NEW VALLEY LLC

Residential Brokerage Business. New Valley is engaged in the real estate business and is seeking to acquire or invest in additional real estate properties or projects. The Company owns a 70.59% interest in Douglas Elliman and the condensed consolidated financial statements of the Company include the account balances of Douglas Elliman.

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



	June 30, 2016		December 31, 2015
10 Madison Square Park (1107 Broadway)	$	9,188	$	11,391
The Marquand (11 East 68th Street)	9,333		13,900
11 Beach Street	13,702		13,209
20 Times Square (701 Seventh Avenue)	16,487		14,985
111 Murray Street	25,308		25,567
160 Leroy Street	4,511		3,952
215 Chrystie Street	5,729		5,592
The Dutch (25-19 43rd Avenue)	1,129		1,077
Queens Plaza (23-10 Queens Plaza South)	16,834		16,177
87 Park (8701 Collins Avenue)	8,846		8,658
125 Greenwich Street	9,780		9,750
West Hollywood Edition (9040 Sunset Boulevard)	7,050		10,510
76 Eleventh Avenue	18,867		17,967
Monad Terrace	7,774		6,608
Takanasee	4,916		4,680
Condominium and Mixed Use Development	159,454		164,023

Maryland Portfolio	—		—
ST Portfolio	9,193		15,754
Apartment Buildings	9,193		15,754

Park Lane Hotel	21,138		19,697
Hotel Taiwana	7,786		7,069
Coral Beach and Tennis Club	3,162		3,159
Hotels	32,086		29,925

The Plaza at Harmon Meadow	3,682		5,449
Commercial	3,682		5,449

Other	1,724		2,017

Investments in real estate ventures	$	206,139	$	217,168

Condominium and Mixed-Use Development:

Condominium and mixed-use development investments range in ownership percentage from 3.1% to 49.5%. New Valley recorded net equity in earnings from real estate ventures of $2,962 and $1,779 for the three and six months ended June 30, 2016 from its condominium and mixed-used developments. For the three months ended June 30, 2016 equity in earnings from real estate related to $3,788 in equity earnings from New Valley's proportionate share of the sale of condominium units at 10 Madison Square Park offset by equity in losses of $826 from the other condominiums and mixed-use development projects. For the six months ended June 30, 2016 equity in earnings from real estate was related to $4,211 in equity earnings from New Valley's proportionate share of the sale of condominium units at 10 Madison Square Park and $34 equity in earnings from other condominiums and mixed-use development projects offset by equity losses of $962 at the Marquand, $160 at 11 Beach Street, $247 at 111 Murray Street, $144 at 215 Chrystie Street, $122 at Queens Plaza, $250 at 87 Park, $177 at West Hollywood Edition, and $404 at Monad Terrace. New Valley recorded equity in earnings from real estate ventures of $138 and $675 for the the three and six months ended June 30, 2015. The Company recorded $1,501 of equity in earnings related to its proportionate share of the Marquand’s equity earnings from the sale of three of its units for the six months ended June 30, 2015. The Company also recorded $236 of equity in earnings from Chelsea Eleven for a distribution of excess amounts held back in 2012 for final expenses of the investment for the six months ended June 30, 2015.

During the six months ended June 30, 2016, New Valley made capital contributions totaling $8,801 related to ventures where New Valley previously held an investment, primarily at 20 Times Square, 160 Leroy Street, West Hollywood Edition, and Monad Terrace. For ventures where New Valley previously held an investment, New Valley contributed its proportionate share of additional capital along with contributions by the other investment partners. New Valley's direct investment percentage did not change. During the six months ended June 30, 2015, New Valley made capital contributions totaling $27,091 primarily related to 215 Chrystie Street, 76 Eleventh Avenue and Monad Terrace. New Valley contributed its proportionate share of additional capital along with contributions by the other investment partners. New Valley's investment percentages did not change.

During the six months ended June 30, 2016, New Valley received distributions of $19,985 primarily related to 10 Madison Square West, the Marquand, West Hollywood Edition and income from marketing fees paid by 125 Greenwich Street. During the six months ended June 30, 2015, New Valley received distributions of $236 from its investment in Chelsea Eleven, which sold its last unit in 2012, for excess amounts held back in 2012 for final expenses of the investment.

New Valley's maximum exposure to loss, net of non-controlling interest, as a result of its investments in condominium and mixed-use developments was $140,667 at June 30, 2016.

New Valley capitalized $4,836 of interest expense into the carrying value of its ventures whose projects were currently under development during the six months ended June 30, 2016.

Douglas Elliman has been engaged by the developers as the sole broker or the co-broker for several of the real estate development projects that New Valley owns an interest in through its joint venture investments. Douglas Elliman had gross commissions of approximately $5,674 and $8,079 for the three and six months ended June 30, 2016 from these projects.

Apartment Buildings:

Apartment building investments range in ownership percentage from 7.6% to 16.3%. New Valley recorded equity in earnings from real estate ventures of $1,630 and $2,146 for the three and six months ended June 30, 2016, primarily related to the ST Portfolio apartment portfolio. In 2015, ST Portfolio sold one (Highgrove) of its two remaining Class A multi-family buildings. New Valley recorded equity in earnings from real estate ventures of $1,848 and $1,801 for the three and six months ended June 30, 2015, related to the ST Portfolio. In 2015, ST Portfolio sold one (Phoenix) of its three remaining Class A multi-family buildings. New Valley received distributions of $8,707 during the six months ended June 30, 2016, primarily related to ST Portfolio and Maryland Portfolio. New Valley received distributions of $493 during the six months ended June 30, 2015, primarily related to the Maryland Portfolio. New Valley has suspended its recognition of equity losses in Maryland Portfolio to the extent such losses exceed its basis. New Valley's maximum exposure to loss as a result of its investment in apartment buildings was $9,193 at June 30, 2016.

Hotels:

Hotel investments range in ownership percentage from 5.2% to 49.0%. New Valley recorded equity in losses from real estate ventures of $189 and $844 for the three and six months ended June 30, 2016, related to hotel operations. New Valley recorded equity in losses from real estate ventures of $261 and $1,006 for the three and six months ended June 30, 2015. New Valley made capital contributions totaling $3,005 for the six months ended June 30, 2016, related to the Park Lane Hotel and Coral Beach and Tennis Club. New Valley made capital contributions totaling $1,980 for the six months ended June 30, 2015, related to the Park Lane Hotel and Coral Beach and Tennis Club. New Valley's maximum exposure to loss as a result of its investments in hotels was $32,086 at June 30, 2016.

Commercial:

New Valley recorded equity in losses from real estate ventures of $1,744 and $1,532 for the three and six months ended June 30, 2016, related to shopping center rental operations. New Valley recorded equity in earnings from real estate ventures of $27 for the three and six months ended June 30, 2015, related to shopping center rental operations. New Valley received distributions totaling $235 for the six months ended June 30, 2016, related to Harmon Meadow. New Valley's maximum exposure to loss as a result of its investments in commercial ventures was $3,682 at June 30, 2016.

Other:

Other investments in real estate ventures relate to a 50% investment in an insurance consulting company owned by Douglas Elliman.

Investments in Real Estate, net:

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



	June 30, 2016		December 31, 2015
Escena, net	$	10,644	$	10,716
Sagaponack	12,684		12,602
Investments in real estate, net	$	23,328	$	23,318

Escena. The assets of “Escena, net” were as follows:



	June 30, 2016			December 31, 2015
Land and land improvements	$	8,907		$	8,907
Building and building improvements	1,874			1,875
Other	2,001			1,923
	12,782			12,705
Less accumulated depreciation	(2,138		)	(1,989		)
	$	10,644		$	10,716

New Valley recorded operating losses of $299 and $173 for the three months ended June 30, 2016 and 2015, respectively, from Escena. New Valley recorded operating income of and $209 and $552 for the six months ended June 30, 2016 and 2015, respectively, from Escena.

Investment in Sagaponack. In April 2015, New Valley invested $12,502 in a residential real estate project located in Sagaponack, NY. The project is wholly owned and the balances of the project are included in the condensed consolidated financial statements of the Company. As of June 30, 2016, the assets of Sagaponack consisted of land and land improvements of $12,684.