align="right">34,653</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">28,015</div>
            </td>
            <td valign="top" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="370">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Vacant</div>
            </td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="38" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">703</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">703</div>
            </td>
            <td valign="top" width="4" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="370">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="38">
              <div style="MARGIN: 0pt" align="right">35,356</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">28,718</div>
            </td>
            <td valign="top" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="370">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Less:
                accumulated depreciation</div>
            </td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="38" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#160;(8,097</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#160;(5,053</div>
            </td>
            <td valign="top" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="370">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total</div>
            </td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="38" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">27,259</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ccffcc 3pt double;">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">23,665</div>
            </td>
            <td valign="top" width="4" style="border-bottom: #ccffcc 3pt double;">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">At
      March&#160;31, 2007 and December 31, 2006, $19.8 million of real estate held for
      sale was pledged to collateralize the payment of non-recourse mortgages
      payable.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 5pt; TEXT-INDENT: 18pt">We market
      portions of our commercial real estate portfolio for sale. Unaudited sales
      activity was as follows (in $000s, except unit data):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="248">
            </td>
            <td width="10">
            </td>
            <td width="9">
            </td>
            <td width="44">
            </td>
            <td width="19">
            </td>
            <td width="9">
            </td>
            <td width="29">
            </td>
            <td width="1">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="331">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="5" valign="bottom" width="152" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three&#160;Months&#160;Ended
                <br>March&#160;31,</strong></div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="331">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="72" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="26">&#160;</td>
            <td colspan="2" valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="331">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="59">&#160;</td>
            <td valign="bottom" width="26">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="331">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Properties
                sold </div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="26">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">4</div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="331">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Proceeds
                received </div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">4,359</div>
            </td>
            <td valign="bottom" width="26">&#160;</td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">973</div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="331">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                gain recorded </div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">3,862</div>
            </td>
            <td valign="bottom" width="26">&#160;</td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">251</div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="331">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gain
                recorded in discontinued operations </div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">3,862</div>
            </td>
            <td valign="bottom" width="26">&#160;</td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">251</div>
            </td>
            <td valign="top" width="2">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">11</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 6.65pt"><strong>Note 2 &#8212; Operating
      Units &#8211; (continued)</strong></div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Property
      Development and Associated Resort Activities</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We own,
      primarily through our Bayswater subsidiary, residential development properties.
      Bayswater, a real estate investment, management and development company, focuses
      primarily on the construction and sale of single-family houses, multi-family
      homes and lots in subdivisions and planned communities and raw land for
      residential development. Our New Seabury development property in Cape Cod,
      Massachusetts and our Grand Harbor and Oak Harbor development property in Vero
      Beach, Florida each include land for future residential development of more
      than
      400 and 1,000 units of residential housing, respectively. Both developments
      operate golf and resort activities. We are also developing residential
      communities in Naples, Florida and Westchester County, New York.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 5pt; TEXT-INDENT: 18pt">Unaudited
      property development sales activity was as follows (in 000s except unit
      data):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="311">
            </td>
            <td width="16">
            </td>
            <td width="6">
            </td>
            <td width="52">
            </td>
            <td width="21">
            </td>
            <td width="6">
            </td>
            <td width="52">
            </td>
            <td width="1">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="415">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td colspan="5" valign="bottom" width="184" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three&#160;Months&#160;Ended
                <br>March&#160;31,</strong></div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="415">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td colspan="2" valign="bottom" width="77" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="28">&#160;</td>
            <td colspan="2" valign="bottom" width="78" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="415">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">&#160;</td>
            <td valign="bottom" width="28">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="415">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Units
                sold:</div>
            </td>
            <td valign="bottom" width="21">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">&#160;</td>
            <td valign="bottom" width="28">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="415">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">New
                Seabury, Massachusetts </div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">6</div>
            </td>
            <td valign="bottom" width="28">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">10</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="415">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Grand
                Harbor/Oak Harbor, Florida </div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">5</div>
            </td>
            <td valign="bottom" width="28">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">2</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="415">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Falling
                Waters, Florida </div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">23</div>
            </td>
            <td valign="bottom" width="28">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="415">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Westchester,
                New York </div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">2</div>
            </td>
            <td valign="bottom" width="28">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="415">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Tampa
                Bay, Florida </div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="69" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="28">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="69" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="415">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="69" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">37</div>
            </td>
            <td valign="bottom" width="28" style="border-bottom: white 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="69" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">12</div>
            </td>
            <td valign="bottom" width="1" style="border-bottom: white 3pt double;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="415">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Revenues:</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">&#160;</td>
            <td valign="bottom" width="28">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="415">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">New
                Seabury, Massachusetts </div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">3,583</div>
            </td>
            <td valign="bottom" width="28">&#160;</td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">9,033</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="415">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Grand
                Harbor/Oak Harbor, Florida </div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">4,349</div>
            </td>
            <td valign="bottom" width="28">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">2,321</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="415">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Falling
                Waters, Florida </div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">5,466</div>
            </td>
            <td valign="bottom" width="28">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="415">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Westchester,
                New York </div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">3,243</div>
            </td>
            <td valign="bottom" width="28">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">30</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="415">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Tampa
                Bay, Florida</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="69" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,504</div>
            </td>
            <td valign="bottom" width="28">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="69" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="415">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="69" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">18,145</div>
            </td>
            <td valign="bottom" width="28" style="border-bottom: #ccffcc 3pt double;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="69" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">11,384</div>
            </td>
            <td valign="bottom" width="1" style="border-bottom: #ccffcc 3pt double;">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>c. Home
      Fashion</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We
      conduct our Home Fashion operations through our majority ownership in West
      Point
      International Inc., or WPI, a manufacturer and distributor of home fashion
      consumer products.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Summary
      balance sheets for Home Fashion as of March&#160;31, 2007 and December 31, 2006
      as included in the consolidated balance sheets are as follows (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="264">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="32">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="41">
            </td>
            <td width="1">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="352">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>March&#160;31,
<br>2007</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="62" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December&#160;31,
<br>2006</strong></div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="352">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="50">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="55">&#160;</td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="352">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Current
                assets </div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">533,815</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="55">
              <div style="MARGIN: 0pt" align="right">567,419 </div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="352">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Assets
                held for sale </div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">20,946 </div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="55">
              <div style="MARGIN: 0pt" align="right">23,838 </div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="352">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Property
                plant and equipment, net </div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">206,764 </div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="55">
              <div style="MARGIN: 0pt" align="right">200,382 </div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="352">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Intangible
                and other assets </div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">38,333 </div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="55" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">38,199</div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="352">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                assets </div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="43" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">799,858 </div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: #ccffcc 3pt double;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="55" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">829,838</div>
            </td>
            <td valign="bottom" width="1" style="border-bottom: #ccffcc 3pt double;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="352">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Current
                liabilities </div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">107,447 </div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="55">
              <div style="MARGIN: 0pt" align="right">101,609 </div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="352">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                liabilities </div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6,941 </div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="55" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">8,980 </div>
            </td>
            <td valign="bottom" width="1">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="352">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                liabilities </div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="43" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">114,388 </div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: white 3pt double;">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="55" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">110,589 </div>
            </td>
            <td valign="bottom" width="1" style="border-bottom: white 3pt double;">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt" align="center"><br></div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">12</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 6.65pt"><strong>Note 2 &#8212; Operating
      Units &#8211; (continued)</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Unaudited
      summarized statements of operations for the three months ended March&#160;31,
      2007 and 2006 are as follows (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="276">
            </td>
            <td width="10">
            </td>
            <td width="5">
            </td>
            <td width="32">
            </td>
            <td width="10">
            </td>
            <td width="5">
            </td>
            <td width="32">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="368">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="5" valign="bottom" width="113" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three
                Months Ended
                <br>March&#160;31,</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="368">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td colspan="2" valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="368">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="368">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                sales</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">210,604</div>
            </td>
            <td valign="bottom" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">243,490</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="368">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Cost
                of goods sold</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">205,910</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">228,360</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="368">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Gross
                earnings</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">4,694</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">15,130</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="368">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Selling,
                general and administrative expenses</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">39,398</div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">43,317</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="368">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Restructuring
                and impairment charges </div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">4,311</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #ccffcc 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">9,771</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN: 0pt">&#160;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="368">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Operating
                loss </div>
            </td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="43" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">&#160;(39,015</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: white 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$ </div>
            </td>
            <td valign="bottom" width="43" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">&#160;(37,958</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Total
      depreciation for the three months ended March&#160;31, 2007 was $4.8 million, of
      which $3.7 million was included in cost of sales and $1.1 million was included
      in selling, general and administrative expenses. Total depreciation for the
      three months ended March&#160;31, 2006 was $10.4 million, of which $8.6 million
      was included in cost of sales and $1.8 million was included in selling, general
      and administrative expenses. Total expenses for the three months ended
      March&#160;31, 2007 include $4.3 million of restructuring charges (of which
      approximately $1.3&#160;million relates to severance and $3.0 million relates to
      continuing costs of closed plants). There were no impairment charges recorded
      in
      the first quarter of fiscal 2007. Total expenses for the three months ended
      March&#160;31, 2006 include $9.8 million of restructuring charges (of which
      approximately $1.2 million related to severance, $0.9 million related to
      continuing costs of closed plants and $7.7 million related to non-cash charges
      for impairment of fixed assets).</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Impairment
      and
      restructuring charges for the three months ended March&#160;31, 2007 and 2006
      are included in Home Fashion operating expenses in the accompanying consolidated
      statements of operations.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">To improve
      WPI&#8217;s competitive position, we intend to continue to restructure its operations
      to significantly reduce its cost of goods sold by closing certain plants located
      in the United States, sourcing goods from lower cost overseas facilities and,
      potentially, acquiring manufacturing facilities outside of the United States.
      WPI has incurred impairment charges to write-down the value of WPI plants taken
      out of service to its estimated liquidation value.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Included
      in
      restructuring expenses are cash charges associated with the ongoing costs of
      closed plants, employee severance, benefits and related costs. The amount of
      the
      accrued liability balance was $1.2 million as of December&#160;31, 2006. During
      the three months ended March&#160;31, 2007, we incurred additional restructuring
      costs of $4.3 million, and $4.5 million was paid during the period. As of
      March&#160;31, 2007, the accrued liability balance was $1.0 million, which is
      included in accounts payable and accrued expenses in our consolidated balance
      sheet.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Total
      cumulative impairment and restructuring charges for the period from our
      acquisition of WPI on August 8, 2005, through March&#160;31, 2007, were $51.6
      million.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We expect
      that restructuring charges will continue to be incurred throughout fiscal 2007.
      As of March&#160;31, 2007, WPI expects to incur additional restructuring costs
      over the next year relating to the current restructuring plan of between $25
      million and $30 million.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">13</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="8"></a>Note
  3 &#8212; Discontinued Operations and Assets Held for Sale</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>The Sands and
      Related Assets</i></strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On November
      17, 2006, Atlantic Coast, ACE, AREH, and certain other entities owned by or
      affiliated with AREH completed the sale to Pinnacle of the outstanding
      membership interests in ACE and 100% of the equity interests in certain
      subsidiaries of AREH that own parcels of real estate adjacent to The Sands,
      including 7.7 acres of land adjacent to The Sands known as the Traymore site.
      We
      owned, through subsidiaries, approximately 67.6% of Atlantic Coast, which owned
      100% of ACE. The aggregate price was approximately $274.8 million, of which
      approximately $200.6 million was paid to Atlantic Coast and approximately $74.2
      million was paid to affiliates of AREH for subsidiaries that owned the Traymore
      site and the adjacent properties. Under the terms of the agreement, $51.8
      million of the purchase price paid to Atlantic Coast was deposited into escrow
      to fund indemnification obligations with regard to the claims of creditors
      and
      stockholders of GB Holdings, Inc., or GB Holdings. On February 22, 2007 we
      resolved all outstanding litigation involving our interest in our Atlantic
      City
      gaming operations resulting in a release of all claims against us. As a result
      of the settlement, our ownership of Atlantic Coast increased from 67.6% to
      96.9%
      and $50.0 million of the amount placed into escrow was released to us.</div>
    <div style="MARGIN-TOP: 8.35pt; MARGIN-BOTTOM: 0pt"><strong><i>Oil and Gas
      Operations</i></strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On November
      21, 2006, our indirect wholly owned subsidiary, AREP O &amp; G Holdings, LLC,
      consummated the sale of all of the issued and outstanding membership interests
      of NEG Oil &amp; Gas to SandRidge, for consideration consisting of $1.025
      billion in cash, 12,842,000 shares of SandRidge&#8217;s common stock valued, at the
      date of closing, at $18 per share, and the repayment by SandRidge of $300.0
      million of debt of NEG Oil &amp; Gas. On April 4, 2007, we sold our entire
      position in SandRidge for cash consideration of approximately $243.2
      million.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On November
      21, 2006, pursuant to an agreement dated October 25, 2006 among AREH, NEG Oil
      &amp; Gas and National Energy Group, Inc., or NEGI, NEGI sold its membership
      interest in NEG Holding LLC to NEG Oil &amp; Gas for consideration of
      approximately $261.1 million paid in cash. Of that amount, $149.6 million was
      used to repay the principal of and accrued interest with respect to the NEGI
      10.75% senior notes due 2007, all of which were held by us.</div>
    <div style="MARGIN-TOP: 8.35pt; MARGIN-BOTTOM: 0pt"><strong><i>Real
      Estate</i></strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Operating
      properties are reclassified to held for sale when subject to a contract or
      letter of intent. The operations of such properties are classified as
      discontinued operations. The properties classified as discontinued operations
      have changed during fiscal 2007 and, accordingly, certain amounts in the
      statement of operations and cash flows for the three months ended March&#160;31,
      2007 and 2006 have been reclassified to conform to the current classification
      of
      properties. During the first quarter of 2007 two properties were reclassified
      to
      held for sale.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Results of Operations
      and Assets Held for Sale</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      financial position and results of our Oil and Gas and Real Estate operations
      and
      of our Atlantic City Gaming operations described above are presented as assets
      and liabilities of discontinued operations held for sale in the consolidated
      balance sheets and discontinued operations in the consolidated statements of
      operations, respectively, for all periods presented in accordance with SFAS
      No.
      144.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">14</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 6.65pt"><strong>Note 3 &#8212;
Discontinued Operations
      and Assets Held for Sale &#8211; (continued)</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">A
      summary of the results of operations for our discontinued operations for the
      three months ended March&#160;31, 2007 and 2006 is as follows (in $000s)
      (unaudited):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="335">
            </td>
            <td width="12">
            </td>
            <td width="7">
            </td>
            <td width="43">
            </td>
            <td width="12">
            </td>
            <td width="6">
            </td>
            <td width="44">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="446">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="5" valign="bottom" width="155" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three
                Months Ended<br>March&#160;31,
                </strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="446">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="2" valign="bottom" width="69">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="2" valign="bottom" width="69" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="446">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="2" valign="bottom" width="69" style="border-top: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="2" valign="bottom" width="69">
              <div style="MARGIN: 0pt" align="right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Revenues</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="59">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Oil
                and Gas</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">108,292</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Atlantic
                City Gaming</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">40,773</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Rental
                Real Estate</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,238</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,718</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Total
                revenues</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">1,238</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="59" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">150,783</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="446">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="59">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Operating
                income from discontinued operations:</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="59">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Oil
                and Gas</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">64,988</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Atlantic
                City Gaming</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">732</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Rental
                Real Estate</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,079</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">962</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                operating income</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">1,079</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">66,682</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Interest
                expense</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">(270</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">(5,435</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Interest
                and other income</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">18,642</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">1,040</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                tax expense</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(2,981</div>
            </td>
            <td valign="bottom" width="17" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(3,446</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Income
                from discontinued operations</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">16,470</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">58,841</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Minority
                interest</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">(1,794</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">54</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="446">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 5.75pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -5.75pt; LINE-HEIGHT: 10.3pt">Gain
                on sales of discontinued operations, net of income taxes</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">13,185</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">251</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="446">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">27,861</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="59" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">59,146</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Interest
      and other income for the three months ended March&#160;31, 2007 includes
      approximately $8.5 million relating to a real estate tax refund received by
      Atlantic Coast and approximately $10.1 million representing the net gain on
      the
      settlement of litigation relating to GB Holdings.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The gain
      on sales of discontinued operations in the three months ended March&#160;31,
      2007 includes approximately $3.9 million of gain on sales of real estate and
      $9.3 million relating to the working capital adjustment to the gain recorded
      on
      the sale of our Oil and Gas operations in November 2006.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Assets
      held for sale as of March&#160;31, 2007 and December 31, 2006 totaled $48.2
      million and $47.5 million, respectively. These relate to assets of WPI and
      Real
      Estate that are classified as held for sale in accordance with SFAS 144.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="9"></a>Note
  4 &#8212; Related Party Transactions</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>a. Administrative
      Services</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In July
      2005, we entered into a license agreement with an affiliate for the
      non-exclusive use of approximately 1,514 square feet of office space for which
      we pay monthly base rent of $13,000 plus 16.4% of certain &#8220;additional rent.&#8221; The
      license agreement expires in May 2012. Under the agreement, base rent is subject
      to increases in July 2008 and December 2011. Additionally, we are entitled
      to
      certain annual rent credits each December beginning December 2005 and continuing
      through December 2011. In each of the three months ended March&#160;31, 2007 and
      2006, we paid rent of approximately $40,000.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">15</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 6.65pt"><strong>Note 4 &#8212; Related
      Party Transactions &#8211; (continued)</strong></div>
    <div style="MARGIN: 0pt; TEXT-INDENT: 18pt">An affiliate occupies a portion
      of
      certain office space leased by us. Monthly payments from the affiliate for
      the
      use of the space began on October 12, 2006. For the three months ended
      March&#160;31, 2007, we received $19,000 for the use of such space.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In the
      three months ended March&#160;31, 2007 and 2006, we paid approximately $162,000
      and $214,500, respectively, to an affiliate for telecommunication
      services.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">An
      affiliate provided certain professional services to WPI for which WPI incurred
      charges of approximately $27,000 and $81,000 for the three months ended
      March&#160;31, 2007 and 2006, respectively.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We
      provided certain professional services to affiliates for which we charged
      $175,000 and $113,000 in the three months ended March&#160;31, 2007 and 2006,
      respectively. As of March&#160;31, 2007, current liabilities in the consolidated
      balance sheet included $116,164 to be applied to our charges to the affiliate
      for services to be provided to it.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>b. Securities
      Ownership</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As of
      March&#160;31, 2007, affiliates of Mr. Icahn owned 10,304,013 preferred units
      and 55,655,382 depositary units, which represented approximately 86.5% and
      90.0%
      of the outstanding preferred units and depositary units, respectively.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="10"></a>Note
  5 &#8212; Investments and Related Matters</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>a. Current
      Investments</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Current
      investments consist of the following (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="195">
            </td>
            <td width="16">
            </td>
            <td width="9">
            </td>
            <td width="42">
            </td>
            <td width="16">
            </td>
            <td width="9">
            </td>
            <td width="42">
            </td>
            <td width="16">
            </td>
            <td width="9">
            </td>
            <td width="42">
            </td>
            <td width="16">
            </td>
            <td width="9">
            </td>
            <td width="42">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="260">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td colspan="5" valign="bottom" width="160" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>March&#160;31,
                2007</strong></div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td colspan="5" valign="bottom" width="160" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December&#160;31,
                2006</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="260">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td colspan="2" valign="bottom" width="69" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Amortized<br>Cost</strong></div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td colspan="2" valign="bottom" width="69" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Carrying<br>Value</strong></div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td colspan="2" valign="bottom" width="69">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Amortized<br>Cost</strong></div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td colspan="2" valign="bottom" width="69" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Carrying<br>Value</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="260">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td colspan="5" valign="bottom" width="160">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="56" style="border-top: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="56">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="260">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Current
                Investments:</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="56">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="260">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><i>Trading</i></div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="56">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="260">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                investments</div>
            </td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">28,727</div>
            </td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="21">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">20,538</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="260">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                current trading</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">28,727</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">20,538</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="260">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><i>Available
                for Sale</i></div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="56">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="260">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Marketable
                equity and debt securities</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="56">
              <div style="MARGIN: 0pt" align="right">236,354</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="56">
              <div style="MARGIN: 0pt" align="right">247,880</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="56">
              <div style="MARGIN: 0pt" align="right">242,080</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13">&#160;</td>
            <td valign="bottom" width="56">
              <div style="MARGIN: 0pt" align="right">265,411</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="260">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                investments</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">284,535</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">286,945</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">251,131</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">253,166</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="260">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                current available for sale</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">520,889</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">534,825</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">493,211</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">518,577</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="260">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                current investments</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="56" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">520,889</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="56" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">563,552</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="56" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">493,211</div>
            </td>
            <td valign="bottom" width="21">&#160;</td>
            <td valign="bottom" width="13" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="56" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">539,115</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We use
      the services of an unaffiliated third-party investment manager to manage certain
      fixed income investments. As of March&#160;31, 2007 and December 31, 2006,
      $162.0 million and $163.7 million, respectively, had been invested at the
      discretion of such manager in a diversified portfolio consisting predominantly
      of short-term investment grade debt securities. Investments managed by the
      third-party investment manager are classified as available for sale securities
      in the above table.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">16</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 6.65pt"><strong>Note 5 &#8212;
Investments and
      Related Matters &#8211; (continued)</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>b. Noncurrent
      Investments</i></strong></div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Investment
      in ImClone Systems Incorporated</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As
      described in Note 1 above, we adopted SFAS 159 as of January 1, 2007 and elected
      to apply the fair value option to our investment in ImClone at the time of
      adoption. Previously, we accounted for our investment in ImClone under the
      equity method in accordance with APB 18, <i>The Equity Method of Accounting for
      Investments in Common Stock.</i> The transition adjustment to beginning
      partners&#8217; equity related to the adoption of SFAS 159 was a charge of
      approximately $42.2 million. We recorded approximately $63.9 million of
      unrealized gains in the first quarter of fiscal 2007 resulting from the change
      in the market price of ImClone&#8217;s stock.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">At
      March&#160;31, 2007 and December 31, 2006, our carrying value of our equity
      investment in ImClone was $186.1 million based on the fair value method of
      accounting and $164.3 million based on the equity method of accounting,
      respectively. As of March&#160;31, 2007 and December 31, 2006, the market value
      of our ImClone shares held was $186.1 million and $122.2 million, respectively,
      which we believe is not material to our total assets. As of March&#160;31, 2007,
      the total shares of ImClone common stock held by us as a percentage of ImClone&#8217;s
      total outstanding shares was 5.4%. ImClone is a registered SEC filer and its
      consolidated financial statements are readily available at www.sec.gov.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Other
      Noncurrent Investments </strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      carrying value of other noncurrent investments was $15.9 million and $15.6
      million as of March&#160;31, 2007 and December 31, 2006, respectively. Included
      in other securities is an investment of 4.4% of the common stock of Philip
      Services Corporation, an entity controlled by related parties. The investment
      has a cost basis of $0.7 million, which is net of significant impairment charges
      taken in prior years.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="11"></a>Note
  6 &#8212; Inventories, Net</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Inventories,
      net, relate solely to our Home Fashion segment and consist of the following
      (in
      $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="333">
            </td>
            <td width="16">
            </td>
            <td width="6">
            </td>
            <td width="43">
            </td>
            <td width="16">
            </td>
            <td width="6">
            </td>
            <td width="43">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="444">&#160;</td>
            <td valign="bottom" width="22">&#160;</td>
            <td colspan="2" valign="bottom" width="67" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>March&#160;31,<br>2007</strong></div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td colspan="2" valign="bottom" width="67" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December&#160;31,<br>2006</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="444">&#160;</td>
            <td valign="bottom" width="22">&#160;</td>
            <td colspan="2" valign="bottom" width="67">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Raw
                materials and supplies</div>
            </td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">26,372</div>
            </td>
            <td valign="bottom" width="22">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">32,059</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Goods
                in process</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">77,481</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">83,592</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Finished
                goods</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">131,505</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">129,851</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="444">&#160;</td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">235,358</div>
            </td>
            <td valign="bottom" width="22">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">245,502</div>
            </td>
          </tr>

      </table>
    </div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="12"></a>Note
  7 &#8212; Trade, Notes and Other Receivables, Net</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Trade
      notes and other receivables, net, consist of the following (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="341">
            </td>
            <td width="13">
            </td>
            <td width="6">
            </td>
            <td width="38">
            </td>
            <td width="13">
            </td>
            <td width="6">
            </td>
            <td width="44">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="455">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>March&#160;31,<br>2007</strong></div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="67" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December&#160;31,<br>2006</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="455">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="59">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="455">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Trade
                receivables&#160;&#8211; Home Fashion</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">142,827</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">134,111</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="455">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Allowance
                for doubtful accounts&#160;&#8211; Home Fashion</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="51">
              <div style="MARGIN: 0pt" align="right">(8,136</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">(8,303</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="455">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="51" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">35,150</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">50,688</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="455">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="51" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">169,841</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">176,496</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">17</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="13"></a>Note
  8 &#8212; Other Current Assets</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Other
      current assets consist of the following (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="354">
            </td>
            <td width="14">
            </td>
            <td width="5">
            </td>
            <td width="32">
            </td>
            <td width="14">
            </td>
            <td width="6">
            </td>
            <td width="40">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="472">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td colspan="2" valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>March&#160;31,<br>2007</strong></div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td colspan="2" valign="bottom" width="62" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December&#160;31,<br>2006</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="472">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td colspan="2" valign="bottom" width="50">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="472">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Restricted
                cash</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="42">
              <div style="MARGIN: 0pt" align="right">33,090</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53">
              <div style="MARGIN: 0pt" align="right">87,428</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="472">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="42" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">43,299</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">47,559</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="472">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="42">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="53">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="472">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="42" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">76,389</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="53" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">134,987</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As of
      December 31, 2006, restricted cash included $50.0 million placed into escrow
      related to our sale of ACE to Pinnacle, which was released in February 2007
      in
      connection with the settlement of the litigation with GB Holdings. Additionally,
      restricted cash consists of balances for escrow deposits and funds held to
      collateralize letters of credit.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="14"></a>Note
  9 &#8212; Property, Plant and Equipment</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Property,
      plant and equipment consists of the following (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="333">
            </td>
            <td width="14">
            </td>
            <td width="5">
            </td>
            <td width="44">
            </td>
            <td width="14">
            </td>
            <td width="5">
            </td>
            <td width="46">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="444">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="67" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>March&#160;31,<br>2007</strong></div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="69" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December&#160;31,<br>2006</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="444">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="67">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="61">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Land</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">115,236</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="61">
              <div style="MARGIN: 0pt" align="right">129,729</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Buildings
                and improvements</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">443,402</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="61">
              <div style="MARGIN: 0pt" align="right">446,878</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Machinery,
                equipment and furniture</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">332,614</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="61">
              <div style="MARGIN: 0pt" align="right">333,741</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Assets
                leased to others</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="59">
              <div style="MARGIN: 0pt" align="right">117,110</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="61">
              <div style="MARGIN: 0pt" align="right">123,398</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Construction
                in progress</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">112,480</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="61" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">90,672</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="444">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,120,842</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="61" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,124,418</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Less
                accumulated depreciation and amortization</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="59" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(222,248</div>
            </td>
            <td valign="bottom" width="18" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="61" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(217,347</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                property, plant and equipment</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="59" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">898,594</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="61" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">907,071</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Depreciation
      and amortization expense related to property, plant and equipment for the three
      months ended March&#160;31, 2007 and 2006 were $14.5 million and $17.4 million,
      respectively.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="15"></a>Note
  10 &#8212; Other Non Current Assets</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Other
      non current assets consist of the following (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="348">
            </td>
            <td width="13">
            </td>
            <td width="6">
            </td>
            <td width="35">
            </td>
            <td width="13">
            </td>
            <td width="7">
            </td>
            <td width="42">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="464">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="55" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>March&#160;31,<br>2007</strong></div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="67" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December&#160;31,<br>2006</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="464">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="55">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="56">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="464">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Deferred
                taxes </div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">45,626</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="56">
              <div style="MARGIN: 0pt" align="right">48,976</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="464">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">Deferred
                finance costs, net of accumulated amortization of $10,560 and<br>$9,883 as
                of March&#160;31, 2007 and December 31, 2006, respectively</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="47">
              <div style="MARGIN: 0pt" align="right">22,780</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="56">
              <div style="MARGIN: 0pt" align="right">24,699</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="464">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                </div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">3,086</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,315</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="464">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="47" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">71,492</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="56" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">75,990</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><br></div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">18</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="16"></a>Note
  11 &#8212; Minority Interests</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 5pt; TEXT-INDENT: 18pt">Minority
      interests consist of the following (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="361">
            </td>
            <td width="5">
            </td>
            <td width="36">
            </td>
            <td width="13">
            </td>
            <td width="6">
            </td>
            <td width="43">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="482">&#160;</td>
            <td colspan="2" valign="bottom" width="55" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>March&#160;31,<br>2007</strong></div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="67" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December&#160;31,<br>2006</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="482">&#160;</td>
            <td colspan="2" valign="bottom" width="55">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="482">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">WPI</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">166,938</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">178,843</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="482">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Atlantic
                Coast</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="48">
              <div style="MARGIN: 0pt" align="right">6,969</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">70,563</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="482">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">NEGI</div>
            </td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">24,112</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">42,815</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="482">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">$</div>
            </td>
            <td valign="bottom" width="48" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">198,019</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">$</div>
            </td>
            <td valign="bottom" width="58" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">292,221</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">The
      minority interest in Atlantic Coast was reduced primarily as a result of the
      settlement of the litigation relating to GB Holdings. As a result, our ownership
      in Atlantic Coast increased from 67.6% to 96.9%.</div>

<div style="MARGIN-TOP: 9.15pt; MARGIN-BOTTOM: 0pt"><strong><a name="17"></a>Note
  12 &#8212; Long-Term Debt</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 5pt; TEXT-INDENT: 18pt">Long-term
      debt consists of the following (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="333">
            </td>
            <td width="14">
            </td>
            <td width="5">
            </td>
            <td width="45">
            </td>
            <td width="14">
            </td>
            <td width="5">
            </td>
            <td width="46">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="444">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="67" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>March&#160;31,<br>2007</strong></div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="70" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December
                31,<br>2006</strong></div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="444">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="67">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="62">&#160;</td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Senior
                unsecured 7.125%&#160;notes due 2013&#160;&#8211; AREP</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt" align="center">$</div>
            </td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">972,294</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="62">
              <div style="MARGIN: 0pt" align="right">480,000</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Senior
                unsecured 8.125%&#160;notes due 2012&#160;&#8211; AREP</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">351,327</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="62">
              <div style="MARGIN: 0pt" align="right">351,246</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Senior
                secured 7.85%&#160;notes due 2012&#160;&#8211; ACEP</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">215,000</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="62">
              <div style="MARGIN: 0pt" align="right">215,000</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Borrowings
                under credit facility&#160;&#8211; ACEP</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">40,000</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="62">
              <div style="MARGIN: 0pt" align="right">40,000</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Mortgages
                payable</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">108,027</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="62">
              <div style="MARGIN: 0pt" align="right">109,289</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">12,470</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="62" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">13,425</div>
            </td>
            <td valign="bottom" width="5" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 3.35pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">Total
                long-term debt</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">1,699,118</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="62">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">1,208,960</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="444">
              <div style="MARGIN-TOP: 3.35pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">Less
                current portion</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">(23,620</div>
            </td>
            <td valign="bottom" width="18" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">)</div>
            </td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="62" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">(23,970</div>
            </td>
            <td valign="bottom" width="5" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="444">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="center">$</div>
            </td>
            <td valign="bottom" width="60" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">1,675,498</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="62" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">1,184,990</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 9.15pt; MARGIN-BOTTOM: 0pt"><strong><i>Senior unsecured
      7.125% notes due 2013</i></strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">On
      February 7, 2005, we issued $480.0 million aggregate principal amount of 7.125%
      senior unsecured notes due 2013, or the 7.125% notes, priced at 100% of
      principal amount. The 7.125% notes were issued pursuant to an indenture dated
      February 7, 2005 between us, as issuer, American Real Estate Finance Corp.,
      or
      AREF, as co-issuer, AREH, as guarantor, and Wilmington Trust Company, as trustee
      (referred to herein as the 2005 Indenture). Other than AREH, no other
      subsidiaries guarantee payment on the notes. AREF, our wholly owned subsidiary,
      was formed solely for the purpose of serving as a co-issuer of the 7.125%
      notes.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">On
      January 16, 2007, we issued an additional $500.0 million aggregate principal
      amount of 7.125% notes, or the additional 7.125% senior notes (the 7.125% notes
      and the additional 7.125% senior notes being referred to herein as the notes),
      priced at 98.4% of par, or at a discount of 1.6%, pursuant to the 2005
      Indenture. The notes have a fixed annual interest rate of 7.125%, which will
      be
      paid every six months on February 15 and August 15 and will mature on February
      15, 2013. At the time we issued the additional 7.125% senior notes, we entered
      into a new registration rights agreement in which we agreed to permit
      noteholders to exchange the notes for new notes which have been registered
      under
      the Securities Act of 1933, as amended, or the Securities Act.</div>
    <div style="MARGIN-TOP: 9.15pt; MARGIN-BOTTOM: 0pt"><strong><i>Senior unsecured
      8.125% notes due 2012</i></strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">On
      May 12, 2004, AREP and AREH co-issued senior unsecured 8.125% notes due 2012,
      or
      the 8.125% notes, in the aggregate principal amount of $353 million. The 8.125%
      notes were priced at 99.266% of principal amount and have a fixed annual
      interest rate of 8.125%, which will be paid every six months on June 1 and
      December 1, commencing December 1, 2004. The 8.125% notes will mature on June
      1,
      2012. AREH is a guarantor of the debt. No other subsidiaries guarantee payment
      on the notes.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">19</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Note 12 &#8212; Long-Term
      Debt &#8211; (continued)</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Senior unsecured
      notes restrictions and covenants &#8212; AREP</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      indentures governing our senior unsecured notes restrict the payment of cash
      dividends or distributions, the purchase of equity interests or the purchase,
      redemption, defeasance or acquisition of debt subordinated to the senior
      unsecured notes. The indentures also restrict the incurrence of debt or the
      issuance of disqualified stock, as defined, with certain exceptions, provided
      that we may incur debt or issue disqualified stock if, immediately after such
      incurrence or issuance, the ratio of the aggregate principal amount of all
      outstanding indebtedness of AREP and its subsidiaries on a consolidated basis
      to
      the tangible net worth of AREP and its subsidiaries on a consolidated basis
      would be less than 1.75 to 1.0. As of March&#160;31, 2007, such ratio was less
      than 1.75 to 1.0.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      indentures governing our senior unsecured notes require that on each quarterly
      determination date we and the guarantor maintain a minimum ratio of cash flow
      to
      fixed charges, each as defined, of 1.5 to 1.0, for the four consecutive fiscal
      quarters most recently completed prior to such quarterly determination date.
      For
      the first fiscal quarter ended March&#160;31, 2007, the ratio of cash flow to
      fixed charges was greater than 1.5 to 1.0.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      indentures also require, on each quarterly determination date, that the ratio
      of
      total unencumbered assets, as defined, to the principal amount of unsecured
      indebtedness, as defined, be greater than 1.5 to 1.0 as of the last day of
      the
      most recently completed fiscal quarter. As of March&#160;31, 2007, such ratio
      was in excess of 1.5 to 1.0. Based on this ratio, as of March&#160;31, 2007, we
      and AREH could have incurred up to approximately $1.4 billion of additional
      indebtedness.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>AREP Senior Secured
      Revolving Credit Facility</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On August
      21, 2006, we and AREF, as the borrowers, and certain of our subsidiaries, as
      guarantors, entered into a credit agreement with Bear Stearns Corporate Lending
      Inc., as administrative agent, and certain other lender parties. Under the
      credit agreement, we are permitted to borrow up to $150.0 million, including
      a
      $50.0&#160;million sub-limit that may be used for letters of credit. Borrowings
      under the agreement, which are based on our credit rating, bear interest at
      LIBOR plus 1.0 % to 2.0 %. We pay an unused line fee of 0.25 % to 0.5 %. As
      of
      March&#160;31, 2007, there were no borrowings under the facility.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Obligations
      under the credit agreement are guaranteed by and secured by liens on
      substantially all of the assets of certain of our indirect wholly owned holding
      company subsidiaries. The credit agreement has a term of four years and all
      amounts are due and payable on August 21, 2010. The credit agreement includes
      covenants that, among other things, restrict the creation of liens and certain
      dispositions of property by holding company subsidiaries that are guarantors.
      Obligations under the credit agreement are immediately due and payable upon
      the
      occurrence of certain events of default.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Senior secured
      7.85% notes due 2012 &#8212; ACEP</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      indenture governing ACEP&#8217;s 7.85% senior secured notes due 2012 restrict the
      payment of cash dividends or distributions by ACEP, the purchase of its equity
      interests, the purchase, redemption, defeasance or acquisition of debt
      subordinated to ACEP&#8217;s notes and investments as &#8220;restricted payments.&#8221; The
      indenture also prohibits the incurrence of debt or the issuance of disqualified
      or preferred stock, as defined, by ACEP, with certain exceptions, provided
      that
      ACEP may incur debt or issue disqualified stock if, immediately after such
      incurrence or issuance, the ratio of consolidated cash flow to fixed charges
      (each as defined) for the most recently ended four full fiscal quarters for
      which internal financial statements are available immediately preceding the
      date
      on which such additional indebtedness is incurred or disqualified stock or
      preferred stock is issued would be at least 2.0 to 1.0, determined on a pro
      forma basis giving effect to the debt incurrence or issuance. As of
      March&#160;31, 2007, such ratio was in excess of 2.0 to 1.0. The indenture also
      restricts the creation of liens, the sale of assets, mergers, consolidations
      or
      sales of substantially all of ACEP&#8217;s assets, the lease or grant of a license,
      concession, other agreements to occupy, manage or use ACEP&#8217;s assets, the
      issuance of capital stock of restricted subsidiaries and certain related party
      transactions. The </div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">20</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Note 12 &#8212; Long-Term
      Debt &#8211; (continued)</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt">ACEP notes allow ACEP to incur
      indebtedness, among other things, of up to $ 50.0 million under credit
      facilities, non-recourse financing of up to $15.0 million to finance the
      construction, purchase or lease of personal or real property used in its
      business, permitted affiliate subordinated indebtedness (as defined), the
      issuance of additional 7.85% senior secured notes due 2012 in an aggregate
      principal amount not to exceed 2.0 times net cash proceeds received from equity
      offerings and permitted affiliate subordinated debt, and additional indebtedness
      of up to $10.0 million.</div>
    <div style="MARGIN-TOP: 9.15pt; MARGIN-BOTTOM: 0pt"><strong><i>ACEP Senior
      Secured Revolving Credit Facility</i></strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Effective
      May 11, 2006, ACEP, and certain of ACEP&#8217;s subsidiaries, as guarantors, entered
      into an amended and restated credit agreement with Wells Fargo Bank N.A., as
      syndication agent, Bear Stearns Corporate Lending Inc., as administrative agent,
      and certain other lender parties. As of March&#160;31, 2007, the interest rate
      on the outstanding borrowings under the credit facility was 6.82% per annum.
      The
      credit agreement amends and restates, and is on substantially the same terms
      as,
      a credit agreement entered into as of January 29, 2004. Under the amended and
      restated credit agreement, ACEP will be permitted to borrow up to $60.0 million.
      Obligations under the credit agreement are secured by liens on substantially
      all
      of the assets of ACEP and its subsidiaries. The credit agreement has a term
      of
      four years and all amounts are due and payable on May 10, 2010. As of
      March&#160;31, 2007, there were $40.0 million of borrowings under the credit
      agreement. The borrowings were incurred to finance a portion of the purchase
      price of the Aquarius.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The credit
      agreement includes covenants that, among other things, restrict the incurrence
      of additional indebtedness by ACEP and its subsidiaries, the issuance of
      disqualified or preferred stock, as defined, the creation of liens by ACEP
      or
      its subsidiaries, the sale of assets, mergers, consolidations or sales of
      substantially all of ACEP&#8217;s assets, the lease or grant of a license or
      concession, other agreements to occupy, manage or use ACEP&#8217;s assets, the
      issuance of capital stock of restricted subsidiaries and certain related party
      transactions. The credit agreement also requires that, as of the last date
      of
      each fiscal quarter, ACEP&#8217;s ratio of consolidated first lien debt to
      consolidated cash flow not be more than 1.0 to 1.0. As of March&#160;31, 2007,
      such ratio was less than 1.0 to 1.0. As of March&#160;31, 2007, ACEP was in
      compliance with each of the covenants.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      restrictions imposed by ACEP&#8217;s senior secured notes and the credit facility
      likely will limit our receiving payments from the operations of our hotel and
      gaming properties.</div>
    <div style="MARGIN-TOP: 9.15pt; MARGIN-BOTTOM: 0pt"><strong><i>Mortgages
      Payable</i></strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Mortgages
      payable, all of which are non-recourse to us, bear interest at rates between
      4.97% and 7.99% and have maturities between September 1, 2008 and July 1,
      2016.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>WestPoint Home
      Secured Revolving Credit Agreement</i></strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On June
      16,
      2006, WestPoint Home, Inc., an indirect wholly owned subsidiary of WPI, entered
      into a $250.0&#160;million loan and security agreement with Bank of America,
      N.A., as administrative agent and lender. On September 18, 2006, The CIT
      Group/Commercial Services, Inc., General Electric Capital Corporation and Wells
      Fargo Foothill, LLC were added as lenders under this credit agreement. Under
      the
      five-year agreement, borrowings are subject to a monthly borrowing base
      calculation and include a $75.0 million sub-limit that may be used for letters
      of credit. Borrowings under the agreement bear interest, at the election of
      WestPoint Home, either at the prime rate adjusted by an applicable margin
      ranging from minus 0.25% to plus 0.50% or LIBOR adjusted by an applicable margin
      ranging from plus 1.25% to 2.00%. WestPoint Home pays an unused line fee of
      0.25% to 0.275%. Obligations under the agreement are secured by WestPoint Home&#8217;s
      receivables, inventory and certain machinery and equipment.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      agreement contains covenants including, among others, restrictions on the
      incurrence of indebtedness, investments, redemption payments, distributions,
      acquisition of stock, securities or assets of any other entity and capital
      expenditures. However, WestPoint Home is not precluded from effecting any of
      these transactions if excess availability, after giving effect to such
      transaction, meets a minimum threshold.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">21</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Note 12 &#8212; Long-Term
      Debt &#8211; (continued)</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As of
      March&#160;31, 2007, there were no borrowings under the agreement, but there
      were outstanding letters of credit of approximately $26.6 million, the majority
      of which relate to trade obligations.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="18"></a>Note
  13 &#8212; Other Income (Expense)</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Unaudited
      Other Income (Expense), net, is comprised of the following (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="360">
            </td>
            <td width="13">
            </td>
            <td width="5">
            </td>
            <td width="30">
            </td>
            <td width="13">
            </td>
            <td width="5">
            </td>
            <td width="34">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="480">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="5" valign="bottom" width="120" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three&#160;Months&#160;Ended<br>March&#160;31,</strong></div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="480">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="53" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="480">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="45">&#160;</td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="480">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                realized gains on sales of marketable securities</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">5,177</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">33,431</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="480">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Unrealized
                gains on marketable securities</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">72,126</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">15,478</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="480">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                realized losses on securities sold short</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">(1,510</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">(5,131</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="480">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Unrealized
                gains (losses) on securities sold short</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">3,617</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">(25,476</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="480">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gain
                on sale of assets</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">3,612</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="45">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="480">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,759</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="45" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">3,007</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="480">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">$</div>
            </td>
            <td valign="bottom" width="40" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">84,781</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt">$</div>
            </td>
            <td valign="bottom" width="45" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">21,309</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We
      recorded approximately $63.9 million of unrealized gains in the first quarter
      of
      fiscal 2007 resulting from the change in the market price of ImClone&#8217;s
      stock.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="19"></a>Note
  14 &#8212; Unit Options</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On June
      29, 2005, we granted 700,000 nonqualified unit options to our then chief
      executive officer to purchase up to 700,000 of our depositary units at an
      exercise price of $35 per unit which would vest over a period of eight years.
      On
      March 14, 2006, our chief executive officer resigned from that position, became
      a director and Vice Chairman of the Board of API, and was designated as API&#8217;s
      principal executive officer. These changes in status caused the options to
      be
      cancelled in accordance with their terms.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      accordance with SFAS No.123(R), <i>Share Based Payment</i>, the cancellation
      required that any previously unrecognized compensation cost be recognized at
      the
      date of cancellation and accordingly we recorded a compensation charge of $6.2
      million in the first quarter of fiscal 2006 related to the previously
      unrecognized compensation cost.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="20"></a>Note
  15 &#8212; Preferred Units</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Pursuant
      to the terms of the preferred units, on February 27, 2007 we declared our
      scheduled annual preferred unit distribution payable in additional preferred
      units at the rate of 5% of the liquidation preference per preferred unit of
      $10.
      The distribution was paid on March&#160;31, 2007 to holders of record as of
      March 15, 2007. A total of 566,830 additional preferred units were issued.
      As of
      March&#160;31, 2007, 11,907,073 preferred units were issued and outstanding. As
      of March&#160;31, 2007, the number of authorized preferred units was
      12,100,000.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="21"></a>Note
  16 &#8212; Earnings Per Limited Partnership Unit</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Basic
      earnings per LP unit are based on earnings attributable to limited partners.
      Net
      earnings available for limited partners are divided by the weighted average
      number of limited partnership units outstanding. Diluted earnings per LP unit
      are based on earnings before the preferred unit distribution as the numerator
      with the denominator based on the weighted average number of limited partnership
      units and equivalent limited partnership units outstanding assuming conversion.
      The preferred units are considered to be equivalent units.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">22</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Note 16 &#8212; Earnings Per
      Limited Partnership Unit &#8211; (continued)</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      following table sets forth the computation of basic and diluted earnings per
      LP
      unit (in 000s, except per unit data) (unaudited):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="365">
            </td>
            <td width="13">
            </td>
            <td width="5">
            </td>
            <td width="30">
            </td>
            <td width="13">
            </td>
            <td width="5">
            </td>
            <td width="30">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="487">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="5" valign="bottom" width="113" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three&#160;Months&#160;Ended<br>March&#160;31,</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="487">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="47" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="487">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Attributable
                to limited partners:</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Basic
                income (loss) from continuing operations</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">67,350</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">(9,224</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Add
                preferred unit distribution(1)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                (loss) before discontinued operations</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">67,350</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">(9,224</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                from discontinued operations</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">27,306</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">57,970</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Diluted
                earnings</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">94,656</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">48,746</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Weighted
                average LP units outstanding</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">61,857</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">61,857</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Dilutive
                effect of redemption of preferred LP units(2)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Dilutive
                effect of unit options</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 3.35pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">Weighted
                average LP units and equivalent partnership units outstanding</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">61,857</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt" align="right">61,857</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Basic
                earnings per LP unit:</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                (loss) from continuing operations</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">1.09</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">(0.15</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                from discontinued operations</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0.44</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0.94</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Basic
                earnings:</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">1.53</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.79</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Diluted
                earnings per LP unit:</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="40">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                (loss) from continuing operations</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">1.09</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">(0.15</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                from discontinued operations</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0.44</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">0.94</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="487">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Diluted
                earnings:</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">1.53</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">0.79</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 13pt">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(1)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">As its
      effect would have been anti-dilutive, the adjustment for interest expense
      associated with the preferred units&#8217; distribution of $1.4 million and $1.3
      million for the three months ended March&#160;31, 2007 and 2006, respectively,
      has been excluded from the calculation of diluted earnings per LP unit.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(2)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">As their
      effect would have been anti-dilutive, 1,063,226 and 2,902,385 units for the
      three months ended<br>March&#160;31, 2007 and 2006, respectively, have been
      excluded from the weighted average LP units and equivalent partnership units
      outstanding.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="22"></a>Note
  17 &#8212; Segment Reporting</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Through
      the second quarter of fiscal 2006, we maintained the following six reportable
      segments: (1) Oil and Gas; (2) Gaming; (3) Rental Real Estate; (4) Property
      Development; (5) Associated Resort Activities; and (6) Home Fashion. Our three
      real estate related operating and reportable segments are all individually
      immaterial and have been aggregated for purposes of the accompanying
      consolidated balance sheets and statements of operations.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      November 2006, we divested our Oil and Gas operating units. As a result, our
      Oil
      and Gas operations are now classified as discontinued operations and thus are
      not considered a reportable segment of our continuing operations. We now
      maintain the five remaining reportable segments.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We assess
      and measure segment operating results based on segment earnings from operations
      as disclosed below. Segment earnings from operations are not necessarily
      indicative of cash available to fund cash requirements nor synonymous with
      cash
      flow from operations. As discussed above, the terms of financings for the
      Gaming, Home Fashion and Associated Resorts Activities segments impose
      restrictions on their ability to transfer funds to us, including restrictions
      on
      dividends, distributions, loans and other transactions.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">23</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Note 17 &#8212; Segment
      Reporting &#8211; (continued)</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      revenues and net segment operating income for each of the reportable segments
      of
      our continuing operations are summarized as follows for the three months ended
      March&#160;31, 2007 and 2006 (in $000s) (unaudited):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="349">
            </td>
            <td width="14">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="14">
            </td>
            <td width="5">
            </td>
            <td width="37">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="465">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td colspan="5" valign="bottom" width="134" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three&#160;Months&#160;Ended<br>March&#160;31,</strong></div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="465">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td colspan="2" valign="bottom" width="57" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td colspan="2" valign="bottom" width="57" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="465">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Revenues:</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gaming,
                net</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">112,888</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">85,945</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Real
                Estate:</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Rental
                Real Estate</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">3,517</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">3,246</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Property
                development</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">18,145</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">11,384</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Resort
                operations</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6,225</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6,082</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Real Estate</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">27,887</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">20,712</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Home
                Fashion</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">210,604</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">243,490</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Total
                revenues</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">351,379</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">350,147</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                segment operating income (loss):</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gaming</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">23,227</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">18,623</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Real
                Estate:</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Rental
                Real Estate</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">2,024</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">2,248</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Property
                development</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">2,533</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">1,408</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 30pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Resort
                operations</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(276</div>
            </td>
            <td valign="bottom" width="19" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(182</div>
            </td>
            <td valign="bottom" width="5" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                Real Estate</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">4,281</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">3,474</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Home
                Fashion</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(39,015</div>
            </td>
            <td valign="bottom" width="19" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(37,958</div>
            </td>
            <td valign="bottom" width="5" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                segment operating loss</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(11,507</div>
            </td>
            <td valign="bottom" width="19" style="border-bottom: #ccffcc 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(15,861</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Holding
                Company costs(i)</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(7,679</div>
            </td>
            <td valign="bottom" width="19" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(11,145</div>
            </td>
            <td valign="bottom" width="5" style="border-bottom: white 0.5pt solid;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                operating loss</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(19,186</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(27,006</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Interest
                expense</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(32,977</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(25,155</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Interest
                income</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">31,458</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">11,554</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                income (expense), net</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">84,781</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">21,309</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Equity
                in earnings of affiliate</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">24</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                from continuing operations before income taxes &amp; minority
                interest</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">64,076</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(19,274</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Income
                tax expense</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(6,949</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">(5,211</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Minority
                interests</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">11,590</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">15,069</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="465">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10pt">Income
                (loss) from continuing operations</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">68,717</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(9,416</div>
            </td>
            <td valign="bottom" width="5" style="border-bottom: #ccffcc 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 13pt">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(i)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Holding
      Company costs include AREP&#8217;s and AREH&#8217;s general and administrative expenses and
      acquisition (legal and professional) costs at the Holding Company level.
      Selling, general and administrative expenses of the segments are included in
      their respective operating expenses in the accompanying statements of
      operations.</div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 2.5pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">24</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 6.65pt"><strong>Note 17 &#8212; Segment
      Reporting &#8211; (continued)</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="340">
            </td>
            <td width="13">
            </td>
            <td width="5">
            </td>
            <td width="43">
            </td>
            <td width="13">
            </td>
            <td width="5">
            </td>
            <td width="45">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="454">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="65" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>March&#160;31,<br>2007</strong></div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="68" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December&#160;31,<br>2006</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="454">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="65">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="68">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(restated)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="454">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Assets
                (in $000s):</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="57">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="60">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="454">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gaming</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">560,646</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">552,753</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="454">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Real
                Estate</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">386,833</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">382,220</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="454">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Home
                Fashion</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="57" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">778,912</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">806,000</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="454">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Subtotal</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">1,726,391</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">1,740,973</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="454">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Assets
                of discontinued operations held for sale</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">48,205</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="60">
              <div style="MARGIN: 0pt" align="right">47,503</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="454">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Reconciling
                items(ii)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="57" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,848,071</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="60" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">2,456,271</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="454">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                assets</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="57" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">4,622,667</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="60" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">4,244,747</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 13pt">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">(ii)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 2.5pt">Reconciling
      items relate principally to cash and investments of AREP and AREH in the Holding
      Company.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="23"></a>Note
  18 &#8212; Income Taxes</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Our
      corporate subsidiaries recorded the following income tax expense attributable
      to
      continuing operations for our taxable subsidiaries for the three months ended
      March&#160;31, 2007 and 2006 (in $000s) (unaudited):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="275">
            </td>
            <td width="10">
            </td>
            <td width="5">
            </td>
            <td width="30">
            </td>
            <td width="13">
            </td>
            <td width="5">
            </td>
            <td width="30">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="367">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td colspan="5" valign="top" width="113" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three
                Months Ended
                <br>March&#160;31,</strong></div>
            </td>
            <td valign="top" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="367">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td colspan="2" valign="top" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="top" width="17">&#160;</td>
            <td colspan="2" valign="bottom" width="48" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="top" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="367">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td colspan="2" valign="top" width="48">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center"><strong>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</strong></div>
            </td>
            <td valign="top" width="17">&#160;</td>
            <td colspan="2" valign="bottom" width="48">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center"><strong>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</strong></div>
            </td>
            <td valign="top" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="367">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Current</div>
            </td>
            <td valign="top" width="13">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="top" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">(6,587</div>
            </td>
            <td valign="top" width="17">
              <div style="MARGIN: 0pt">)&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40">
              <div style="MARGIN: 0pt" align="right">(5,595</div>
            </td>
            <td valign="top" width="4">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="367">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Deferred</div>
            </td>
            <td valign="top" width="13">&#160;</td>
            <td valign="top" width="7" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">(362</div>
            </td>
            <td valign="top" width="17">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">384</div>
            </td>
            <td valign="top" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="367">&#160;</td>
            <td valign="top" width="13">&#160;</td>
            <td valign="top" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="40" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(6,949</div>
            </td>
            <td valign="top" width="17" style="border-bottom: #ccffcc 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="40" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(5,211</div>
            </td>
            <td valign="top" width="4" style="border-bottom: #ccffcc 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We
      recorded income tax provisions of $6.9 million and $5.2 million on pre-tax
      income of $64.1 million for the three months ended March&#160;31, 2007 and
      pre-tax loss of ($19.3) million for the three months ended March&#160;31, 2006.
      Our effective income tax rate was 10.8% and (27.0)% for the respective periods.
      The difference between the effective tax rate and the statutory federal rate
      of
      35% is due principally to income or losses from partnership entities in which
      taxes are the responsibility of the partners, as well as changes in valuation
      allowances.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We
      adopted the provisions of Financial Accounting Standards Board (FASB)
      Interpretation No. 48, &#8220;Accounting for Uncertainty in Income Taxes&#8221; (FIN 48), on
      January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income
      taxes
      recognized in accordance with SFAS No. 109 , &#8220;Accounting for Income Taxes,&#8221; and
      prescribes a recognition threshold and measurement process for financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. The adoption of FIN 48 did not have a material impact
      on
      our consolidated financial statements.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As of
      the
      date of adoption, our unrecognized tax benefits totaled $5.0 million, all of
      which, if recognized, would affect the annual effective tax rate. During the
      three months ended March&#160;31, 2007, there have been no changes to the amount
      of unrecognized tax benefits. We believe it is reasonably possible that the
      total amounts of unrecognized tax benefits could materially change as a result
      of settlements due to audits and the expiration of statutes of limitations
      prior
      to March&#160;31, 2008; however, quantification of an estimated amount cannot be
      made at this time.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We
      recognize interest accrued related to uncertain tax positions in interest
      expense. Penalties are recognized as a component of income tax expense. The
      amount of accrued interest and penalties on uncertain tax positions was $1.2
      million and $1.1 million as of March&#160;31, 2007 and January 1, 2007,
      respectively. The amount of interest and penalties accrued during the three
      months ended March&#160;31, 2007 was approximately $0.1 million.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">25</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Note 18 &#8212; Income Taxes
&#8211; (continued)</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">We
      or certain of our subsidiaries file income tax returns in the U.S. federal
      jurisdiction, various state jurisdictions, and various non-U.S. jurisdictions.
      We are no longer subject to U.S. federal, state, and non-U.S. income tax
      examinations for years prior to 2002.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="24"></a>Note
  19 &#8212; Commitments and Contingencies</strong></div>
<div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We are
  from time to time parties to various legal proceedings arising out of our businesses.
  We believe however, that other than the proceedings described in Part I, Item
  3 of our Annual Report on Form 10-K for fiscal 2006, filed with the SEC on March
  6, 2007, including that relating to WPI discussed below, there are no proceedings
  pending or threatened against us which, if determined adversely, would have
  a material adverse effect on our business, financial condition, results of operations
  or liquidity</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>WPI
      Litigation</i></strong></div>

<div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In August
  2005, WPI acquired substantially all of the assets of WestPoint Stevens, Inc.
  pursuant to an order of the Bankruptcy Court, or the Sale Order. We were holders
  of approximately 39.99% of the outstanding first lien debt and approximately
  51.21% of the outstanding second lien debt of WestPoint Stevens, Inc. Since
  2005, we have been involved in litigation with certain of the first lien holders
  of WestPoint Stevens, Inc., or the Contrarian Group, in the Bankruptcy Court,
  the U.S. District Court for the Southern District of New York and, since 2006,
  in the Delaware Chancery Court, relating to the Sale Order and our ownership
  of a majority of the common stock of WPI. In late 2005, the District ruled on
  the Contrarian Group&#8217;s appeal of the Sale Order and remanded the matter
  to the Bankruptcy Court. On April 13, 2006, the Bankruptcy Court entered a remand
  order, or the Remand Order, which provides, among other things, that all of
  the shares of common stock and rights to acquire shares of common stock of WPI
  issued to us and the other first lien lenders or held in escrow pursuant to
  the Sale Order constituted &#8220;replacement collateral&#8221;, other than
  5,250,000 shares of common stock that we acquired for cash. The Bankruptcy Court
  also issued a stay of the Remand Order pending the parties&#8217; appeal. Both
  parties appealed the Bankruptcy Court&#8217;s Remand Order to the District Court.
  In addition, the Contrarian Group requested that the stay be lifted or that
  we be required to post a bond as a condition to the continuance of the stay.
  On May 9, 2007, the District Court denied the Contrarian Group&#8217;s motion to lift
  the stay of the Remand Order, but conditioned the continuation of the stay on
  the posting of a bond of $200 million by May 17, 2007. The order is without
  prejudice to the right of any party to seek a change in the amount of the bond.
  We are currently reviewing the order. As of the date hereof, the District Court
  has not rendered a decision on the cross-appeals.</div>

<div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On January
  19, 2007, the trustee for the first lien lenders, Beal Bank, and certain of
  the first lien lenders filed an Amended Complaint, captioned <em>Beal Bank,
  S.S.B. et al v. WestPoint International, Inc., et al.</em> Plaintiffs seek,
  among other relief, an order declaring that WPI is obliged to register the common
  stock (other than the 5,250,000 shares purchased by us) in Beal Bank&#8217;s
  name, an order declaring certain corporate governance changes implemented in
  2005 invalid, an order declaring invalid the actions taken at the December 20,
  2006 stockholders&#8217; meeting and an order to &#8220;unwind&#8221; the issuance
  to us in December 2006 of the preferred stock of WPI, or, alternatively, directing
  that such preferred stock be held in trust. We have filed a motion to dismiss
  the Delaware action to which the Plaintiffs have objected. Oral argument is
  scheduled for May 23, 2007.</div>

<div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We currently
  own approximately 67.7% of the outstanding shares of common stock and 100% of
  the preferred stock of WPI. As a result of the District Court&#8217;s order
  in the Bankruptcy case, the proceedings on remand, and the proceedings in the
  Delaware action, our percentage of the outstanding shares of common stock of
  WPI could be reduced to less than 50% and perhaps substantially less and our
  ownership of the preferred stock of WPI could also be affected. If we were to
  lose control of WPI, it could adversely affect the business and prospects of
  WPI and the value of our investment in it. In addition, we consolidated the
  balance sheet of WPI as of March 31, 2007 and WPI&#8217;s results of operations
  for the period from the date of acquisition through March 31, 2007. If we were
  to own less than 50% of the outstanding common stock or the challenge to our
  preferred stock ownership is successful, we would have to evaluate whether we
  should consolidate WPI and if so our financial statements could be materially
  different than as presented as of March 31, 2007, December 31, 2006 and December
  31, 2005 and for the periods then ended.</div>

<div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We cannot
  predict the outcome of these proceedings or the ultimate impact on our investment
  in WPI or the business prospects of WPI.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">26</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="25"></a>Note
  20 &#8212; Fair Value of Financial Instruments</strong></div>
    <div style="MARGIN-TOP: 5.85pt; MARGIN-BOTTOM: 5pt; TEXT-INDENT: 18pt">The
      following table sets forth our financial instruments owned, at fair value,
      and
      financial instruments sold, but not yet purchased, at fair value (in
      $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="336">
            </td>
            <td width="13">
            </td>
            <td width="7">
            </td>
            <td width="46">
            </td>
            <td width="13">
            </td>
            <td width="6">
            </td>
            <td width="43">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="448">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="72" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>March&#160;31,<br>2007</strong></div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="67" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December&#160;31,<br>2006</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="448">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="72">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="448">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt"><strong>Financial
                Instruments Owned:</strong></div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td colspan="2" valign="bottom" width="72">
              <div style="MARGIN: 0pt" align="right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="448">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Trading
                investments</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="62">
              <div style="MARGIN: 0pt" align="right">28,727</div>
            </td>
            <td valign="bottom" width="18">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="9">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">20,538</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="448">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Available
                for sale investments:</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="62">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="58">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="448">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Marketable
                equity and debt securities</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="62">
              <div style="MARGIN: 0pt" align="right">247,880</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">265,411</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="448">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                securities</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="62">
              <div style="MARGIN: 0pt" align="right">286,945</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9">&#160;</td>
            <td valign="bottom" width="58">
              <div style="MARGIN: 0pt" align="right">253,166</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="448">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Investment
                in ImClone Systems Incorporated</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="62" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">186,058</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="58" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">122,122</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="448">&#160;</td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="62" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">749,610</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">661,237</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="448">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt"><strong>Securities
                sold not yet purchased</strong></div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="62" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">8,682</div>
            </td>
            <td valign="bottom" width="18">&#160;</td>
            <td valign="bottom" width="9" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="58" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">25,398</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">The
      following table sets forth our financial assets and liabilities that were
      accounted for at fair value as of March&#160;31, 2007 by level within the fair
      value hierarchy. As required by SFAS 157, financial assets and liabilities
      are
      classified in their entirety based on the lowest level of input that is
      significant to the fair value measurement.</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="297">
            </td>
            <td width="14">
            </td>
            <td width="5">
            </td>
            <td width="36">
            </td>
            <td width="14">
            </td>
            <td width="5">
            </td>
            <td width="36">
            </td>
            <td width="14">
            </td>
            <td width="5">
            </td>
            <td width="36">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="396">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td colspan="8" valign="bottom" width="208" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Assets
                and Liabilities at Fair Value<br>As of
                March&#160;31, 2007 ($000)</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="396">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td colspan="2" valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Level
                1</strong></div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td colspan="2" valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Level
                2</strong></div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td colspan="2" valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Total</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="396">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td colspan="8" valign="bottom" width="208">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="396">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt" align="center"><strong>Assets</strong></div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="396">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Trading
                investments(i)</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">28,727</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">28,727</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="396">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Available
                for sale investments:</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="396">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Marketable
                equity and debt securities(i)</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">247,880</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">247,880</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="396">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other
                securities</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">23,500</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">(i)</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">263,445</div>
            </td>
            <td valign="bottom" width="19">
              <div style="MARGIN: 0pt">(ii)</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">
              <div style="MARGIN: 0pt" align="right">286,945</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="396">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Investment
                in ImClone Systems Incorporated(i)</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">186,058</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">186,058</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="396">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">486,165</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">263,445</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">749,610</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="396">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt" align="center"><strong>Liabilities</strong></div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="49">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="396">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Securities
                sold not yet purchased(i)</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">8,682</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="19">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="49" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">8,682</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="FONT-SIZE: 11pt; MARGIN: 0pt; LINE-HEIGHT: 9pt">&#8212;&#8212;&#8212;&#8212;&#8212;&#8212;</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -13pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 13pt">(i)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 1.65pt; LINE-HEIGHT: 11pt">Based
      on quoted prices in active markets of the securities.</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: -13pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 13pt">(ii)</div>
    <div style="MARGIN-TOP: 0pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 1.65pt; LINE-HEIGHT: 11pt">Includes
      $243.2 million representing 13,508,666 shares of SandRidge valued at $18.00
      per
      share based on an appraisal conducted in November 2006. As disclosed in Note
      21,
      on April 4, 2007, we sold all of our shares of SandRidge common stock to a
      consortium of investors for $18.00 per share.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="26"></a>Note
  21 &#8212; Subsequent Events</strong></div>
    <div style="MARGIN-TOP: 8.35pt; MARGIN-BOTTOM: 0pt"><strong><i>Sale of Common
      Stock of SandRidge Energy, Inc.</i></strong></div>
    <div style="MARGIN-TOP: 5.85pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">On
      April 4, 2007, our subsidiaries signed agreements to sell their entire position
      in the common stock of SandRidge &#160;to a consortium of investors in a series
      of private transactions. The per share selling price was $18, and total cash
      consideration received at closing was approximately $243.2 million.</div>
    <div style="MARGIN-TOP: 8.35pt; MARGIN-BOTTOM: 0pt"><strong><i>Issuance of
      Convertible Debt</i></strong></div>
    <div style="MARGIN-TOP: 5.85pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">In
      April 2007, we sold an aggregate of $600.0 million of Variable Rate Senior
      Convertible Notes due 2013, or the Notes. The Notes were sold in a private
      placement pursuant to Section 4(2) of the Securities Act. The Notes bear
      interest at a rate of three month LIBOR minus 125 basis points, but no less
      than
      4.0% nor higher than 5.5%, and are convertible into depositary units of AREP
      at
      a conversion price of $132.595 per share, subject to adjustments in certain
      circumstances.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">27</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt" align="center">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p><strong>AMERICAN
      REAL ESTATE PARTNERS, L.P. AND
      SUBSIDIARIES</strong></div>
    <div style="MARGIN-TOP: 13.35pt; MARGIN-BOTTOM: 0pt" align="center"><strong>NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)<br>March&#160;31,
      2007</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Note 21 &#8212; Subsequent
      Events &#8211; (continued)</strong></div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The Notes
      have not been and will not be registered under the Securities Act and may not
      be
      offered or sold in the United States absent registration or an applicable
      exemption from the registration requirements of the Securities Act. In
      connection with the sale of the Notes, we and the buyers have entered into
      a
      registration rights agreement, pursuant to which we have agreed to file one
      or
      more shelf registration statements with respect to resales of depositary units
      issuable upon conversion of the Notes.</div>
    <div style="MARGIN-TOP: 9.15pt; MARGIN-BOTTOM: 0pt"><strong><i>Sale of American
      Casino &amp; Entertainment Properties LLC</i></strong></div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On April
      22, 2007, American Entertainment Properties Corp, or AEP, a wholly owned
      indirect subsidiary of AREP, entered into a Membership Interest Purchase
      Agreement with W2007/ACEP Holdings, LLC, an affiliate of Whitehall Street Real
      Estate Funds, a series of real estate investment funds affiliated with Goldman,
      Sachs &amp; Co., to sell all of the issued and outstanding membership interests
      of ACEP, which comprises our gaming operations, for $1.3 billion, plus or minus
      certain adjustments such as working capital, more fully described in the
      agreement. Pursuant to the terms of the agreement, AEP is required to cause
      ACEP
      to repay from funds provided by AEP, the principal, interest, prepayment penalty
      or premium due on ACEP&#8217;s 7.85% senior secured notes due 2012 and ACEP&#8217;s senior
      secured credit facility. With this transaction, we anticipate realizing a gain
      of approximately $0.8 billion on our investments in ACEP, before income taxes.
      ACEP&#8217;s casino assets are comprised of the Stratosphere Casino Hotel &amp; Tower,
      the Arizona Charlie&#8217;s Decatur, the Arizona Charlie&#8217;s Boulder and the Aquarius
      Casino Resort. The transaction is subject to the approval of the Nevada Gaming
      Commission and the Nevada State Gaming Control Board, as well as customary
      conditions. The parties expect to close the transaction in approximately eight
      months; however, we can not assure you that we will be able to consummate the
      transaction.</div>
    <div style="MARGIN-TOP: 9.15pt; MARGIN-BOTTOM: 0pt"><strong><i>Declaration
      of
      Distribution on Depositary Units</i></strong></div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On May
      4,
      2007, the Board of Directors approved a $0.05 increase in our quarterly
      distribution policy and payment of a quarterly cash distribution of $0.15 per
      unit on our depositary units payable in the second quarter of fiscal 2007.
      The
      distribution will be paid on June 1, 2007 to depositary unitholders of record
      at
      the close of business on May&#160;22, 2007. Under the terms of the indenture
      dated April&#160;5, 2007 governing our senior convertible notes due 2013, we
      will also be making a $0.05 distribution to holders of these notes in accordance
      with the formula set forth in the indenture.</div>
    <div style="MARGIN-TOP: 9.15pt; MARGIN-BOTTOM: 0pt"><strong><i>Potential
      Acquisitions</i></strong></div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      February 2007, we entered into an agreement and plan of merger pursuant to
      which
      we would acquire Lear Corporation, or Lear, for an aggregate purchase price
      of
      approximately $5.2 billion. In connection with the planned merger, our
      subsidiary, AREP Car Holdings Corp., entered into a commitment letter with
      Bank
      of America, N.A., and Banc of America Securities LLC on February 8, 2007,
      pursuant to which Bank of America would act as the initial lender under two
      senior secured credit facilities in an aggregate principal amount of $3.6
      billion, consisting of a $1.0 billion senior secured revolving facility and
      a
      $2.6 billion senior secured term loan B facility. The credit facilities, along
      with cash on hand, are intended to refinance and replace Lear&#8217;s existing credit
      facilities and to fund the transactions contemplated by the merger. We intend
      to
      fund approximately $1.4 billion of the purchase price from our cash and cash
      equivalents and investments.</div>
    <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Mr. Carl
      C. Icahn has proposed that we acquire his interests in American Railcar, Inc.,
      or ARI, and Philip Services Corporation. A committee of independent directors
      of
      the board has been formed to consider the proposals. No agreement has been
      reached as to price or terms. Any acquisition would be subject to, among other
      things, the negotiation, execution and closing of a definitive agreement and
      the
      receipt of a fairness opinion. We continuously identify, evaluate and engage
      in
      discussions concerning potential investments and acquisitions, including
      potential investments in and acquisitions of affiliates of Mr. Icahn. There
      cannot be any assurance that the current proposals or any other potential
      transactions that we consider will be completed. ARI is a publicly traded
      company that is primarily engaged in the business of manufacturing covered
      hoppers and tank railcars. Philip is an industrial services company that
      provides industrial outsourcing, environmental services and metal services
      to
      major industry sectors throughout North America.</div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">28</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p>
  <strong><a name="27"></a>Item 2. Management&#8217;s Discussion and Analysis
  of Financial Condition and Results of Operations</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Management&#8217;s
      discussion and analysis of financial condition and results of operations is
      comprised of the following sections:</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">1.</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Overview</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">2.</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Discontinued Operations</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">3.</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Results of Operations</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 54pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 54pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Consolidated
      Financial Results</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 54pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 54pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Gaming</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 54pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 54pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Real
      Estate</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 54pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 54pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Home
      Fashion</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 54pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 54pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Holding
      Company</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">4.</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Liquidity and Capital
      Resources</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 54pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 54pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Consolidated
      Financial Results</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 54pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 54pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Gaming</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 54pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 54pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Real
      Estate</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 54pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 54pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Home
      Fashion</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; MARGIN-BOTTOM: -12pt; TEXT-INDENT: -18pt">5.</div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt">Certain Trends and
      Uncertainties</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="28"></a>Overview</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">American
      Real Estate Partners, L.P., (referred to herein as the Company or AREP or we)
      is
      a master limited partnership formed in Delaware on February 17, 1987. AREP
      is a
      diversified holding company owning subsidiaries engaged in the following
      operating businesses: Gaming, Real Estate, and Home Fashion. In addition, during
      the fourth quarter of fiscal 2006 we divested our Oil and Gas operating unit
      and
      our Atlantic City Gaming properties.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Our business
      strategy includes the following:</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Enhance
      Value of Existing Businesses.</i> We continually evaluate our operating
      businesses with a view to maximizing their value to us. In each of our
      businesses, we place senior management with the expertise to run their
      businesses and give them operating objectives that they must achieve. We may
      make additional investments in a business segment to improve the performance
      of
      their operations.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Invest
      Capital to Grow Existing Operations or Add New Operating Platforms.</i> Our
      management team has extensive experience in identifying, acquiring and
      developing undervalued businesses or assets. We may look to make acquisitions
      of
      assets or operations that complement our existing operations. We also may look
      to add new operating platforms by acquiring businesses or assets directly or
      establishing an ownership position through the purchase of debt or equity
      securities of troubled entities and may then negotiate for the ownership or
      effective control of their assets.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><i>Enhance
      Returns on Assets.</i> We continually look for opportunities to enhance returns
      on both liquid and operating assets. We may seek to unlock value by selling
      all
      or a part of a business segment.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We own a
      99%
      limited partnership interest in American Real Estate Holdings Limited
      Partnership, or AREH. AREH and its subsidiaries hold our investments and
      substantially all of our operations are conducted through AREH and its
      subsidiaries. American Property Investors, Inc., or API, owns a 1% general
      partnership interest in both us and AREH, representing an aggregate 1.99%
      general partnership interest in us and AREH. API is owned and controlled by
      Mr.
      Carl C. Icahn. As of March&#160;31, 2007, affiliates of Mr. Icahn beneficially
      owned approximately 90% of our outstanding depositary units and approximately
      86.5% of our outstanding preferred units.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In addition
      to our Gaming, Real Estate and Home Fashion operating units, we discuss the
      Holding Company. The Holding Company includes the unconsolidated results of
      AREH
      and AREP, and investment activity and expenses associated with the activities
      of
      a holding company.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">29</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p>
  <strong><a name="29"></a>Discontinued Operations</strong></div>
    <div style="MARGIN-TOP: 8.35pt; MARGIN-BOTTOM: 0pt"><strong><i>The Sands and
      Related Assets</i></strong></div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      November 17, 2006, our indirect majority-owned subsidiary, ACE, a New Jersey
      limited liability company and a wholly owned subsidiary of Atlantic Coast,
      which
      formerly owned The Sands Hotel and Casino in Atlantic City, AREH, and certain
      other entities owned by or affiliated with AREH, completed the sale to Pinnacle,
      of the outstanding membership interests in ACE and 100% of the equity interests
      in certain subsidiaries of AREH that owned parcels of real estate adjacent
      to
      The Sands, including 7.7 acres of land known as the Traymore site. We owned,
      through subsidiaries, approximately 67.6% of Atlantic Coast, which owns 100%
      of
      ACE. The aggregate price was approximately $274.8 million, of which
      approximately $200.6 million was paid to Atlantic Coast and approximately $74.2
      million was paid to affiliates of AREH for subsidiaries that owned the Traymore
      site and the adjacent properties. Under the terms of the agreement, $51.8
      million of the purchase price paid to Atlantic Coast was deposited into escrow
      to fund indemnification obligations with regard to the claims of creditors
      and
      stockholders of GB Holdings. On February 22, 2007, we resolved all outstanding
      litigation involving our interest in the Atlantic City gaming operations,
      resulting in a release of all claims against us. As a result of the settlement,
      our ownership of Atlantic Coast increased from 67.6% to 96.9% and $50.0 million
      of the amount placed into escrow was released to us.</div>
    <div style="MARGIN-TOP: 8.35pt; MARGIN-BOTTOM: 0pt"><strong><i>Oil and Gas
      Operations</i></strong></div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      November 21, 2006, our indirect wholly owned subsidiary, AREP O &amp; G Holdings
      LLC, consummated the sale of all of the issued and outstanding membership
      interests of NEG Oil &amp; Gas LLC to SandRidge for consideration consisting of
      $1.025 billion in cash, 12,842,000 shares of SandRidge&#8217;s common stock, valued at
      $18 per share on the date of closing, and the repayment by SandRidge of $300.0
      million of debt of NEG Oil &amp; Gas. On April 4, 2007, we sold our entire
      position in SandRidge for cash consideration of approximately $243.2
      million.</div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      November 21, 2006, pursuant to an agreement dated October 25, 2006 among AREH,
      NEG Oil &amp; Gas and NEGI, NEGI sold its membership interest in NEG Holding LLC
      to NEG Oil &amp; Gas for consideration of approximately $261.1 million paid in
      cash. Of that amount, $149.6 million was used to repay the principal and accrued
      interest with respect to the NEGI 10.75% senior notes due 2007, all of which
      was
      held by us.</div>
    <div style="MARGIN-TOP: 8.35pt; MARGIN-BOTTOM: 0pt"><strong><i>Real
      Estate</i></strong></div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Operating
      properties of our real estate segment are reclassified to held for sale when
      subject to a contract or letter of intent. The operations of such properties
      are
      classified as discontinued operations. The properties classified as discontinued
      operations have changed during fiscal 2007 and, accordingly, certain amounts
      in
      the statement of operations and cash flows for the three months ended
      March&#160;31, 2007 and 2006 have been reclassified to conform to the current
      classification of properties. During the first quarter of fiscal 2007 two
      properties were reclassified to held for sale.</div>
    <div style="MARGIN-TOP: 8.35pt; MARGIN-BOTTOM: 0pt"><strong><i>Results of
      Discontinued Operations</i></strong></div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      financial position and results of these operations are presented as assets
      and
      liabilities of discontinued operations held for sale in the consolidated balance
      sheets and discontinued operations in the consolidated statements of operations,
      respectively, for all periods presented in accordance with Statement of
      Financial Accounting Standards No. 144 (SFAS No. 144), <i>Accounting for the
      Impairment or Disposal of Long-Lived Assets.</i></div>
    <div style="MARGIN-TOP: 4.15pt; MARGIN-BOTTOM: 4.15pt; TEXT-INDENT: 18pt">Summarized
      financial information for discontinued operations is set forth below:</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="374">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="27">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="27">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="499">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="5" valign="bottom" width="103" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 9pt" align="center"><strong>Three&#160;Months&#160;Ended<br>March&#160;31,</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="499">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 9pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 9pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="499">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">&#160;</td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="499">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Total
                operating income</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">1,079</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt">$</div>
            </td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">66,682</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="499">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Interest
                expense</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">(270</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">(5,435</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="499">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Interest
                and other income</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">18,642</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">1,040</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="499">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Income
                tax expense</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">(2,981</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt">)</div>
            </td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">(3,446</div>
            </td>
            <td valign="bottom" width="4">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="499">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Income
                from discontinued operations</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">16,470</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">58,841</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="499">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Minority
                interests</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">(1,794</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt">)</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="36">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">54</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="499">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Gain
                on sales of discontinued operations, net of income taxes</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">13,185</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="36" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">251</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="499">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Total
                income from discontinued operations, net of income taxes</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">27,861</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt">$</div>
            </td>
            <td valign="bottom" width="36" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">59,146</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">30</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="PAGE-BREAK-BEFORE: always; MARGIN: 0pt">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p>
  <strong><a name="30"></a>Results of Operations</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Overview</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The key
      factors affecting our financial results for the three months ended
      March&#160;31, 2007 compared to the three months ended March&#160;31, 2006
      were:</div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Increased
      revenues from our gaming segment
      of $26.9 million, primarily reflecting the acquisition of the Aquarius Casino
      Resort in Laughlin, Nevada in May, 2006;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Reduced
      revenues from WPI of $32.9 million
      due to a weaker retail sales environment and our continuing efforts to reduce
      revenues from less profitable programs, offset by reduced WPI operating expenses
      of $31.8 million;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Settlement
      of litigation relating to GB
      Holdings;</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Unrealized
      gains on our investment in
      ImClone Systems Incorporated of $63.9 million resulting from the increase in
      the
      market price of ImClone&#8217;s common stock; and</font></div>
    <div style="MARGIN-TOP: 5pt; PADDING-LEFT: 36pt; FONT-SIZE: 8pt; MARGIN-BOTTOM: -10pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 10pt; FONT-FAMILY: Symbol"><font style="FONT-FAMILY: Symbol">&#183;</font></div>
    <div style="PADDING-LEFT: 36pt; MARGIN: 0pt"><font style="FONT-FAMILY: Times New Roman">Issuance
      of $500 million of additional
      7.125% senior unsecured notes in January 2007.</font></div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Consolidated
      Financial Results</strong></div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><i>Three
      months ended March&#160;31, 2007 compared to three months ended March&#160;31,
      2006</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Revenues
      for the first quarter of 2007 increased by $1.2 million, or 0.4%, as compared
      to
      the first quarter of 2006. This increase was principally due to increased gaming
      revenues of $26.9 million resulting from the inclusion of revenues from the
      Aquarius Hotel and Casino acquired in May 2006, increased revenues from real
      estate property development activities, substantially offset by reduced sales
      from WPI of $32.9 million.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Operating
      loss for the first quarter of 2007 was $19.2 million, as compared to an
      operating loss of $27.0 million for the first quarter of 2006. This change
      resulted primarily from a $4.6 million increase in operating income from gaming
      and reduced holding company expenses as discussed below.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Interest
      expense for the first quarter of 2007 increased by $7.8 million, or 31.1%,
      as
      compared to the first quarter of 2006. This increase is primarily the result
      of
      interest incurred on the $500 million of the additional 7.125% senior notes
      that
      were issued in January 2007. Interest income for the first quarter of 2007
      increased by $19.9 million, as compared to the first quarter of 2006, primarily
      due to the increase in the Holding Company&#8217;s cash position resulting from the
      sales of our Oil and Gas and Atlantic City gaming operations in November, 2006.
      Other income (expense), net increased by $63.5 million for the first quarter
      of
      2007 as compared to the first quarter of 2006, resulting primarily from
      unrealized gains on our investment in ImClone systems Incorporated.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Gaming</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Our
      Gaming segment consists of our four gaming properties in Nevada: the
      Stratosphere Casino Hotel and Tower, Arizona Charlie&#8217;s Boulder and Arizona
      Charlie&#8217;s Decatur in Las Vegas and the Aquarius Casino Resort, in Laughlin. As
      described above, operating results for The Sands are classified as discontinued
      operations and thus are excluded from the results of our continuing Gaming
      operations. As disclosed in Note 1 to our consolidated financial statements,
      we
      acquired the Aquarius on May 19, 2006. Net revenues and operating income for
      the
      Aquarius for the three months ended March&#160;31, 2007 were $28.8 million and
      $5.4 million, respectively. These amounts are included in the table below with
      the heading &#8220;Including Aquarius.&#8221; The results of operations discussed below
      refer to our gaming properties excluding the results of the Aquarius.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As
      discussed in Note 21 to the financial statements, on April 22, 2007, we entered
      into an agreement to sell all of the issued and outstanding membership interests
      of ACEP. Accordingly, in the second quarter of 2007 the financial position
      and
      the results of ACEP&#8217;s operations will be presented as assets and liabilities of
      discontinued operations held for sale in the consolidated balance sheets and
      discontinued operations in the consolidated statements of operations for all
      periods in accordance with SFAS No. 144.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">31</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 5pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 0pt">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p>
</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 18pt">	The
      following table summarizes the key operating data for the continuing operations
      of our gaming segment for the periods indicated (in $000s) (unaudited):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="324">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="32">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="29">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="27">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="432">&#160;</td>
            <td valign="top" width="16">&#160;</td>
            <td colspan="8" valign="bottom" width="174" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three&#160;Months&#160;Ended&#160;March&#160;31,</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="432">&#160;</td>
            <td valign="top" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Including<br>Aquarius</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Excluding<br>Aquarius</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="43">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="432">&#160;</td>
            <td valign="top" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="50" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="46" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="432">&#160;</td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="432">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Revenues:</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="432">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Casino</div>
            </td>
            <td valign="top" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">67,370</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">46,132</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">48,022</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="432">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Hotel</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">22,616</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">18,076</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">17,433</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="432">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Food
                and beverage</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">23,109</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">18,271</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">18,070</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="432">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Tower,
                retail and other income</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">9,311</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">7,992</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">8,219</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="432">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gross
                revenues</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">122,406</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">90,471</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">91,744</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="432">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Less
                promotional allowances</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">9,518</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6,401</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">5,799</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="432">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                revenues</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">112,888</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">84,070</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">85,945</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="432">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Expenses:</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="432">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Casino</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">22,566</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">16,203</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">16,488</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="432">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Hotel</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">9,063</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">6,690</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">6,843</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="432">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Food
                and beverage</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">15,975</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">13,331</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">13,201</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="432">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Tower,
                retail and other income</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">4,244</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">3,561</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">4,248</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="432">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Selling,
                general and administrative</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="43">
              <div style="MARGIN: 0pt" align="right">29,472</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="39">
              <div style="MARGIN: 0pt" align="right">19,998</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">20,782</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="432">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Depreciation
                and amortization</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">8,341</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">6,492</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">5,760</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="432">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                costs and expenses</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">89,661</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="39" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">66,275</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">67,322</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="432">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Operating
                income</div>
            </td>
            <td valign="top" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="43" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">23,227</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="39" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">17,795</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="37" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">18,623</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">We
      use certain key measurements to evaluate operating revenue. Casino revenue
      measurements include &#8220;table games drop&#8221; and &#8220;slot coin-in,&#8221; which are measures
      of the total amounts wagered by patrons. Win or hold percentage represents
      the
      percentage of table games drop or slot coin-in that is won by the casino and
      recorded as casino revenue. Hotel revenue measurements include hotel occupancy
      rate, which is the average percentage of available hotel rooms occupied during
      a
      period, and average daily room rate, which is the average price of occupied
      rooms per day. Food and beverage revenue measurements include number of covers,
      which is the number of guest checks, and the average check amount.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Gross
      Revenues</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">Gross
      revenues decreased 1.4% to $90.5 million for the three months ended
      March&#160;31, 2007 from $91.7 million for the three months ended March&#160;31,
      2006. This decrease was primarily due to a decrease in casino revenues as
      discussed below.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Casino
      Revenues</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">Casino
      revenues decreased 3.9% to $46.1 million, or 51.0% of gross revenues, for the
      three months ended March&#160;31, 2007 from $48.0 million, or 52.3% of gross
      revenues, for the three months ended March&#160;31, 2006. This decrease was
      primarily due to a decrease in slot and table game revenue, resulting from
      a
      decrease in slot coin-in and table games drop, predominantly caused by increases
      in the price of gas which decreased automobile traffic to Las Vegas and the
      entrance of a new competitor in the market served by Arizona Charlie&#8217;s Decatur.
      For the three months ended March&#160;31, 2007, slot machine revenues were $37.8
      million, or 82.0% of casino revenues, and table game revenues were $6.6 million,
      or 14.3% of casino revenues, compared to $38.2 million and $7.3 million,
      respectively, for the three months ended March&#160;31, 2006. Other casino
      revenues, consisting of race and sports book, poker, bingo and keno, were $1.7
      million and $2.5 million for the three months ended March&#160;31, 2007 and
      2006, respectively.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Non-Casino
      Revenues</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">Hotel
      revenues increased 3.7% to $18.1 million, or 20.0% of gross revenues, for the
      three months ended March&#160;31, 2007 from $17.4 million, or 19.0% of gross
      revenues, for the three months ended March&#160;31, 2006. This increase was
      primarily due to a 5.6% increase in the average room rate, partially offset
      by a
      1.9% decrease in the hotel occupancy rate.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 11pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">32</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 0pt; LINE-HEIGHT: 11pt">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p>
</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 18pt">	Food
      and beverage revenues increased 1.1% to $18.3 million, or 20.2% of gross
      revenues, for the three months ended March&#160;31, 2007, from $18.1 million, or
      19.7% of gross revenues, for the three months ended March&#160;31, 2006. This
      increase was primarily due to an 8.9% increase in the average check amount
      partially offset by a 7.2% decrease in the number of covers.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">Tower,
      retail and other revenues decreased 2.8% to $8.0 million, or 8.8% of gross
      revenues, for the three months ended March&#160;31, 2007, compared to $8.2
      million, or 9.0% of gross revenues, for the three months ended March&#160;31,
      2006 due to inclement weather that resulted in the closure of the tower
      rides.</div>
    <div style="MARGIN-TOP: 8.35pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Promotional
      Allowances</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">Promotional
      allowances are comprised of the retail value of goods and services provided
      to
      casino patrons under various marketing programs. As a percentage of casino
      revenues, promotional allowances increased to 13.9% for the three months ended
      March&#160;31, 2007 from 12.1% for the three months ended March&#160;31, 2006.
      This increase was primarily due to increased marketing promotions, especially
      at
      the Stratosphere.</div>
    <div style="MARGIN-TOP: 8.35pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Operating
      Expenses</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">Casino
      operating expenses decreased 1.7% to $16.2 million, or 35.1% of casino revenues,
      for the three months ended March&#160;31, 2007, from $16.5 million, or 34.3% of
      casino revenues, for the three months ended March&#160;31, 2006. This decrease
      was primarily due to decreased participation expense.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">Hotel
      operating expenses decreased 2.2% to $6.7 million, or 37.0% of hotel revenues,
      for the three months ended March&#160;31, 2007, from $6.8 million or 39.3% of
      hotel revenues, for the three months ended March&#160;31, 2006. This decrease
      was primarily due to the decrease in hotel occupancy.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">Food
      and beverage operating expenses increased 1.0% to $13.3 million, or 73.0% of
      food and beverage revenues, for the three months ended March&#160;31, 2007, from
      $13.2 million, or 73.1% of food and beverage revenues, for the three months
      ended March&#160;31, 2006. This increase was primarily due to increased supplies
      cost.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">Tower,
      retail and other operating expenses decreased 16.2% to $3.6 million, or 44.6%
      of
      tower, retail and other revenues, for the three months ended March&#160;31,
      2007, from $4.2 million or 51.7% of tower, retail and other revenues, for the
      three months ended March&#160;31, 2006. This decrease was primarily due to
      reduced entertainer fees due to the cancellation of the afternoon show at the
      Stratosphere, Viva Las Vegas.</div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">Selling,
      general and administrative expenses were primarily comprised of payroll,
      supplies, marketing, advertising, utilities and other administrative expenses.
      These expenses decreased 3.8% to $20.0 million, or 22.1% of gross revenues,
      for
      the three months ended March&#160;31, 2007, from $20.8 million, or 22.7% of
      gross revenues, for the three months ended March&#160;31, 2006. This decrease
      was primarily due to decrease in legal fees and supplies.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Real
      Estate</i></strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 5pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 11pt">Our
      real estate activities comprise three segments: rental real estate, property
      development, and associated resort activities. The following table summarizes
      the key unaudited operating data for the three segments for the periods
      indicated (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="376">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="27">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="27">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="502">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="5" valign="bottom" width="104" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three&#160;Months&#160;Ended<br>March&#160;31,</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="502">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="502">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Revenues:</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="502">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Rental
                real estate:</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="502">
              <div style="PADDING-LEFT: 30pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Interest
                income on financing leases</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt">$</div>
            </td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">1,578</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt">$</div>
            </td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">1,735</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="502">
              <div style="PADDING-LEFT: 30pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Rental
                income</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">1,939</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">1,511</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="502">
              <div style="PADDING-LEFT: 30pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Subtotal
                rental real estate</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">3,517</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">3,246</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="502">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Property
                development</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">18,145</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">11,384</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="502">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Resort
                operations</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">6,225</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">6,082</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="502">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Total
                revenues</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">27,887</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">20,712</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="502">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Operating
                expenses:</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="502">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Rental
                real estate</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">1,493</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">998</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="502">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Property
                development</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">15,612</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">9,976</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="502">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Resort
                operations</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">6,501</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">6,264</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="502">
              <div style="PADDING-LEFT: 18pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Total
                expenses</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">23,606</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">17,238</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="502">
              <div style="PADDING-LEFT: 6pt; MARGIN: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Operating
                income</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt">$</div>
            </td>
            <td valign="bottom" width="37" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">4,281</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt">$</div>
            </td>
            <td valign="bottom" width="37" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt; LINE-HEIGHT: 11pt" align="right">3,474</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">33</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 0pt; LINE-HEIGHT: 11pt">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p>
</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 18pt">
	<strong>Rental
      Real Estate</strong></div>
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 5pt; TEXT-INDENT: 18pt">We market
      portions of our commercial real estate portfolio for sale. Unaudited sale
      activity was as follows (in $000s, except unit data):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="377">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="26">
            </td>
            <td width="12">
            </td>
            <td width="8">
            </td>
            <td width="24">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="503">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="5" valign="bottom" width="103" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three&#160;Months&#160;Ended<br>March&#160;31,</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="503">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="43" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="503">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="43">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center"><strong>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="43">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center"><strong>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</strong></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="503">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Properties
                sold</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
            <td valign="bottom" width="35">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="32">
              <div style="MARGIN: 0pt" align="right">4</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="503">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Proceeds
                received</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="35">
              <div style="MARGIN: 0pt" align="right">4,359</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="32">
              <div style="MARGIN: 0pt" align="right">973</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="503">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                gain &#160;recorded</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="35">
              <div style="MARGIN: 0pt" align="right">3,862</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="32">
              <div style="MARGIN: 0pt" align="right">251</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="503">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gain
                recorded in discontinued operations</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="35">
              <div style="MARGIN: 0pt" align="right">3,862</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="32">
              <div style="MARGIN: 0pt" align="right">251</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><i>Three
      months ended March&#160;31, 2007 compared to the three months ended
      March&#160;31, 2006</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Revenues
      increased to $3.5 million, or by 8.3 %, in the first quarter of 2007 from $3.2
      million in the first quarter of 2006. The increase was primarily attributable
      to
      leasing of previously vacant space partially offset by increased financing
      lease
      amortization.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Operating
      expenses increased to $1.5 million, or by 49.6%, in the first quarter of 2007
      from $1.0 million in the first quarter of 2006. The increase was primarily
      due
      to increased property write downs and increased rental and administrative
      expenses. </div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>Property
      Development</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Property
      development sales activity was as follows (in 000s, except unit data)
      (unaudited):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="375">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="28">
            </td>
            <td width="12">
            </td>
            <td width="5">
            </td>
            <td width="28">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="500">&#160;</td>
            <td valign="top" width="17">&#160;</td>
            <td colspan="5" valign="bottom" width="106" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three&#160;Months&#160;Ended<br>March&#160;31,</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="500">&#160;</td>
            <td valign="top" width="17">&#160;</td>
            <td colspan="2" valign="bottom" width="44" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td colspan="2" valign="bottom" width="44" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="500">&#160;</td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="500">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Units
                sold:</div>
            </td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="500">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">New
                Seabury, Massachusetts</div>
            </td>
            <td valign="top" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">6</div>
            </td>
            <td valign="bottom" width="17">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">10</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="500">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Grand
                Harbor/Oak Harbor, Florida</div>
            </td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">5</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">2</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="500">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Falling
                Waters, Florida</div>
            </td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">23</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="500">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Westchester,
                New York</div>
            </td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">2</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="500">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Tampa
                Bay, Florida</div>
            </td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="500">&#160;</td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">37</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">12</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="500">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Revenues:</div>
            </td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="500">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">New
                Seabury, Massachusetts</div>
            </td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">3,583</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">9,033</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="500">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Grand
                Harbor/Oak Harbor, Florida</div>
            </td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">4,349</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">2,321</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="500">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Falling
                Waters, Florida</div>
            </td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">5,466</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="500">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Westchester,
                New York</div>
            </td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">3,243</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6">&#160;</td>
            <td valign="bottom" width="37">
              <div style="MARGIN: 0pt" align="right">30</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="500">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Tampa
                Bay, Florida</div>
            </td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,504</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="37" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="500">&#160;</td>
            <td valign="top" width="17">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="37" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">18,145</div>
            </td>
            <td valign="bottom" width="17">&#160;</td>
            <td valign="bottom" width="6" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="37" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">11,384</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><i>Three
      months ended March&#160;31, 2007 compared to the three months ended
      March&#160;31, 2006</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Revenues
      increased to $18.1 million, or 59.4%, in the first quarter of 2007, from $11.4
      million in the first quarter of 2006. Operating expenses increased to $15.6
      million, or 56.5%, in the first quarter of 2007 from $10.0&#160;million in the
      first quarter of 2006. Revenues and operating expenses increased due to an
      increase in the number of units sold partially offset by a decrease in the
      prices and related costs of units sold.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In the
      first quarter of 2007, we sold 37 units at an average price of $490,405 with
      a
      profit margin of 14.0%. In the first quarter of 2006, we sold 12 units at an
      average price of $948,667 with a profit margin of $12.4%. Increased sales and
      operating income were generated in our Florida and New York developments. These
      increases were partially offset by a decrease in New Seabury&#8217;s sales and
      profits.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">34</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
  <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 0pt; LINE-HEIGHT: 11pt">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p>
</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 18pt">
  <p>Due to the current residential and vacation home sales slowdown, property
    development sales and profits are expected to decline in fiscal 2007 from
    levels achieved in fiscal 2006.</p>
</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt"><strong>Resort
      Activities</strong></div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><i>Three
      months ended March&#160;31, 2007 compared to the three months ended
      March&#160;31, 2006</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Revenues
      increased to $6.2 million, or by 2.4%, in the first quarter of 2007 from $6.1
      million in the first quarter of 2006, primarily attributable to increased club
      dues.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Operating
      expenses increased to $6.5 million, or by 3.8 %, in the first quarter of 2007
      from $6.3 million in the first quarter of 2006, primarily due to increased
      insurance expenses.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Home
      Fashion</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">WPI,
      through its indirect wholly owned subsidiary, WestPoint Home, Inc., is engaged
      in the business of manufacturing, sourcing, marketing and distributing bed
      and
      bath home fashion products, including among others, sheets, pillowcases,
      comforters, blankets, bedspreads, pillows, mattress pads, towels and related
      products. WPI recognizes revenue primarily through the sale of home fashion
      products to a variety of retail and institutional customers. WPI also operates
      30 retail outlet stores that sell home fashion products consisting principally
      of products manufactured by WPI. In addition, WPI receives a small portion
      of
      its revenues through the licensing of its trademarks.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Ongoing
      litigation may result in our ownership of WPI being reduced to less than 50%
      as
      described in Part I, Item 3 of our Annual Report on Form 10-K for fiscal 2006
      filed with the SEC on March 6, 2007.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Overview</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The first
      quarter of 2007 remained challenging for WPI. Sales volume was $210.6 million,
      a
      decline of 13.5% compared to $243.5 million in the first quarter of 2006. The
      decline was primarily attributable to a weaker retail sales environment and
      our
      continuing efforts to reduce revenues from less profitable programs. During
      the
      first quarter of 2007, WPI launched key new programs in both its bath and bed
      sectors which should have an impact in the remainder of fiscal 2007.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For the
      first quarter of 2007, gross margins were affected by competitive pricing and
      a
      soft retail environment, and lower manufacturing plant utilizations at some
      of
      our United States plants. WPI will continue to realign its manufacturing
      operations to optimize its cost structure, pursuing offshore sourcing
      arrangements that employ a combination of owned and operated facilities, joint
      ventures and third-party supply contracts.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">During
      the first quarter of 2007, WPI continued to successfully implement its strategic
      plans to shift manufacturing capacity from the United States to lower-cost
      countries. WPI&#8217;s newly acquired bedding operation in Bahrain is now producing
      product as planned, with significantly lower production costs. Additionally,
      the
      expansion of WPI&#8217;s joint venture bath manufacturing operation in Pakistan is
      proceeding on schedule and should be fully operational by the fourth quarter
      of
      2007. WPI anticipates improvements in gross margins through cost of sales
      reductions in the second half of 2007 and into 2008.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">WPI is
      lowering its selling, general and administrative expense by consolidating its
      locations, reducing headcount and applying more stringent oversight of expense
      areas where potential savings may be realized. For example, WPI entered into
      a
      long-term contract during the first quarter of fiscal 2007 to outsource its
      accounts receivable and accounts payable transaction operations to a substantial
      third party provider of these services. WPI expects to realize administrative
      cost savings and improved service levels over the life of the contract. Selling,
      general and administrative expenses for the first quarter of 2007 were $39.4
      million as compared to $43.3 million for the first quarter of 2006, reflecting
      WPI&#8217;s continuing efforts to reduce its selling, general and administrative
      expenses over the time since it was acquired by AREP in August 2005.</div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">35</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 0pt; LINE-HEIGHT: 11pt">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p>
</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 18pt">
<i>Results
      of
      Operations</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Summarized
      statements of operations for WPI for the three months ended March&#160;31, 2007
      and 2006 are as follows (in $000s) (unaudited):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="339">
            </td>
            <td width="12">
            </td>
            <td width="6">
            </td>
            <td width="43">
            </td>
            <td width="12">
            </td>
            <td width="6">
            </td>
            <td width="43">
            </td>
            <td width="3">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="452">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="5" valign="bottom" width="150" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three
                Months
                Ended<br>March&#160;31,</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="452">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="66">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="66" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="452">&#160;</td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="66" style="border-top: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td colspan="2" valign="bottom" width="66">
              <div style="MARGIN: 0pt" align="right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="452">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                sales</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">210,604</div>
            </td>
            <td valign="bottom" width="16">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">243,490</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="452">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Cost
                of goods sold</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="57" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">205,910</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: white 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="57" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">228,360</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="452">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gross
                earnings</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">4,694</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">15,130</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="452">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Selling,
                general and administrative expenses</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">39,398</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="57">
              <div style="MARGIN: 0pt" align="right">43,317</div>
            </td>
            <td valign="bottom" width="4" style="border-top: #ffffff 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="452">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Restructuring
                and impairment charges</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="57" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">4,311</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="57" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">9,771</div>
            </td>
            <td valign="bottom" width="4">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="452">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Operating
                loss</div>
            </td>
            <td valign="bottom" width="16">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="57" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(39,015</div>
            </td>
            <td valign="bottom" width="16" style="border-bottom: white 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="57" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">(37,958</div>
            </td>
            <td valign="bottom" width="4" style="border-bottom: white 3pt double;">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><i>Three
      months ended March&#160;31, 2007 compared to the three months ended
      March&#160;31, 2006</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Net sales
      for the first quarter of 2007 decreased $32.9 million, to $210.6 million, or
      13.5% from net sales of $243.5 million for the first quarter of 2006. The
      decrease was primarily related to lower sales volumes in all lines of business.
      Bed products net sales for the first quarter of 2007 were $124.5 million, a
      decrease of $11.5 million from $136.0 million, bath products net sales were
      $71.3 million, a decrease of $19.2&#160;million from $90.5 million and other net
      sales were $14.8 million (consisting primarily of sales from the Company&#8217;s
      retail outlet stores), a decrease of $2.2 million from $17.0 million for the
      first quarter of 2006.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Total
      depreciation expense for the first quarter of 2007 was $4.8 million, of which
      $3.7 million was included in cost of sales and $1.1 million was included in
      selling, general and administrative. Total depreciation expense for the first
      quarter of 2006 was $10.4 million, of which $8.6 million was included in cost
      of
      sales and $1.8 million was included in selling, general and administrative.
      Depreciation expenses were reduced primarily as the result of plant closures
      subsequent to the first quarter of 2006.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Gross
      earnings for the first quarter of 2007 were $4.7 million, or 2.2% of net sales,
      compared with $15.1&#160;million, or 6.2% of net sales during the first quarter
      2006. Gross earnings during the first quarter of 2007 were negatively impacted
      by higher production costs which include the carrying costs of plants scheduled
      to be closed in fiscal 2007 and lower sales across all product lines.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For the
      first three months of fiscal 2007, selling, general and administrative expenses
      were $39.4 million, or 18.7% of net sales, compared to $43.3 million or 17.8%
      of
      net sales for the first quarter of 2006. The decrease was primarily attributable
      to a decrease in selling, warehousing and shipping expenses.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Total
      expenses for the first quarter of 2007 include $4.3 million of restructuring
      charges (of which $1.3&#160;million related to severance costs and $3.0 million
      related to continuing costs of closed plants). Total expenses for the first
      quarter of 2006 included $7.7 million of non-cash impairment charges and
      $2.1&#160;million of restructuring charges (of which $1.2 million related to
      severance costs and $0.9 million related to continuing costs of closed
      plants).</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We expect
      to continue our restructuring efforts and, accordingly, expect that
      restructuring charges and operating losses will continue to be incurred
      throughout fiscal 2007. If our restructuring efforts are unsuccessful, we may
      be
      required to record additional impairment charges related to the carrying value
      of long-lived assets. Additionally, as part of the restructuring efforts, we
      expect to record impairment charges as additional plants are closed.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong>Holding
      Company</strong></div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Activities</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      Holding Company engages in various activities including investing its available
      liquidity, investing to earn returns from increases or decreases in the market
      price of securities, investing in our subsidiaries&#8217; growth, raising capital and
      acquiring or divesting businesses.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">36</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 0pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always">
		<p align="left"> <strong><a href="#index">Back to Index</a></strong></p></div>
	<div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Holding
      Company Costs</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Holding
      Company costs are principally related to payroll, legal and other professional
      fees and general expenses of the Holding Company.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><i>Three
      months ended March&#160;31, 2007 compared to the three months ended
      March&#160;31, 2006</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Holding
      Company costs decreased $3.5 million, or 31.1%, to $7.7 million in the first
      quarter of 2007, as compared to $11.1 million in the first quarter of 2006
      due
      largely to the impact of a compensation charge related to the cancellation
      of
      unit options of $6.2 million in fiscal 2006, offset in part by higher legal
      and
      professional fees in fiscal 2007 relating to increased merger and acquisition
      activities and financing transactions.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Interest
      Income and Expense</strong></div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><i>Three
      months ended March&#160;31, 2007 compared to the three months ended
      March&#160;31, 2006</i></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Interest
      expense increased 31.1% to $33.0 million, during the first quarter of 2007
      as
      compared to $25.2 million in the first quarter of 2006. This increase is a
      result of interest incurred on the $500.0 million additional 7.125% senior
      notes
      issued in January 2007.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Interest
      income increased 172.3%, to $31.5 million during the first quarter of 2007
      as
      compared to $11.6&#160;million in the first quarter of 2006. This was primarily
      due to the substantial increase in the Holding Company&#8217;s cash position from the
      sales of our Oil and Gas operations and ACE in the fourth quarter of 2006.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Other
      Income (Expense), net</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Other
      Income (Expense), net, is comprised of the following (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="317">
            </td>
            <td width="19">
            </td>
            <td width="7">
            </td>
            <td width="42">
            </td>
            <td width="19">
            </td>
            <td width="7">
            </td>
            <td width="47">
            </td>
            <td width="5">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="423">&#160;</td>
            <td valign="bottom" width="25">&#160;</td>
            <td colspan="5" valign="bottom" width="167" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Three&#160;Months&#160;Ended<br>March&#160;31,</strong></div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="423">&#160;</td>
            <td valign="bottom" width="25">&#160;</td>
            <td colspan="2" valign="bottom" width="67" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2007</strong></div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td colspan="2" valign="bottom" width="74" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>2006</strong></div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="423">&#160;</td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="56">&#160;</td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="63">&#160;</td>
            <td valign="bottom" width="7">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="423">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                realized gains on sales of marketable securities</div>
            </td>
            <td valign="bottom" width="25">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="56">
              <div style="MARGIN: 0pt" align="right">5,177</div>
            </td>
            <td valign="bottom" width="25">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="10">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="63">
              <div style="MARGIN: 0pt" align="right">33,431</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="423">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Unrealized
                gains on marketable securities</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="56">
              <div style="MARGIN: 0pt" align="right">72,126</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="63">
              <div style="MARGIN: 0pt" align="right">15,478</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="423">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Net
                realized losses on securities sold short</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="56">
              <div style="MARGIN: 0pt" align="right">(1,510</div>
            </td>
            <td valign="bottom" width="25">
              <div style="MARGIN: 0pt">)</div>
            </td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="63">
              <div style="MARGIN: 0pt" align="right">(5,131</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="423">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Unrealized
                gains (losses) on securities sold short</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="56">
              <div style="MARGIN: 0pt" align="right">3,617</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="63">
              <div style="MARGIN: 0pt" align="right">(25,476</div>
            </td>
            <td valign="bottom" width="7">
              <div style="MARGIN: 0pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="423">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Gain
                on sale of assets</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="56">
              <div style="MARGIN: 0pt" align="right">3,612</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="10">&#160;</td>
            <td valign="bottom" width="63">
              <div style="MARGIN: 0pt" align="right">&#8212;</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="423">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="56" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">1,759</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="63" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">3,007</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="423">&#160;</td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="56" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">84,781</div>
            </td>
            <td valign="bottom" width="25">&#160;</td>
            <td valign="bottom" width="10" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="63" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">21,309</div>
            </td>
            <td valign="bottom" width="7">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We
      recorded approximately $63.9 million of unrealized gains in the first quarter
      of
      fiscal 2007 resulting from the change in the market price of ImClone&#8217;s
      stock.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Minority
      Interests</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Minority
      interest totaled $11.6 million and $15.1 million for the three months ended
      March&#160;31, 2007 and 2006, respectively, primarily as a result of the impact
      of the minority interests&#8217; share of the losses incurred by WPI.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Effective
      Income Tax Rate</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We
      recorded income tax provisions of $6.9 million and $5.2 million on pre-tax
      income of $64.1 million for the three months ended March&#160;31, 2007 and
      pre-tax loss of $19.3 million for the three months ended March&#160;31, 2006.
      Our effective income tax rate was 10.8% and (27.0)% for the respective periods.
      The difference between the effective tax rate and the statutory federal rate
      of
      35% is due principally to income or losses from partnership entities in which
      taxes are the responsibility of the partners, as well as changes in valuation
      allowances.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Seasonality</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Generally,
      our
      Nevada gaming and entertainment properties are not affected by seasonal trends.
      However, the Aquarius tends to have increased customer flow mid-January through
      April. Resort operations are highly seasonal </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">37</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
<div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 0pt; LINE-HEIGHT: 11pt">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p>
</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0pt">with
      peak activity in Cape Cod from June to September and in Florida from November
      to
      February. Sales activity for our real estate developments in Cape Cod and New
      York typically peak in late winter and early spring while in Florida our peak
      selling season is during the winter months. The Home Fashion segment experiences
      its peak sales season in the fall.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="31"></a>Liquidity
  and Capital Resources</strong></div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Consolidated
      Financial Results</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As of
      March 31, 2007, the Holding Company had a cash and cash equivalents balance
      of
      $2.0 billion, short-term investments of $560.4 million (of which $162.0 million
      was invested in short-term fixed-income securities) and total debt of $1.3
      billion, which primarily relates to the senior unsecured notes.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      addition, we also have the ability to draw down on our credit facility. In
      August 2006, we entered into a credit agreement with a consortium of banks
      pursuant to which we will be permitted to borrow up to $150.0 million. As of
      March 31, 2007, there were no borrowings under the facility. See &#8220;Borrowings&#8221;
below for additional information concerning credit facilities for our
      subsidiaries.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We are
      a
      holding company. In addition to cash and cash equivalents, U.S. government
      and
      agency obligations, marketable equity and debt securities and other short-term
      investments, our assets consist primarily of investments in our subsidiaries.
      The sale of our Oil and Gas operating unit and Atlantic City gaming properties
      in November 2006 resulted in significant increases in our liquid assets.
      However, we may make investments in our operating businesses or make investments
      in new businesses, which would reduce our liquid assets. </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As a
      holding company, our cash flow and our ability to meet our debt service
      obligations and make distributions with respect to depositary units and
      preferred units likely will depend on the cash flow resulting from divestitures,
      equity and debt financings, interest income, and the payment of funds to us
      by
      our subsidiaries in the form of loans, dividends and distributions. We may
      pursue various means to raise cash from our subsidiaries. To date, such means
      include payment of dividends from subsidiaries, obtaining loans or other
      financings based on the asset values of subsidiaries or selling debt or equity
      securities of subsidiaries through capital market transactions. To the degree
      any distributions and transfers are impaired or prohibited, our ability to
      make
      payments on our debt could be limited. The operating results of our subsidiaries
      may not be sufficient for them to make distributions to us. In addition, our
      subsidiaries are not obligated to make funds available to us, and distributions
      and intercompany transfers from our subsidiaries to us may be restricted by
      applicable law or covenants contained in debt agreements and other agreements
      to
      which our subsidiaries may be subject or enter into in the future.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Cash
      Resources</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">During
      2007 we consummated the following transactions that provided an aggregate of
      $1.3 billion:</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      January 16, 2007, we issued $500.0 million aggregate principal amount of
      additional 7.125 % senior notes due 2013. The additional 7.125% senior notes
      were issued pursuant to an indenture dated February 7, 2005, between us, as
      issuer, and AREF, as co-issuer, AREH, as guarantor, and Wilmington Trust
      Company, as trustee. The additional 7.125% senior notes have a fixed annual
      interest rate of 7.125%, which will be paid every six months on February 15
      and
      August 15 and will mature on February 15, 2013.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In April
      2007, we issued $600.0 million aggregate principal amount of senior convertible
      notes due 2013. The notes bear interest of LIBOR minus 125 basis points, but
      no
      less than 4% nor higher than 5.5%, and are convertible into depositary units
      of
      AREP at a conversion price of $132.595 per share, subject to adjustments in
      certain circumstances.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On April
      4, 2007, our subsidiaries signed agreements to sell their entire position in
      the
      common stock of SandRidge (formerly Riata Energy, Inc.) to a consortium of
      investors in a series of private transactions. The per share selling price
      was
      $18, and total cash consideration received at closing was approximately $243.2
      million.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On April
      22, 2007, American Entertainment Properties Corp, or AEP, a wholly owned
      indirect subsidiary of AREP, entered into a Membership Interest Purchase
      Agreement with W2007/ACEP Holdings, LLC, an affiliate of Whitehall Street Real
      Estate Funds, a series of real estate investment funds affiliated with Goldman,
      Sachs &amp; Co., to sell all of the issued and outstanding membership interests
      of ACEP, which comprises AREP&#8217;s gaming operations, </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">38</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
  <div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 0pt; LINE-HEIGHT: 11pt">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p>
</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0pt">for
      $1.3 billion, plus or minus certain adjustments such as working capital, more
      fully described in the agreement. Pursuant to the terms of the agreement, AEP
      is
      required to cause ACEP to repay, from funds provided by AEP, the principal,
      interest, prepayment penalty or premium due on ACEP&#8217;s 7.85% senior secured notes
      due 2012 and ACEP&#8217;s senior secured credit facility. With this transaction, AREP
      anticipates realizing a gain of approximately $0.8 billion on its investments
      in
      ACEP, before income taxes. ACEP&#8217;s casino assets are comprised of the
      Stratosphere Casino Hotel &amp; Tower, the Arizona Charlie&#8217;s Decatur, the
      Arizona Charlie&#8217;s Boulder and the Aquarius Casino Resort. The transaction is
      subject to the approval of the Nevada Gaming Commission and the Nevada State
      Gaming Control Board, as well as customary conditions. The parties expect to
      close the transaction in approximately eight months; however, we cannot assure
      you that we will be able to consummate the transaction.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Cash
      Commitments</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In
      February 2007, we entered into an agreement and plan of merger pursuant to
      which
      we would acquire Lear Corporation, or Lear, for an aggregate purchase price
      of
      approximately $5.2 billion. In connection with the planned merger, our
      subsidiary, AREP Car Holdings Corp., entered into a commitment letter with
      Bank
      of America, N.A., and Banc of America Securities LLC on February 8, 2007,
      pursuant to which Bank of America would act as the initial lender under two
      senior secured credit facilities in an aggregate principal amount of $3.6
      billion, consisting of a $1.0 billion senior secured revolving facility and
      a
      $2.6 billion senior secured term loan B facility. The credit facilities, along
      with cash on hand, are intended to refinance and replace Lear&#8217;s existing credit
      facilities and to fund the transactions contemplated by the merger. We intend
      to
      fund approximately $1.4 billion of the purchase price from our cash and cash
      equivalents and investments.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">If we
      complete the acquisition of Lear and fund the acquisition as we currently
      contemplate, under the financial tests in their indentures, we and AREH will
      not
      be able to incur additional indebtedness. However, our subsidiaries, other
      than
      AREH, are not subject to any of the covenants contained in the indentures with
      respect to our senior notes, including the covenants restricting debt
      incurred.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Cash
      Flows</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Net cash
      used in continuing operating activities was $11.5 million for the first three
      months of 2007 as compared to net cash used in continuing operating activities
      of $88.7 million in the first three months of 2006. The change in cash used
      in
      continuing operations for the three months ended March&#160;31, 2007 was due to
      a decrease in net cash used related to trading securities and changes in various
      working capital asset categories. Our cash and cash equivalents increased by
      $419.3 million at March&#160;31, 2007, from December 31, 2006, primarily due to
      the net proceeds from long term-debt of $492.1 million issued in January
      2007.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We are
      continuing to pursue the purchase of assets, including assets that may not
      generate positive cash flow, may be difficult to finance or may require
      additional capital, such as properties for development, non-performing loans,
      securities of companies that are undergoing or that may undergo restructuring,
      and other companies that are in need of capital. All of these activities require
      us to maintain a strong capital base and liquidity.</div>
    <div style="MARGIN: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">39</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
<div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 0pt; LINE-HEIGHT: 11pt">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p>
</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 18pt">
<strong>Borrowings</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6.65pt; TEXT-INDENT: 18pt">Long-term
      debt consists of the following (in $000s):</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="321">
            </td>
            <td width="15">
            </td>
            <td width="6">
            </td>
            <td width="49">
            </td>
            <td width="15">
            </td>
            <td width="6">
            </td>
            <td width="49">
            </td>
            <td width="4">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="429">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td colspan="2" valign="bottom" width="74" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>March&#160;31,<br>2007</strong></div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td colspan="2" valign="bottom" width="74" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>December
                31,<br>2006</strong></div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr>
            <td valign="bottom" width="429">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td colspan="2" valign="bottom" width="74">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center">(unaudited)</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="65">&#160;</td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="429">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Senior
                unsecured 7.125%&#160;notes due 2013&#160;&#8211; AREP</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">972,294</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN: 0pt">&#160;&#160;&#160;&#160;&#160;</div>
            </td>
            <td valign="bottom" width="8">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">480,000</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="429">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Senior
                unsecured 8.125%&#160;notes due 2012&#160;&#8211; AREP</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">351,327</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">351,246</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="429">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Senior
                secured 7.85%&#160;notes due 2012&#160;&#8211; ACEP</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">215,000</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">215,000</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="429">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Borrowings
                under credit facility&#160;&#8211; ACEP</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">40,000</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">40,000</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="429">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Mortgages
                payable</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">108,027</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">109,289</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="429">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Other</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="65" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">12,470</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="65" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt" align="right">13,425</div>
            </td>
            <td valign="bottom" width="5" style="border-bottom: white 0.5pt solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="429">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Total
                long-term debt</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">1,699,118</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8">&#160;</td>
            <td valign="bottom" width="65">
              <div style="MARGIN: 0pt" align="right">1,208,960</div>
            </td>
            <td valign="bottom" width="5">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="bottom" width="429">
              <div style="MARGIN-TOP: 3.35pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 11pt">Less
                current portion, including debt related to assets held for sale</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="65" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 11pt" align="right">(23,620</div>
            </td>
            <td valign="bottom" width="20">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 11pt">)</div>
            </td>
            <td valign="bottom" width="8" style="border-bottom: #000000 0.5pt solid;">&#160;</td>
            <td valign="bottom" width="65" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 11pt" align="right">(23,970</div>
            </td>
            <td valign="bottom" width="5">
              <div style="MARGIN-TOP: 3.35pt; MARGIN-BOTTOM: 0pt; LINE-HEIGHT: 11pt">)</div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="bottom" width="429">&#160;</td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="65" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">1,675,498</div>
            </td>
            <td valign="bottom" width="20">&#160;</td>
            <td valign="bottom" width="8" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt">$</div>
            </td>
            <td valign="bottom" width="65" style="border-bottom: #000000 3pt double;">
              <div style="MARGIN: 0pt" align="right">1,184,990</div>
            </td>
            <td valign="bottom" width="5" style="border-bottom: #ccffcc 3pt double;">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong><i>AREP
      Senior unsecured 7.125% notes due 2013</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      February 7, 2005, we issued $480.0 million aggregate principal amount of the
      7.125% notes, priced at 100% of principal amount. The 7.125% notes were issued
      pursuant to an indenture dated February 7, 2005 between us, as issuer, American
      Real Estate Finance Corp., or AREF, as co-issuer, AREH, as guarantor, and
      Wilmington Trust Company, as trustee (referred to herein as the 2005 Indenture).
      Other than AREH, no other subsidiaries guarantee payment on the notes. AREF,
      our
      wholly owned subsidiary, was formed solely for the purpose of serving as a
      co-issuer of the 7.125% notes.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      January 16, 2007, we issued an additional $500.0 million aggregate principal
      amount of 7.125% senior notes, or the additional 7.125% notes (the 7.125% notes
      and the additional 7.125% notes being referred to herein as the notes), priced
      at 98.4% of par, or at a discount of 1.6%, pursuant to the 2005 Indenture.
      The
      notes have a fixed annual interest rate of 7.125%, which will be paid every
      six
      months on February 15 and August 15 and will mature on February 15, 2013. At
      the
      time we issued the additional 7.125% senior notes, we entered into a new
      registration rights agreement in which we agreed to permit noteholders to
      exchange the notes for new notes which have been registered under the Securities
      Act. </div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong><i>AREP
      Senior unsecured 8.125% notes due 2012</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On May
      12, 2004, AREP and AREH co-issued senior unsecured 8.125% notes due 2012, or
      the
      8.125% notes, in the aggregate principal amount of $353 million. The 8.125%
      notes were priced at 99.266% of principal amount and have a fixed annual
      interest rate of 8.125%, which will be paid every six months on June 1 and
      December 1, commencing December 1, 2004. The 8.125% notes will mature on June
      1,
      2012. AREH is a guarantor of the debt. No other subsidiaries guarantee payment
      on the notes.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong><i>Senior
      unsecured notes restrictions and covenants &#8212; AREP</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      indentures governing our senior unsecured notes restrict the payment of cash
      dividends or distributions, the purchase of equity interests or the purchase,
      redemption, defeasance or acquisition of debt subordinated to the senior
      unsecured notes. The indentures also restrict the incurrence of debt or the
      issuance of disqualified stock, as defined, with certain exceptions, provided
      that we may incur debt or issue disqualified stock if, immediately after such
      incurrence or issuance, the ratio of the aggregate principal amount of all
      outstanding indebtedness of AREP and its subsidiaries on a consolidated basis
      to
      the tangible net worth of AREP and its subsidiaries on a consolidated basis
      would be less than 1.75 to 1.0. As of March&#160;31, 2007, such ratio was less
      than 1.75 to 1.0.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      indentures governing of our senior unsecured notes require that on each
      quarterly determination date we and the guarantor maintain a minimum ratio
      of
      cash flow to fixed charges, each as defined, of 1.5 to 1.0, for the four
      consecutive fiscal quarters most recently completed prior to such quarterly
      determination date. For the first fiscal quarter ended March&#160;31, 2007, the
      ratio of cash flow to fixed charges was greater than 1.5 to 1.0.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      indentures also require, on each quarterly determination date, that the ratio
      of
      total unencumbered assets, as defined, to the principal amount of unsecured
      indebtedness, as defined, be greater than 1.5 to 1.0 as of the last day of
      </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">40</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
<div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 0pt; LINE-HEIGHT: 11pt">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p>
</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0pt">the
      most recently completed fiscal quarter. As of March&#160;31, 2007, such ratio
      was in excess of 1.5 to 1.0. Based on this ratio, as of March&#160;31, 2007, we
      and AREH could have incurred up to approximately $1.4 billion of additional
      indebtedness.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong><i>AREP
      Senior Secured Revolving Credit Facility</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On August
      21, 2006, we and AREF, as the borrowers, and certain of our subsidiaries, as
      guarantors, entered into a credit agreement with Bear Stearns Corporate Lending
      Inc., as administrative agent, and certain other lender parties. Under the
      credit agreement, we are permitted to borrow up to $150.0 million, including
      a
      $50.0&#160;million sub-limit that may be used for letters of credit. Borrowings
      under the agreement, which are based on our credit rating, bear interest at
      LIBOR plus 1.0% to 2.0%. We pay an unused line fee of 0.25% to 0.5%. As of
      March&#160;31, 2007, there were no borrowings under the facility.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Obligations
      under the credit agreement are guaranteed by and secured by liens on
      substantially all of the assets of certain of our indirect wholly owned holding
      company subsidiaries. The credit agreement has a term of four years and all
      amounts are due and payable on August 21, 2010. The credit agreement includes
      covenants that, among other things, restrict the creation of liens and certain
      dispositions of property by holding company subsidiaries that are guarantors.
      Obligations under the credit agreement are immediately due and payable upon
      the
      occurrence of certain events of default.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong><i>Senior
      secured 7.85% notes due 2012 &#8212; ACEP</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      indenture governing ACEP&#8217;s 7.85% senior secured notes due 2012 restrict the
      payment of cash dividends or distributions by ACEP, the purchase of its equity
      interests, the purchase, redemption, defeasance or acquisition of debt
      subordinated to ACEP&#8217;s notes and investments as &#8220;restricted payments.&#8221; The
      indenture also prohibits the incurrence of debt or the issuance of disqualified
      or preferred stock, as defined, by ACEP, with certain exceptions, provided
      that
      ACEP may incur debt or issue disqualified stock if, immediately after such
      incurrence or issuance, the ratio of consolidated cash flow to fixed charges
      (each as defined) for the most recently ended four full fiscal quarters for
      which internal financial statements are available immediately preceding the
      date
      on which such additional indebtedness is incurred or disqualified stock or
      preferred stock is issued would be at least 2.0 to 1.0, determined on a pro
      forma basis giving effect to the debt incurrence or issuance. As of
      March&#160;31, 2007, such ratio was in excess of 2.0 to 1.0. The indenture also
      restricts the creation of liens, the sale of assets, mergers, consolidations
      or
      sales of substantially all of ACEP&#8217;s assets, the lease or grant of a license,
      concession, other agreements to occupy, manage or use ACEP&#8217;s assets, the
      issuance of capital stock of restricted subsidiaries and certain related party
      transactions. The ACEP notes allow it to incur indebtedness, among other things,
      of up to $ 50.0 million under credit facilities, non-recourse financing of
      up to
      $15.0 million to finance the construction, purchase or lease of personal or
      real
      property used in its business, permitted affiliate subordinated indebtedness
      (as
      defined), the issuance of additional 7.85% senior secured notes due 2012 in
      an
      aggregate principal amount not to exceed 2.0 times net cash proceeds received
      from equity offerings and permitted affiliate subordinated debt, and additional
      indebtedness of up to $10.0 million.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong><i>ACEP
      Senior Secured Revolving Credit Facility</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Effective
      May 11, 2006, ACEP, and certain of ACEP&#8217;s subsidiaries, as guarantors, entered
      into an amended and restated credit agreement with Wells Fargo Bank N.A., as
      syndication agent, Bear Stearns Corporate Lending Inc., as administrative agent,
      and certain other lender parties. As of March&#160;31, 2007, the interest rate
      on the outstanding borrowings under the credit facility was 6.82% per annum.
      The
      credit agreement amends and restates, and is on substantially the same terms
      as,
      a credit agreement entered into as of January 29, 2004. Under the amended and
      restated credit agreement, ACEP will be permitted to borrow up to $60.0 million.
      Obligations under the credit agreement are secured by liens on substantially
      all
      of the assets of ACEP and its subsidiaries. The credit agreement has a term
      of
      four years and all amounts are due and payable on May 10, 2010. As of
      March&#160;31, 2007, there were $40.0 million of borrowings under the credit
      agreement. The borrowings were incurred to finance a portion of the purchase
      price of the Aquarius.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      credit agreement includes covenants that, among other things, restrict the
      incurrence of additional indebtedness by ACEP and its subsidiaries, the issuance
      of disqualified or preferred stock, as defined, the creation of liens by ACEP
      or
      its subsidiaries, the sale of assets, mergers, consolidations or sales of
      substantially all of ACEP&#8217;s assets, the lease or grant of a license or
      concession, other agreements to occupy, manage or use ACEP&#8217;s assets, the
      issuance of capital stock of restricted subsidiaries and certain related party
      transactions. The credit agreement also </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">41</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
	<div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 0pt; LINE-HEIGHT: 11pt">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p>
</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0pt">requires
      that, as of the last date of each fiscal quarter, ACEP&#8217;s ratio of consolidated
      first lien debt to consolidated cash flow not be more than 1.0 to 1.0. As of
      March&#160;31, 2007, such ratio was less than 1.0 to 1.0. As of March&#160;31,
      2007, ACEP was in compliance with each of the covenants.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      restrictions imposed by ACEP&#8217;s senior secured notes and the credit facility
      likely will limit our receiving payments from the operations of our hotel and
      gaming properties.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong><i>Mortgages
      Payable</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Mortgages
      payable, all of which are non-recourse to us, bear interest at rates between
      4.97% and 7.99% and have maturities between September&#160;1, 2008 and July 1,
      2016.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>WestPoint
      Home Secured Revolving Credit Agreement</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On June
      16, 2006, WestPoint Home, Inc., an indirect wholly-owned subsidiary of WPI,
      entered into a $250.0&#160;million loan and security agreement with Bank of
      America, N.A., as administrative agent and lender. On September&#160;18, 2006,
      The CIT Group/Commercial Services, Inc., General Electric Capital Corporation
      and Wells Fargo Foothill, LLC were added as lenders under this credit agreement.
      Under the five-year agreement, borrowings are subject to a monthly borrowing
      base calculation and include a $75.0 million sub-limit that may be used for
      letters of credit. Borrowings under the agreement bear interest, at the election
      of WestPoint Home, either at the prime rate adjusted by an applicable margin
      ranging from minus 0.25% to plus 0.50% or LIBOR adjusted by an applicable margin
      ranging from plus 1.25% to 2.00%. WestPoint Home pays an unused line fee of
      0.25% to 0.275%. Obligations under the agreement are secured by WestPoint Home&#8217;s
      receivables, inventory and certain machinery and equipment.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      agreement contains covenants including, among others, restrictions on the
      incurrence of indebtedness, investments, redemption payments, distributions,
      acquisition of stock, securities or assets of any other entity and capital
      expenditures. However, WestPoint Home is not precluded from effecting any of
      these transactions if excess availability, after giving effect to such
      transaction, meets a minimum threshold. As of March&#160;31, 2007, there were no
      borrowings under the agreement, but there were outstanding letters of credit
      of
      approximately $26.6 million, the majority of which relate to trade obligations.
      </div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong><i>Quarterly
      Distributions</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      May&#160;4, 2007, the Board of Directors approved a $0.05 increase in our
      quarterly distribution policy and payment of a quarterly cash distribution
      of
      $0.15 per unit on our depositary units payable in the second quarter of fiscal
      2007. The distribution will be paid on June&#160;1, 2007 to depositary
      unitholders of record at the close of business on May&#160;22, 2007. Under the
      terms of the indenture dated April&#160;5, 2007 governing our senior convertible
      notes due 2013, we will also be making a $0.05 distribution to holders of these
      notes in accordance with the formula set forth in the indenture.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On
      February&#160;27, 2007, the Board of Directors approved payment of a quarterly
      cash distribution of $0.10 per unit on our depositary units in the first quarter
      of 2007. The distribution was paid on March&#160;29, 2007 to depositary
      unitholders of record at the close of business on March&#160;14, 2007.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      payment of future distributions will be determined by the Board of Directors
      quarterly. There can be no assurance as to whether or in what amounts any future
      distributions might be paid.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong><i>Contractual
      Commitments</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As of
      March&#160;31, 2007, other than the issuance of an additional $500.0 million
      aggregate principal amount of the additional 7.125% senior notes due 2013,
      there
      were no other material changes in our contractual obligations or any other
      long-term liabilities reflected on our consolidated balance sheet as compared
      to
      those reported in our Annual Report on Form 10-K for fiscal 2006, filed with
      the
      Securities and Exchange Commission on March 6, 2006.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong><i>Off
      Balance Sheet Arrangements</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We do
      not
      maintain any off-balance sheet transactions, arrangements, obligations or other
      relationships with unconsolidated entities or others.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">42</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
	<div style="MARGIN-TOP: 5pt; MARGIN-BOTTOM: 0pt; PAGE-BREAK-BEFORE: always; TEXT-INDENT: 0pt; LINE-HEIGHT: 11pt">
	<p align="left"> <strong><a href="#index">Back to Index</a></strong></p>
</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0pt"><strong><i>Segment
      Liquidity and Capital Resources</i></strong></div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Gaming</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">ACEP&#8217;s
      primary source of cash is from the operation of its properties. At
      March&#160;31, 2007, ACEP had cash and cash equivalents of $70.5 million. For
      the three months ended March&#160;31, 2007, net cash provided by operating
      activities (including the operations of the Aquarius) totaled approximately
      $18.5 million compared to approximately $15.4 million for the three months
      ended
      March&#160;31, 2006. The change in cash provided by operating activities was
      attributable to the increase in net income from $9.8 million for the three
      months ended March&#160;31, 2006 to $11.8&#160;million for the three months
      ended March&#160;31, 2007, reflecting factors discussed above. In addition to
      cash from operations, cash is available to ACEP, if necessary, under the senior
      secured revolving credit facility entered into by ACEP, as borrower, and certain
      of our subsidiaries, as guarantors. In May 2006, ACEP entered into an amendment
      to the senior secured revolving credit facility, increasing the amount of
      borrowings allowed by it to $60.0 million, subject to ACEP complying with
      financial and other covenants (discussed below), until May 12, 2010. ACEP
      borrowed the maximum amount available under the facility, $60.0 million, in
      order to fund its acquisition of the Aquarius. At March&#160;31, 2007, ACEP had
      outstanding borrowings under the senior secured revolving credit facility of
      $40.0 million and availability of $20.0 million.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">ACEP&#8217;s
      primary use of cash during the three months ended March&#160;31, 2007 was for
      operating expenses, to pay interest on ACEP&#8217;s 7.85% senior secured notes due
      2012 and interest under ACEP&#8217;s senior secured revolving credit facility. ACEP&#8217;s
      capital spending was approximately $3.8 million, and $2.2 million for the three
      months ended March&#160;31, 2007 and 2006, respectively. ACEP&#8217;s has estimated
      its 2007 capital spending for its existing facilities at approximately $31.1
      million, which it anticipates to include approximately $14.9 million to purchase
      new and convert existing slot machines and approximately $8.5 million for
      remaining Aquarius hotel renovations. The remainder of ACEP&#8217;s capital spending
      estimate for 2007 will be for upgrades or maintenance to its existing
      assets.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">ACEP
      believes operating cash flows will be adequate to meet its anticipated
      requirements for working capital, capital spending and scheduled interest
      payments on the notes and under the senior secured revolving credit facility,
      lease payments and other indebtedness at least through the next twelve months.
      However, additional financing, if needed, may not be available to ACEP,or if
      available, the financing may not be on terms favorable to ACEP. ACEP&#8217;s estimates
      of its reasonably anticipated liquidity needs may not be accurate and new
      business opportunities or other unforeseen events could occur, resulting in
      the
      need to raise additional funds from outside sources.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      indenture governing ACEP&#8217;s 7.85% senior secured notes due 2012 restrict the
      payment of cash dividends or distributions, the purchase of equity interests,
      and the purchase, redemption, defeasance or acquisition of debt subordinated
      to
      the investments as &#8220;restricted payments&#8221; by ACEP. The indenture also prohibits
      the incurrence of debt and the issuance of disqualified or preferred stock,
      as
      defined, by ACEP and its restricted subsidiaries, with certain exceptions,
      provided that ACEP may incur debt or issue disqualified or preferred stock
      if,
      immediately after such incurrence or issuance, the ratio of consolidated cash
      flow to fixed charges (each as defined in the indenture governing the 7.85%
      senior secured notes due 2012) for the most recently ended four full fiscal
      quarters for which internal financial statements are available immediately
      preceding the date on which such additional indebtedness is incurred or
      disqualified or preferred stock is issued would have been at least 2.0 to 1.0,
      determined on a pro forma basis giving effect to the debt incurrence or
      issuance. As of March&#160;31, 2007, such ratio was 4.3 to 1.0. The indenture
      also restricts the creation of liens, the sale of assets, mergers,
      consolidations or sales of substantially all of ACEP&#8217;s assets, the lease or
      grant of a license, concession, other agreements to occupy, manage or use its
      assets, the issuance of capital stock of restricted subsidiaries and certain
      related party transactions. The indenture allows ACEP, and its restricted
      subsidiaries, to incur indebtedness, among other things, of up to $50.0 million
      under credit facilities, non-recourse financing of up to $15.0 million to
      finance the construction, purchase or lease of personal or real property used
      in
      its business, permitted affiliate subordinated indebtedness (as defined),
      additional 7.85% senior secured notes due 2012 in an aggregate principal amount
      not to exceed 2.0 times net cash proceeds received from equity offerings and
      permitted affiliate subordinated debt and additional indebtedness of up to
      $10
      million.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Additionally
      as described above, ACEP has a senior secured revolving credit facility that
      allows for borrowings of up to $60.0 million, including the issuance of letters
      of credit of up to $10.0 million. Loans made under the senior secured revolving
      facility will mature and the commitments under them will terminate in May 2010.
      The facility contains restrictive covenants similar to those contained in the
      7.85% senior secured notes due 2012. In addition, the facility requires that,
      as
      of the last date of each fiscal quarter, ACEP&#8217;s ratio of consolidated first lien
      debt to </div>
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    <div style="MARGIN: 0pt" align="center">43</div>
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    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0pt">consolidated
      cash flow be not more than 1.0 to 1.0. As of March&#160;31, 2007, this ratio was
      0.5 to 1.0. At March&#160;31, 2007, there were $40.0 million of borrowings
      outstanding under the facility and availability of $20.0 million.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Real
      Estate</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Our real
      estate operating units generate cash though rentals, leases and asset sales
      (principally sales of rental and residential properties) and the operation
      of
      resorts. All of these operations generate cash flows from operations.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Real
      estate development activities require a significant amount of funds. In 2007,
      our development operations are expected to require cash expenditures of
      approximately $50 million. We expect that such amounts will be funded from
      unit
      sales and, to the extent such proceeds are insufficient, by AREP from available
      cash.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">During
      the three months ended March&#160;31, 2007, we sold one rental real estate
      property for $4.4 million, which was unencumbered by mortgage debt.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">During
      the three months ended March&#160;31, 2006, we sold four rental real estate
      properties for $1.0 million, which were unencumbered by mortgage debt.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong>Home
      Fashion</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">For the
      quarter ended March&#160;31, 2007, our Home Fashion segment had a negative cash
      flow from operations of $23.7 million. The negative cash flow from operations
      was principally due to net operating losses and ongoing restructuring efforts
      offset in part by an $8.7 million reduction in working capital. WPI expects
      to
      continue its restructuring efforts and, accordingly, expects that restructuring
      charges and operating losses will continue to be incurred through the end of
      fiscal 2007.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">At
      March&#160;31, 2007, WPI had $148.9 million of unrestricted cash. There were no
      borrowings under the WestPoint Home senior secured revolving credit agreement,
      but there were outstanding letters of credit of $26.6&#160;million. Based upon
      the eligibility and reserve calculations within the agreement, WestPoint Home
      had unused borrowing availability of approximately $132.1 million at
      March&#160;31, 2007.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The
      senior secured revolving credit agreement contains various covenants including,
      among others, restrictions on indebtedness, investments, redemption payments,
      distributions, acquisition of stock, securities or assets of any other entity
      and capital expenditures. However, WestPoint Home is not precluded from
      effecting any of these, if excess availability, as defined, after giving effect
      to any such debt issuance, investment, redemption, distribution or other
      transition or payment restricted by covenant meets a minimum threshold.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Capital
      expenditures by WPI were $12.4 million for the quarter ended March&#160;31,
      2007, compared to $1.4&#160;million for the comparable period last year. Capital
      expenditures for fiscal 2007 are expected to total approximately $28.1 million.
      During the first quarter of 2007, WPI received $6.7 million of net proceeds
      from
      sale of assets as compared to $7.1 million in the comparable period last
      year.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Through
      a
      combination of its existing cash on hand and its borrowing availability under
      the WestPoint Home senior secured revolving credit facility, WPI believes that
      it has adequate capital resources and liquidity to meet its anticipated
      requirements to continue its operational restructuring initiatives and for
      working capital, capital spending and scheduled payments on the notes payable
      at
      least through the next twelve months. However, depending upon the levels of
      additional acquisitions and joint venture investment activity, if any,
      additional financing, if needed, may not be available to WPI, or if available,
      the financing may not be on terms favorable to WPI. WPI&#8217;s estimates of its
      reasonably anticipated liquidity needs may not be accurate and new business
      opportunities or other unforeseen events could occur, resulting in the need
      to
      raise additional funds from outside sources.</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>Forward-Looking
      Statements</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Statements
      included in &#8220;Management&#8217;s Discussion and Analysis of Financial Condition and
      Results of Operations&#8221; which are not historical in nature are intended to be,
      and are hereby identified as, &#8220;Forward-Looking Statements&#8221; for purposes of the
      safe harbor provided by Section 27A of the Securities Act and Section 21E of
      the
      1934 Act, as amended by Public Law 104-67.</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Forward
      looking statements regarding management&#8217;s present plans or expectations involve
      risks and uncertainties and changing economic or competitive conditions, as
      well
      as the negotiation of agreements with third </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">44</div>
    <div style="MARGIN: 0pt"><br></div>
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</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0pt">parties,
      which could cause results to differ from present plans or expectations, and
      such
      differences could be material. Readers should consider that such statements
      speak only as of the date hereof.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="32"></a>Certain
  Trends and Uncertainties</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Our
      future results could differ materially from our forward-looking statements.
      Factors that could cause or contribute to such differences include, but are
      not
      limited to those discussed in this document. These statements are subject to
      risks and uncertainties that could cause actual results to differ materially
      from those predicted. Also, please see Risk Factors in our Annual Report on
      Form
      10-K for fiscal 2006.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="33"></a>Item
  3. Quantitative and Qualitative Disclosures About Market Risk</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">Market
      risk is the risk of loss arising from adverse changes in market rates and
      prices, such as interest rates, foreign currency exchange rates and commodity
      prices. Our significant market risks are primarily associated with interest
      rates and equity prices. Reference is made to Part II, Item 7A of our Annual
      Report on Form 10-K for fiscal 2006 that we filed with the SEC on March 6,
      2007
      for disclosures relating to interest rates and our equity prices. As of
      March&#160;31, 2007 there have been no material changes in the market risks in
      these two categories.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="34"></a>Item
  4. Controls and Procedures</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">As of
      March&#160;31, 2007, our management, including our Principal Executive Officer
      and Chief Financial Officer, evaluated the effectiveness of the design and
      operation of the Company&#8217;s and our subsidiaries&#8217; disclosure controls and
      procedures pursuant to the Rule 13a-15(e) and 15d-15(e) promulgated under the
      &#8217;34 act. Based upon that evaluation, our Principal Executive Officer and Chief
      Financial Officer concluded that our disclosure controls and procedures are
      currently effective to ensure that information required to be disclosed by
      us in
      reports that we file or submit under the Exchange Act is recorded, processed,
      summarized and reported within the time periods specified in Securities and
      Exchange Commission rules and forms, and include controls and procedures
      designed to ensure that information required to be disclosed by us in such
      reports is accumulated and communicated to our management, including our
      principal executive officer and principal financial officer, as appropriate
      to
      allow timely decisions regarding required disclosure.</div>
    <div style="MARGIN-TOP: 10pt; PADDING-LEFT: 18pt; MARGIN-BOTTOM: 0pt"><strong><i>Changes
      in Internal Control Over Financial Reporting</i></strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">There
      have not been any changes in our internal control over financial reporting
      during the three months ended March&#160;31, 2007 that have materially affected,
      or are reasonably likely to materially affect, our internal control over
      financial reporting.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">45</div>
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</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0pt">
  <p align="center"><strong><a name="35"></a>PART II. OTHER INFORMATION</strong></p>
</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="36"></a>Item
  1. Legal Proceedings</strong></div>

<div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We are
  from time to time parties to various legal proceedings arising out of our businesses.
  We believe however, that other than the proceedings described in Part I, Item
  3 of our Annual Report on Form 10-K for fiscal 2006, filed with the SEC on March
  6, 2007, including that relating to WPI and Lear discussed below, there are
  no proceedings pending or threatened against us which, if determined adversely,
  would have a material adverse effect on our business, financial condition, results
  of operations or liquidity</div>
    <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><i>WPI
      Litigation</i></strong></div>

<div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">In August
  2005, WPI acquired substantially all of the assets of WestPoint Stevens, Inc.
  pursuant to an order of the Bankruptcy Court, or the Sale Order. We were holders
  of approximately 39.99% of the outstanding first lien debt and approximately
  51.21% of the outstanding second lien debt of WestPoint Stevens, Inc. Since
  2005, we have been involved in litigation with certain of the first lien holders
  of WestPoint Stevens, Inc., or the Contrarian Group, in the Bankruptcy Court,
  the U.S. District Court for the Southern District of New York and, since 2006,
  in the Delaware Chancery Court, relating to the Sale Order and our ownership
  of a majority of the common stock of WPI. In late 2005, the District ruled on
  the Contrarian Group&#8217;s appeal of the Sale Order and remanded the matter
  to the Bankruptcy Court. On April 13, 2006, the Bankruptcy Court entered a remand
  order, or the Remand Order, which provides, among other things, that all of
  the shares of common stock and rights to acquire shares of common stock of WPI
  issued to us and the other first lien lenders or held in escrow pursuant to
  the Sale Order constituted &#8220;replacement collateral&#8221;, other than
  5,250,000 shares of common stock that we acquired for cash. The Bankruptcy Court
  also issued a stay of the Remand Order pending the parties&#8217; appeal. Both
  parties appealed the Bankruptcy Court&#8217;s Remand Order to the District Court.
  In addition, the Contrarian Group requested that the stay be lifted or that
  we be required to post a bond as a condition to the continuance of the stay.
  On May 9, 2007, the District Court denied the Contrarian Group&#8217;s motion
  to lift the stay of the Remand Order, but conditioned the continuation of the
  stay on the posting of a bond of $200 million by May 17, 2007. The order is
  without prejudice to the right of any party to seek a change in the amount of
  the bond. We are currently reviewing the order. As of the date hereof, the District
  Court has not rendered a decision on the cross-appeals.</div>

<div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On January
  19, 2007, the trustee for the first lien lenders, Beal Bank, and certain of
  the first lien lenders filed an Amended Complaint, captioned <em>Beal Bank,
  S.S.B. et al v. WestPoint International, Inc., et al.</em> Plaintiffs seek,
  among other relief, an order declaring that WPI is obliged to register the common
  stock (other than the 5,250,000 shares purchased by us) in Beal Bank&#8217;s
  name, an order declaring certain corporate governance changes implemented in
  2005 invalid, an order declaring invalid the actions taken at the December 20,
  2006 stockholders&#8217; meeting and an order to &#8220;unwind&#8221; the issuance
  to us in December 2006 of the preferred stock of WPI, or, alternatively, directing
  that such preferred stock be held in trust. We have filed a motion to dismiss
  the Delaware action to which the Plaintiffs have objected. Oral argument is
  scheduled for May 23, 2007.</div>

<div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We currently
  own approximately 67.7% of the outstanding shares of common stock and 100% of
  the preferred stock of WPI. As a result of the District Court&#8217;s order
  in the Bankruptcy case, the proceedings on remand, and the proceedings in the
  Delaware action, our percentage of the outstanding shares of common stock of
  WPI could be reduced to less than 50% and perhaps substantially less and our
  ownership of the preferred stock of WPI could also be affected. If we were to
  lose control of WPI, it could adversely affect the business and prospects of
  WPI and the value of our investment in it. In addition, we consolidated the
  balance sheet of WPI as of March 31, 2007 and WPI&#8217;s results of operations
  for the period from the date of acquisition through March 31, 2007. If we were
  to own less than 50% of the outstanding common stock or the challenge to our
  preferred stock ownership is successful, we would have to evaluate whether we
  should consolidate WPI and if so our financial statements could be materially
  different than as presented as of March 31, 2007, December 31, 2006 and December
  31, 2005 and for the periods then ended.</div>

<div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We
cannot predict the outcome of these proceedings or the ultimate impact
    on our investment in WPI or the business prospects of WPI.</div>


<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt  TEXT-INDENT: 0pt"><strong><i>Lear
  Corporation</i></strong></div>

<div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">
  We have been named as a defendant in various actions filed in connection
    with our agreement and plan of merger to acquire Lear Corporation. The following
    actions have been filed in the Court of Chancery of State of</div>
   <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">46</div>
    <div style="MARGIN: 0pt"><br></div>
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</div>

	<div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 0pt">Delaware,
	New Castle County: Market Street Securities, Inc. v. Rossiter,
    et al.; Harry Massie, Jr. v. Lear Corporation, et al.; and Classic Fund Management
    AG v. Lear Corporation, et al. These actions are purported class actions filed
    on behalf of stockholders of Lear and have been consolidated into a single
    action that names as defendants the Company, certain of our affiliates and
    one of our directors who serves on the board of Lear, alleging generally that
    we and our named affiliates aided and abetted the Lear directors&#8217; claimed
    breaches of their fiduciary duties to the stockholders of Lear. On February
    23, 2007, the plaintiffs in the consolidated Delaware action filed a consolidated
    amended complaint, a motion for expedited proceedings and a motion to preliminarily
    enjoin our proposed merger with Lear. A motion for a preliminary injunction
    is scheduled to be heard on June 6, 2007.</p>
</div>

  <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The following
  actions have been filed in the Circuit court for Oakland County, Michigan:
  Louis Carulli v. Lear Corp et al.; Emilio Valentine v. Lear Corp et al.;
  and Jeanette Ciambella v. Lear Corp. et al. These actions are also purported
  class actions on behalf of stockholders of Lear that assert claims against us, and
  one of our directors who also serves on the board of Lear. The allegations in these
  actions are generally similar to those asserted in the Delaware lawsuits. On May 9,
  2007, the Circuit court ruled in our favor and dismissed all three of these
  lawsuits based upon a determination that plaintiffs&#8217; claims should be adjudicated
  in the above referenced Delaware action.</div>
<div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">On March
  1, 2007, we and two of our directors were named as defendants in a purported
  class action lawsuit filed in the United States District Court in Detroit, Michigan
  as a purported class action on behalf of participants in certain of Lear&#8217;s stock
  option plans, alleging that members of Lear&#8217;s board of directors breached their
  fiduciary duties to the employees as owners of shares of the stock of Lear and
  that the transaction violates the Employment Retirement Income Security Act.</div>

<div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">We
intend to vigorously defend against these claims.</div>

	 <div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="37"></a>Item
  1A. Risk Factors</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The risk
      factors included in our Annual Report on Form 10-K for the fiscal year ended
      December 31, 2006, filed with the SEC on March 6, 2007 have not materially
      changed.</div>

<div style="MARGIN-TOP: 10pt; MARGIN-BOTTOM: 0pt"><strong><a name="38"></a>Item
  6. Exhibits</strong></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: 18pt">The list
      of exhibits required by Item 601 of Regulation S-K and filed as part of this
      report is set forth in the Exhibit Index.</div>
    <div style="MARGIN: 0pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">47</div>
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</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 6pt; TEXT-INDENT: 0pt">
  <p align="center"> <strong><a name="39"></a>SIGNATURES</strong></p>
</div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 15pt; TEXT-INDENT: 18pt">Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.</div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="224">
            </td>
            <td width="23">
            </td>
            <td width="219">
            </td>
          </tr>
          <tr>
            <td valign="top" width="299">&#160;</td>
            <td colspan="2" valign="top" width="324">
              <div style="MARGIN: 0pt"><strong>AMERICAN REAL ESTATE PARTNERS,
                L.P.</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="299">&#160;</td>
            <td valign="top" width="31">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">By:&#160;&#160;</div>
            </td>
            <td valign="top" width="293">
              <div style="MARGIN: 0pt">American Property Investors, Inc., its
                general&#160;partner</div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="299">&#160;</td>
            <td valign="top" width="31">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">By:</div>
            </td>
            <td valign="top" width="293" style="border-bottom: #000000 0.5pt solid;">
              <div style="MARGIN: 0pt">/s/ KEITH MEISTER</div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="299">&#160;</td>
            <td valign="top" width="31">&#160;</td>
            <td valign="top" width="293">
              <div style="MARGIN: 0pt">Keith Meister <br>Principal Executive
                Officer</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt">Date: May 9, 2007</div>
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 10pt" align="center"><br><br></div>
    <div style="MARGIN: 0pt" align="center">48</div>
    <div style="MARGIN: 0pt"><br></div>
    <hr style="PADDING-BOTTOM: 7.2pt; PADDING-TOP: 7.2pt" noshade size="1">
    <div style="MARGIN-TOP: 0pt; MARGIN-BOTTOM: 10pt; PAGE-BREAK-BEFORE: always" align="center"><strong>EXHIBITS
      INDEX</strong></div>
    <div>
      <table align="center" cellspacing="0" style="FONT-SIZE: 10pt">

          <tr>
            <td width="49">
            </td>
            <td width="8">
            </td>
            <td width="410">
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="65" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt"><strong>Exhibit
                No.</strong></div>
            </td>
            <td valign="top" width="10">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt" align="center"><strong>&#160;&#160;&#160;&#160;</strong></div>
            </td>
            <td valign="bottom" width="547" style="border-bottom: #000000 0.5pt solid;">
              <div style="FONT-SIZE: 8pt; MARGIN: 0pt; LINE-HEIGHT: 10pt" align="center"><strong>Description</strong></div>
            </td>
          </tr>
          <tr>
            <td valign="bottom" width="65">&#160;</td>
            <td valign="top" width="10">&#160;</td>
            <td valign="bottom" width="547">&#160;</td>
          </tr>
          <tr>
            <td valign="top" width="65">
              <div style="MARGIN-TOP: 1.65pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt; LINE-HEIGHT: 10.35pt">Exhibit&#160;31.1</div>
            </td>
            <td valign="top" width="10">&#160;</td>
            <td valign="bottom" width="547">
              <div style="MARGIN: 0pt">Certification of Principal Executive Officer
                pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.</div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="65">
              <div style="MARGIN-TOP: 2.5pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">Exhibit
                31.2</div>
            </td>
            <td valign="top" width="10">&#160;</td>
            <td valign="bottom" width="547">
              <div style="MARGIN-TOP: 2.5pt; MARGIN-BOTTOM: 0pt">Certification of
                Principal Financial Officer pursuant to Section 302(a) of the
                Sarbanes-Oxley Act of 2002.</div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="65">
              <div style="MARGIN-TOP: 2.5pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">Exhibit
                32.1</div>
            </td>
            <td valign="top" width="10">&#160;</td>
            <td valign="bottom" width="547">
              <div style="MARGIN-TOP: 2.5pt; MARGIN-BOTTOM: 0pt">Certification of
                Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.</div>
            </td>
          </tr>
          <tr>
            <td valign="top" width="65">
              <div style="MARGIN-TOP: 2.5pt; PADDING-LEFT: 6pt; MARGIN-BOTTOM: 0pt; TEXT-INDENT: -6pt">Exhibit
                32.2</div>
            </td>
            <td valign="top" width="10">&#160;</td>
            <td valign="bottom" width="547">
              <div style="MARGIN-TOP: 2.5pt; MARGIN-BOTTOM: 0pt">Certification of
                Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br></div>
    <div style="MARGIN-TOP: 6.65pt; MARGIN-BOTTOM: 0pt"><br><br></div>
    <div style="MARGIN: 0pt" align="center">48</div>
    <div style="MARGIN: 0pt"><br></div>
  </body>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>v073849_ex31-1.htm
<TEXT>
<html>
  <head>
    <title>
</title>
</head>
  <body bgcolor="#ffffff"><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>EXHIBIT&#160;31.1</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><a name="FIS_CERTIFICATION">&#160;</a></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CERTIFICATION
      OF PRINCIPAL EXECUTIVE OFFICER</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">I,
      Keith
      A. Meister certify that:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.&#160;I
      have reviewed this quarterly report on Form&#160;10-Q of American Real Estate
      Partners, L.P. for the period ended March 31, 2007 (the &#8220;Report&#8221;);</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.&#160;Based
      on my knowledge, this Report does not contain any untrue statement of a material
      fact or omit to state a material fact necessary to make the statements made,
      in
      light of the circumstances under which such statements were made, not misleading
      with respect to the period covered by this Report;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.&#160;Based
      on my knowledge, the financial statements, and other financial information
      included in this Report, fairly present in all material respects the financial
      condition, results of operations and cash flows of the Registrant as of, and
      for, the periods presented in this Report;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.&#160;The
      Registrant&#8217;s other certifying officer and I are responsible for establishing and
      maintaining disclosure controls and procedures (as defined in Exchange Act
      Rules&#160;13a-15(e) and 15d-15(e)) and internal control over financial
      reporting as defined in Exchange Act Rules&#160;13a-15(f) and 15d-15(f) for the
      Registrant and we have:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a)&#160;designed
      such disclosure controls and procedures, or caused such disclosure controls
      and
      procedures to be designed under our supervision, to ensure that material
      information relating to the Registrant, including its consolidated subsidiaries,
      is made known to us by others within those entities, particularly during the
      period in which this Report is being prepared;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b)&#160;designed
      such internal control over financial reporting, or caused such internal control
      over financial reporting to be designed under our supervision, to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external purposes in accordance with
      generally accepted accounting principles;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">c)&#160;evaluated
      the effectiveness of the Registrant&#8217;s disclosure controls and procedures and
      presented in the Report our conclusions about the effectiveness of the
      disclosure controls and procedures as of the end of the period covered by this
      report based on such evaluation;&#160;and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">d)&#160;disclosed
      in this Report any change in the Registrant&#8217;s internal control over financial
      reporting that occurred during the Registrant&#8217;s most recent fiscal quarter (the
      Registrant&#8217;s fourth fiscal quarter in the case of an annual report) that has
      materially affected, or is reasonably likely to materially affect, the
      Registrant&#8217;s internal control over financial reporting.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.&#160;The
      Registrant&#8217;s other certifying officer and I have disclosed, based on our most
      recent evaluation of internal control over financial reporting, to the
      Registrant&#8217;s auditors and the audit committee of Registrant&#8217;s board of directors
      (or persons performing the equivalent functions):</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a)&#160;all
      significant deficiencies and material weaknesses in the design or operation
      of
      internal control over financial reporting which are reasonably likely to
      adversely affect the Registrant&#8217;s ability to record, process, summarize and
      report financial information;&#160;and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b)&#160;any
      fraud, whether or not material, that involves management or other employees
      who
      have a significant role in the Registrant&#8217;s internal control over financial
      reporting.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td width="60%">&#160;</td>
            <td align="justify" valign="top" width="40%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/
                KEITH A. MEISTER</font></div>
            </td>
          </tr>
          <tr>
            <td width="60%">&#160;</td>
            <td align="justify" valign="top" width="40%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Keith
                A Meister</font></div>
            </td>
          </tr>
          <tr>
            <td width="60%">&#160;</td>
            <td align="justify" valign="top" width="40%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Principal
                Executive Officer and Vice Chairman of the Board of American Property
                Investors, Inc., the General Partner of American Real Estate Partners,
                L.P.</font></div>
            </td>
          </tr>
          <tr>
            <td width="60%">&#160;</td>
            <td align="justify" valign="top" width="40%">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: -27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Date:
      May
      9, 2007</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: -27pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">&#160;</div>
      </div>
      <div id="PN">
        <div style="WIDTH: 100%; TEXT-ALIGN: center">&#160;</div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">&#160;</div>
      </div>
    </div>
  </body>
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>v073849_ex31-2.htm
<TEXT>
<html>
  <head>
    <title>
</title>
</head>
  <body bgcolor="#ffffff"><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>EXHIBIT&#160;31.2</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="right"><a name="FIS_CERTIFICATION_2">&#160;</a></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>CERTIFICATION
      OF PRINCIPAL FINANCIAL OFFICER</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">I,
      Andrew
      R. Skobe, certify that:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.&#160;I
      have reviewed this quarterly report on Form&#160;10-Q of American Real Estate
      Partners, L.P. for the period ended March 31, 2007 (the &#8220;Report&#8221;);</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.&#160;Based
      on my knowledge, this Report does not contain any untrue statement of a material
      fact or omit to state a material fact necessary to make the statements made,
      in
      light of the circumstances under which such statements were made, not misleading
      with respect to the period covered by this Report;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.&#160;Based
      on my knowledge, the financial statements, and other financial information
      included in this Report, fairly present in all material respects the financial
      condition, results of operations and cash flows of the Registrant as of, and
      for, the periods presented in this Report;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.&#160;The
      Registrant&#8217;s other certifying officer and I are responsible for establishing and
      maintaining disclosure controls and procedures (as defined in Exchange Act
      Rules&#160;13a-15(e) and 15d-15(e)) and internal control over financial
      reporting as defined in Exchange Act Rules&#160;13a-15(f) and 15d-15(f) for the
      Registrant and have:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a)&#160;designed
      such disclosure controls and procedures, or caused such disclosure controls
      and
      procedures to be designed under our supervision, to ensure that material
      information relating to the Registrant, including its consolidated subsidiaries,
      is made known to us by others within those entities, particularly during the
      period in which this Report is being prepared;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b)&#160;designed
      such internal control over financial reporting, or caused such internal control
      over financial reporting to be designed under our supervision, to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external purposes in accordance with
      generally accepted accounting principles;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">c)&#160;evaluated
      the effectiveness of the Registrant&#8217;s disclosure controls and procedures and
      presented in the Report our conclusions about the effectiveness of the
      disclosure controls and procedures as of the end of the period covered by this
      report based on such evaluation;&#160;and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">d)&#160;disclosed
      in this Report any change in the Registrant&#8217;s internal control over financial
      reporting that occurred during the Registrant&#8217;s most recent fiscal quarter (the
      Registrant&#8217;s fourth fiscal quarter in the case of an annual report) that has
      materially affected, or is reasonably likely to materially affect, the
      Registrant&#8217;s internal control over financial reporting.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.&#160;The
      Registrant&#8217;s other certifying officer and I have disclosed, based on our most
      recent evaluation of internal control over financial reporting, to the
      Registrant&#8217;s auditors and the audit committee of Registrant&#8217;s board of directors
      (or persons performing the equivalent functions):</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">a)&#160;all
      significant deficiencies and material weaknesses in the design or operation
      of
      internal control over financial reporting which are reasonably likely to
      adversely affect the Registrant&#8217;s ability to record, process, summarize and
      report financial information;&#160;and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">b)&#160;any
      fraud, whether or not material, that involves management or other employees
      who
      have a significant role in the Registrant&#8217;s internal control over financial
      reporting.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 27pt; TEXT-INDENT: 18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
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<DOCUMENT>
<TYPE>EX-32.1
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      certify that to the best of my knowledge, based upon a review of the American
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                KEITH A. MEISTER</font></div>
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                Executive Officer and Vice Chairman of the Board of American Property
                Investors, Inc., the General Partner of American Real Estate Partners,
                L.P.</font></div>
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<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>5
<FILENAME>v073849_ex32-2.htm
<TEXT>
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      L.P. (the &#8220;Registrant&#8221;), certify that to the best of my knowledge, based upon a
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                ANDREW R. SKOBE</font></div>
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                Financial Officer of American Property Investors, Inc., the General
                Partner of American Real Estate Partners, L.P.</font></div>
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