Note 5 – Investment in 111 West 57^th Partners LLC

On June 28, 2013, 111 West 57^th Investment LLC, a Delaware limited liability company ("Investment LLC"), a newly formed subsidiary of the Company, entered into a joint venture agreement (as amended, the "JV Agreement") with 111 West 57^th Sponsor LLC, a Delaware limited liability company (the "Sponsor"), an entity affiliated with Michael Stern of JDS Development Group, and Kevin Maloney of Property Markets Group, Inc., pursuant to which Investment LLC invested $56,000,000 (the "Investment") in a real estate development project to purchase and develop the real property located at 105 through 111 West 57^th Street in New York, New York (the "111 West 57^th Property"). In consideration for making the Investment, Investment LLC was granted a 59% membership interest in 111 West 57^th Partners LLC ("111 West 57^th Partners"), a Delaware limited liability company, which indirectly acquired the 111 West 57^th Property on June 28, 2013 (the "Joint Venture," and such date, the "Closing Date"). The JV Agreement was submitted into escrow pursuant to that certain Escrow Procedure Letter dated as of June 17, 2013 between Sponsor and Investment LLC (the "Escrow Letter"), and became effective on the Closing Date. The Company also indirectly contributed an additional $1,250,000 to the Joint Venture in exchange for an additional indirect 1.3% interest in the Joint Venture. Other members and the Sponsor contributed an additional $37,750,000 of cash and/or property to the Joint Venture.

The JV Agreement and related operating agreements generally provide that all distributable cash shall be distributed as follows: (i) first, 100% to the members in proportion to their percentage interests until Investment LLC has received distributions yielding a 20% internal rate of return as calculated; (ii) second, 100% to the Sponsor as a return of (but not a return on) any additional capital contributions made by the Sponsor on account of manager overruns; and (iii) thereafter, (a) 50% to the members in proportion to their respective percentage interests at the time of such distribution, and (b) fifty percent 50% to the Sponsor.

Additionally, the JV Agreement provides that (i) Mr. Richard A. Bianco (the Company's current Chairman, President and Chief Executive Officer) ("Mr. R. A. Bianco"), his immediate family, and/or any limited liability company wholly-owned thereby, and/or a trust in which Mr. R. A. Bianco and/or his immediate family is the beneficiary, shall at all times own, in the aggregate, not less than 20% of the outstanding shares of AmBase; and (ii) Mr. R. A. Bianco shall remain the Chairman of the Board of Directors of AmBase for the duration of the JV Agreement.

AMBASE CORPORATION AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

The 111 West 57^th Property was acquired from 57th Street Partners NY, LLC (an entity affiliated with Starwood Capital Group Global), Steinway, Inc., and 111 West 57th Street Associates, L.P. (an entity affiliated with Wexford Capital LLC), pursuant to three separate purchase agreements for various components of the 111 West 57^th Property. The aggregate purchase price as noted herein below includes various capitalized costs for the 111 West 57^th Property. The Joint Venture intends to purchase additional inclusionary zoning rights for a purchase price of $6,500,000. The acquisition of the 111 West 57^th Property was partially financed pursuant to a mortgage and acquisition loan, as noted herein below, by Annaly CRE LLC, a Delaware limited liability company that is a wholly-owned subsidiary of Annaly Commercial Real Estate Group, Inc., which closed concurrently with the acquisition of the 111 West 57^th Property on the Closing Date. The Joint Venture plans to redevelop the 111 West 57^th Property into an approximate combined 346,000 gross square foot luxury residential tower, retail and/or hotel project.

The foregoing descriptions of each of the JV Agreement and the other agreements referenced herein are qualified in their entirety by the contents of the respective agreements. A copy of the JV Agreement, the Annaly CRE LLC mortgage agreement, and the Escrow Letter were previously filed as exhibits to the Company's financial reports.

The Company has recorded the investment in the 111 West 57^th Partners utilizing the equity method of accounting, as pursuant to the various agreements the Company has significant influence, but does not have control, as defined under GAAP. Accordingly, the results of operations of 111 West 57^th Partners are included in equity income (loss) in the Company's condensed consolidated statements of operations. As of September 30, 2013, the Company's carrying amount of its investment in 111 West 57^th Partners as noted in the Company's condensed consolidated balance sheet, is greater than the Company's equity in the underlying net assets of the 111 West 57^th Partners by $867,000, categorized as goodwill, due to a difference resulting from the reduction in equity for syndication fees paid relating to 111 West 57^th Partners. The Company reviews its investments and ownership interests recorded under the equity method for impairment on a regular basis and/or if events or changes in circumstances indicate a loss in the value of its investment may be other than temporary. There was no impairment on the Company's equity method investment for the nine months ended September 30, 2013.

The following table presents summarized financial information for the Company's equity method investment in 111 West 57^th Partners. The amounts shown represent 100% of the financial position and results of operations of 111 West 57^thPartners for the three months ended September 30, 2013 and from June 28, 2013, (date of investment), through September 30, 2013.

(in thousands)

Assets:	September 30, 2013
Real estate held for development, net	$	254,030
Escrow deposits		44,125
Other assets		27,214
Total assets	$	325,369
Liabilities:
Mortgage payable	$	230,000
Accounts payable		2,301
Total liabilities		232,301
Equity:
Total equity		93,068
Total liabilities and equity	$	325,369

(in thousands)	Three Months Ended September 30, 2013			June 28, 2013, (date of investment), through September 30, 2013
Rental income	$	584		$	599
Expenses		1,059			1,094
Net income (loss)	$	(475	)	$	(495	)