Note 5—Investments in Equity Affiliates

The following is a summary of our investments in equity affiliates:

	Investment in Equity Affiliates at
	Investment in Equity Affiliates at				UPB of Loans to Equity Affiliates at December 31, 2015
Equity Affiliates	December 31, 2015		December 31, 2014		UPB of Loans to Equity Affiliates at December 31, 2015
Arbor Residential Investor LLC	$	25,923,679	$	—	$	—
West Shore Café		1,955,933		1,872,661		1,687,500
Lightstone Value Plus REIT L.P		1,894,727		1,894,727		—
Issuers of Junior Subordinated Notes		578,000		578,000		—
JT Prime		425,000		425,000		—
East River Portfolio		92,796		98,578		4,994,166
Lexford Portfolio		100		100		2,324,000
Ritz-Carlton Club		—		—		—

Total	$	30,870,235	$	4,869,066	$	9,005,666

We account for all investments in equity affiliates under the equity method.

Arbor Residential Investor LLC ("ARI")—In the first quarter of 2015, we invested $9.6 million for 50% of our Manager's indirect interest in a joint venture with a third party that was formed to invest in a residential mortgage banking business. Our Manager retained a promote of 25% over a 10% return on this investment. As a result of this transaction, we had an initial indirect interest of 22.5% in the mortgage banking business, which is subject to dilution upon attaining certain profit hurdles of the business. As a result of the business's profitability to date, we currently own a 20% indirect interest. During the year ended December 31, 2015, we recorded $6.6 million to income from equity affiliates in our consolidated statements of income related to this investment.

In the first quarter of 2015, we invested $1.7 million through ARI for 100% of our Manager's investment in non-qualified residential mortgages purchased from the mortgage banking business's origination platform, resulting in a non-controlling ownership interest of 50% in this investment. We also funded $7.9 million of additional mortgage purchases during 2015, for a total investment of $9.7 million as of December 31, 2015. During 2015, we recorded income from equity affiliates of less than $0.1 million in our consolidated statements of income related to this investment.

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 an affiliated entity to acquire property adjacent to the original property, which matures in May 2017 and bears interest at LIBOR plus 4.00%.

Lightstone Value Plus REIT L.P. / JT Prime—We own a $1.9 million interest in an unconsolidated joint venture that holds common operating partnership units of Lightstone Value Plus REIT L.P. ("Lightstone"). The joint venture owned $56.0 million of preferred and common operating partnership units of Lightstone and had debt of $50.2 million, in which we had a two thirds interest in a consolidated entity. In 2013, our portion of the preferred operating partnership units were redeemed, the note related to our portion was repaid in full and the entity was deconsolidated. During the year ended December 31, 2013, we recorded $1.8 million of dividends from the operating partnership units which were reflected in interest income, and $1.3 million of interest expense in our consolidated statements of income. We also own a 50% non-controlling interest in an unconsolidated joint venture, JT Prime, which holds common operating partnership units of Lightstone at a carrying value of $0.4 million. During the years ended December 31, 2015, 2014 and 2013, we recorded $0.2 million, $0.2 million and $0.1 million, respectively, to income from equity affiliates in our consolidated statements of income related to these investments.

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 is comprised 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 March 2016. 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. In the third and fourth quarters of 2015, we received distributions from this equity investment and recognized income totaling $4.5 million, net of expenses. The $4.5 million of income is comprised of income from equity affiliates of $5.5 million, partially offset by $1.0 million of expenses related to these distributions that were recorded in employee compensation and benefits. See Note 14—"Agreements and Transactions with Related Parties" for further details.

Ritz-Carlton Club—We owned 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. As of December 31, 2015, we no longer have an interest in this investment.

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

450 West 33rd Street—We were a 29% participant in an investor group that owned a non-controlling interest in an office building at 450 West 33rd Street in Manhattan, New York. The investor group, as a whole, had a 1.44% ownership interest in the property and 50% of the property's air rights, both were retained from the transfer of control of the property in 2007. As part of this transaction, we recorded a deferred gain of $77.1 million as a result of the joint venture members guaranteeing a portion of the debt outstanding on the property. In 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 2014, we invested an additional $0.3 million into this investment. 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.

Summarized Financial Information

The condensed combined balance sheets for our unconsolidated investments in equity affiliates accounted for under the equity method are as follows:

	December 31,
Condensed Combined Balance Sheets	2015		2014
Assets:
Cash and cash equivalents	$	29,829,360	$	22,551,762
Real estate assets		973,649,322		639,813,257
Other assets		121,802,429		19,169,267

Total assets	$	1,125,281,111	$	681,534,286


Liabilities:
Notes payable	$	1,044,965,627	$	691,487,617
Other liabilities		30,064,837		22,653,656

Total liabilities		1,075,030,464		714,141,273

Stockholders' equity Arbor(1)		30,292,234		4,291,066
Stockholders' equity (deficit)		19,958,413		(36,898,053	)

Total stockholders' equity (deficit)		50,250,647		(32,606,987	)

Total liabilities and equity (deficit)	$	1,125,281,111	$	681,534,286


(1)	Combined with $0.6 million of equity relating to the issuance of junior subordinated notes, equals $30.9 million of investments in equity affiliates at December 31, 2015. 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.

The condensed combined statements of operations for our unconsolidated investments in equity affiliates accounted for under the equity method for the years presented are as follows:

	Year Ended
Statements of Operations:	2015		2014			2013
Revenue:
Rental income	$	95,937,528	$	89,192,393		$	85,550,846
Interest income		10,215,267		258,516			477,935
Operating income		130,931,755		4,168,348			5,709,013
Reimbursement income		6,800,824		6,500,526			6,653,440
Other income		15,320,832		7,993,602			6,686,053

Total revenues		259,206,206		108,113,385			105,077,287

Expenses:
Operating expenses		157,772,966		59,266,385			58,265,261
Interest expense		43,766,835		33,032,580			36,060,617
Depreciation and amortization		21,763,714		26,793,320			23,345,096
Other expenses		1,627,791		620,906			493,627

Total expenses		224,931,306		119,713,191			118,164,601

Net income (loss)	$	34,274,900	$	(11,599,806	)	$	(13,087,314	)


Arbor's Share of income (loss)	$	12,300,516	$	248,658		$	(204,475	)