NEW VALLEY LLC

(a) Investments in real estate ventures.

New Valley also holds equity investments in various real estate projects domestically and internationally. The majority of New Valley's investment in real estate ventures were located in the New York City Standard Metropolitan Statistical Area ("SMSA"). New Valley aggregated the disclosure of its investments in real estate ventures by property type and operating characteristics.

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



	Range of Ownership	December 31, 2016		December 31, 2015
Condominium and Mixed Use Development:
New York City SMSA	3.1% - 49.5%	$	131,770	$	138,247
All other U.S. areas	15.0% - 48.5%	40,950		25,776
		172,720		164,023
Apartment Buildings:
All other U.S. areas	7.6% - 16.3%	8,287		15,754
		8,287		15,754
Hotels:
New York City SMSA	5.2%	21,895		19,697
International	49.0%	3,037		10,228
		24,932		29,925
Commercial:
New York City SMSA	49.0%	3,290		5,449
All other U.S. areas	2.1%	10,000		—
		13,290		5,449

Other	50.0%	2,029		2,017
Investments in real estate ventures		$	221,258	$	217,168

Contributions

New Valley made contributions to its investments in real estate ventures as follows:



	December 31, 2016		December 31, 2015
Condominium and Mixed Use Development:
New York City SMSA	$	5,661	$	48,232
All other U.S. areas	23,874		12,836
	29,535		61,068
Hotels:
New York City SMSA	4,082		1,896
International	490		1,377
	4,572		3,273
Commercial:
New York City SMSA	—		5,931
All other U.S. areas	10,000		—
	10,000		5,931

Total contributions	$	44,107	$	70,272

During the year-ended December 31, 2016, New Valley did not make certain capital contributions to Monad Terrace. This resulted in a change in ownership percentage from 31.3% to 24.3%. For other 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 during the years ended December 31, 2016 and December 31, 2015. New Valley's direct investment percentage for these ventures did not change.

Distributions

New Valley received distributions from its investments in real estate ventures as follows:



	December 31, 2016			December 31, 2015
Condominium and Mixed Use Development:
New York City SMSA	$	(27,574	)	$	(18,787	)
All other U.S. areas	(10,336		)	—
	(37,910		)	(18,787		)
Apartment Buildings:
All other U.S. areas	(9,055		)	(3,290		)
	(9,055		)	(3,290		)
Hotels:
International	(8,120		)	—
	(8,120		)	—
Commercial:
New York City SMSA	(515		)	(480		)
	(515		)	(480		)

Other	(1,050		)	(900		)
Total distributions	$	(56,650	)	$	(23,457	)

Of the distributions received by New Valley from its investment in real estate ventures, $23,446 and $5,894 were from distributions of earnings and $33,204 and $17,563 were a return of capital for the years ended December 31, 2016 and December 31, 2015, respectively.

Equity in Earnings (Losses) from Real Estate Ventures

New Valley recognized equity in earnings (losses) from real estate ventures as follows:



	December 31, 2016			December 31, 2015			December 31, 2014
Condominium and Mixed Use Development:
New York City SMSA	$	7,432		$	4,533		$	7,806
All other U.S. areas	(1,793		)	(869		)	100
	5,639			3,664			7,906
Apartment Buildings:
All other U.S. areas	1,588			527			341
	1,588			527			341
Hotels:
New York City SMSA	(1,884		)	(1,540		)	(2,643		)
International	439			(1,594		)	(1,612		)
	(1,445		)	(3,134		)	(4,255		)
Commercial:
New York City SMSA	(1,644		)	(2		)	—
	(1,644		)	(2		)	—

Other	1,062			946			111
Total equity in earnings from real estate ventures	$	5,200		$	2,001		4,103

Investment in Real Estate Ventures Entered Into During 2016

In July 2016, New Valley entered into a newly created joint venture related to the 20 Times Square project. The joint venture is a variable interest entity, however, New Valley is not the primary beneficiary. New Valley accounts for its interest in the joint venture under the equity method of accounting and has combined this investment with the existing 20 Times Square venture carrying balance.

In August 2016, New Valley entered into a newly created joint venture related to the 87 Park project. The joint venture is a variable interest entity, however, New Valley is not the primary beneficiary. New Valley accounts for its interest in the joint venture under the equity method of accounting and has combined this investment with the existing 87 Park venture carrying balance.

In December 2016, New Valley invested $10,000 for an approximate 2.1% interest in Wynn/CA JV, LLC. The purpose of the joint venture is to own and operate retail space in the Wynn Resort in Las Vegas, Nevada. The joint venture is a variable interest entity; however, New Valley is not the primary beneficiary. New Valley accounts for this investment under the equity method of accounting. New Valley's maximum exposure to loss as a result of its investment in Wynn Las Vegas Retail was $10,000 at December 31, 2016.

VIE Consideration

It was determined that New Valley is the primary beneficiary of two joint ventures as New Valley controls the activities that most significantly impact economic performance of the entities. Therefore, New Valley consolidates these VIEs.

The carrying amount of the consolidated VIEs' assets were $14,385 and $13,702 for the years ended December 31, 2016 and 2015, respectively. Those assets are owned by the VIEs, not the Company. Neither of the consolidated VIEs had non-recourse liabilities as of December 31, 2016 and 2015. A VIE's assets can only be used to settle obligations of that VIE. The VIEs are not guarantors of the Company's senior notes and other debts payable.

For the remaining investments in real estate ventures, New Valley determined that the entities were variable interest entities but New Valley was not the primary beneficiary.

Maximum Exposure to Loss

New Valley's maximum exposure to loss was as follows:



	December 31, 2016
Condominium and Mixed Use Development:
New York City SMSA	$	133,335
All other U.S. areas	46,712
	180,047
Apartment Buildings:
All other U.S. areas	8,287
	8,287
Hotels:
New York City SMSA	21,895
International	3,037
	24,932
Commercial:
New York City SMSA	3,290
All other U.S. areas	10,000
	13,290
Other	2,029
Total maximum exposure to loss	$	228,585

New Valley capitalized $11,433 and $9,928 of interest expense into the carrying value of its ventures whose projects were currently under development during the years ended December 31, 2016 and December 31, 2015, respectively.

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 $15,078 and $3,077 from these projects for the years ended December 31, 2016 and December 31, 2015, respectively.

(b) Combined Financial Statements for Unconsolidated Subsidiaries:

Pursuant to Rule 4-08(g), the following summarized financial data for unconsolidated subsidiaries includes information for the following entities: Condominium and Mixed Use Development (10 Madison West , The Marquand, 11 Beach Street, 160 Leroy Street, 215 Chrystie Street, Queens Plaza South, 111 Murray Street, 87 Park, 20 Times Square, 25-19 43rd Avenue - The Dutch LIC, 76 Eleventh Avenue, Monad Terrace, West Hollywood Edition and 125 Greenwich Street) Apartment Buildings (ST Portfolio and Maryland Portfolio), Hotels (Coral Beach, Park Lane Hotel, and Hotel Taiwana) and Commercial (Harmon Meadow and Wynn Las Vegas Retail). New Valley has elected a one-month lag reporting period for 10 Madison West, Hotel Taiwana, 11 Beach Street, Maryland Portfolio, 20 Times Square, 160 Leroy Street, 215 Chrystie Street, 87 Park, 125 Greenwich Street, Harmon Meadow, Monad Terrace, Park Lane Hotel, ST Portfolio, Coral Beach, West Hollywood Edition and Wynn Las Vegas Retail. New Valley has elected a three month lag reporting period for The Marquand, Queens Plaza South, 111 Murray Street, 25-19 43rd Avenue - The Dutch LIC and 76 Eleventh Avenue.

Condominium and Mixed Use Development:



	Year Ended December 31,
	2016		2015		2014
Income Statement
Revenue	$	511,844	$	141,884	$	182,635
Cost of Goods Sold	303,020		92,837		96,993
Other Expenses	42,566		10,672		6,798
Income from continuing operations	$	166,258	$	38,375	$	78,844



	December 31, 2016		December 31, 2015
Balance Sheets
Investment in real estate	$	3,413,928	$	2,921,611
Total assets	3,786,206		3,237,835
Total debt	2,478,574		2,014,682
Total liabilities	2,687,351		2,195,940
Non controlling interest	564,194		535,573

Apartment & Office Buildings:



	Year Ended December 31,
	2016		2015		2014
Income Statement
Revenue	$	87,225	$	83,871	$	85,704
Other Expenses	83,117		75,384		86,153
Income from continuing operations	$	4,108	$	8,487	$	(449	)



	December 31, 2016			December 31, 2015
Balance Sheets
Investment in real estate	$	488,732		$	590,331
Total assets	522,459			626,513
Total debt	475,668			512,479
Total liabilities	484,377			529,692
Non controlling interest	(9,931		)	(4,463		)

Hotels:



	Year Ended December 31,
	2016			2015			2014
Income Statement
Revenue	$	81,517		$	83,324		$	82,899
Cost of Goods Sold	4,262			3,837			3,064
Other Expenses	114,582			112,069			133,258
Loss from continuing operations	$	(37,327	)	$	(32,582	)	$	(53,423	)



	December 31, 2016		December 31, 2015
Balance Sheets
Investment in real estate	$	781,461	$	824,753
Total assets	854,559		894,447
Total debt	491,200		511,029
Total liabilities	509,385		538,426
Non controlling interest	312,113		294,470

Commercial:



	Year Ended December 31,
	2016			2015			2014
Income Statement
Revenue	$	8,410		$	5,638
Other Expenses	11,195			5,642
Loss from continuing operations	$	(2,785	)	$	(4	)	$	—



	December 31, 2016		December 31, 2015
Balance Sheets
Investment in real estate	$	61,091	$	65,398
Total assets	74,512		67,343
Total debt	55,625		55,624
Total liabilities	57,601		56,415

Other:



	Year Ended December 31,
	2016		2015		2014
Income Statement
Revenue	$	3,344	$	3,030	$	2,714
Other Expenses	1,227		1,049		1,019
Income from continuing operations	$	2,117	$	1,981	$	1,695



	December 31, 2016		December 31, 2015
Balance Sheets
Total assets	$	5,382	$	5,157
Total liabilities	$	1,230	$	1,022

The joint venture agreements by which New Valley invests in real estate set forth certain conditions where New Valley or its affiliate is required to contribute payments towards the satisfaction of liabilities of the other partners in the joint venture, or to otherwise indemnify other partners. Mostly these contribution/indemnity requirements are triggered in the event New Valley or its affiliate commits an act that results in liability of another partner under a guarantee that the other partner has given to a lender in connection with a mortgage or mezzanine loan. The guarantees given in connection with the loans may include non-recourse carve-out guarantees, environmental indemnities, carry guarantees and/or completion guarantees, depending on the specific project. In some instances, New Valley or its affiliate would be proportionately liable in the event of liability under a guarantee that is not the fault of any of the partners in the joint venture. In very limited circumstances, New Valley has agreed to be a guarantor directly in connection with a loan, but in almost all of New Valley’s investments, neither New Valley nor any of its affiliates is a direct guarantor under the loan documents. In some instances, New Valley and its partners have guaranteed the debt of certain unconsolidated entities. As of December 31, 2016 and 2015, no events are known to the Company that would trigger any guarantees or contribution requirements by New Valley related to its unconsolidated entities.

As of December 31, 2016 and 2015, the aforementioned contribution/indemnity obligations and guarantees were not material to the Company. The Company believes that as of December 31, 2016, in the event New Valley becomes legally obligated to contribute funds or otherwise indemnify another partner due to a triggering event under a guarantee, or becomes legally obligated as a guarantor (in the limited circumstances where New Valley is a direct guarantor under the loan documents), the real estate underlying the applicable project is expected to be sufficient to largely repay any guaranteed obligation (although a lender need not necessarily resort to foreclosing on the real estate before seeking recourse under a loan guarantee). In one of New Valley's projects, New Valley and its partner have guaranteed approximately $6,000 of a construction loan. The guarantee is automatically reduced for all additional capital contributions New Valley and it partner contribute to the investment, and for any additional equity raised for the project. In another project, New Valley has executed limited recourse guarantees with a maximum exposure to New Valley of approximately $5,400.

If New Valley is required to make a payment under any guarantee, the payment would constitute a capital contribution or loan to the New Valley unconsolidated entity and increase New Valley's investment in the unconsolidated entity and its share of any funds the entity distributes.

(d) Investments in Real Estate, net:

The components of “Investments in Real Estate, net” were as follows:



	December 31, 2016		December 31, 2015
Escena, net	$	10,792	$	10,716
Sagaponack	12,848		12,602
Investment in real estate, net	$	23,640	$	23,318

Escena. In March 2008, a subsidiary of New Valley purchased a loan collateralized by a substantial portion of a 450-acre approved master planned community in Palm Springs, California known as “Escena.” In April 2009 New Valley completed the foreclosure process and took title to the collateral which consisted of 867 residential lots with site and public infrastructure, an 18-hole golf course, a substantially completed clubhouse, and a seven-acre site approved for a 450-room hotel.

The assets have been classified as an “Investments in Real Estate, net” on the Company’s consolidated balance sheet and the components are as follows:



	December 31, 2016			December 31, 2015
Land and land improvements	$	8,907		$	8,907
Building and building improvements	1,878			1,875
Other	2,028			1,923
	12,813			12,705
Less accumulated depreciation	(2,021		)	(1,989		)
	$	10,792		$	10,716

The Company recorded an operating loss of $899, $789 and $760 for the years ended December 31, 2016, 2015 and 2014, respectively, from Escena. The operating loss recorded for the year ended December 31, 2015 includes an impairment charge of $230 related to the golf course.

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 consolidated financial statements of the Company. As of December 31, 2016, the assets of Sagaponack consist of land and land improvements of $12,848.

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 results of Indian Creek.

In May 2014, the Indian Creek property was sold for $14,400. New Valley recognized income of approximately $2,400 from the sale for the year ended December 31, 2014. The project has concluded.

Real Estate Market Conditions. Because of the risks and uncertainties of the real estate markets, the Company will continue to perform additional assessments to determine the impact of the markets, if any, on the Company’s consolidated financial statements. Thus, future impairment charges may occur.