Note 5—Investments in Equity Affiliates

The following is a summary of our investments in equity affiliates at December 31, 2014 and 2013:

	Investments in Equity Affiliates at				Unpaid Principal Balance of Loans to Equity Affiliates at
Equity Affiliates	December 31, 2014		December 31, 2013		December 31, 2014
Lightstone Value Plus REIT L.P	$	1,894,727	$	1,894,727	$	—
West Shore Café		1,872,661		1,690,280		1,687,500
Issuers of Junior Subordinated Notes		578,000		578,000		—
JT Prime		425,000		425,000		—
East River Portfolio		98,578		—		4,994,166
Lexford Portfolio		100		100		112,740,000
930 Flushing & 80 Evergreen		—		92,199		—
450 West 33rd Street		—		—		—
Ritz-Carlton Club		—		—		—

Total	$	4,869,066	$	4,680,306	$	119,421,666

We account for the 450 West 33rd Street investment under the cost method of accounting and the remaining investments under the equity method.

Lightstone Value Plus REIT L.P. / JT Prime—We owned approximately $56.0 million of preferred and common operating partnership units of Lightstone through a consolidated entity in which we have a two thirds interest. In addition, the consolidated entity had debt of approximately $50.2 million, which was secured by these operating partnership units. In September 2013, our portion of the preferred operating partnership units were redeemed by Lightstone for cash, at par, and the note related to our portion was repaid in full. As a result, we received cash of $2.0 million, reflecting our equity in the preferred operating partnership units redeemed. In the fourth quarter of 2013, the entity's operating agreement was amended to provide joint control to the members of the entity, and therefore, the entity was deconsolidated. The investment balance of approximately $1.9 million reflects the carrying value of the remaining common operating partnership units of Lightstone. At the time of deconsolidation, the $1.9 million carrying value of our remaining interest approximated its fair value. The fair value was determined by the latest issued tender offer by Lightstone for its common stock.

We own a 50% non-controlling interest in an unconsolidated joint venture, JT Prime, which holds preferred and common operating partnership units of Lightstone as well as a promissory note secured by these operating partnership units. In September 2013, our portion of the preferred operating partnership units were redeemed by Lightstone for cash, at par, and the note related to our portion was repaid in full. As a result, we received cash of $0.4 million and the carrying value of our investment in JT Prime was reduced to $0.4 million, reflecting our remaining interest in the common operating partnership units.

The preferred operating partnership units yielded 4.63% and the loan bore interest at a rate of 4.00%. During the years ended December 31, 2013 and 2012, we recorded $1.8 million and $2.7 million, respectively, of dividends from the preferred and common operating partnership units which were reflected in interest income, and $1.3 million and $2.0 million, respectively, of interest expense in our consolidated statements of income.

West Shore Café—We own a 50% noncontrolling interest in the West Shore Lake Café, a restaurant/inn lakefront property in Lake Tahoe, California. During the second quarter of 2014, we provided a $1.7 million first mortgage loan to acquire property adjacent to the original property, which matures in May 2017 and bears interest at a yield of LIBOR plus 4.00%.

Issuers of Junior Subordinated Notes—We have invested a total of $0.6 million for 100% of the common shares of two affiliated entities of ours. These entities pay dividends on both the common shares and preferred securities on a quarterly basis at variable rates based on three-month LIBOR. See Note 7—"Debt Obligations" for further details.

East River Portfolio—In August 2014, we invested $0.1 million for a 5% interest in a joint venture that owns two multifamily properties. The joint venture consists of a consortium of investors consisting of certain of our officers, including Mr. Ivan Kaufman, and other related parties, who together own an interest of 95%. In August 2014, we originated two bridge loans totaling $5.0 million with an interest rate of 5.5% over one-month LIBOR and a maturity date of August 2015. See Note 14—"Agreements and Transactions with Related Parties" for further details.

Lexford Portfolio—We, along with third party investors, made a $0.1 million equity investment into Lexford, a portfolio of multifamily assets. Our portion of this investment is a $44,000 noncontrolling interest. We also had a $10.5 million interest in a $25.0 million preferred equity investment in Lexford with the same third party investors that was repaid during 2013. See Note 14—"Agreements and Transactions with Related Parties" for further details.

930 Flushing & 80 Evergreen—We had a 12.5% preferred interest in a joint venture that owns and operates two commercial properties. We also had a $22.4 million bridge loan and a $0.5 million mezzanine loan outstanding to affiliated entities of the joint venture.

In May 2014, our interest in the properties was sold for $7.9 million. As a result, we recorded a gain on sale of equity interest in our consolidated statements of income of approximately $7.9 million and reduced our investment to $0. We no longer have an interest in this investment. In July 2014, our outstanding loans totaling $22.9 million to this joint venture were repaid in full.

450 West 33rd Street—We were a participant in an investor group that owns a non-controlling interest in an office building at 450 West 33rd Street in Manhattan, New York. The investor group as a whole has a 1.44% retained ownership interest in the property and 50% of the property's air rights. We had a 29% interest in the 1.44% retained ownership interest and 50% air rights.

In 2007, we, as part of the investor group, transferred control of the property and recorded deferred revenue of approximately $77.1 million. The gain was deferred as a result of the agreement of the joint venture members to guarantee a portion of the debt outstanding on the property. The guarantee was allocated to the members in accordance with their ownership percentages. Our portion of the guarantee was $76.3 million. In July 2014, the existing debt on the property was refinanced and our portion of the guarantee was terminated, resulting in the recognition of the $77.1 million deferred gain as well as a $19.0 million prepaid incentive management fee for a non-cash net gain of $58.1 million. See Note 14—"Agreements and Transactions with Related Parties" for details of the prepaid incentive fee recorded in 2007 related to this investment. In the third quarter of 2014, we made an additional investment of $0.3 million. In the fourth quarter of 2014, we sold our remaining interest in this property for $1.1 million and recorded a gain on sale of $0.8 million. We no longer have an interest in this investment.

Ritz-Carlton Club—We own a 19.09% non-controlling interest with a 10% return subject to certain conditions in the Ritz-Carlton Club, a condominium project in Lake Tahoe, California. During 2012, we recorded $0.8 million of losses from the entity against the equity investment reducing the balance of our investment to $0.

Summarized Financial Information

The condensed combined balance sheets for our unconsolidated investments in equity affiliates accounted for under the equity method at December 31, 2014 and 2013 are as follows (in thousands):

	December 31,
Condensed Combined Balance Sheets	2014			2013
Assets:
Cash and cash equivalents	$	22,552		$	13,101
Real estate assets		639,813			697,484
Other assets		19,169			19,618

Total assets	$	681,534		$	730,203


Liabilities:
Notes payable	$	691,488		$	734,693
Other liabilities		22,653			19,607

Total liabilities		714,141			754,300

Stockholders' equity Arbor(1)		4,291			4,102
Stockholders' deficit		(36,898	)		(28,199	)

Total stockholders' deficit		(32,607	)		(24,097	)

Total liabilities and deficit	$	681,534		$	730,203

(1)

Combined with $0.6 million of equity relating to the issuance of junior subordinated notes, equals $4.9 million of investments in equity affiliates, at December 31, 2014. Combined with $0.6 million of equity relating to the issuance of junior subordinated notes, equals $4.7 million of investments in equity affiliates, at December 31, 2013.

The condensed combined statements of operations for our unconsolidated investments in equity affiliates accounted for under the equity method for the years ended December 31, 2014, 2013 and 2012, are as follows (in thousands):

	Year Ended
Statements of Operations:	2014			2013			2012
Revenue:
Rental income	$	89,192		$	85,551		$	80,472
Interest income		259			478			813
Operating income		4,168			5,709			8,619
Reimbursement income		6,501			6,653			5,427
Other income		7,993			6,686			6,436

Total revenues		108,113			105,077			101,767

Expenses:
Operating expenses		59,266			58,265			60,257
Interest expense		33,033			36,061			36,315
Depreciation and amortization		26,793			23,345			22,283
Other expenses		621			493			27

Total expenses		119,713			118,164			118,882

Net loss	$	(11,600	)	$	(13,087	)	$	(17,115	)


Arbor's Share of income (loss)	$	249		$	(204	)	$	(698	)