NEW VALLEY LLC

Residential Brokerage Business Acquisition. New Valley is engaged in the real estate business and is seeking to acquire additional real estate properties and operating companies. As of January 1, 2013, the Company owned a 50% interest in Douglas Elliman, and the Company accounted for its 50% using the equity method of accounting. On December 13, 2013, an affiliate of New Valley acquired an additional 20.59% interest in Douglas Elliman from Prudential Real Estate Financial Services of America, Inc. for a purchase price of $60,000 in cash. The acquisition increased the Company's ownership position in Douglas Elliman from 50% to 70.59%.

The preliminary fair values of the assets acquired, liabilities assumed and the non-controlling interest recorded for Douglas Elliman as of December 13, 2013 were adjusted during the first quarter of 2014. Goodwill and current liabilities were reduced by $454 and $105, respectively, while intangible assets related to favorable lease agreements were increased by $559. The amounts are preliminary as management is still evaluating the valuations of certain assets acquired in the acquisition. These adjustments have been reflected in the Company's condensed consolidated balance sheet as of December 31, 2013 and March 31, 2014, respectively.

Equity Method of Accounting. Prior to December 13, 2013, New Valley accounted for its 50% interest in Douglas Elliman under the equity method of accounting. New Valley recorded income of $623, which includes management fees earned by New Valley from Douglas Elliman, for the three months ended March 31, 2013 associated with Douglas Elliman.

Summarized income statement information for Douglas Elliman for the three months ended March 31, 2013, is presented below.



	Three Months Ended
	March 31, 2013
Revenues	$	74,537
Costs and expenses	73,614
Depreciation expense	973
Amortization expense	56
Other income	142
Interest expense, net	—
Income tax benefit	(59		)
Net income	$	95

New Valley received cash distributions from Douglas Elliman of $1,325 for the three months ended March 31, 2013.

Investments in non-consolidated real estate businesses. New Valley also holds equity investments in various real estate projects domestically and internationally. The components of “Investments in non-consolidated real estate businesses” were as follows:



	March 31, 2014		December 31, 2013

Sesto Holdings	$	5,037	$	5,037
Land Development	5,037		5,037

1107 Broadway	6,384		6,579
The Whitman	1,165		1,165
The Marquand	7,000		7,000
11 Beach Street	12,249		11,160
701 Seventh Avenue	10,791		11,148
101 Murray Street	20,506		19,256
Leroy Street	605		1,150
8701 Collins Avenue	3,832		3,794
Condominium and Mixed Use Development	62,532		61,252

23-10 Queens Plaza South	8,058		8,058
Maryland Portfolio	3,688		3,498
ST Portfolio	15,722		15,984
Apartment and Office Buildings	27,468		27,540

Chrystie Street	2,986		2,048
Park Lane Hotel	18,545		19,514
Hotel Taiwana	7,600		7,428
Coral Beach	2,447		2,964
Hotels	31,578		31,954

Other	3,264		2,419

Investments in non-consolidated real estate businesses	$	129,879	$	128,202

Condominium and Mixed Use Development:

Condominium and mixed use developments investments range in ownership percentage from 5% to 49.5%. During the three months ended March 31, 2014, New Valley made capital contributions totaling $3,070, received distributions of $4,142, and recorded equity income of $2,292 primarily related to the sale of a commercial unit at 1107 Broadway. New Valley's maximum exposure to loss as a result of its investments in condominium and mixed use developments was $62,532 at March 31, 2014.

Apartment and Office Buildings:

Apartment and office buildings investments range in ownership percentage from 7.5% to 45.4%. During the three months ended March 31, 2014, New Valley received distributions of $125 and recorded net equity income of $53. New Valley received distributions of $142 and recorded equity loss of $142 for the same period in 2013. New Valley's maximum exposure to loss as a result of its investment in apartment and office buildings was $27,468 at March 31, 2014.

Hotels:

Hotel investments range in ownership percentage from 5% to 49%. During the three months ended March 31, 2014, New Valley made capital contributions totaling $938 and recorded a net equity loss of $1,314. New Valley's maximum exposure to loss as a result of its investments in hotels was $31,578 at March 31, 2014.

Consolidated real estate investments:

The components of “Investments in consolidated real estate businesses, net” were as follows:



	March 31, 2014		December 31, 2013
Escena, net	$	10,765	$	10,625
Indian Creek	10,322		10,286
Investment in consolidated real estate businesses, net	$	21,087	$	20,911

Escena. In October 2013, the Company sold 200 of the 867 residential lots. The remaining project consists of 667 residential lots, consisting of both single family and multi-family lots, an 18-hole golf course, clubhouse restaurant and golf shop, and a seven-acre site approved for a 450-room hotel.

The assets of "Escena, net" are as follows:



	March 31, 2014			December 31, 2013
Land and land improvements	$	8,930		$	8,930
Building and building improvements	1,530			1,530
Other	1,818			1,577
	12,278			12,037
Less accumulated depreciation	(1,513		)	(1,412		)
	$	10,765		$	10,625

The Company recorded operating income of $520 and $383 for three months ended March 31, 2014 and 2013, respectively, from Escena.

Investment in Indian Creek. In March 2013, New Valley invested $7,616 for an 80% interest in Timbo LLC ("Indian Creek") which owns a residential real estate project located on Indian Creek, Florida. As a result of the 80% ownership interest, the consolidated financial statements of the Company include the balances of Indian Creek which included land and building of approximately $9,979, a line of credit of $3,570, equity interest of $4,742 and a minority interest of $1,185 as of March 31, 2014. There is a $770 is payable to the minority interest shareholder as of March 31, 2014.

In May 2014, the Indian Creek property was sold for approximately $14,400 and New Valley received a distribution of approximately $7,100.