Note 5 – Investment in 111 West 57^th Partners LLC

On June 28, 2013, 111 West 57^th Investment LLC, a Delaware limited liability company ("Investment LLC"), a newly formed subsidiary of the Company, entered into a joint venture agreement (as amended, the "JV Agreement") with 111 West 57^th Sponsor LLC, a Delaware limited liability company (the "Sponsor"), pursuant to which Investment LLC invested $56,000,000 (the "Investment") in a real estate development property to purchase and develop the 111 West 57^th Street Property (the "111 West 57th Property"). In consideration for making the Investment, Investment LLC was granted a 59% membership interest in 111 West 57^th Partners LLC ("111 West 57^th Partners"), a Delaware limited liability company, which indirectly acquired the 111 West 57^th Property on June 28, 2013 (the "Joint Venture," and such date, the "Closing Date"). The Company also indirectly contributed an additional $1,250,000 to the Joint Venture in exchange for an additional indirect interest of approximately 1.3% in the Joint Venture. Other members and the Sponsor contributed an additional $37,750,000 of cash and/or property to the Joint Venture.The Joint Venture plans to redevelop the 111 West 57^th Property into an approximate combined 346,000 gross square foot luxury residential tower and retail project.

The 111 West 57^th Property was acquired from 57th Street Partners NY, LLC, pursuant to separate purchase agreements for various components of the 111 West 57^th Property. The aggregate purchase price as noted herein below includes various capitalized costs for the 111 West 57^th Property. The acquisition of the 111 West 57^th Property was partially financed pursuant to a mortgage and acquisition loan, as noted herein, by Annaly CRE LLC, a Delaware limited liability company that is a wholly-owned subsidiary of Annaly Commercial Real Estate Group, Inc., which closed concurrently with the acquisition of the 111 West 57^th Property on the Closing Date.

On June 30, 2015, 111 West 57^th Partners obtained $725,000,000 of financing for the 111 West 57^th Property. The financing was obtained in two parts; (i) a first mortgage construction loan with AIG Asset Management (US), LLC, ("AIG") and (ii) a mezzanine loan with Apollo Commercial Real Estate Finance, Inc., ("Apollo"). Both loans have a four-year term with a one-year extension option subject to satisfying certain conditions. The loan agreements also include customary events of default and other customary terms and conditions. Simultaneously with the closing of the AIG and the Apollo financing, 111 West 57^th Partners repaid approximately $230,000,000 in full satisfaction of all outstanding liabilities and obligations to Annaly CRE, LLC under the mortgage and acquisition loan agreement, dated June 28, 2013, between 111 West 57^th Partners and Annaly CRE, LLC. 111 West 57^th Partners intends to use the remaining loan proceeds for construction and related costs, loan interest escrow and other related project expenses for development of the 111 West 57^th Property.

In July 2015, based on available net proceeds received from the financing and equity previously invested in the project, $24,682,000 was distributed to the members of 111 West 57^th Partners. In connection therewith, the Company, principally through Investment LLC, received a distribution of $11,895,000 but reserved its rights to dispute the actual amount to which it is entitled based on the 111 West 57^th Partners Operating Agreement and the Company's percentage interests thereunder. In accordance with the Second Amended and Restated Investment Operating Agreement as noted herein, the Company, throught Investment LLC fully repaid 111 West 57^th Capital LLC, a Delaware limited liability company, wholly owned by Mr. R.A. Bianco ("Capital LLC") its capital contributions of $9,895,000. The remaining $2,000,000 was retained by the Company.

The JV Agreement and related operating agreements generally provide that all distributable cash shall be distributed as follows: (i) first, 100% to the members in proportion to their percentage interests until Investment LLC has received distributions yielding a 20% internal rate of return as calculated; (ii) second, 100% to the Sponsor as a return of (but not a return on) any additional capital contributions made by the Sponsor on account of manager overruns; and (iii) thereafter, (a) 50% to the members in proportion to their respective percentage interests at the time of such distribution, and (b) fifty percent 50% to the Sponsor.

Additionally, the JV Agreement provides that (i) Mr. Richard A. Bianco (the Company's current Chairman, President and Chief Executive Officer) ("Mr. R. A. Bianco"), his immediate family, and/or any limited liability company wholly-owned thereby, and/or a trust in which Mr. R. A. Bianco and/or his immediate family is the beneficiary, shall at all times own, in the aggregate, not less than 20% of the outstanding shares of AmBase; and (ii) Mr. R. A. Bianco shall remain the Chairman of the Board of Directors of AmBase for the duration of the JV Agreement.

In March 2014, the Company entered into an amended and restated operating agreement for Investment LLC (the "Amended and Restated Investment Operating Agreement") to grant a 10% subordinated participation interest in Investment LLC to Mr. R. A. Bianco as contingent future incentive compensation for Mr. R. A. Bianco's past, current and anticipated ongoing role to develop and commercialize the Company's equity investment in the 111 West 57^th Property. Pursuant to the terms of the Amended and Restated Investment Operating Agreement, Mr. R.A. Bianco has no voting rights with respect to his interest in Investment LLC, and his entitlement to receive 10% of the distributions from Investment LLC is subject to the Company first receiving distributions equal to 150% of the Company's initial aggregate $57,250,000 investment in Investment LLC and the Joint Venture, plus any additional investments by the Company if any, and only with respect to any distributions thereafter. At the current time the Company has not expensed nor accrued any amounts relating to this subordinated participation interest, as no amount nor range of amounts can be reasonably estimated or assured.

During 2014, in connection with the funding of additional capital calls under the JV Agreement for required borrowing and development costs for the 111 West 57^th Property, the Company's management and its Board of Directors concluded that, given the continuing development risks of the Joint Venture, and the Company's financial position, the Company should not at that time increase its already significant concentration and risk exposure to the 111 West 57th Street Property and the Joint Venture. Nonetheless, the Company sought to limit dilution of its interest in the Joint Venture resulting from any failure to fund the capital call requirements, but at the same time wished to avoid the time, expense and financial return requirements (with attendant dilution and possible loss of voting rights) that obtaining a replacement third-party investor would require. The Company therefore entered into a second amended and restated operating agreement for Investment LLC ("Second Amended and Restated Investment Operating Agreement") pursuant to which Capital LLC was admitted as a member of Investment LLC. In exchange for Capital LLC contributing $4,100,000 toward Investment LLC capital calls in respect of the 111 West 57^th Property, available cash of Investment LLC will be distributed first to Capital LLC until it has received a 20% internal rate of return (calculated as provided for in the JV Agreement), second to the Company until it has received 150% of its capital, and; thereafter, available cash is split 10/90 with 10% going to Mr. R.A. Bianco as the subordinated participation interest noted and 90% going to Capital LLC and the Company pari-passu, with Capital LLC receiving one-half of its pro-rata share based on capital contributed and the Company receiving the balance. No other material changes were made to the Amended and Restated Investment Operating Agreement, and neither Mr. Bianco nor Capital LLC has any voting rights with respect to their interest and investment in Investment LLC.

Because of time constraints, concerns regarding the potential level of any financial dilution, complications relating to structure of the investments in the Joint Venture, bank constraints and potential loss of voting rights over the Joint Venture, the terms of Capital LLC's admission to and investment in the Investment LLC were reviewed by the Board of Directors and determined to be no less favorable to the Company than would have been obtained in negotiations with a third party unaffiliated with the Company, even assuming that any such third party investor was available and prepared to fund under the time constraints imposed by the JV Agreement. Based in part on such determination, the Board of Directors (with Mr. Bianco abstaining) unanimously approved the admission of Capital LLC to Investment LLC on the terms described.

The Company made additional capital contributions to the Joint Venture as indicated below:

(in housands)		Six Months Ended June 30, 2015
Capital Contributions		$	6,911

Pursuant to a capital call due December 31, 2014, the Company was to contribute an aggregate of approximately $10.3 million to the 111 West 57^th Property Joint Venture.Of this aggregate amount, the Company only contributed approximately $1.5 million in December 2014 for this capital call (not including amounts allocated to a subsequent capital call). The remaining December capital call amount was contributed by the Sponsor (the "December Shortfall Capital Contribution"). In accordance with the agreements, a shortfall capital contribution may be treated either as a member loan or as a dilutive capital contribution by the funding party valued at one and one-half times the amount actually contributed. The Sponsor deemed this December Shortfall Capital Contribution as a dilutive capital contribution to the Company at one and one-half times the amount, which the Sponsor contends would cause the Company to be diluted. The Company believes in accordance with the terms of the agreements, this December Shortfall Capital Contribution should be treated as a Member Loan; therefore, resulting in no dilution to the Company. The Company is currently in discussions with the Sponsor regarding the treatment and allocation of these amounts.

In February 2015, the Company received a shortfall capital contribution notice pursuant to which it was to contribute approximately $7.5 million to the 111 West 57^th Joint Venture for additional development costs (the "February Shortfall Capital Contribution"). The Company chose to contribute approximately $0.7 million of the requested amount. The remaining amount was contributed to the Joint Venture by the Sponsor. In accordance with the agreements, the Sponsor deemed the February Shortfall Capital Contribution as a dilutive capital contribution to the Company at one and one-half times the amount.

In April 2015, the Company received a capital contribution notice pursuant to which it was to contribute approximately $6.2 million to the 111 West 57^th Property Joint Venture (the "April Capital Contribution"). Of this aggregate amount, the Company chose to contribute approximately $0.4 million of the requested amount. The Company's remaining April Capital Contribution amount of $5.8 million was contributed to the Joint Venture through the Company by Capital LLC pursuant to terms of the Second Amended and Restated Investment Operating Agreement as noted above and will entitle Capital LLC to rights to future distributions on the same basis as noted above.

The Sponsor contends that the December Shortfall Capital Contribution if taken together with the February Shortfall Capital Contribution would cause the Company, in the aggregate, to be diluted to approximately 48 % after this event. The parties are currently in discussions with regard to the calculation of the revised investment percentages resulting from the February Shortfall Capital Contribution, along with the treatment and allocation of these and the December Shortfall Capital Contribution amounts.

The Company has recorded the investment in 111 West 57^th Partners utilizing the equity method of accounting, as pursuant to the various agreements the Company has significant influence, but does not have control, as defined under GAAP. Accordingly, the results of operations of 111 West 57^th Partners are included in equity income (loss) in the Company's condensed consolidated statements of operations. As of June 30, 2015, , the Company's carrying amount of its investment in 111 West 57^th Partners, as noted in the Company's condensed consolidated balance sheet, is greater than the Company's equity in the underlying net assets of 111 West 57^th Partners by $867,000, categorized as goodwill, due to a difference resulting from the reduction in equity for syndication fees paid relating to 111 West 57^th Partners. The Company reviews its investments and ownership interests recorded under the equity method for impairment on a regular basis and/or if events or changes in circumstances indicate that a loss in the value of its investment may be other than temporary. There was no impairment on the Company's equity method investment for the periods ended June 30, 2015 or December 31, 2014.

The following tables present summarized financial information for the Company's equity method investment in 111 West 57^th Partners. The amounts shown represent 100% of the financial position and results of operations of 111 West 57^thPartners for the dates indicated below.

(in thousands)

Assets:	June 30, 2015		December 31, 2014
Real estate held for development, net	$	378,935	$	326,387
Escrow deposits		9,407		26,011
Other assets		49,383		16,370
Total assets	$	437,725	$	368,768
Liabilities:
Loans payable	$	278,226	$	230,000
Other liabilities		12,072		8,319
Total liabilities		290,298		238,319
Equity:
Total equity		147,427		130,449
Total liabilities and equity	$	437,725	$	368,768

	Three Months Ended June 30, 2015			June 30, 2014			Six Months Ended June 30, 2015			Six Months Ended June 30, 2014

Rental income	$	-		$	10		$	-		$	283
Expenses		473			1,290			890			2,560
Net income (loss)	$	(473	)	$	(1,280	)	$	(890	)	$	(2,277	)