Exhibit

We have audited the accompanying financial statements of Kewalo Development LLC (the Company), which comprise the balance sheet as of December 31, 2015, and the related statements of income and changes in members’ equity, and cash flows for the year then ended, and the related notes to financial statements.

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amount and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Kewalo Development LLC as of December 31, 2015, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.



					2014
		Assets	2015		(Unaudited)

Cash			$	2,573,165	$	485,513
Real Estate Development Costs					192,649,651
Deferred Financing Costs					8,901
		Total Assets	$	2,573,165	$	193,144,065

		Liabilities and Members' Equity

Liabilities:
	Contingency Reserve		$	2,457,823	$	96,596
	Accounts Payable and Accrued Expenses				212,881
	Retention Payable				14,743,123
	Loan Payable				76,068,549
	Deposits				36,072,303
		Total Liabilities	2,457,823		127,193,452

Members' Equity			115,342		65,950,613

			$	2,573,165	$	193,144,065



						2014
			2015			(Unaudited)

Real Estate Sales, Net			$	242,952,850		$	9,659,590
Cost of Sales			208,911,678			8,268,443
			34,041,172			1,391,147

Operating Expenses			1,413			178,842

	Operating Income		34,039,759			1,212,305

Other Income (Expense):
	Rental and Other Income		36,544			80,992
	Other Expense		(7,841		)	(8,994		)
		Net Income	34,068,462			1,284,303

Members' Equity at Beginning of Year			65,950,613			53,092,321
Member's Contributions			—			11,573,989
Distributions to Members			(99,903,733		)	—

			$	115,342		$	65,950,613



							2014
				2015			(Unaudited)

Cash Flows from Operating Activities:
	Net Income			$	34,068,462		$	1,284,303
	Adjustments to Reconcile Net Income to Net Cash Provided (Used In) Operating Activities:
		Real Estate Development Costs		192,649,651			(88,449,655		)
		Prepaid Expenses		8,901			134
		Contingency Reserve		2,361,227			96,596
		Accounts Payable and Accrued Expenses		(212,881		)	(8,962,494		)
		Retention Payable		(14,743,123		)	8,072,229
		Deposits		(36,072,303		)	(1,407,864		)
			Net Cash Provided by (Used In) Operating Activities	178,059,934			(89,366,751		)

Cash Flows From Financing Activities:
	Distributions to Members			(99,903,733		)	—
	Principal Payment on Debt			(76,068,549		)	(7,878,179		)
	Proceeds From Issuance of Debt			—			83,946,728
	Contributions from Members			—			11,573,989
		Net Cash Provided by (Used In) Financing Activities		(175,972,282		)	87,642,538
		Net Increase (Decrease) in Cash		2,087,652			(1,724,213		)
Cash at Beginning of Year				485,513			2,209,726
Cash at End of Year				$	2,573,165		$	485,513

Supplemental Cash Flow Information:
	Interest Paid			$	203,663		$	953,825
Supplemental Noncash Operating Information:
	Deferred Financing Cost Amortized to Real Estate Development Costs			$	—		$	882,826

Kewalo Development LLC (the Company) is a Hawaii limited liability company formed on June 3, 2010, by Waimanu Development LLC, a Hawaii limited liability company (Waimanu). A&B Properties, Inc., a Hawaii corporation is Waimanu’s parent company and is the Manager of the Company. On September 5, 2012, the Company amended and restated its operating agreement (the Operating Agreement) and admitted N1189 LLC, a Hawaii limited liability company, BSC Waihonua LLC, a Hawaii limited liability company, and Armstrong Homes, Ltd., a Hawaii corporation as members (the Additional Members). The Company was formed primarily for the purpose of developing and selling real property commonly referred to as “Waihonua at Kewalo”, comprised of a condominium high rise project with 341 fee simple units, in Honolulu, Hawaii (the Project) and a senior citizen housing building in Honolulu, Hawaii, consisting of approximately 70 rental units.

In conjunction with a planned development permit (the Permit) issued by the Hawaii Community Development Authority (HCDA), the Company effectively satisfied the reserve housing obligations under the Permit to receive approval for issuance of the certificate of occupancy for the Waihonua at Kewalo condominium project. The Company deposited deeds and other consideration in conjunction with a development agreement by and between the Company and an unrelated third party developer, SCD Piikoi, LLC. The certificate of occupancy for the Project was issued in October 2014.

The Operating Agreement provides for distributions to the Members first to the Additional Members proportionately until their respective unpaid preferred amount, as defined, equals zero. Further distributions are then to be paid to Waimanu until its unpaid preferred amount, as defined equals zero and then allocated 90 percent to Waimanu and 10 percent to the Additional Members in proportion to their respective economic interest.

Pursuant to the Operating Agreement, net profits from operations are first allocated to reduce any negative capital accounts, as defined, to zero, then to the Additional Members’ respective adjusted capital account up to their unpaid preferred amount, as defined. Additional net profits are then allocated to Waimanu’s capital account up to its unpaid preferred amount, as defined, and then allocated 90% to Waimanu and 10% to the Additional Members in proportion to their respective economic interest. Losses are first allocated to any member with a capital account greater than its unpaid preferred amount and then to Waimanu’s capital account until it equals zero. Additional losses are proportionately allocated to the Additional Members’ with capital accounts equal to zero and then to all members in proportion to their respective economic interest.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Profit on sales of real estate is recognized when title has passed, minimum down payment criterion are met, the terms of any note received are such as to satisfy continuing investment requirements and collectability of the note is reasonably assured, the risks and rewards of ownership have been transferred to the buyer, and there is no substantial continuing involvement with the property. If any of the aforementioned criteria are not met, profit is deferred and recognized under the cost recovery, deposit, or percentage of completion method.

As a limited liability company, the Company is not a tax-paying entity for purposes of federal and state income taxes. Income or losses of the Company are reported on the Members’ income tax returns. Therefore, no provision or liability for income taxes has been included in the financial statements.

The Company follows the provisions of Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 740, Income Taxes. ASC Topic 740 clarifies the accounting for uncertain tax positions in an enterprise’s financial statements by prescribing a recognition and measurement of a tax position taken or expected to be taken in a tax return. Management has determined that the Company does not have an uncertain tax position and associated unrecognized benefits that materially impact the financial statements or related disclosures.

As tax matters are subject to some degree of uncertainty, there can be no assurance that the Company’s tax returns will not be challenged by the taxing authorities and that the Company or its members will not be subject to additional tax, penalties, and interest as a result of such challenge. The Company is no longer subject to U.S. federal examinations by tax authorities for the years ended December 31, 2011 and prior.

As of December 31, 2015, the Company has cash in bank amounting to $2,457,823, which is reserved for possible claims against or obligations of the Company arising out of the normal course of business as provided by the Operating Agreement and at the discretion of the Manager. The reserve was established using funds from distributable cash to the Members.

On November 30, 2012, the Company entered into a $120 million loan agreement with four unrelated financial institutions to finance the construction of the condominium project. Borrowings under the loan agreement bear interest at a base rate as defined, plus 3 percent (3.1545% at December 31, 2014 (unaudited)). Drawings under the loan agreement were secured by the real property, the assignment of sales contracts and a limited repayment guaranty and a completion guaranty by the Manager.

At December 31, 2014, the outstanding balance of this loan was $76,068,549 (unaudited). The loan agreement contained certain financial and operational covenants including, the timely completion of the Project, and financial ratio and minimum ownership and guarantor tangible net worth requirements.

Loan fees related to the construction debt were capitalized to deferred financing costs and amortized over the term of the loan. During the year ended December 31, 2014, the Company amortized approximately $883,000 (unaudited) of deferred financing costs which were capitalized as real estate development costs.

The Company recorded real estate sales at market prices to directors, officers and employees of the Manager and the Manager’s parent company of approximately $3,800,000 and $2,400,000 in 2015 and 2014 (unaudited), respectively. In 2015, the Company also recorded approximately $2,000,000 in real estate sales to an Additional Member.

In accordance with the Operating Agreement, the Manager has sole responsibility for the day-to-day oversight and administration of the Company’s business activities and internal affairs, including the management of cash and personnel. In consideration for such duties, the Operating Agreement provided for a developer fee to be paid to the Manager equal to 4% of the total cost of constructing the condominium units. The developer fee amounted to approximately $2,025,200 for the year ended December 31, 2015, and $1,640,300 for the year ended December 31, 2014 (unaudited), excluding the consulting fees described below.

The Company has a consulting agreement with an affiliate of BSC Waihonua LLC, to market the Project, assist in meeting the affordable housing requirements and to advise on certain development and construction issues. The consulting fee is calculated as 24% of the developer fee. For the years ended December 31, 2015 and 2014, the Company capitalized approximately $492,700 and $518,000 (unaudited), respectively, to real estate development costs under the Consulting Agreement.

In conjunction with provisions of the Company’s Operating Agreement, the Manager has recorded a reserve liability for possible claims against or obligations of the Company arising out of the normal course of business. The liability approximates 1% of total sales proceeds on the Project and was included in cost of sales of the Project for the year ended December 31, 2015 and 2014 (unaudited). The contingency reserve amounted to $2,457,823 and $96,596 (unaudited) at December 31, 2015 and 2014, respectively.



	Economic		Voting
	Interest		Interest

Waimanu Development LLC	50.000	%	50	%
N1189 LLC	19.231	%	25	%
BSC Waihonua LLC	29.231	%	23	%
Armstrong Homes, Ltd.	1.538	%	2	%


(1)	Organization and Description of Business


(2)	Summary of Significant Accounting Principles


(4)	Debt


(6)	Related-Party Transactions