4.	Real Estate Fund Investments

Real estate fund investments are presented at fair value on our consolidated balance sheets and are comprised of (i) Property Funds and (ii) Alternative Investment Funds.

The Company

Below is a summary of the fair value of the fund investments on our consolidated balance sheets.

(Amounts in thousands)	As of
Balance Sheets	December 31, 2015		December 31, 2014
Real Estate Fund Investments:
Property Funds	$	248,824	$	183,216
Alternative Investment Funds		167,614		140,171
Total	$	416,438	$	323,387

Below is a summary of income from the fund investments on our consolidated statements of income.

				Period from
(Amounts in thousands)	Year Ended			November 24, 2014
Income Statements	December 31, 2015			to December 31, 2014
Investment income	$	13,406		$	3,334
Investment expenses		1,132			565
Net investment income		12,274			2,769
Net realized gains		11,955			50
Previously recorded unrealized gains on exited investments		(6,584	)		-
Net unrealized gains (losses)		20,330			(1,407	)
Income from real estate fund investments	$	37,975		$	1,412

Property Funds

The purpose of the Property Funds is to invest in office buildings and related facilities primarily in New York City and San Francisco.

On October 29, 2015, Fund VII and Fund VII-H completed the acquisition of 670 Broadway, a 75,945 square foot creative office building located in Manhattan, for $112,000,000, comprised of $42,000,000 in cash and $70,000,000 of initial mortgage debt.

The following is a summary of the Property Funds, our ownership interests in these Funds and Funds’ ownership interest in the underlying properties.

				As of December 31, 2015
	% Ownership			60 Wall Street			One Market Plaza				50 Beale Street			670 Broadway
Fund II		10.0	%		46.3	%		-				-			-
Fund III		3.1	%		16.0	%		2.0	%			-			-
Fund VII/VII-H		7.2	%		-			-				42.8	%		100.0	%
Total Property Funds					62.3	%		2.0	%			42.8	%		100.0	%
Other Investors					37.7	%		98.0	%	⁽¹⁾		57.2	%		-
Total					100.0	%		100.0	%			100.0	%		100.0	%

⁽¹⁾	Includes a 49.0% ownership interest held by us.

Alternative Investment Funds

The purpose of the Alternative Investment Funds is to invest primarily in real estate related debt and preferred equity investments. As of December 31, 2015, the Alternate Investment Funds had an aggregate of $580,200,000 of committed capital, of which we have invested $166,560,000.

The following is a summary of our ownership interests in the Alternative Investment Funds and the Funds’ underlying investments, as of December 31, 2015.


(Amounts in thousands)		%					As of
Fund/Investment	Investment Type	Ownership		Interest Rate		Initial Maturity	December 31, 2015		December 31, 2014
Fund VIII
26 Broadway ⁽¹⁾	Mezzanine Loan		1.7%		8.3%	Jan-2022	$	46,678	$	45,947
1440 Broadway ⁽²⁾	Mezzanine Loan		1.7%		6.4%	Oct-2019		40,619		-
700 Eighth Avenue ⁽³⁾	Mortgage/Mezzanine Loans		1.7%		6.4%	Dec-2016		80,317		-
Total Mortgage and Mezzanine Loans							$	167,614	$	45,947

PGRESS Funds
470 Vanderbilt Avenue ⁽⁴⁾	Preferred Equity Investment						$	-	$	35,039
2 Herald Square⁽⁵⁾	Preferred Equity Investment							-		18,107
One Court Square ⁽⁶⁾	Preferred Equity Investment							-		41,078
Total Preferred Equity Investments							$	-	$	94,224

Total Alternative Investment Funds							$	167,614	$	140,171

⁽¹⁾

The loan is secured by the equity interests in the owner of 26 Broadway, an 836,000 square foot office building, located in the financial district of Manhattan. The loan has a fixed interest rate and is subordinate to $220,000 of other debt.

⁽²⁾

On September 30, 2015, Fund VIII closed on a $40,000 mezzanine loan secured by the equity interests in the owner of 1440 Broadway, a 751,546 square foot office and retail property located in Manhattan. The loan bears interest at LIBOR plus 600 bps, and has a one-year extension option and is subordinate to $265,000 of other debt.

⁽³⁾

On November 24, 2015, Fund VIII closed on a senior mortgage and mezzanine loan aggregating $80,000 secured by 700 Eighth Avenue, a 26,126 square foot retail property located in Manhattan. The loans bear interest at LIBOR plus 600 bps and have one-year extension options.

⁽⁴⁾

Represents a preferred equity investment in a partnership that owns 470 Vanderbilt Avenue, a 650,000 square foot office building located in Brooklyn, New York. (See Note 5, Preferred Equity Investments for details).

⁽⁵⁾

Represents a preferred equity investment in a partnership that owns 2 Herald Square, a 369,000 square foot office and retail property in Manhattan. (See Note 5, Preferred Equity Investments for details).

⁽⁶⁾

On September 1, 2015, PGRESS and PGRESS-H redeemed their preferred equity investment in One Court Square for $42,475, resulting in a realized gain on the investment of $7,455.

The Predecessor

Below is a summary of realized and unrealized gains from real estate fund investments on our consolidated statements of income.

	The Predecessor
	Period from
(Amounts in thousands)	January 1, 2014			Year Ended
Income Statements	to November 23, 2014			December 31, 2013
Net realized gains (losses) on real estate fund investments		43,309			(694	)
Previously recorded unrealized (gains) losses on exited investments		(10,405	)		10,571
Net unrealized gains on real estate fund investments		96,450			322,176
Realized and unrealized gains, net	$	129,354		$	332,053

Asset Management Fees

Our predecessor earned asset management fees from the Funds it managed. Asset management fees and expenses related to Funds included in the combined consolidated statements of income are eliminated in combination and consolidation. The limited partners’ share of such fees are reflected as a reduction of net income attributable to noncontrolling interests, which results in a corresponding increase in net income attributable to our Predecessor.

Below is a summary of the asset management fees earned by our Predecessor.

	The Predecessor
	Period from
(Amounts in thousands)	January 1, 2014			Year Ended
Income Statements	to November 23, 2014			December 31, 2013
Gross asset management fees	$	23,701		$	26,180
Eliminated fees⁽¹⁾		(1,078	)		(1,118	)
Net asset management fees	$	22,623		$	25,062

⁽¹⁾	Eliminated fees reflect a reduction in asset management fees from the general partner interest in each of the Funds.

The following tables summarizes the income statements for the period January 1, 2014 to November 23, 2014 and for the year ended December 31, 2013 for each of the Property Funds’ underlying investments.

(Amounts in thousands)	Property Funds' Underlying Investments for the Period from January 1, 2014 to November 23, 2014
Statements of Income	1633 Broadway			900 Third Ave			31 West 52nd St			1301 Ave of the Americas			One Market Plaza			Liberty Place			1899 Penn. Ave			2099 Penn. Ave			425 Eye St
Revenues:
Rental income	$	136,422		$	31,219		$	67,453		$	104,220		$	65,314		$	5,823		$	7,249		$	165		$	9,501
Tenant reimbursement income		12,742			3,001			5,126			8,252			1,191			1,884			3,648			6			879
Fee and other income		2,951			1,680			3,360			9,667			3,242			50			115			280			319
Total revenue		152,115			35,900			75,939			122,139			69,747			7,757			11,012			451			10,699
Expenses:
Building operating		50,830			14,904			21,516			46,679			25,119			3,911			4,674			4,147			5,148
Related party management fees		2,864			914			1,244			1,580			701			214			254			38			339
Operating		53,694			15,818			22,760			48,259			25,820			4,125			4,928			4,185			5,487
Depreciation and amortization		10,990			6,085			23,438			37,212			31,422			-			3,484			-			5,022
General and administrative		118			113			119			167			4,545			66			58			798			71
Total expenses		64,802			22,016			46,317			85,638			61,787			4,191			8,470			4,983			10,580
Operating income (loss)		87,313			13,884			29,622			36,501			7,960			3,566			2,542			(4,532	)		119
Unrealized gain on interest rate swaps		25,226			5,759			8,466			12,042			20,848			-			-			-			-
Interest and debt expense		(46,315	)		(13,269	)		(20,092	)		(54,436	)		(48,486	)		(3,488	)		(4,051	)		(4,578	)		(4,548	)
Unrealized depreciation on investment in real estate		-			-			-			-			-			(2,772	)		-			(749	)		-
Net income (loss) before taxes		66,224			6,374			17,996			(5,893	)		(19,678	)		(2,694	)		(1,509	)		(9,859	)		(4,429	)
Income tax (expense) benefit		-			-			-			-			-			(105	)		53			-			(2,430	)
Net income (loss)	$	66,224		$	6,374		$	17,996		$	(5,893	)	$	(19,678	)	$	(2,799	)	$	(1,456	)	$	(9,859	)	$	(6,859	)

(Amounts in thousands)	Property Funds' Underlying Investments for the Year Ended December 31, 2013
Statements of Income	1633 Broadway			900 Third Ave			31 West 52nd St			1301 Ave of the Americas			One Market Plaza			Liberty Place			1899 Penn. Ave			2099 Penn. Ave			425 Eye St
Revenues:
Rental income	$	130,590		$	33,601		$	77,257		$	97,576		$	77,265		$	8,421		$	9,686		$	432		$	10,167
Tenant reimbursement income		13,538			3,036			5,100			9,693			1,707			2,528			4,807			74			4
Fee and other income		2,994			732			1,154			2,598			7,778			82			153			58			801
Total revenue		147,122			37,369			83,511			109,867			86,750			11,031			14,646			564			10,972
Expenses:
Building operating		54,867			16,150			22,905			51,247			29,985			4,286			5,066			4,531			5,448
Related party management fees		2,870			980			1,295			1,646			832			275			330			13			354
Operating		57,737			17,130			24,200			52,893			30,817			4,561			5,396			4,544			5,802
Depreciation and amortization		11,187			6,349			22,688			37,075			37,847			-			4,139			-			5,502
General and administrative		251			156			130			215			236			63			69			66			75
Total expenses		69,175			23,635			47,018			90,183			68,900			4,624			9,604			4,610			11,379
Operating income (loss)		77,947			13,734			36,493			19,684			17,850			6,407			5,042			(4,046	)		(407	)
Unrealized gain on interest rate swaps		34,711			9,985			15,993			21,275			36,378			-			-			1,101			427
Interest and debt expense		(52,563	)		(14,872	)		(22,307	)		(68,540	)		(55,170	)		(3,887	)		(4,514	)		(5,285	)		(5,664	)
Unrealized (depreciation) appreciation on investment in real estate		-			-			-			-			-			(2,066	)		-			1,965			-
Net income (loss) before taxes		60,095			8,847			30,179			(27,581	)		(942	)		454			528			(6,265	)		(5,644	)
Income tax (expense) benefit		-			-			-			-			-			(45	)		(54	)		-			2,492
Net income (loss)	$	60,095		$	8,847		$	30,179		$	(27,581	)	$	(942	)	$	409		$	474		$	(6,265	)	$	(3,152	)