NEW VALLEY LLC

Investments in real estate ventures:

New Valley also holds equity investments in various real estate projects. 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	June 30, 2017		December 31, 2016
Condominium and Mixed Use Development:
New York City SMSA	3.1% - 49.5%	$	128,168	$	131,770
All other U.S. areas	3.0% - 48.5%	26,615		40,950
		154,783		172,720
Apartment Buildings:
All other U.S. areas	7.6% - 16.3%	7,458		8,287
		7,458		8,287
Hotels:
New York City SMSA	5.2%	22,226		21,895
International	49.0%	2,501		3,037
		24,727		24,932
Commercial:
New York City SMSA	49.0%	2,820		3,290
All other U.S. areas	2.1%	9,844		10,000
		12,664		13,290

Other	50.0%	1,724		2,029
Investments in real estate ventures		$	201,356	$	221,258

Contributions:

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



	Six Months Ended June 30,
	2017		2016
Condominium and Mixed Use Development:
New York City SMSA	$	675	$	1,259
All other U.S. areas	6,242		7,542
	6,917		8,801
Hotels:
New York City SMSA	1,537		2,515
International	—		490
	1,537		3,005

Total contributions	$	8,454	$	11,806

New Valley contributed its proportionate share of additional capital along with contributions by the other investment partners during the six months ended June 30, 2017 and June 30, 2016. New Valley did not elect to make certain capital contributions to Monad Terrace. This resulted in a change in ownership percentage from 24.3% to 22.2%. 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 investors. 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:



	Six Months Ended June 30,
	2017		2016
Condominium and Mixed Use Development:
New York City SMSA	$	31,280	$	9,940
All other U.S. areas	17,949		10,045
	49,229		19,985
Apartment Buildings:
All other U.S. areas	182		8,707
	182		8,707
Hotels:
International	239		—
	239		—
Commercial:
New York City SMSA	101		235
All other U.S. areas	92		—
	193		235

Other	1,150		1,049
Total distributions	$	50,993	$	29,976

Of the distributions received by New Valley from its investment in real estate ventures, $27,655 and $11,993 were from distributions of earnings for the six months ended June 30, 2017 and June 30, 2016, respectively, and $23,338 and $17,983 were a return of capital for the six months ended June 30, 2017 and June 30, 2016, respectively. Distributions from earnings are included in cash from operations in the Condensed Consolidating Statements of Cash Flows, while distributions that are returns of capital are included in cash flows from investing activities in the Condensed Consolidating Statements of Cash Flows.

Equity in Earnings (Losses) from Real Estate Ventures:

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



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Condominium and Mixed Use Development:
New York City SMSA	$	17,116		$	3,279		$	29,296		$	2,610
All other U.S. areas	(863		)	(317		)	(1,155		)	(831		)
	16,253			2,962			28,141			1,779
Apartment Buildings:
All other U.S. areas	(724		)	1,630			(647		)	2,146
	(724		)	1,630			(647		)	2,146
Hotels:
New York City SMSA	(519		)	(494		)	(1,206		)	(1,074		)
International	254			305			(296		)	230
	(265		)	(189		)	(1,502		)	(844		)
Commercial:
New York City SMSA	(124		)	(1,744		)	(369		)	(1,532		)
All other U.S. areas	(64		)	—			(64		)	—
	(188		)	(1,744		)	(433		)	(1,532		)

Other	215			154			845			757
Equity in earnings from real estate ventures	$	15,291		$	2,813		$	26,404		$	2,306

Investment in Real Estate Ventures Entered into during 2017:

In March 2017, New Valley invested $1,170 for an approximate 3.0% interest in Witkoff GP Partners LLC. The purpose of the joint venture is to use contributed capital to invest in other real estate ventures. New Valley has invested an additional $4,286 as of June 30, 2017. The 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 Witkoff GP Partners LLC was $5,463 at June 30, 2017. New Valley has committed to contribute up to an additional $14,544 to the venture.

In April 2017, New Valley invested $402 for an approximate 9.8% interest in New Brookland East LLC. The joint venture plans to develop a condominium complex. The 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 New Brookland East LLC was $410 at June 30, 2017.

VIE Consideration:

The Company has determined that New Valley is the primary beneficiary of two real state ventures because it controls the activities that most significantly impact economic performance of each of the two real estate ventures. Consequently, New Valley consolidates these variable interest entities ("VIEs").

The carrying amount of the consolidated assets of the VIEs was $14,533 and $14,385 as of June 30, 2017 and December 31, 2016, respectively. Those assets are owned by the VIEs, not the Company. Neither of the two consolidated VIEs had recourse liabilities as of June 30, 2017 and December 31, 2016. 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. Therefore, New Valley's investment in such real estate ventures has been accounted for under the equity method of accounting.

Maximum Exposure to Loss:

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



	June 30, 2017
Condominium and Mixed Use Development:
New York City SMSA	$	129,745
All other U.S. areas	32,377
	162,122
Apartment Buildings:
All other U.S. areas	7,458
	7,458
Hotels:
New York City SMSA	22,226
International	2,501
	24,727
Commercial:
New York City SMSA	2,820
All other U.S. areas	9,844
	12,664
Other	1,724
Total maximum exposure to loss	$	208,695

For the six months ended June 30, 2017, New Valley recognized $3,766 of interest expense that was previously capitalized into the carrying value of its ventures. For the six months ended June 30, 2016, New Valley capitalized $4,836 of interest expense into the carrying value of its ventures whose projects were currently under development.

Douglas Elliman has been engaged by the developers as the sole broker or the co-broker for several of the real estate ventures that New Valley owns an interest. Douglas Elliman earned gross commissions of approximately $5,371 and $8,079 from these projects for the six months ended June 30, 2017 and June 30, 2016, respectively.

Combined Financial Statements for Unconsolidated Subsidiaries:

Pursuant to Rule 10-01(b), the following summarized financial data for unconsolidated subsidiaries includes information for the 10 Madison Square West Condominium and Mixed Use Development. New Valley has elected a one-month lag reporting period for 10 Madison Square West.

Condominium and Mixed Use Development:



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Income Statement
Revenue	$	102,039	$	196,658	$	162,364	$	258,584
Cost of sales	49,037		122,911		101,879		155,714
Other expenses	1,512		1,151		3,093		1,436
Income from continuing operations	$	51,490	$	72,596	$	57,392	$	101,434

Investments in Real Estate, net:

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



	June 30, 2017		December 31, 2016
Escena, net	$	10,622	$	10,792
Sagaponack	13,053		12,848
Investments in real estate, net	$	23,675	$	23,640

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



	June 30, 2017			December 31, 2016
Land and land improvements	$	8,907		$	8,907
Building and building improvements	1,879			1,878
Other	2,058			2,028
	12,844			12,813
Less accumulated depreciation	(2,222		)	(2,021		)
	$	10,622		$	10,792

New Valley recorded operating losses of $345 and $299 for the three months ended June 30, 2017 and 2016, respectively, from Escena. New Valley recorded operating income of $207 and $209 for the six months ended June 30, 2017 and 2016, 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, 2017, the assets of Sagaponack consisted of land and land improvements of $13,053.