10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to           .

Commission File No. 1-32248

GRAMERCY CAPITAL CORP.

(Exact name of registrant as specified in its charter)

Maryland	06-1722127
(State or other jurisdiction incorporation or organization)	(I.R.S. Employer of Identification No.)
420 Lexington Avenue, New York, NY 10170
(Address of principal executive offices - zip code)
(212) 297-1000
(Registrant’s telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $.001 Par Value	New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o No ý.

As of March 17, 2005, there were 18,833,000 shares of the Registrant’s common stock outstanding. The aggregate market value of common stock held by non-affiliates of the registrant (9,447,000  shares) at December 3, 2004, was $163,149,690.  The aggregate market value was calculated by using the price at which our common stock was last sold, which was $17.27 per share on December 3, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for the 2005 Annual Stockholders’ Meeting to be held May 18, 2005 and to be filed within 120 days after the close of the Registrant’s fiscal year are incorporated by reference into Part III of this Annual Report on Form 10-K.

GRAMERCY CAPITAL CORP.
FORM 10-K
TABLE OF CONTENTS

10-K PART AND ITEM NO.

PART I
1.	Business
2.	Properties
3.	Legal Proceedings
4.	Submission of Matters to a Vote of Security Holders
PART II
5.	Market for Registrant’s Common Equity and Related Stockholders Matters
6.	Selected Financial Data
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
7A.	Quantitative and Qualitative Disclosures about Market Risk
8.	Financial Statements and Supplemental Data
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
9A.	Controls and Procedures
PART III
10.	Directors and Executive Officers of the Registrant
11.	Executive Compensation
12.	Security Ownership of Certain Beneficial Owners and Management
13.	Certain Relationships and Related Transactions
14.	Principal Accounting Fees and Services
PART IV
15.	Exhibits, Financial Statements, Schedules and Reports on Form 8-K
	SIGNATURES

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PART I

ITEM 1.BUSINESS

General

Gramercy Capital Corp., (the “Company” or “Gramercy”) was formed in April 2004 and we completed our initial public offering in August 2004.  We are a commercial real estate specialty finance company focused on originating and acquiring, for our own account, whole loans, bridge loans, subordinate interests in whole loans, permanent loans, distressed debt, mortgage backed securities, mezzanine loans and preferred equity interests in entities that own commercial real estate.  Our objective is to grow our portfolio through investments that compensate us appropriately for the risk of loss associated with them, rather than targeting a specific gross interest rate or yield hurdle. We assess this risk-adjusted return when evaluating transactions and target transactions with yields that ensure an equitable balance between risks and return. We invest in assets with the potential for appreciation, in addition to providing current income.

As of December 31, 2004, we held investments of approximately $406.6 million, net of origination fees and discounts.  For the period from formation through December 31, 2004 we generated revenues of $6.8 million on those investments.

We conduct substantially all of our operations through GKK Capital LP, or the “Operating Partnership”, and are externally managed and advised by GKK Manager LLC, or the “Manager”, a majority-owned subsidiary of SL Green Realty Corp., or “SL Green”.  At December 31, 2004, SL Green owned an approximately 25% interest in the outstanding shares of our common stock.  We have elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code and generally will not be subject to federal income taxes to the extent we distribute our income to our stockholders.

Our corporate offices are located in midtown Manhattan at 420 Lexington Avenue, New York, New York 10170.  We do not currently have any employees, nor do we anticipate hiring any employees in the near term. Our executive officers are all employed by our Manager or SL Green. We can be contacted at (212) 297-1000.  We maintain a website at www.gramercycapitalcorp.com.  On our website, you can obtain, free of charge, a copy of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as practicable after we file such material electronically with, or furnish it to, the Securities and Exchange Commission.  We have also made available on our website our audit committee charter, compensation committee charter, corporate governance and nominating committee charter, code of business conduct and ethics and corporate governance principles.

Unless the context requires otherwise, all references to “we,” “our,” and “us” in this annual report means Gramercy Capital Corp., a Maryland corporation, and one or more of its subsidiaries, including GKK Capital LP, a Delaware limited partnership.

Corporate Structure

Substantially all of our assets are held by, and all of our operations are conducted through, our Operating Partnership.  We are the sole general partner and sole owner of the Class A Limited Partner Interests of the Operating Partnership.  SL Green Operating Partnership, L.P., or “SL Green”, and the Manager own 85 units and 15 units of the Class B limited partner interests, respectively, which represents 100% of all Class B limited partner interests.  SL Green Operating Partnership, L.P. intends to own at least 70 units of the Class B limited partner interests.  To provide an incentive for the Manager to enhance the value of the common stock, the Manager and SL Green Operating Partnership, L.P. are entitled through their ownership of Class B limited partner interests of the Operating Partnership to an incentive return equal to 25% of the amount by which funds from operations (as defined in the partnership agreement of the Operating Partnership) plus certain accounting gains exceed the product of the weighted average stockholders equity (as defined in the partnership agreement of the Operating Partnership) multiplied by 9.5% (divided by 4 to adjust for quarterly calculations).

As of December 31, 2004, SL Green Operating Partnership, L.P. owned an 85% interest in the Manager and intends to own at least a 70% interest in the Manager.  The remaining 15% is owned by certain members of our executive management team who are not also employees of SL Green.  We pay to the Manager a base management fee equal to one and three-quarters of one percent (1.75%) of our stockholders’ equity (as defined in the Management Agreement).  In addition, we are obligated to reimburse the Manager for its costs incurred under an Asset Servicing Agreement and a separate Outsource Agreement between the Manager and SL Green Operating Partnership, L.P.  The Asset Servicing Agreement provides for an annual fee payable by us of 0.15% of the book value of our investments serviced by SL Green Operating Partnership, L.P., excluding certain defined investments for which other servicing

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arrangements are executed, and further reduced by fees paid directly to outside servicers by Gramercy.  The Outsourcing Agreement provides for an annual fee payable by us of $1.25 million per year, increasing 3% annually over the prior year, for management services outlined in the agreement.  The Asset Servicing and Outsourcing Agreements allow us to leverage the experience, resources and relationships SL Green has established while maintaining a moderate level of corporate overhead expenses.

Business and Growth Strategies

We invest in a diversified portfolio of domestic real estate loans and securities including whole loans, bridge loans, subordinate interests in whole loans, permanent loans, distressed debt, mortgage-backed securities, mezzanine loans, preferred equity, and other real estate-related assets. We believe these investments offer attractive risk-adjusted returns with long-term principal protection under a variety of default and loss scenarios. We actively manage our assets with a goal of generating cash available for distribution, facilitating capital appreciation and generating attractive returns to our stockholders.

We generate income principally from the spread between the yields on our assets and the cost of our borrowing and hedging activities. We leverage our investments to enhance returns to shareholders equity.  We finance, or intend to finance, assets through a variety of techniques, including repurchase agreements, secured credit facilities, issuances of commercial mortgage-backed securities, collateralized debt obligations and other structured financings.  In addition, we match fund interest rates with like-kind debt (i.e., fixed-rate assets are financed with fixed-rate debt, and floating rate assets are financed with floating rate debt), through the use of hedges such as interest rate swaps, caps, or through a combination of these strategies. This allows us to reduce the impact of changing interest rates on our cash flow and earnings.  We actively manage our positions, using our credit, structuring and asset management skills to enhance returns. We intend to grow our business using prudent levels of debt financing, syndication of loan interests and structured financing when feasible, rather than relying solely on equity capital, in order to increase earnings per share.

Our ability to manage the real estate risk underwritten by our Manager and us is a critical component of our success. We actively manage and maintain the credit quality of our portfolio by using our management team’s expertise in structuring and repositioning investments to improve the quality and yield on managed investments. When investing in higher leverage transactions, we use guidelines and standards developed and employed by senior management of the Manager and SL Green, including rigorous underwriting of collateral performance and valuation, a review of the creditworthiness of the equity investors, additional forms of collateral and strategies to effect repayment. If defaults occur, we will employ SL Green’s strong asset management skills to mitigate the severity of any losses and seek to optimize the recovery from assets in the event that we foreclose upon them. In New York, Washington, D.C. and elsewhere as appropriate, SL Green will manage these assets and has the right to purchase properties in metropolitan New York and Washington, D.C. that we acquire in foreclosure. In other geographic markets, we often use long-standing relationships of senior management or SL Green with local operators or investors to enhance our ability to underwrite transactions or mitigate defaults when making or managing investments.

We seek to structure the debt transactions in which we invest, which enhances our ability to mitigate our losses, by having the benefit of loan documents that afford us appropriate rights and control over our collateral, and having the right to control the debt that is senior to our position. We believe that this level of control allows us to achieve attractive risk-adjusted returns within a real estate debt capital structure. We generally avoid investments where we cannot secure adequate control rights, unless we believe the default risk is very low. Our flexibility to invest in all or any part of a debt capital structure enables us to participate in many transactions and to retain only the investments that meet our investment parameters.

We believe that our ability to provide a wide range of financing products and our ability to customize financing structures to meet borrowers’ needs differentiates us from our competitors. We are a one-stop shop for real estate financing solutions capable of financing the most senior capital positions through subordinate interests to equity participations. Our senior management team has substantial experience in responding to unique borrower needs by crafting financial products that are tailored to meet the business plan of a property owner.

We focus on certain types of investments where we believe we have a competitive advantage and that offer appropriate risk adjusted returns. For properties that we believe have stable values or where we have specific asset management capabilities to mitigate losses, we will target higher leverage investments. If we conclude that a property to be financed will have a more volatile value under a variety of market conditions, we target a less leveraged investment. In such transactions we may seek a second loss position. We also target the origination of larger components of financings, including whole loans, to afford us the opportunity to syndicate and securitize our

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investments to create retained instruments with above-market returns. We originate investments in direct transactions with borrowers, we co-originate with or acquire existing assets from third parties, primarily financial institutions, and we occasionally co-invest with SL Green and its affiliates.

Our targeted investments include the following:

Bridge Loans —We offer floating rate whole loans to borrowers who are seeking debt capital with a final term to maturity of not more than five years to be used in the acquisition, construction or redevelopment of a property. Typically, the borrower has identified a property in a favorable market that it believes to be poorly managed or undervalued. Bridge financing enables the borrower to secure short-term financing while improving the operating performance and physical aspects of the property and avoid burdening it with restrictive long-term debt. The bridge loans we originate are predominantly secured by first mortgage liens on the property and are expected to provide interest rates ranging from 225 to 400 basis points over applicable index rate indexes.  We expect the stated maturity of our bridge loans to range from two years to five years, and we expect to hold these investments to maturity.

We believe our bridge loans will lead to additional financing opportunities in the future, as bridge facilities are often a first step toward permanent financing or a sale.  We have experienced that many major financial institutions have largely avoided this type of lending because it does not lead to significant trading profits from subsequent securitizations. However, we intend to use securitization as a financing rather than a trading activity.  We intend to use these transactions to pool together smaller bridge loans and retain the resulting non-investment grade interests and interest-only certificates (perhaps in a single bond structure). To increase our volume, enhance financing efficiencies and create a national presence, we may seek joint ventures, mergers or other arrangements with regional or product specific originators.

Subordinate Interests in Whole Loans (B Notes) —We purchase from third parties, and may retain from whole loans we originate and co-originate and securitize or sell, subordinate interests in first mortgage loans referred to as B Notes. B Notes are loans secured by a first mortgage and subordinated to a senior interest, referred to as an A Note. The subordination of a B Note is generally evidenced by a co-lender or participation agreement between the holders of the related A Note and the B Note. In some instances, the B Note lender may additionally require a security interest in the stock or partnership interests of the borrower as part of the transaction. We originate B Notes directly or acquire B Notes in negotiated transactions with originators of the whole loan. When we originate first mortgage loans, we may divide them, securitizing or selling the A Note and keeping the B Note for investment. We believe the B Note market will continue to grow with the expansion of the commercial mortgage securitization market.

B Notes typically bear interest at a rate of 200 to 600 basis points over the applicable interest rate index and have loan-to-value ratios between 65% and 75%. B Note lenders have the same obligations, collateral and borrower as the A Note lender, but typically are subordinated in recovery upon a default. B Notes share certain credit characteristics with second mortgages, in that both are subject to greater credit risk with respect to the underlying mortgage collateral than the corresponding first mortgage or A Note.

B Notes created from bridge loans generally will have terms matching those of the whole loan of which they are a part, typically two to five years.  B notes created from permanent loans generally will have terms of five years to fifteen years.  We expect to hold B notes to their maturity.

When we acquire B Notes from third parties, we may earn income on the investment, in addition to the interest payable on the B Note, in the form of fees charged to the borrower under that note (currently approximately 0.25% to 1% of the note amount) or by receiving principal payments in excess of the discounted price (below par value) we paid to acquire the note. When we originate B Notes out of whole loans and then sell the A Notes, we allocate our basis in the whole loan among the two (or more) components to reflect the fair market value of the new instruments. We may realize a profit on sale if our allocated value is below the sale price. Our ownership of a B Note with controlling class rights, which typically means we have the unilateral ability to determine when, and in what manner, to exercise the rights and remedies afforded the holder of the first mortgage note, may, in the event the financing fails to perform according to its terms, cause us to elect to pursue our remedies as owner of the B Note, which may include foreclosure on, or modification of, the note. In some cases, usually

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restricted to situations in which the current market value of the underlying commercial property securing the loan has declined below the aggregate unpaid principal balance of secured debt senior to our investment, the owner of the A Note may be able to foreclose or modify the note against our wishes as holder of the B Note. As a result, our economic and business interests may diverge from the interests of the holders of the A Note. These divergent interests among the holders of each investment may result in conflicts of interest.

Permanent Loans — We originate fixed-rate whole loans with terms of up to 15 years, with the intention of separating them into tranches, which can be securitized and resold. We would expect to retain B Notes, mezzanine loans and preferred equity created in connection with the whole loan origination, where we see the most advantageous risk-adjusted returns.  We expect the stated maturity of our permanent loan investments to range from five years to 15 years. We may sell these investments prior to maturity.

Distressed Debt —We may also invest in distressed debt, most often sub- and non-performing real estate loans acquired from financial institutions. We will make these investments when we believe our underwriting, credit, financing and asset management experience will enable us to generate above-average risk-adjusted returns by resolving these distressed loans expeditiously through refinancings, negotiated repayments with borrowers or foreclosure and subsequent sale of the underlying property. A sub-performing loan is a loan with a very high loan-to-value ratio, with a low debt service coverage ratio, and which is likely to default at maturity because the property securing the loan cannot support a refinancing of the loan’s entire unpaid principal balance. A non-performing loan is a loan that is in default of its covenants, is past due in interest payments, or is past its final maturity date and has not been repaid. Sub- and non-performing loans are typically purchased at a discount to the note balance. Our investment return results from a combination of current cash flow from the note or underlying property, plus any eventual recovery of loan principal.

We expect the maturity of our distressed debt investments to range from several months to up to ten years. Such investments will usually be held until resolution, which may entail a bankruptcy and foreclosure process, which can require months or years.

Mortgage-Backed Securities — We acquire mortgage-backed securities (“MBS”) that are created when commercial or residential loans are pooled and securitized.  These securities may be issued by government sponsored agencies or other entities and may or may not be rated investment grade by rating agencies. We may also originate mortgage-backed securities from pools of commercial loans we assemble, in which event we expect to retain the more junior interests.

Commercial mortgage-backed securities (“CMBS”) are secured by or evidenced by ownership interests in a single commercial mortgage loan or a pool of mortgage loans secured by commercial properties. Residential mortgage-backed securities are backed by pools of home mortgages. We expect a majority of our mortgage-backed securities investments to be rated by at least one rating agency.

Commercial mortgage-backed securities are generally pass-through certificates that represent beneficial ownership interests in common law trusts whose assets consist of defined portfolios of one or more commercial mortgage loans. They are typically issued in multiple tranches whereby the more senior classes are entitled to priority distributions from the trust’s income to make specified interest and principal payments on such tranches. Losses and other shortfalls from expected amounts to be received on the mortgage pool are borne by the most subordinate classes, which receive payments only after the more senior classes have received all principal and/or interest to which they are entitled.

The credit quality of mortgage-backed securities depends on the credit quality of the underlying mortgage loans, which is a function of factors such as:

•the principal amount of loans relative to the value of the related properties;

•the mortgage loan terms (e.g. amortization);

•market assessment and geographic location;

•construction quality of the property; and

•the creditworthiness of the borrowers.

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We focus not on new issues but rather on “Story Securities” available in the secondary market where we are able to analyze and underwrite the underlying assets. “Story Securities” are seasoned securities with identifiable credit risks (such as large defaulted or sub-performing loans or a negative development with respect to the sponsor of a large loan) that we believe may require complex financial analysis to fully understand the issues and which fixed income money managers cannot efficiently underwrite, or which make them unattractive to a significant number of fixed income investors. We seek capital appreciation, in addition to interest income, by buying these securities at a discount to par value.

We expect the stated maturity of our mortgage-backed securities investments to range from several months to up to 15 years for commercial mortgage-backed securities and up to 40 years for residential mortgage-backed securities. Such securities do not have stated maturities but rather receive principal payments from the underlying investments. We expect to hold commercial mortgage-backed securities to maturity and may sell residential mortgage-backed securities prior to maturity.

Mezzanine Loans —We originate mezzanine loans that are senior to the borrower’s equity in, and subordinate to a first mortgage loan on, a property. These loans are secured by pledges of ownership interests, typically in whole but occasionally in part (but usually with effective sole control over all the ownership interests), in entities that directly or indirectly own the real property. In addition, we may require other collateral to secure mezzanine loans, including letters of credit, personal guarantees, or collateral unrelated to the property.

We typically structure our mezzanine loans to receive a stated coupon (benchmarked usually against LIBOR, or occasionally against a Treasury index or a swap index).  We may in certain, select instances structure our mezzanine loans to receive a stated coupon plus a percentage of gross revenues and a percentage of the increase in the fair market value of the property securing the loan, payable upon maturity, refinancing or sale of the property.  Mezzanine loans may also have prepayment lockouts, penalties, minimum profit hurdles and other mechanisms to protect and enhance returns in the event of premature repayment.

These investments typically range in size from $10 to $50 million, have terms from two to ten years and typically bear interest at a rate of 400 to 1000 basis points over the applicable interest rate index. Some transactions entail the issuance of more than one tranche or class of mezzanine debt.  Mezzanine loans usually have loan-to-value ratios between 75% and 90%.  Mezzanine loans frequently have maturities that match the maturity of the related mortgage loan but may have shorter or longer terms.  We expect to hold these investments to maturity.

Preferred Equity —We originate preferred equity investments in entities that directly or indirectly own commercial real estate. Preferred equity is not secured, but holders have priority relative to common equity holders on cash flow distributions and proceeds from capital events. In addition, preferred holders can often enhance their position and protect their equity position with covenants that limit the entity’s activities and grant us the exclusive right to control the property after an event of default. Occasionally, the first mortgage on a property prohibits additional liens and a preferred equity structure provides an attractive financing alternative. With preferred equity investments, we may become a special limited partner or member in the ownership entity and may be entitled to take certain actions, or cause a liquidation, upon a default. Preferred equity typically is more highly leveraged, with loan-to-value ratios of 85% to more than 90%.  We expect our preferred equity to have mandatory redemption dates (that is, maturity dates) that range from three years to five years, and we expect to hold these investments to maturity.

Other Real Estate-Related Investments— We may also make investments in other types of commercial or multi-family real estate assets. These may include acquisitions of real property and debt issued by REITs or other real estate companies. We have authority to issue our common stock or other equity or debt securities in exchange for property. Subject to gross income and asset tests necessary for REIT qualification, we may also invest in securities of other REITs, or other entities engaged in real estate activities or securities of other issuers, including for the purpose of exercising control over such entities.

Some of these investments may be equity interests in properties with no stated maturity or redemption date, or long-term leasehold interests with expiration dates as long as 40 years beyond the date of our investment. We expect to hold these investments for between several months and up to ten years, depending upon the risk profile of the investment and our investment rationale. The timing of our sale of these investments, or of their repayment, will frequently be tied to certain events involving the underlying property, such as new tenants or superior financing.

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As of December 31, 2004, our Investment portfolio, net of origination fees and discounts, was comprised of the following (in thousands);

Investment Type	Carrying Value
Whole loans	$	155,215
Subordinate mortgage interests	240,502
CMBS	10,898
	$	406,615

We monitor our portfolio periodically and prior to each acquisition to confirm that we continue to qualify for the exemption from registration under the Investment Company Act provided by Section 3(c)(5)(C) of the Investment Company Act. We generally expect permanent loans, bridge loans, whole pool mortgage-backed securities and certain distressed debt securities to be qualifying assets under the Section 3(c)(5)(C) exemption from the Investment Company Act and make investments so that at least 55% of our portfolio is comprised of qualifying assets.  The treatment of distressed debt securities as qualifying assets is based on the characteristics of the particular type of loan, including its foreclosure rights. Junior (first loss) interests in mortgage-backed securities pools may constitute qualifying assets under Section 3(c)(5)(C) provided that we have the unilateral right to foreclose, directly or indirectly, on the mortgages in the pool and that we may act as the controlling class or directing holder of the pool. Similarly, B Notes may constitute qualifying assets under Section 3(c)(5)(C) provided that we have the unilateral right to foreclose, directly or indirectly, on the mortgage and that we may act as the controlling class or directing holder of the note.  We generally do not treat mezzanine loans and preferred equity investments as qualifying assets.  In addition to making investments of qualifying assets, we also make investments so that at least 80% of our portfolio is comprised of real estate-related assets.  We expect that all of these classes of investments will be considered real estate-related assets under the Investment Company Act for purposes of the 80% investment threshold. Qualification for this exemption will limit our ability to make certain investments.

On occasion, we utilize a special servicer, which in some instances may be an affiliate of us or SL Green, to manage, modify and resolve loans and other investments that fail to perform under the terms of the loan agreement, note, indenture, or other governing documents. We will typically negotiate for the right to appoint a special servicer as part of the origination or purchase of an investment. Special servicers are most frequently employed in connection with whole loans, B Notes and first-loss classes of commercial mortgage-backed securities. The rights of the special servicer, which are typically subject to a servicing standard that requires the special servicer to pursue remedies that maximize the recovery of investment principal, typically include, among other things, the right to foreclose upon the loan collateral after an event of default.

Where we use a special servicer, our rights, including foreclosure rights we hold, are found in the agreements among the lenders or holders of notes, such as intercreditor or participation agreements. Where we hold unilateral foreclosure rights, those rights generally become exercisable upon the occurrence of events of default, such as nonpayment of the debt. In certain circumstances we may lose our foreclosure rights. For example, where the appraised value of the collateral for the debt falls below agreed levels relative to the total outstanding debt, we may lose our foreclosure rights, which are then exercisable by the holder of more senior debt. Generally, we do not expect SL Green or its affiliates to hold these types of senior debt where we hold a more junior instrument.

While we intend to hold our investments to maturity, in all instances we may sell an investment prior to its stated maturity for reasons of risk management, liquidity, changing investment objectives, or regulatory requirements.

Financing Strategy

We use debt financing in various forms in an effort to increase the size of our portfolio and potential returns to our stockholders. Access to low-cost capital is crucial to our business, since we earn income based on the spread between the yield on our investments and the cost of our borrowings.

Our financing strategy focuses on the use of match-funded financing structures. This means that we seek to match the maturities of our financial obligations with the maturities of our investments to minimize the risk that we have to refinance our liabilities prior to the maturities of our assets, and to reduce the impact of changing interest rates on our cash flow and earnings. In addition, we match fund

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interest rates with like-kind debt (i.e., fixed-rate assets are financed with fixed-rate debt, and floating rate assets are financed with floating rate debt), through the use of hedges such as interest rate swaps, caps, or through a combination of these strategies. This allows us to reduce the impact on our cash flow and earnings of changing interest rates.  At December 31, 2004, approximately 90% of our investments, when measured by carrying value, were floating rate instruments based on LIBOR.  These investments had a weighted average remaining term to initial maturity of 22.4 months.  The remaining 10% of our investments carried fixed rates of interest, although we have entered into swap contracts that convert substantially all of the floating rate financing expenses against these assets to fixed rate expenses to eliminate basis risk.

We use short-term financing in the form of our revolving credit facilities, repurchase agreements, bridge financings and bank warehousing facilities, prior to the implementation of longer-term match-funded financing.  At December 31, 2004, we had approximately $238.9 million outstanding under our repurchase facility with Wachovia Capital Markets, LLC.  Under our facilities with Wachovia Capital Markets LP, an event of default will be triggered if GKK Manager LLC ceases to be the Manager.  For longer-term funding, we intend to utilize securitization structures, including collateralized debt obligations (“CDO”), as well as other match-funded financing structures. Collateralized debt obligations are multiple class debt securities, or bonds, secured by pools of assets, such as mortgage-backed securities, B Notes, mezzanine loans and REIT debt. Like typical securitization structures, in a CDO the assets are pledged to a trustee for the benefit of the holders of the bonds. The bonds may be rated by one or more rating agencies. One or more classes of the bonds are marketed to a wide variety of fixed income investors, which enables the CDO sponsor to achieve a relatively low cost of long-term financing. We believe that CDO’s are a suitable long-term financing vehicle for our investments because they will enable us to maintain our strategy of funding substantially all of our assets and related liabilities using the same LIBOR benchmark, lock-in a long-term cost of funds tied to LIBOR, and reduce the risk that we have to refinance our liabilities prior to the maturities of our investments.

We use different levels of leverage depending on the specific risk-return characteristics of each investment type. For example, we generally use more leverage with whole loans than mezzanine loans. We anticipate our overall leverage will be 70% to 80% of the carrying value of our assets; but our actual leverage depends on our mix of assets.  At December 31, 2004, our leverage as a percentage of total asset value was 46% due to our management’s decision to fully deploy all of our proceeds from our initial public offering before utilizing our secured credit facilities.  The average advance rate against investment assets pledged under our credit facility with Wachovia was 75%.

Our charter and bylaws do not limit the amount of indebtedness we can incur. Our leverage policy permits us to leverage up to 80% of the carrying value of our assets. Our board of directors has discretion to deviate from or change our indebtedness policy at any time. However, we maintain an adequate capital base to protect against various business environments in which our financing and hedging costs might exceed the interest income from our investments. These conditions could occur, for example, due to credit losses or when, due to interest rate fluctuations, interest income on our investment lags behind interest rate increases on our borrowings, which are predominantly variable rate. We use leverage for the sole purpose of financing our portfolio and not for the purpose of speculating on changes in interest rates.

In addition, we continuously evaluate other souces of long-term debt and hybrid debt/equity capital, including perpetual preferred equity and trust preferred equity, which may be available to us on competitive market pricing and terms.

Origination, Underwriting and Asset Management

Our Manager and SL Green provide all of our critical investment selection, asset management, servicing and portfolio management and reporting functions from loan origination to disposition.  Our origination and underwriting is based on careful review and preparation, and generally proceeds as follows:

•All investments are analyzed for consistency with investment parameters developed by our Manager and adopted by our board of directors;

•All transactions considered for funding are presented at a weekly pipeline meeting attended by our Manager’s senior executive officers; and

•All financing applications, conditional commitments and submissions to the credit committee must be approved by a managing director of our Manager.

The affirmative vote of all members of a credit committee consisting of all senior officers of our Manager plus our chief executive officer is necessary to approve all transactions over $3 million. The investment committee of our board of directors must unanimously approve all transactions involving commitments over $15 million; the full board of directors must approve investments over $50 million. Our Manager has full discretion with respect to investments under $15 million.

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The stages of the investment process are described in more detail below.

Origination

Our Manager is primarily responsible for originating all of our assets. In addition to SL Green’s existing customer base, our Manager utilizes an extensive national network of relationships with property owners, developers, mortgage loan brokers, commercial and investment banks and institutional investors. This network has been developed by the senior managers of the Manager and senior executives of SL Green over more than 15 years.  We originate investments in direct transactions with borrowers, we co-originate with or acquire existing assets from third parties, primarily financial institutions, and we may occasionally co-invest with SL Green and its affiliates.  We have been growing our platform on a national scale through the creation of strategic partnerships and hiring additional originators who are responsible for generating new financing opportunities. At December 31, 2004 and for the period since inception, approximately 48% of our investments were directly originated by us while the remaining 52% were co-originated with third parties.  Once potential investment opportunities have been identified, our Manager determines which financing products best meet the borrower’s needs. Our Manager works to optimize pricing and structure and create a favorable transaction for us while meeting our borrower’s needs. After identifying a suitable structure, our Manager works with the borrower to prepare a loan application and an initial review of the investment before committing underwriting resources. Once a loan is identified as suitable, it is underwritten by our Manager’s team of experienced underwriters.

Underwriting

Once a potential investment has been identified, our Manager’s underwriters perform comprehensive financial, structural, operational and legal due diligence to assess the risks of the investment. Our Manager’s underwriters analyze the loan application package and conduct follow-up due diligence on each borrower as part of the underwriting process. The Manager’s underwriters generally review the following criteria as part of the underwriting process:

•the historic, in-place and projected property revenues and expenses;

•the potential for near-term revenue growth and opportunity for expense reduction and increased operating efficiencies;

•on higher leverage loans secured by leased properties, accountants may be engaged to audit operating expense recovery income;

•the property’s location and its attributes;

•the valuation of the property based upon financial projections prepared by our Manager’s underwriters and confirmed by an independent “as is” and/or “as stabilized” appraisal;

•market assessment, including, review of tenant lease files, surveys of property sales and leasing comparables based on conversations with local property owners, leasing brokers, investment sales brokers and other local market participants, and an analysis of area economic and demographic trends, and a review of an acceptable mortgagee’s title policy;

•market rents, and in the case of certain high-leverage loans, leasing projections for major vacant spaces and near-term vacancies, to be provided by a leasing broker with local knowledge;

•structural and environmental review of the property, including review of engineering and environmental reports and a site inspection, to determine future maintenance and capital expenditure requirements;

•the requirements for any reserves, including those for immediate repairs or rehabilitation, replacement reserves, tenant improvement and leasing commission costs, real estate taxes and property, casualty and liability insurance;

•the “Underwritten Net Cash Flow” for a property, which is a set of calculations and adjustments prepared for the underwriting process to assist in evaluating a property’s cash flows. The Underwritten Net Cash Flow is generally the estimated stabilized annual revenue derived from the use and operation of the property (consisting primarily of rental income and reimbursement

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of expenses where applicable) after an allowance for vacancies, concessions and credit losses, less estimated stabilized annual expenses;

•credit quality of the borrower through background checks and review of financial strength and real estate operating experience; and

•the loan documents, to ensure that we have the necessary protections, rights and remedies.

Key factors that are considered in credit decisions include, but are not limited to, debt service coverage, loan-to-value ratios and property and financial and operating performance. Consideration is also given to other factors such as the experience, financial strength, reputation, and investment track record of the borrower, additional forms of collateral and identified likely strategies to effect repayment. Our Manager will continue to refine its underwriting criteria based upon actual loan portfolio experience and as market conditions and investor requirements evolve. Once diligence is completed and our Manager has reviewed the Underwritten Net Cash Flow, sponsorship and the deal structure, our Manager determines the level in the capital structure at which an investment will be made and the required legal and structural protections.

Servicing and Asset Management

SL Green services substantially all of our assets through a sub-contract with our Manager. The loan servicing platform is designed to provide timely, responsive customer service as well as accurate and timely information for account follow-up, financial reporting and management review. In addition, the servicing operations include enforcement of the loan documents and standard asset management functions, including monitoring of property performance and condition and market analysis. The asset management group monitors the investments to identify any potential underperformance of the asset and work with the borrower to remedy the situation in an expeditious manner in order to mitigate any effects of underperformance. The asset manager is responsible for understanding the borrower’s business plan with respect to each collateral property and monitoring performance measured against that plan. We differentiate ourselves by leveraging our Manager’s real estate knowledge and proactive approach to asset management by providing approvals and processing requests on a more timely and efficient basis. We believe that asset management is a vital component of the borrower and lender relationship because it leaves a lasting positive impression, and our ability to gain mutual respect with our borrowers and quickly respond to their needs will help us to develop strong and meaningful relationships that will lead to repeat business.

Operating Policies

Investment and Borrowing Guidelines

We operate pursuant to the following general guidelines for our investments and borrowings:

•no investments are made that would cause us to fail to qualify as a REIT;

•no investments are made that would cause us to be regulated as an investment company under the Investment Company Act;

•substantially all assets are financed through securitization, syndication and secured borrowings, and assets intended for inclusion in traditional securitization transactions will be hedged against movements in the applicable swap yield through customary techniques;

•hedging is done through the bank providing the related credit facility on market terms, or through other dealers. We engage an outside advisory firm to assist in monitoring hedges and advising management on the appropriateness of such hedges;

•our leverage generally will not exceed 80% of the carrying value of our assets; and

•we will not co-invest with SL Green or any of its affiliates unless the terms of such transaction are approved by a majority of our independent directors.

These investment guidelines may be changed by our board of directors without the approval of our stockholders.

Origination Agreement

We have an origination agreement with SL Green pursuant to which SL Green will not originate, acquire or participate in fixed income investments in the United States, subject to certain conditions and exclusions described below. Fixed income investments include debt obligations or interests in debt obligations bearing a fixed-rate of return and collateralized by real property or interests in real property.

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SL Green has also agreed not to acquire, originate or participate in preferred equity investments which bear a fixed rate of return in the United States, unless we have determined not to pursue that opportunity.

Under the agreement, SL Green has the following rights:

(a)to retain any fixed income investments and/or preferred equity investments it owned or committed to own on the date of our initial public offering;

(b)to originate fixed income investments or acquire interests in fixed income investments and/or preferred equity investments in connection with the sale of any real estate or real estate-related assets or fixed income investments it currently owns or owns at any future time, in part or whole, directly or indirectly;

(c)to originate or acquire fixed income and/or preferred equity investments that provide a rate of return tied to the cash flow, appreciation or both of the underlying real property or interests in real property;

(d)to modify or refinance any portion of the investments in item (a), (b) or (c) above including, but not limited to, changes in principal, rate of return, maturity or redemption date, lien priority, return priority and/or borrower; and

(e)to originate, acquire or participate in any distressed debt, where there is a payment default, an acceleration, bankruptcy or foreclosure, when a default is highly likely because the loan-to-value ratio is over 100% or when the debt service exceeds the available cash flow from the property on both a current and projected basis.

We will agree that we will not:

•acquire real property in metropolitan New York and Washington, D.C. (except by foreclosure or similar conveyance) resulting from a fixed income investment;

•originate or acquire investments described in (c) above or distressed debt, in each case located in metropolitan New York or Washington, D.C.; and

•originate or acquire participations in any investments described in item (b) or (d) above.

We will also agree that, when we acquire direct or indirect ownership interests in property in metropolitan New York or Washington D.C. by foreclosure or similar conveyance, SL Green will have the right to purchase the property at a price equal to our unpaid asset balance on the date we foreclosed or acquired the asset, plus interest at the last stated contract (non-default) rate and, to the extent payable by the borrower under the initial documentation evidencing the property, legal costs incurred by us directly related to the conveyance and the fee, if any, due upon the repayment or prepayment of the investment which is commonly referred to as an “exit fee” (but not including default interest, late charges, prepayment penalties, extension fees or other premiums of any kind) through the date of SL Green’s purchase (this amount is called “Par Value”). If we seek to sell the asset and receive a bona fide third party offer to acquire the asset for cash that we desire to accept, SL Green may purchase the asset at the lower of the Par Value or the third party’s offer price. If the asset is not sold within one year, SL Green has the right to purchase the property at its appraised value. The appraised value will be determined as follows: we will select an appraiser and SL Green will select an appraiser, who will each appraise the property. These two appraisers jointly will select a third appraiser, who will then choose one of the two appraisals as the final appraised value. These rights may make it more difficult to sell such assets because third parties may not want to incur the expense and effort to bid on assets when they perceive that SL Green may acquire them at the lower of the same terms proposed by the third party or Par Value. As a result, we may not receive the same value on the sale of such assets as we might receive from an independent third party submitting an offer through a competitive bidding process.

SL Green has a right of first offer to acquire any distressed debt which we decide to sell.

In the event the Management Agreement is terminated for cause by us or if neither SL Green nor any of its affiliates shall be the managing member of our Manager, then the non-compete provisions in the origination agreement will survive such termination for a period of one year with respect only to potential investments by us as to which our Manager has commenced due diligence.

Hedging Activities

We use derivative instruments, including forwards, futures, swaps and options, in our risk management strategy to limit the effects of changes in interest rates on our operations. Our primary hedging strategy consists of entering into interest rate swap contracts.

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Additionally, we may in certain select instances choose to hedge our exposure to fluctuations in commercial mortgage-backed securities credit spreads by purchasing swaps written against a broad-based commercial mortgage-backed securities index. The value of our forwards, futures and swaps may fluctuate over time in response to changing market conditions, and will tend to change inversely with the value of the risk in our liabilities that we intend to hedge. Hedges are sometimes ineffective because the correlation between changes in value of the underlying investment and the derivative instrument is less than was expected when the hedging transaction was undertaken. Since most of our hedging activity covers the period between origination or purchase of loans and their eventual sale or securitization, unmatched losses in our hedging program will tend to occur when the planned securitization fails to occur, or if the hedge proves to be ineffective. We continuously monitor the effectiveness of our hedging strategies and adjust our strategies as appropriate. These transactions may include interest rate swaps, the purchase or sale of interest rate collars, caps or floors, options, other hedging instruments and such other hedging instruments as may be developed in the future and which we determine are suitable to achieve our hedging objectives.

We have retained the services of an outside financial services firm with expertise in the use of derivative instruments to advise us on our overall hedging strategy, to effect hedging trades, and to provide the appropriate designation and accounting of all hedging activities from a GAAP and tax accounting and reporting perspective.

These instruments are used to hedge as much of the interest rate risk as our Manager determines is in the best interest of our stockholders, given the cost of such hedges and the need to maintain our status as a REIT. To the extent that we enter into a hedging contract to reduce interest rate risk on indebtedness incurred to acquire or carry real estate assets, any income that we derive from the contract is qualifying income for purposes of the REIT 95% gross income test, but not for the 75% gross income test. Our Manager can elect to have us bear a level of interest rate risk that could otherwise be hedged when it believes, based on all relevant facts, that bearing such risk is advisable.

Disposition Policies

Our Manager evaluates our assets on a regular basis to determine if they continue to satisfy our investment criteria. Subject to certain restrictions applicable to REITs, our Manager may cause us to sell our investments opportunistically and use the proceeds of any such sale for debt reduction, additional acquisitions or working capital purposes.

Equity Capital Policies

Subject to applicable law, our board of directors has the authority, without further stockholder approval, to issue additional authorized common stock and preferred stock or otherwise raise capital, including through the issuance of senior securities, in any manner and on the terms and for the consideration it deems appropriate.

We may, under certain circumstances, repurchase our common stock in private transactions with our stockholders if those purchases are approved by our board of directors. Our board of directors has no present intention of causing us to repurchase any shares, and any action would only be taken in conformity with applicable federal and state laws and the applicable requirements for qualifying as a REIT, for so long as our board of directors concludes that we should remain a REIT.

Other Policies

We operate in a manner that will not subject us to regulation under the Investment Company Act. We may invest in the securities of other issuers for the purpose of exercising control over such issuers. We do not underwrite the securities of other issuers.

Future Revisions in Policies and Strategies

Our board of directors has the power to modify or waive our investment guidelines, policies and strategies. Among other factors, developments in the market that either affect the policies and strategies mentioned herein or that change our assessment of the market may cause our board of directors to revise our investment guidelines, policies and strategies. However, if such modification or waiver involves the relationship of, or any transaction between, us and our Manager or any affiliate of our Manager, the approval of a majority of our independent directors is also required. We may not, however, amend our charter to change the requirement that a majority of our board of directors consist of independent directors or the requirement that a majority of our independent directors approve related party transactions without the approval of two-thirds of the votes entitled to be cast by our stockholders.

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Acquisitions

During the year ended December 31, 2004 we acquired, either through direct origination, co-origination with third parties, or acquisition from third parties, the following investments (in thousands):

Investment Type	Underlying Property Type	Carrying Value		Principal Outstanding			Senior Financing			Effective Maturity Date (1)	Interest Payment Rate (2)
CMBS	Office	$	10,898	$		11,847	$	109,996		December 2007	8.544% - 10.736%
Subordinate mortgage interests:
C Note	Office	24,728		25,000			190,000			July 2006	LIBOR + 3.00%
D Note	Office	19,782		20,000			215,000			July 2006	LIBOR + 7.50%
		44,510		45,000			405,000
Subordinate mortgage interests:
C Note	Office	34,286		34,440			275,405			July 2007	LIBOR + 5.00%
D Note	Office	32,875		34,439			309,900			July 2007	LIBOR + 12.50%
		67,161		68,879			585,305
Subordinate mortgage interest	Office	31,215		36,500			255,500			November 2009	5.41% (4)
Subordinate mortgage interest	Multifamily	9,906		10,000			50,300			February 2007	LIBOR + 6.30%
Whole loan	Hotel	42,000		42,000			—			April 2005	LIBOR + 5.25%
Subordinate mortgage interest	Golf Courses	47,954		47,954			467,000			February 2006	LIBOR + 5.50%
Whole loan (3)	Other	28,723		29,094			—			November 2006	LIBOR + 3.50%
Subordinate mortgage interest	Office	4,952		5,000			68,000			August 2006	LIBOR + 7.00%
Subordinate mortgage interest
C Note	Office	17,402		17,500			85,000			November 2006	LIBOR + 2.75%
D Note	Office	17,402		17,500			102,500			November 2006	LIBOR + 7.25%
		34,804		35,000			187,500
Whole loan	Office/ Industrial	84,492		84,704			—			September 2007	LIBOR + 3.05%
		$	406,615	$	415,978		$		2,128,601

(1) Reflects the initial maturity of the investment and does not consider any options to extend that are at the discretion of the borrower.

(2) All variable-rate loans are based on 30-day LIBOR and reprice monthly.

(3) There is an obligation to fund an additional $11 million to the borrower. This obligation is contingent upon the borrower’s ability to obtain the appropriate approvals to continue their acquisition of parcels of land for development which would serve as additional collateral on the loan.  Should the borrower not be granted these approvals, there is no future obligation to fund.

(4) The effective yield of the investment is 8.29% taking into consideration our purchase discount.

Competition

Our net income depends, in large part, on our ability to originate investments with spreads over our borrowing cost. In originating these investments, we compete with other mortgage REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, other lenders, governmental bodies and other entities, many of which have greater financial resources and lower costs of capital available to them than we have. In addition, there are numerous mortgage REITs with asset acquisition objectives similar to ours, and others may be organized in the future, which may increase competition for the available investments suitable for us. Competitive variables include market presence and visibility, size of loans offered and underwriting standards.

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To the extent that a competitor is willing to risk larger amounts of capital in a particular transaction or to employ more liberal underwriting standards when evaluating potential loans than we are, our origination volume and profit margins for our investment portfolio could be adversely affected. Our competitors may also be willing to accept lower returns on their investments and may succeed in originating or acquiring the assets that we have targeted for origination or acquisition. Although we believe that we are well positioned to compete effectively in each facet of our business, there is considerable competition in our market sector and there can be no assurance that we will compete effectively or that we will not encounter further increased competition in the future that could limit our ability to conduct our business effectively.

Industry Segments

We are focused on originating and acquiring loans and other securities related to commercial real estate and currently operate in only one segment.

Employees

We do not currently have any employees, nor do we anticipate hiring any employees in the near term. Our executive officers and other staff are all employed by our Manager or SL Green who are then reimbursed for the cost of these employees through a management fee and outsourcing fee, respectively, under the requirements of our Management Agreement and Outsourcing Agreement.

Environmental Matters

Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner of real estate (including, in certain circumstances, a secured lender that succeeds to ownership or control of a property) may become liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, under or in its property. Those laws typically impose cleanup responsibility and liability without regard to whether the owner or control party knew of or was responsible for the release or presence of such hazardous or toxic substances. The costs of investigation, remediation or removal of those substances may be substantial. The owner or control party of a site may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from a site. Certain environmental laws also impose liability in connection with the handling of or exposure to asbestos-containing materials, pursuant to which third parties may seek recovery from owners of real properties for personal injuries associated with asbestos-containing materials. Absent succeeding to ownership or control of real property, a secured lender is not likely to be subject to any of these forms of environmental liability. We are not currently aware of any environmental issues which could materially affect the Company.

Forward-Looking Information

This report includes certain statements that may be deemed to be “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.  Such forward-looking statements relate to, without limitation, our future capital expenditures, dividends and acquisitions (including the amount and nature thereof) and other trends of the real estate industry, debt capital and commercial markets, business strategies, and the expansion and growth of our operations.  These statements are based on certain assumptions and analyses made by us in light of our Manager’s experience and our Manager’s perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate.  We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Act and Section 21E of the Exchange Act.  Such statements are subject to a number of assumptions, risks and uncertainties which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by these forward-looking statements.  Forward-looking statements are generally identifiable by the use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “project,” “continue,” or the negative of these words, or other similar words or terms.  Readers are cautioned not to place undue reliance on these forward-looking statements.  These assumptions, risks and uncertainties include, but are not limited to:

•the success or failure of our efforts to implement our current business strategy;

•economic conditions generally and in the commercial finance and commercial real estate markets specifically;

•the performance and financial condition of borrowers and corporate customers;

•the actions of our competitors and our ability to respond to those actions;

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•the cost of our capital, which depends in part on our asset quality, the nature of our relationships with our lenders and other capital providers, our business prospects and outlook and general market conditions;

•GKK Manager LLC remaining as our Manager;

•our ability to qualify as a REIT in any taxable year;

•changes in governmental regulations, tax rates and similar matters; and

•legislative and regulatory changes (including changes to laws governing the taxation of REITs), and other factors, many of which are beyond our control.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of future events, new information or otherwise.

The risks included here are not exhaustive.  Other sections of this report may include additional factors that could adversely affect our business and financial performance.  Moreover, we operate in a very competitive and rapidly changing environment.  New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.  Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

ITEM 2.PROPERTIES

Our corporate offices are located in midtown Manhattan at 420 Lexington Avenue, New York, New York 10170.  We can be contacted at (212) 297-1000.  We maintain a website at www.gramercycapitalcorp.com.

ITEM 3.LEGAL PROCEEDINGS

As of December 31, 2004, we were not involved in any material litigation nor, to management’s knowledge, is any material litigation threatened against us or our Manager.

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our stockholders during the fourth quarter ended December 31, 2004.

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PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock began trading on the New York Stock Exchange (“NYSE”) on August 2, 2004 under the symbol “GKK.” On March 16, 2005, the reported closing sale price per share of common stock on the NYSE was $21.61 and there were approximately 23 holders of record of our common stock.  The table below sets forth the quarterly high and low closing sales prices of our common stock on the NYSE since our initial public offering and the distributions paid by us with respect to the periods indicated.

Quarter Ended	High		Low		Dividends
September 30, 2004 (from August 2, 2004)	$	16.20	$	14.00	$		0.00
December 31, 2004	$	21.30	$	15.20	$	0.15

If dividends are declared in a quarter, those dividends will be paid during the subsequent quarter.  We expect to continue our policy of generally distributing 100% of our taxable income through regular cash dividends on a quarterly basis, although there is no assurance as to future dividends because they depend on future earnings, capital requirements and financial condition.  See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Dividends” for additional information regarding our dividends.

We declared a quarterly dividend of $0.15 per share, payable on January 14, 2005, for stockholders of record of our common stock on December 31, 2004.

SALE OF UNREGISTERED AND REGISTERED SECURITIES

On December 3, 2004 we sold 5,500,000 shares of common stock, at a price of $17.27 per share, through a private placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.  A total of 4,225,000 shares were sold to various institutional investors and an additional 1,275,000 were sold to SL Green Operating Partnership, L.P., an affiliate of SL Green Realty Corp., pursuant to its contractual right to choose to maintain a 25% ownership interest in the outstanding shares of our common stock.  After the private placement, SL Green Operating Partnership, L.P. owned 4,710,000 shares of our common stock.  On December 31, 2004, 2,000,000 shares sold in the offering were issued.  The remaining 3,500,000 shares were issued on January 3, 2005.  At December 31, 2004 $60.5 million was held in a stock subscription receivable representing the value of the 3,500,000 shares that were settled in January 2005.  The gross proceeds from the offering (approximately $95.0 million) were used to fund additional investments, repay borrowings and for general corporate purposes.

USE OF PROCEEDS

On August 2, 2004, we consummated the initial public offering of our common stock, $0.001 par value per share.  The underwriters for the offering were Wachovia Capital Markets, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of America Securities LLC and JMP Securities LLC.  The shares of common stock sold in the offering were registered under the Securities Act of 1933, as amended, on a Registration Statement (Registration No. 333-114673) on Form S-11 that was declared effective by the Securities and Exchange Commission on July 27, 2004.  All 12,500,000 shares of common stock registered under the Registration Statement were sold at a price to the public of $15.00 per share, generating gross proceeds of approximately $187.5 million.  The net proceeds to us were approximately $172.9 million after deducting an aggregate of approximately $14.6 million in underwriting discounts and commissions paid to the underwriters and other offering expenses, including a $1.6 million reimbursement to SL Green for organization and offering expenses incurred on our behalf, and $800,000 to reimburse SL Green for a consulting fee of $400,000 paid by SL Green to each of Messrs. Foley and Hall.  SL Green owns slightly more than 25% of our outstanding common stock.  All of the shares of common stock were sold by us and there were no selling stockholders in the offering.  The offering did not terminate until after the sale of all of the securities registered on the Registration Statement, which occurred on August 2, 2004.

We contributed the net proceeds from the offering to the Operating Partnership to make investments in commercial real estate-related loans and securities and for general corporate purposes, including financing and operating expenses and other expenses of our company.

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ITEM 6.SELECTED FINANCIAL DATA

The following table sets forth our selected financial data and should be read in conjunction with our Financial Statements and notes thereto included in Item 8, “Financial Statements and Supplementary Data” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K.

Operating Data

(In thousands, except per share data)	For the Period April 12, 2004 (formation) through December 31, 2004
Total revenue	$	7,151
Interest expense	1,463
Management fees	1,965
Depreciation and amortization	38
Marketing, general and administrative	1,358
Total expenses	4,824
Income from continuing operations	2,327
GKK formation costs	275
Income available to common stockholders	$	2,052
Net income per common share -Basic	$	0.15
Net income per common share -Diluted	$	0.15
Cash dividends declared per common share	$	0.15
Basic weighted average common shares outstanding	13,348
Diluted weighted average common shares and common share equivalents outstanding	13,411

Balance Sheet Data

(In thousands)	As of December 31, 2004
Loans and other lending investments, net	$	395,717
Commercial mortgage backed securities, net	10,898
Total assets	514,047
Credit facilities	238,885
Total liabilities	245,088
Stockholders’ equity	268,959

Other Data

(In thousands)	For the Period April 12, 2004 (formation) through December 31, 2004
Funds from operations (1)	$	2,052
Cash flows provided by operating activities	1,145
Cash flows used in investing activities	(407,056		)
Cash flows provided by financing activities	444,805

(1) FFO is a widely recognized measure of REIT performance.  We compute FFO in accordance with standards established by the

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National Association of Real Estate Investment Trusts, or NAREIT, which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than we do.  The revised White Paper on FFO approved by the Board of Governors of NAREIT in April 2002 defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from debt restructuring and sales of properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures.  We present FFO because we consider it an important supplemental measure of our operating performance and believe that it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs.  FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate assets diminishes ratably over time.  Historically, however, real estate values have risen or fallen with market conditions.  Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, interest costs, providing perspective not immediately apparent from net income.  FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of our financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions.

A reconciliation of FFO to net income computed in accordance with GAAP is provided under the heading of “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Funds From Operations”.

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ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a commercial real estate specialty finance company formed in April of 2004 focused on originating and acquiring, for our own account, whole loans, bridge loans, subordinate interests in whole loans, permanent loans, distressed debt, mortgage-backed securities, mezzanine loans, preferred equity interests in entities that own commercial real estate.  We conduct substantially all of our operations through our operating partnership, GKK Capital LP.  We are externally managed and advised by GKK Manager LLC, or the Manager, a majority-owned subsidiary of SL Green Realty Corp.  We have elected to be taxed as a REIT under the Internal Revenue Code and generally will not be subject to federal income taxes to the extent we distribute our income to our stockholders.  However, we may establish taxable REIT subsidiaries to effect various taxable transactions.  Those taxable REIT subsidiaries would incur federal, state and local taxes on the taxable income from their activities.  Unless the context requires otherwise, all references to “we,” “our” and “us” means Gramercy Capital Corp.

In each financing transaction we undertake, we seek to control as much of the capital structure as possible in order to be able to identify and retain that portion that provides the best risk adjusted returns.  This is generally achieved through the direct origination of whole loans, the ownership of which permits a wide variety of syndication and securitization executions to achieve excess returns.  By providing a single source of financing for developers and sponsors, we intend to streamline the lending process, provide greater certainty for borrowers and retain the high yield debt instruments that we manufacture.  By creating, rather than buying, whole loans, subordinate mortgage participations, mezzanine debt and preferred equity, we strive to deliver superior returns to our shareholders.

Since our inception, we have completed transactions in a variety of markets and secured by several property types, while maintaining concentrations in the Tri-State region and the office sector in which we have a strong presence.  During this period, the market for commercial real estate debt has continued to demonstrate low rates of default, high relative returns and tremendous inflows of capital.  Consequently, the market for debt instruments has evidenced declining yields and more flexible credit standards and loan structures.  In particular, “conduit” originators who package whole loans for resale to investors have driven down debt yields while maintaining substantial liquidity because of the strong demand for the resulting securities.  When working with a securitized lender, we focus on opportunities where we can co-originate in order to assist with underwriting and structuring loan terms. Consequently, in most of the secondary market transactions we have closed to date, we have avoided first loss risk. We have also focused on whole loan origination in markets and transactions where we have an advantage due to knowledge or relationships we have or our largest shareholder, SL Green, has or where we have an ability to assess and manage risks over time.  In this environment we look for areas where we have comparative advantages rather than competing for product merely on the basis of yield or structure.  Because of the significant increase in the value of institutional quality assets relative to historic norms, we typically focus on positions in which a customary refinancing at loan maturity would provide for a return of our investment.  Because of our relatively small size at this time, we can meet our growth objectives with a moderate amount of new investment activity.

Because of the high relative valuation of debt instruments in the current market and a generally increasing rate environment, we have carefully managed our exposure to interest rate changes that could affect our liquidity.  We generally match our assets and liabilities in terms of base interest rate (generally 30-day LIBOR) and expected duration.  We raised $95.0 million of additional equity in December 2004 and January 2005 to reduce our outstanding indebtedness and maintain sufficient liquidity for our investment portfolio.  We continue to assess the utilization of a variety of structured financing techniques to extend the duration of our liabilities and create financing with availability and advance rates that are not subject to prevailing market conditions.  We continue to assess whether an issuance of a CDO would achieve our financing and return objectives.  While our exposure to market conditions would generally increase as we approach the consumation of a CDO, we continue to carefully manage our liquidity.

As of December 31, 2004, we held investments of approximately $406.6 million, net of origination fees and discounts.  The aggregate carrying values, allocation by product type and weighted average coupons of our investments as of December 31, 2004 were as follows:

	Investments net of fees and discounts ($ in thousands)		Allocation by Investment Type		Fixed Rate: Average Yield		Floating Rate: Average Spread over LIBOR
Whole Loans	$	155,215	38	%	—		373	bps
Subordinate Investments, Floating Rate	209,286		51	%	—		640	bps
Subordinate Investments, Fixed Rate	31,216		8	%	9.57	%	—
Commercial Mortgage Backed Securities	10,898		3	%	13.49	%	—
Total / Average	$	406,615	100	%	10.58	%	526	bps

The following discussion related to our consolidated financial statements should be read in conjunction with the financial statements appearing in Item 8 of the Annual Report on Form 10-K.

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, known as GAAP. These accounting principles require us to make some complex and subjective decisions and assessments.  Our most critical accounting polices involve decisions and assessments which could significantly affect our reported assets, liabilities and contingencies, as well as our reported revenues and expenses.  We believe that all of the decisions and assessments upon which our financial statements are based were reasonable at the time made based upon information available to us at that time.  We evaluate these decisions and assessments on an ongoing basis.  Actual results may differ from these estimates under different assumptions or conditions.  We have identified our most critical accounting policies to be the following:

Loans and Investments

Loans held for investment intended to be held to maturity are carried at cost, net of unamortized loan origination costs and fees, unless such loan or investment is deemed to be impaired.  At such time as we invest in preferred equity interests that allow us to participate in a percentage of the underlying property’s cash flows from operations and proceeds from a sale or refinancing, we must determine whether such investment should be accounted for as a loan, joint venture or as real estate at the inception of the investment.  We did not own any preferred equity investments at December 31, 2004.

Specific valuation allowances are established for impaired loans based on the fair value of collateral on an individual loan basis.  The fair value of the collateral is determined by an evaluation of operating cash flow from the property during the projected holding period, and estimated sales value computed by applying an expected capitalization rate to the stabilized net operating income of the specific property, less selling costs, discounted at market discount rates.

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If upon completion of the valuation, the fair value of the underlying collateral securing the impaired loan is less than the net carrying value of the loan, an allowance is created with a corresponding charge to the provision for loan losses.  The allowance for each loan is maintained at a level we believe is adequate to absorb probable losses.  There was no loan loss allowance at December 31, 2004.

Our Manager evaluates our assets on a regular basis to determine if they continue to satisfy our investment criteria. Subject to certain restrictions applicable to REITs, our Manager may cause us to sell our investments opportunistically and use the proceeds of any such sale for debt reduction, additional acquisitions or working capital purposes.

Classifications of Mortgage-Backed Securities

In accordance with applicable GAAP, mortgage-backed securities are classified as available-for-sale securities.  As a result, changes in fair value will be recorded as a balance sheet adjustment to accumulated other comprehensive income, which is a component of stockholders equity, rather than through our statement of operations.  If available-for-sale securities were classified as trading securities, there could be substantially greater volatility in earnings from period-to-period as these investments would be marked to market and any reduction in the value of the securities versus the previous carrying value would be considered an expense on our statement of operations.  The Company had no investments as of December 31 2004 that were accounted for as trading securities.

Valuations of Mortgage-Backed Securities

All mortgage-backed securities are carried on the balance sheet at fair value.  We determine the fair value of mortgage-backed securities based on the types of securities in which we have invested.  For liquid, investment-grade securities, we consult with dealers of such securities to periodically obtain updated market pricing for the same or similar instruments.  For non-investment grade securities, we actively monitor the performance of the underlying properties and loans and update our pricing model to reflect changes in projected cash flows.  The value of the securities is derived by applying discount rates to such cash flows based on current market yields.  The yields employed may be obtained from the experience of our Manager in the market, advice from dealers and/or information obtained in consultation with other investors in similar instruments.  Because fair value estimates may vary to some degree, we must make certain judgments and assumptions about the appropriate price to use to calculate the fair values for financial reporting purposes.  Different judgments and assumptions could result in different presentations of value.

When the fair value of an available-for-sale security is less than the amortized cost, we consider whether there is an other-than-temporary impairment in the value of the security (for example, whether the security will be sold prior to the recovery of fair value).  If, in our judgment, an other-than-temporary impairment exists, the cost basis of the security is written down to the then-current fair value, and this loss is realized and charged against earnings.  The determination of other-than-temporary impairment is a subjective process, and different judgments and assumptions could affect the timing of loss realization.

Revenue Recognition

Interest income on debt investments is recognized over the life of the investment using the effective interest method and recognized on the accrual basis.  Fees received in connection with loan commitments are deferred until the loan is funded and are then recognized over the term of the loan as an adjustment to yield.  Anticipated exit fees, whose collection is expected, are also recognized over the term of the loan as an adjustment to yield.  Fees on commitments that expire unused are recognized at expiration.  Fees received in exchange for the credit enhancement of another lender, either subordinate or senior to us, in an investment, in the form of a guarantee, are recognized over the term of that guarantee.

Income recognition is generally suspended for debt investments at the earlier of the date at which payments become 90 days past due or when, in our opinion, a full recovery of income and principal becomes doubtful.  Income recognition is resumed when the loan becomes contractually current and performance is demonstrated to be resumed.

Reserve for Possible Credit Losses

The expense for possible credit losses in connection with debt investments is the charge to earnings to increase the allowance for possible credit losses to the level that management estimates to be adequate considering delinquencies, loss experience and collateral quality.  Other factors considered relate to geographic trends and project diversification, the size of the portfolio and current economic

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conditions.  Based upon these factors, we establish the provision for possible credit losses by category of asset.  When it is probable that we will be unable to collect all amounts contractually due, the account is considered impaired.

Where impairment is indicated, a valuation write-down or write-off is measured based upon the excess of the recorded investment amount over the net fair value of the collateral, as reduced by selling costs.  Any deficiency between the carrying amount of an asset and the net sales price of repossessed collateral is charged to the allowance for credit losses.  As of December 31, 2004, we did not have an allowance for credit losses.

Incentive Distribution (Class B Limited Partner Interest)

The Class B limited partner interest will be entitled to receive quarterly profit distributions based on our financial performance.  We will record any distributions on the Class B limited partner interests as an incentive distribution expense in the period when earned and when payment of such amounts has become probable and reasonably estimable in accordance with the partnership agreement.  These cash distributions will reduce the amount of cash available for distribution to our common unitholders in the Operating Partnership and to common stockholders.  No amounts were earned or accrued under this agreement as of December 31, 2004.

Derivative Instruments

In the normal course of business, we use a variety of derivative instruments to manage, or hedge, interest rate risk.  We require that hedging derivative instruments be effective in reducing the interest rate risk exposure that they are designated to hedge.  This effectiveness is essential for qualifying for hedge accounting.  Some derivative instruments are associated with an anticipated transaction.  In those cases, hedge effectiveness criteria also require that it be probable that the underlying transaction occurs.  Instruments that meet these hedging criteria are formally designated as hedges at the inception of the derivative contract.

To determine the fair value of derivative instruments, we use a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date.  For the majority of financial instruments including most derivatives, long-term investments and long-term debt, standard market conventions and techniques such as discounted cash flow analysis, option-pricing models, replacement cost, and termination cost are used to determine fair value.  All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized.

In the normal course of business, we are exposed to the effect of interest rate changes and limit these risks by following established risk management policies and procedures including the use of derivatives.  To address exposure to interest rates, we use derivatives primarily to hedge the mark-to-market risk of our liabilities with respect to certain of our assets.

We use a variety of commonly used derivative products that are considered plain vanilla derivatives.  These derivatives typically include interest rate swaps, caps, collars and floors.  We expressly prohibit the use of unconventional derivative instruments and using derivative instruments for trading or speculative purposes.  Further, we have a policy of only entering into contracts with major financial institutions based upon their credit ratings and other factors.

FASB No. 133, or SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” requires us to recognize all derivatives on the balance sheet at fair value.  Derivatives that are not hedges must be adjusted to fair value through income.  If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings.  The ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings.  SFAS 133 may increase or decrease reported net income and stockholders’ equity prospectively, depending on future levels of LIBOR interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows, provided the contract is carried through to full term.

We may employ swaps, forwards or purchased options to hedge qualifying forecasted transactions.  Gains and losses related to these transactions are deferred and recognized in net income as interest expense in the same period or periods that the underlying transaction occurs, expires or is otherwise terminated.

All hedges held by us are deemed to be fully effective in meeting the hedging objectives established by our corporate policy governing interest rate risk management.

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Income Taxes

We intend to elect to be taxed as a REIT, under Sections 856 through 860 of the Internal Revenue Code beginning with our taxable year ending December 31, 2004.  To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our ordinary taxable income to stockholders.  As a REIT, we generally will not be subject to federal income tax on taxable income that we distribute to our stockholders.  If we fail to qualify as a REIT in any taxable year, we will then be subject to federal income taxes on our taxable income at regular corporate rates and we will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions.  Such an event could materially adversely affect our net income and net cash available for distributions to stockholders.  However, we believe that we will be organized and operate in such a manner as to qualify for treatment as a REIT and we intend to operate in the foreseeable future in such a manner so that we will qualify as a REIT for federal income tax purposes.  We may, however, be subject to certain state and local taxes.

Results of Operations

For the period from April 12, 2004 (formation) through December 31, 2004 (dollars in thousands)

Revenue

Investment income of $6,841 for the period from formation through December 31, 2004 was generated on our whole loans, senior mortgage interests, subordinate mortgage interests and CMBS investments.  $1,204 was earned on fixed rate investments with a weighted average yield of 10.58%.  The remaining $5,637 relates to floating rate investments with a weighted average interest rate of LIBOR plus 5.26%.

Other income of $310 for the period from formation through December 31, 2004 represents interest earned on cash balances, including the proceeds from our initial public offering.

Expenses

Interest expense was $1,463 for the period from formation through December 31, 2004, of which $949 represents interest on borrowings on our master repurchase facility which had a weighted average spread to LIBOR of 199 basis points for the same period.  The remaining balance in interest expense is comprised of $224 of interest expense related to our two interest rate swap contracts and $290 of amortization of deferred financing costs related, primarily, to the closing of our three facilities with Wachovia Capital Markets, LLC.

Management fees of $1,965 for the period from formation through December 31, 2004 represents fees paid or payable to the Manager of $1,349 under our management agreement and fees paid or payable to SL Green Operating Partnership, L.P. of $521 and $95 under our outsourcing and servicing agreements, respectively.  These fees and the relationship between us, the Manager and SL Green Operating Partnership, L.P. are discussed further in “Related Party Transactions”.

Marketing, general and administrative expenses were $1,358 for the period from formation through December 31, 2004, which represents professional fees, stock-based compensation, insurance and general overhead costs.

Stock-based compensation expense included in marketing, general and administrative expenses was $404 for the period from formation through December 31, 2004.  This represents the cost of restricted stock and options granted to certain of our executive officers and directors.  Of the shares of restricted stock issued, approximately 89% will vest equally over a three-year period and the remaining 11% will vest equally over a four-year period.  Of the options granted 59% will vest equally over a three-year period and the remaining 41% will vest equally over a four-year period.  The compensation expense recorded for the quarter and the period from formation through December 31, 2004 represents a ratable portion of the expense of the issuance of these shares over their vesting period.

Capitalization (dollars in thousands)

As of the date of our formation, April 12, 2004, we had 500,000 shares of common stock outstanding valued at approximately $200 held by members of our management.  On August 2, 2004 we completed our initial public offering of 12,500,000 shares of common stock resulting in net proceeds of approximately $177,600, which was used to fund investments and commence our operations.  As of

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December 31, 2004, 312,500 restricted shares had also been issued under our Equity Incentive Plan.  These shares have a vesting period of three to four years and are not entitled to receive distributions declared by us on our common stock until such time as the shares have vested.  Unvested shares may be entitled to receive dividends at the discretion of the Compensation Committee of Gramercy’s Board of Directors.

On December 3, 2004 we sold 5,500,000 shares of common stock under a private placement exemption from the registration requirements of Section 5 of the Securities Act of 1933 for gross proceeds of approximately $95,000.  A total of 4,225,000 shares were sold to various institutional investors, and an additional 1,275,000 were sold to SL Green Operating Partnership, L.P., an affiliate of SL Green Realty Corp., pursuant to its contractual right to choose to maintain a 25% ownership interest in the outstanding shares of our common stock.  After the private placement, SL Green Operating Partnership, L.P. owned 4,710,000 shares of our common stock. On December 31, 2004, 2,000,000 shares sold in the offering were issued.  The remaining 3,500,000 shares were issued on January 3, 2005.  At December 31, 2004, $60,445 was held in a stock subscription receivable representing the value of the 3,500,000 shares that were settled in January 2005.  The proceeds from this offering were used to fund additional investments, repay borrowings and for general corporate purposes.

On December 31, 2004, we had 18,812,500 shares of common stock outstanding.  A total of 3,500,000 of the 18,812,500 shares outstanding represented a stock subscription receivable and were included in weighted average shares outstanding for purposes of calculating basic earnings per share.

Liquidity and Capital Resources

Liquidity is a measurement of the ability to meet cash requirements, including ongoing commitments to repay borrowings, fund and maintain loans and investments, pay dividends and other general business needs.We believe that our principal sources of working capital and funds for additional investments will primarily include: 1) cash flow from operations; 2) borrowings under our repurchase and credit facilities; 3) other forms of financing or securitizations; 4) proceeds from common or preferred equity offerings and, to a lesser extent, 5) the proceeds from principal payments on our investments.  We believe these sources of financing will be sufficient to meet our short-term liquidity needs.

Our ability to meet our long-term liquidity and capital resource requirements will be subject to obtaining additional debt financing and equity capital.  If we are unable to renew, replace or expand our sources of financing on substantially similar terms, it may have an adverse effect on our business and results of operations.  In addition, an event of default is triggered under our facility with Wachovia Capital Markets LP if the management agreement with GKK Manager LLC is terminated.  Depending on market conditions, our debt financing will be in the range of 70% to 80% of the carrying value of our total assets.  Any indebtedness we incur will likely be subject to continuing covenants and we will likely be required to make continuing representations and warranties about our Company in connection with such debt.  Our debt financing terms may require us to keep uninvested cash on hand, or to maintain a certain portion of our assets free of liens, each of which could serve to limit our borrowing ability.  Moreover, our debt may be secured by our assets.  If we default in the payment of interest or principal on any such debt, breach any representation or warranty in connection with any borrowing or violate any covenant in any loan document, our lender may accelerate the maturity of such debt requiring us to immediately repay all outstanding principal.  If we are unable to make such payment, our lender could foreclose on our assets that are pledged as collateral to such lender.  The lender could also sue us or force us into bankruptcy.  Any such event would have a material adverse effect on our liquidity and the value of our common stock.  In addition, posting additional collateral to support our credit facilities will reduce our liquidity and limit our ability to leverage our assets.

To maintain our status as a REIT under the Internal Revenue Code, we must distribute annually at least 90% of our taxable income.  These distribution requirements limit our ability to retain earnings and thereby replenish or increase capital for operations.  However, we believe that our significant capital resources and access to financing will provide us with financial flexibility at levels sufficient to meet current and anticipated capital requirements, including funding new lending and investment opportunities.

Market Capitalization

At December 31, 2004, borrowings under our repurchase facilities and our revolving credit facilities represented 38% of our consolidated market capitalization of $626 million (based on a common stock price of $20.60 per share, the closing price of our common stock on the New York Stock Exchange on December 31, 2004).  Market capitalization includes our consolidated debt and common stock.

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Indebtedness

The table below summarizes borrowings under our Wachovia repurchase facility at December 31, 2004 (dollars in thousands).

Debt Summary:	December 31, 2004
Balance
Fixed rate	$	—
Variable rate	238,885
Total	$	238,885
Effective interest rate for the year	LIBOR + 1.99%

Repurchase Facilities

We currently have two repurchase facilities with an aggregate of $550 million of total debt capacity.  In August 2004 we closed on a $250 million repurchase facility with Wachovia Capital Markets LP.  This facility was then increased to $350 million on January 3, 2005.  It has an initial term of three years with one 12-month extension option. The facility provides for a pricing rate of a spread of 1.25% to 3.50% over 30-day LIBOR and, based on our investment activities, provides for an advance rate that varies from 50% to 95% based upon the collateral provided under a borrowing base calculation.  The lender has a consent right with respect to the inclusion of investments in this facility, will determine periodically the market value of the investments, and will have the right to require additional collateral if the estimated market value of the included investments declines.   At December 31, 2004 we had an outstanding balance of $238.9 million on this facility at a weighted average spread to LIBOR of 1.99%.  Borrowings under this facility were secured by the following investments (in thousands):

Investment Type	Carrying Value
Whole loans	$	113,216
Subordinate mortgage interests	200,745
CMBS	10,898
	$	324,859

On January 3, 2005 we closed an additional repurchase facility of $200 million with Goldman Sachs Mortgage Company, an affiliate of Goldman Sachs & Co.  This facility has an initial term of three years with one six-month extension option.  This facility provides for a pricing rate of a spread of 1.125% to 2.75% over a 30-day LIBOR and, based on our investment activities, provides for an advance rate that varies from 75% to 90% based upon the collateral provided under a borrowing base calculation.  As with the Wachovia repurchase facility, the lender will have a consent right to the inclusion of investments in this facility, will determine periodically the market value of the investments, and will have the right to require additional collateral if the estimated market value of the included investments declines.

The repurchase facilities require that we pay down borrowings under these facilities as principal payments on our loans and investments are received.

Assets pledged as collateral under these facilities may include stabilized and transitional first mortgage whole loans, first mortgage B-notes, mezzanine loans, and rated CMBS or commercial real estate CDO securities originated or acquired by us.

Credit Facilities

We currently have two credit facilities with Wachovia Capital Markets LP.  The first facility is a $50 million repurchase facility with a term of two years and also has one 12-month extension option.  This facility bears interest at a spread over LIBOR of 225 basis points.  The advance rate on this facility varies with the collateral being acquired.  Amounts drawn under this facility must be repaid within 210 days.

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The second facility is a $25 million revolving credit facility with a term of two years.  Amounts drawn under this facility for liquidity purposes bear interest at a rate equal to a spread over LIBOR of 525 basis points.  Amounts drawn under this facility for acquisition purposes bear interest at a spread over LIBOR of 225 basis points.  Amounts drawn under this facility for liquidity purposes must be repaid within 90-days.  Amounts drawn under this facility generally will be secured by assets established under a borrowing base calculation unless certain financial covenants are satisfied.  These covenants are generally more restrictive that those set forth below.  At December 31, 2004 we did not have any borrowings under our credit facilities.

The credit facilities require that we pay down borrowings under these facilities as principal payments on our loans and investments are received.

Restrictive Covenants

The terms of both of our repurchase facilities and our two credit facilities include covenants that (a) limit our maximum total liabilities to no more than 85%, (b) require us to maintain minimum liquidity of at least $10 million for the first two years and $15 million thereafter, (c) our fixed charge coverage ratio shall at no time be less than 1.50 to 1.00, (d) our minimum interest coverage ratio shall at no time be less than 1.75 to 1.00, (e) require us to maintain minimum tangible net worth of not less than the greater of (i) $129.75 million, or (i) plus (ii) 75% of the proceeds of our subsequent equity issuances and (f) restrict the maximum amount of our total indebtedness.  The covenants also restrict us from making distributions in excess of a maximum of 103% of our funds from operations (as defined by the National Association of Real Estate Investment Trusts) through July 2005 and 100% thereafter, except that we may in any case pay distributions necessary to maintain our REIT status.  Under our facilities with Wachovia Capital Markets LP, an event of default will be triggered if GKK Manager LLC ceases to be the Manager.  As of December 31, 2004, we were in compliance with all such covenants.

Contractual Obligations

Combined aggregate principal maturities of borrowings under our repurchase facilities and revolving credit facilities as of December 31, 2004 are as follows (in thousands):

	Repurchase Facilities		Revolving Credit Facilities		Total
2005	$	—	$	—	$	—
2006	—		—		—
2007	238,885		—		238,885
	$	238,885	$	—	$	238,885

Off-Balance Sheet Arrangements

As of December 31, 2004, we had no off-balance sheet investments.

Dividends

To maintain our qualification as a REIT, we must pay annual dividends to our stockholders of at least 90% of our REIT taxable income, determined before taking into consideration the dividends paid deduction and net capital gains.  We intend to continue to pay regular quarterly dividends to our stockholders.  Before we pay any dividend, whether for Federal income tax purposes or otherwise, which would only be paid out of available cash to the extent permitted under our unsecured and secured credit facilities, and our term loans, we must first meet both our operating requirements and scheduled debt service on our mortgages and loans payable.

Related Party Transactions (dollars in thousands)

Management Agreement

In connection with our initial public offering, we entered into a Management Agreement with GKK Manager LLC, which provides for an initial term through December 2007 with automatic one-year extension options and is subject to certain termination rights.  We pay the Manager an annual management fee equal to 1.75% of our gross stockholders equity (as defined in the Management Agreement).  For the period from April 12, 2004 through December 31, 2004, we paid or had payable an aggregate of approximately $1,349 to the Manager under this agreement.

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The Manager and SL Green Operating Partnership, L.P., hold 15 units and 85 units, respectively, of Class B limited partner interests of the Operating Partnership, which represents 100% of all Class B limited partner interests.  SL Green Operating Partnership, L.P. intends to own at least 70 units of the Class B limited partner interests. To provide an incentive for the Manager to enhance the value of the common stock, the Manager and SL Green Operating Partnership, L.P. are entitled through their ownership of Class B limited partner interests of the Operating Partnership to an incentive return equal to 25% of the amount by which funds from operations (as defined in the partnership agreement of the Operating Partnership) plus certain accounting gains exceed the product of our weighted average stockholders equity (as defined in the partnership agreement of the Operating Partnership) multiplied by 9.5% (divided by 4 to adjust for quarterly calculations).  We will record any distributions on the Class B limited partner interests as an incentive distribution expense in the period when earned and when payments of such amounts have become probable and reasonably estimable in accordance with the partnership agreement.  No amounts were earned or accrued under this agreement as of December 31, 2004.

Asset Servicing Agreement and Outsourcing Agreement

We are obligated to reimburse the Manager for its costs incurred under an Asset Servicing Agreement and a separate Outsourcing Agreement between the Manager and SL Green Operating Partnership, L.P.  The Asset Servicing Agreement provides for an annual fee payable by us of 0.15% of the carrying value of our investments, excluding certain defined investments for which other servicing arrangements are executed and further reduced by fees paid directly to outside servicers by Gramercy.  The Outsourcing Agreement provides a fee payable by us of $1,250 per year, increasing 3% annually over the prior year.  For the period from April 12, 2004 through December 31, 2004, we paid or had payable an aggregate of $521 and $95 to the Manager under the Outsourcing and Asset Servicing Agreements, respectively.

During that same period we reimbursed approximately $2,400 to SL Green Operating Partnership, L.P. for organizational costs incurred in connection with the formation of Gramercy, the formation of its affiliates, the initial public offering, and to reimburse $800 in consulting fees paid by SL Green to Messrs. Hall and Foley, our Chief Operating Officer and Chief Financial Officer, respectively.

Messenger Services

Bright Star Couriers LLC, or Bright Star, provides messenger services to Gramercy.  Bright Star is owned by Gary Green, a son of Stephen L. Green.  The aggregate amount of fees paid by us for such services was less than $1 in 2004.

Investments

SL Green Operating Partnership, L.P. has invested $75,000 in a preferred equity interest that is subordinate to Gramercy’s $68,879 investment (“PW/MS”).

Funds from Operations

FFO is a widely recognized measure of REIT performance.  We compute FFO in accordance with standards established by the National Association of Real Estate Investment Trusts, or NAREIT, which may not be comparable to FFO reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than we do.  The revised White Paper on FFO approved by the Board of Governors of NAREIT in April 2002 defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from debt restructuring and sales of properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures.  We present FFO because we consider it an important supplemental measure of our operating performance and believe that it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITS.  We also use FFO as one of several criteria to determine performance-based bonuses for members of our senior management.  FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate assets diminishes ratably over time.  Historically, however, real estate values have risen or fallen with market conditions.  Because FFO excludes depreciation and amortization unique to real estate, gains and losses from property dispositions and extraordinary items, it provides a performance measure that, when compared year over year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, interest costs, providing perspective not immediately apparent from net income.  FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of our financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions.

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Funds from Operations for the period from April 12, 2004 (formation) through December 31, 2004 are as follows (in thousands):

	The Period from April 12, 2004 (formation) through December 31, 2004
Net income available to common stockholders	$	2,052
Add:
Depreciation and amortization	327
Less:
Amortization of deferred financing costs and depreciation on non-rental real estate assets	(327		)
Funds From Operations – basic	2,052
Dividends on preferred shares	—
Funds From Operations – diluted	$	2,052
Cash flows provided by operating activities	1,145
Cash flows used in investing activities	(407,056		)
Cash flows provided by financing activities	444,805

Recently Issued Accounting Pronouncements

FASB Interpretation No. 45, or FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” an interpretation of Statement of Financial Accounting Standards No. 5 (“SFAS No. 5”), “Accounting for Contingencies,” Statement of Financial Accounting Standards No. 57, “Related Party Disclosures,” Statement of Financial Accounting Standards No. 107, “Disclosures about Fair Value of Financial Instruments” and rescinds FASB Interpretation No. 34, “Disclosure of Indirect Guarantees of Indebtedness of Others, an Interpretation of SFAS No. 5.” It requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee regardless if the Company receives separately identifiable consideration. The disclosure requirements are effective December 31, 2002.

FASB Interpretation No. 46, or FIN 46, “Consolidation of Variable Interest Entities,” clarifies the application of existing accounting pronouncements to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.

SFAS No. 123(R), “Share-Based Payment, a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation,” requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair value.  The new standard is effective for interim or annual reporting periods beginning after June 15, 2005.  Because the Company currently recognizes all restricted share and option grants using the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” implementation of SFAS No. 123(R) will have no impact on the Company’s financial statements.

SFAS 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” amends and clarifies the accounting guidance on (1) derivative instruments (including certain derivative instruments embedded in other contracts) and (2) hedging activities that fall within the scope of SFAS No. 133, or SFAS 133, “Accounting for Derivative Instruments and Hedging Activities.”  SFAS 149 also amends certain other existing pronouncements, which will result in more consistent reporting of contracts that are derivatives in their entirety or that contain embedded derivatives that warrant separate accounting.

SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. It is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the statement and still existing at the beginning of the interim period of adoption.

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ITEM 7A.       QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Market Risk

Market risk includes risks that arise from changes in interest rates, commodity prices, equity prices and other market changes that affect market sensitive instruments.  In pursuing our business plan, we expect that the primary market risks to which we will be exposed are real estate and interest rate risks.

Real Estate Risk

Commercial and multi-family property values and net operating income derived from such properties are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions which may be adversely affected by industry slowdowns and other factors), local real estate conditions (such as an oversupply of retail, industrial, office or other commercial or multi-family space), changes or continued weakness in specific industry segments, construction quality, age and design, demographic factors, retroactive changes to building or similar codes, and increases in operating expenses (such as energy costs).  In the event net operating income decreases, a borrower may have difficulty repaying our loans, which could result in losses to us.  In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay our loans, which could also cause us to suffer losses.  Even when a property’s net operating income is sufficient to cover the property’s debt service, at the time a loan is made, there can be no assurance that this will continue in the future.

Interest Rate Risk (dollars in thousands)

Interest rate risk is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control. A hypothetical 100 basis point increase in interest rates along the entire interest rate curve for 2004 would have increased our annual interest cost by approximately $204, offset by an increase in our investment income of approximately $713.

Our operating results will depend in large part on differences between the income from our assets and our borrowing costs.  Most of our assets and borrowings are expected to be variable-rate instruments that we will finance with variable rate debt.  The objective of this strategy is to minimize the impact of interest rate changes on the spread between the yield on our assets and our cost of funds.  We enter into hedging transactions with respect to all liabilities relating to fixed rate assets in the future.  If we were to finance fixed rate assets with variable rate debt and the benchmark for our variable rate debt increased, our net income would decrease.  Furthermore, as most of our available financing provides for an ability of the lender to mark our assets to market and make margin calls based on a change in the value of our assets, financing fixed rate assets with this debt creates the risk that an increase in fixed rate benchmarks (such as “swap” yields) would decrease the value of our fixed rate assets.  We have entered into certain swap transactions in anticipation of drawing upon our mark-to-market debt to hedge against this risk.  Some of our loans may be subject to various interest rate floors.  As a result, if interest rates fall below the floor rates, the spread between the yield on our assets and our cost of funds will increase, which will generally increase our returns.  Because of our strategies to date, our net income will generally increase if LIBOR increases and decreases if LIBOR decreases, but this may not always be true in the future.  Our exposure to interest rates will also be affected by our overall corporate leverage, which we anticipate will be 70% to 80% of the carrying value of our assets; but our actual leverage depends on our mix of assets.

In the event of a significant rising interest rate environment and/or economic downturn, delinquencies and defaults could increase and result in credit losses to us, which could adversely affect our liquidity and operating results.  Further, such delinquencies or defaults could have an adverse effect on the spreads between interest-earning assets and interest-bearing liabilities.

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The aggregate carrying values, allocation by product type and weighted average coupons of our investments as of December 31, 2004 were as follows:

	Investments net of fees and discounts ($ in thousands)		Allocation by Investment Type		Fixed Rate: Average Yield		Floating Rate : Average Spread over LIBOR
Whole Loans	$	155,215	38	%	—		373	bps
Subordinate Investments, Floating Rate	209,286		51	%	—		640	bps
Subordinate Investments, Fixed Rate	31,216		8	%	9.57	%	—
Commercial Mortgage Backed Securities	10,898		3	%	13.49	%	—
Total / Average	$	406,615	100	%	10.58	%	526	bps

As of December 31, 2004, our investment portfolio had the following maturity characteristics:

Year of Maturity	Number of Investments Maturing	Current Carrying Value (In thousands)		% of Total
2005	1	$	42,000	10.3	%
2006	5	160,943		39.6	%
2007	4	172,457		42.4	%
2008	—	—		—
2009	1	31,215		7.7	%
	11	$	406,615	100.00	%
Weighted average maturity		2.1 years

The following table summarizes the notional and fair value of our derivative financial instruments at December 31, 2004.  The notional value is an indication of the extent of our involvement in this instrument at that time, but does not represent exposure to credit, interest rate or market risks (dollars in thousands):

	Notional Value		Strike Rate		Effective Date		Expiration Date		Fair Value
Interest Rate Swap	$	10,729	3.36	%	8/2004		12/2007		$	69
Interest Rate Swap	$	31,686	2.25	%(1)	11/2004	(1)	4/2005	(1)	$	180

(1)This swap has a step-up component with a strike rate of 3.86%, an effective date of April 2005 and an expiration of November 2009.  The total fair value of the initial swap and the step-up provisions are reflected in the fair value stated above.

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ITEM 8.          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements and Schedules

GRAMERCY CAPITAL CORP.

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2004 and April 12, 2004

Consolidated Statement of Income for the year ended December 31, 2004

Consolidated Statement of Stockholders’ Equity for the year ended December 31, 2004

Consolidated Statement of Cash Flows for the year ended December 31, 2004

Notes to Consolidated Financial Statements

Schedules

Schedule IV Mortgage Loans on Real Estate as of December 31, 2004

All other schedules are omitted because they are not required or the required information is shown in the financial statements or notes thereto.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Gramercy Capital Corp.

We have audited the accompanying consolidated balance sheets of Gramercy Capital Corp. as of December 31, 2004 and April 12, 2004, and the related consolidated statement of income, shareholders’ equity, and cash flows for the period from April 12, 2004 (formation) through December 31, 2004.  Our audits also included the financial statement schedule listed in the Index at Item 15(a).  These financial statements and schedule are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Gramercy Capital Corp.  at December 31, 2004 and April 12, 2004,  and the consolidated results of its operations and its cash flows for the period from April 12, 2004 (formation) through December 31, 2004, in conformity with U.S. generally accepted accounting principles.  Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

New York, New York

January 19, 2005,

except for Note 19, as to which the date is

February 24, 2005

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Gramercy Capital Corp.
Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)

	December 31, 2004		April 12, 2004
Assets:
Cash and cash equivalents	$	39,094	$	200
Restricted cash	1,901		—
Loans and other lending investments, net	395,717		—
Commercial mortgage backed securities, net	10,898		—
Stock subscriptions receivable	60,445		—
Accrued interest	2,921		—
Deferred financing costs	2,044		—
Deferred costs	189		—
Derivative instruments, at fair value	249		—
Other assets	589		—
Total assets	$	514,047	$	200
Liabilities and Stockholders’ Equity:
Credit facilities	$	238,885	$	—
Management fees payable	416		—
Dividends payable	1,951		—
Accounts payable and accrued expenses	1,935		—
Other liabilities	1,901
Total liabilities	245,088		—
Commitments and contingencies	—		—
Stockholders’ Equity:
Preferred stock, par value $0.001, 25,000,000 shares authorized, no shares issued or outstanding	—		—
Common stock, par value $0.001, 100,000,000 shares authorized, 18,812,500 (3,500,000 as a stock subscription) and 500,000 shares issued and outstanding at December 31, 2004 and April 12, 2004, respectively	19		1
Additional paid-in-capital	268,558		199
Accumulated other comprehensive income	282		—
Retained earnings	100		—
Total stockholders’ equity	268,959		200
Total liabilities and stockholders’ equity	$	514,047	$	200

The accompanying notes are an integral part of these financial statements.

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Gramercy Capital Corp.
Consolidated Statement of Income
(Amounts in thousands, except per share data)

	For the Period April 12, 2004 (formation) through December 31, 2004
Revenues
Investment income	$	6,841
Other income	310
Total revenues	7,151
Expenses
Interest expense	1,463
Management fees	1,965
Depreciation and amortization	38
Marketing, general and administrative	1,358
Total expenses	4,824
Income from continuing operations	2,327
GKK formation costs	275
Net income available to common stockholders	$	2,052
Basic earnings per share:
Net income available to common stockholders	$	0.15
Diluted earnings per share:
Net income available to common stockholders	$	0.15
Basic weighted average common shares outstanding	13,348
Diluted weighted average common shares and common share equivalents outstanding	13,411

The accompanying notes are an integral part of these financial statements.

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Gramercy Capital Corp.
Consolidated Statement of Stockholders’ Equity
(Amounts in thousands, except share data)

				Additional Paid- In-Capital		Accumulated Other Comprehensive Income		Retained Earnings			Total			Comprehensive Income
	Common
	Stock
	Shares	Par Value
Balance at April 12, 2004	500	$	1	$	199	$	—	$	—		$	200		$	—
Net income								2,052			2,052			2,052
Net unrealized gain on derivative instruments						282					282			282
Net proceeds from common stock offerings	18,000	18		267,955							267,973
Stock-based compensation – fair value				404							404
Deferred compensation plan, net	313	—									—
Cash distributions declared								(1,952		)	(1,952		)
Balance at December 31, 2004	18,813	$	19	$	268,558	$	282	$	100		$	268,959		$	2,334

The accompanying notes are an integral part of these financial statements.

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Gramercy Capital Corp.
Consolidated Statement of Cash Flows
(Amounts in thousands)

	For the Period April 12, 2004 (formation) through December 31, 2004
Operating Activities
Net income available to common stockholders	$	2,052
Adjustments to reconcile net income available to common stockholders to net cash provided by operating activities:
Depreciation and amortization	38
Amortization of discount on investments	253
Changes in operating assets and liabilities:
Accrued interest	(2,921		)
Other assets	(628		)
Management fees payable	416
Accounts payable, accrued expenses and other liabilities	1,935
Net cash provided by operating activities	1,145
Investing Activities
New investment originations	(407,603		)
Principal collections on investments	736
Deferred loan costs	(189		)
Net cash used in investing activities	(407,056		)
Financing Activities
Proceeds from credit facilities	238,885
Net proceeds from sale of common stock	266,458
Stock subscription receivable	(60,445		)
Deferred financing costs	(2,044		)
Dividends payable	1,951
Net cash provided by financing activities	444,805
Net increase in cash and cash equivalents	38,894
Cash and cash equivalents at beginning of period	200
Cash and cash equivalents at end of period	$	39,094

The accompanying notes are an integral part of these financial statements.

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Gramercy Capital Corp.
Notes To Consolidated Financial Statements
December 31, 2004

1.     Organization

Gramercy Capital Corp. (the “Company” or “Gramercy”), was organized in Maryland on April 1, 2004, as a commercial real estate specialty finance company focused on originating and acquiring whole loans, bridge loans, subordinate interests in whole loans, permanent loans, distressed debt, mortgage-backed securities, mezzanine loans, and preferred equity interests in entities that own commercial real estate, primarily in the United States.

In connection with the completion of our initial public offering on August 2, 2004, Gramercy contributed the proceeds of the offering in exchange for units of limited partnership interest in GKK Capital LP, a Delaware limited partnership, or the “Operating Partnership.”  Substantially all of Gramercy’s operations are conducted through and all assets are held by the Operating Partnership.  Gramercy, as the sole general partner of, and holder of 100% of the common units of, the Operating Partnership, has responsibility and discretion in the management and control of the Operating Partnership, and the limited partners of the Operating Partnership, in such capacity, have no authority to transact business for, or participate in the management activities of, the Operating Partnership.  Accordingly, we consolidate the accounts of the Operating Partnership.

We are externally managed and advised by GKK Manager LLC, or the “Manager,” a majority-owned subsidiary of SL Green Realty Corp., or SL Green.  At December 31, 2004, SL Green also owned an approximately 25% interest in the outstanding shares of our common stock. We qualified as a real estate investment trust, or “REIT,” under the Internal Revenue Code commencing with our taxable year ending December 31, 2004.  To maintain our tax status as a REIT, we plan to distribute at least 90% of our taxable income.  Unless the context requires otherwise, all references to “we,” “our,” and “us” means Gramercy Capital Corp.

As of December 31, 2004, we held investments of approximately $406.6 million, net of origination fees and discounts, with an average spread to LIBOR of 526 basis points for our floating rate investments and an average yield of 10.58% for our fixed rate investments.

The balance sheet at April 12, 2004 has been derived from the audited financial statement at that date, but does not include all the information and footnotes required by GAAP for complete financial statements.

2.     Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include our accounts and those of our subsidiaries, which are wholly-owned or controlled by us or entities which are variable interest entities in which Gramercy is the primary beneficiary under Financial Accounting Standards Board, or FASB Interpretation No. 46, or FIN 46, “Consolidation of Variable Interest Entities.”  FIN 46 requires a variable interest entity, or VIE, to be consolidated by its primary beneficiary.  The primary beneficiary is the party that absorbs a majority of the VIE’s anticipated losses and/or a majority of the expected returns.  We have evaluated our investments for potential variable interests by evaluating the sufficiency of the entities equity investment at risk to absorb losses and determined that we are not the primary beneficiary for any of our investments.  Entities which we do not control and entities which are VIE’s, but where we are not the primary beneficiary, are accounted for under the equity method.  All significant intercompany balances and transactions have been eliminated.

Cash and Cash Equivalents

We consider all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.

Restricted Cash

Restricted cash consists of interest reserves held on behalf of borrowers.

Loans and Investments

Loans held for investment are intended to be held to maturity and, accordingly, are carried at cost, net of unamortized loan origination costs and fees, unless such loan or investment is deemed to be impaired.  At such time as we invest in preferred equity interests that allow us to participate in a percentage of the underlying property’s cash flows from operations and proceeds from a sale or refinancing, we must determine whether such investment should be accounted for as a loan, joint venture or as real estate at the inception of the investment.  Gramercy did not own any preferred equity investments at December 31, 2004.

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Specific valuation allowances are established for impaired loans based on the fair value of collateral on an individual loan basis.  The fair value of the collateral is determined by an evaluation of operating cash flow from the property during the projected holding period, and estimated sales value computed by applying an expected capitalization rate to the stabilized net operating income of the specific property, less selling costs, discounted at market discount rates.

If upon completion of the valuation, the fair value of the underlying collateral securing the impaired loan is less than the net carrying value of the loan, an allowance is created with a corresponding charge to the provision for loan losses.  The allowance for each loan is maintained at a level we believe is adequate to absorb probable losses.  There was no loan loss allowance at December 31, 2004.

Our Manager evaluates our assets on a regular basis to determine if they continue to satisfy our investment criteria. Subject to certain restrictions applicable to REITs, our Manager may cause us to sell our investments opportunistically and use the proceeds of any such sale for debt reduction, additional acquisitions or working capital purposes.

Classifications of Mortgage-Backed Securities

In accordance with applicable GAAP, mortgage-backed securities are classified as available-for-sale securities.  As a result, changes in fair value will be recorded as a balance sheet adjustment to accumulated other comprehensive income, which is a component of stockholders equity, rather than through our statement of operations.  If available-for-sale securities were classified as trading securities, there could be substantially greater volatility in earnings from period-to-period as these investments would be marked to market and any reduction in the value of the securities versus the previous carrying value would be considered an expense on our statement of operations. The Company had no investments as of December 31 2004 that were accounted for as trading securities.

Valuations of Mortgage-Backed Securities

All mortgage-backed securities are carried on the balance sheet at fair value.  We determine the fair value of mortgage-backed securities based on the types of securities in which we have invested.  For liquid, investment-grade securities, we may consult with dealers of such securities to periodically obtain updated market pricing for the same or similar instruments.  For non-investment grade securities, we actively monitor the performance of the underlying properties and loans and update our pricing model to reflect changes in projected cash flows.  The value of the securities is derived by applying discount rates to such cash flows based on current market yields.  The yields employed may be obtained from the experience of the Manager in the market, advice from dealers and/or information obtained in consultation with other investors in similar instruments.  Because fair value estimates may vary to some degree, we must make certain judgments and assumptions about the appropriate price to use to calculate the fair values for financial reporting purposes.  Different judgments and assumptions could result in different presentations of value.

When the fair value of an available-for-sale security is less than the amortized cost, we consider whether there is an other-than-temporary impairment in the value of the security (for example, whether the security will be sold prior to the recovery of fair value).  If, in our judgment, an other-than-temporary impairment exists, the cost basis of the security is written down to the then-current fair value, and this loss is realized and charged against earnings.  The determination of other-than-temporary impairment is a subjective process, and different judgments and assumptions could affect the timing of loss realization.

Revenue Recognition

Interest income on debt investments is recognized over the life of the investment using the effective interest method and recognized on the accrual basis.  Fees received in connection with loan commitments are deferred until the loan is funded and are then recognized over the term of the loan as an adjustment to yield.  Anticipated exit fees, whose collection is expected, are also recognized over the term of the loan as an adjustment to yield.  Fees on commitments that expire unused are recognized at expiration.  Fees received in exchange for the credit enhancement of another lender, either subordinate or senior to Gramercy, in the form of a guarantee are recognized over the term of that guarantee.

Income recognition is generally suspended for debt investments at the earlier of the date at which payments become 90 days past due or when, in our opinion, a full recovery of income and principal becomes doubtful.  Income recognition is resumed when the loan becomes contractually current and performance is demonstrated to be resumed.

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Reserve for Possible Credit Losses

The expense for possible credit losses in connection with debt investments is the charge to earnings to increase the allowance for possible credit losses to the level that management estimates to be adequate considering delinquencies, loss experience and collateral quality.  Other factors considered relate to geographic trends and project diversification, the size of the portfolio and current economic conditions.  Based upon these factors, we establish the provision for possible credit losses by category of asset.  When it is probable that we will be unable to collect all amounts contractually due, the account is considered impaired.

Where impairment is indicated, a valuation write-down or write-off is measured based upon the excess of the recorded investment amount over the net fair value of the collateral, as reduced by selling costs.  Any deficiency between the carrying amount of an asset and the net sales price of repossessed collateral is charged to the allowance for credit losses.  As of December 31, 2004, we did not have an allowance for credit losses.

Deferred Costs

Deferred costs consist of fees and direct costs incurred to originate new investments and are amortized using the effective yield method over the related term of the investment.

Deferred Financing Costs

Deferred financing costs represent commitment fees, legal and other third party costs associated with obtaining commitments for financing which result in a closing of such financing.  These costs are amortized over the terms of the respective agreements and the amortization is reflected in interest expense.  Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity.  Costs incurred in seeking financial transactions, which do not close, are expensed in the period in which it is determined that the financing will not close.

Stock-Based Employee Compensation Plans

We have a stock-based employee compensation plan, described more fully in Note 10.  We account for this plan using the fair value recognition provisions of FASB Statement No. 123, or SFAS 123, “Accounting for Stock-Based Compensation.”

The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable.  In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility.  Because Gramercy’s plan has characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the fair value estimate, in our opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our employee stock options.

Compensation cost for stock options, if any, is recognized ratably over the vesting period of the award.  Gramercy’s policy is to grant options with an exercise price equal to the quoted closing market price of our stock on the business day preceding the grant date.  Awards of stock or restricted stock are expensed as compensation on a current basis over the benefit period.

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for grants in 2004.

	2004
Dividend yield	10.0	%
Expected life of option	7 years
Risk-free interest rate	4.10	%
Expected stock price volatility	18.0	%

Incentive Distribution (Class B Limited Partner Interest)

The Class B limited partner interest will be entitled to receive quarterly profit distributions based on our financial performance.  We will record any distributions on the Class B limited partner interests as an incentive distribution expense in the period when earned and

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when payment of such amounts has become probable and reasonably estimable in accordance with the partnership agreement.  These cash distributions will reduce the amount of cash available for distribution to our common unitholders in our Operating Partnership and to common stockholders.  No amounts were earned or accrued under this agreement as of December 31, 2004.

Derivative Instruments

In the normal course of business, we use a variety of derivative instruments to manage, or hedge, interest rate risk.  We require that hedging derivative instruments be effective in reducing the interest rate risk exposure that they are designated to hedge.  This effectiveness is essential for qualifying for hedge accounting.  Some derivative instruments are associated with an anticipated transaction.  In those cases, hedge effectiveness criteria also require that it be probable that the underlying transaction occurs.  Instruments that meet these hedging criteria are formally designated as hedges at the inception of the derivative contract.

To determine the fair value of derivative instruments, we use a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date.  For the majority of financial instruments including most derivatives, long-term investments and long-term debt, standard market conventions and techniques such as discounted cash flow analysis, option-pricing models, replacement cost, and termination cost are used to determine fair value.  All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized.

In the normal course of business, we are exposed to the effect of interest rate changes and limit these risks by following established risk management policies and procedures including the use of derivatives.  To address exposure to interest rates, we use derivatives primarily to hedge the mark-to-market risk of our liabilities with respect to certain of our assets.

We use a variety of commonly used derivative products that are considered plain vanilla derivatives.  These derivatives typically include interest rate swaps, caps, collars and floors.  We expressly prohibit the use of unconventional derivative instruments and using derivative instruments for trading or speculative purposes.  Further, we have a policy of only entering into contracts with major financial institutions based upon their credit ratings and other factors.

FASB No. 133, or SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” which became effective January 1, 2001, requires Gramercy to recognize all derivatives on the balance sheet at fair value.  Derivatives that are not hedges must be adjusted to fair value through income.  If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings.  The ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings.  SFAS 133 may increase or decrease reported net income and stockholders’ equity prospectively, depending on future levels of LIBOR interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows, provided the contract is carried through to full term.

We may employ swaps, forwards or purchased options to hedge qualifying forecasted transactions.  Gains and losses related to these transactions are deferred and recognized in net income as interest expense in the same period or periods that the underlying transaction occurs, expires or is otherwise terminated.

All hedges held by us are deemed to be fully effective in meeting the hedging objectives established by our corporate policy governing interest rate risk management. The effect of our derivative instruments on our financial statements is discussed more fully in Note 14.

Income Taxes

Gramercy has elected to be taxed as a REIT, under Sections 856 through 860 of the Internal Revenue Code beginning with our taxable year ending December 31, 2004.  To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our ordinary taxable income to stockholders.  As a REIT, we generally will not be subject to federal income tax on taxable income that we distribute to our stockholders.  If we fail to qualify as a REIT in any taxable year, we will then be subject to federal income taxes on our taxable income at regular corporate rates and we will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions.  Such an event could materially adversely affect our net income and net cash available for distributions to stockholders.  However, we believe that we will be organized and operate in such a manner as to qualify for treatment as a REIT and we intend to operate in the foreseeable future in such a manner so that we will qualify as a REIT for federal income tax purposes.  We may, however, be subject to certain state and local taxes.

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Underwriting Commissions and Costs

Underwriting commissions and costs incurred in connection with our stock offerings are reflected as a reduction of additional paid-in-capital.

Organization Costs

Costs incurred to organize Gramercy in 2004 have been expensed as incurred.

Earnings Per Share

Gramercy presents both basic and diluted earnings per share, or EPS.  Basic EPS excludes dilution and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period.  Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower EPS amount.  Diluted EPS at December 31, 2004 reflects the dilutive effect of stock options.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States, or GAAP, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Concentrations of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash investments, debt investments and accounts receivable.  Gramercy places its cash investments in excess of insured amounts with high quality financial institutions.  Gramercy performs ongoing analysis of credit risk concentrations in our debt investment portfolio by evaluating exposure to various markets, underlying property types, investment structure, term, sponsors, tenant mix and other credit metrics.  Two investments accounted for more than 37% of the total investments of the Company as of December 31, 2004. Two investments accounted for more than 58% of the revenue earned on our investments for the period from April 12, 2004 through December 31, 2004.

Recently Issued Accounting Pronouncements

FASB Interpretation No. 45, or FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” an interpretation of Statement of Financial Accounting Standards No. 5 (“SFAS No. 5”), “Accounting for Contingencies,” Statement of Financial Accounting Standards No. 57, “Related Party Disclosures,” Statement of Financial Accounting Standards No. 107, “Disclosures about Fair Value of Financial Instruments” and rescinds FASB Interpretation No. 34, “Disclosure of Indirect Guarantees of Indebtedness of Others, an Interpretation of SFAS No. 5.” It requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee regardless if the Company receives separately identifiable consideration. The disclosure requirements are effective December 31, 2002.

FASB Interpretation No. 46, or FIN 46, “Consolidation of Variable Interest Entities,” clarifies the application of existing accounting pronouncements to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.

SFAS No. 123(R), “Share-Based Payment, a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation,” requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair value.  The new standard is effective for interim or annual reporting periods beginning after June 15, 2005.  Because the Company currently recognizes all restricted share and option grants using the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” implementation of SFAS No. 123(R) will have no impact on the Company’s financial statements.

SFAS 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” amends and clarifies the accounting guidance on (1) derivative instruments (including certain derivative instruments embedded in other contracts) and (2) hedging activities that fall within the scope of SFAS No. 133, or SFAS 133, “Accounting for Derivative Instruments and Hedging Activities”.  SFAS 149 also amends certain other existing pronouncements, which will result in more consistent reporting of contracts that are derivatives in their entirety or that contain embedded derivatives that warrant separate accounting.

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SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” establishes standards for the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. It is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the statement and still existing at the beginning of the interim period of adoption.

3.     Loans and Other Lending Investments (dollars in thousands)

As of December 31, 2004 we held the following investments.  All investments and loans were performing in accordance with the terms of the loan agreements:

Investment Type	Underlying Property Type	Carrying Value		Principal Outstanding		Senior Financing		Effective Maturity Date (1)	Interest Payment Rate (2)
CMBS	Office	$	10,898	$	11,847	$	109,996	December 2007	8.544% - 10.736%
Subordinate mortgage interest
C Note	Office	24,728		25,000		190,000		July 2006	LIBOR + 3.00%
D Note	Office	19,782		20,000		215,000		July 2006	LIBOR + 7.50%
		44,510		45,000		405,000
Subordinate mortgage interest
C Note	Office	34,286		34,440		275,405		July 2007	LIBOR + 5.00%
D Note	Office	32,875		34,439		309,900		July 2007	LIBOR + 12.50%
		67,161		68,879		585,305
Subordinate mortgage interest	Office	31,215		36,500		255,500		November 2009	5.41% (4)
Subordinate mortgage interest	Multifamily	9,906		10,000		50,300		February 2007	LIBOR + 6.30%
Whole loan	Hotel	42,000		42,000		—		April 2005	LIBOR + 5.25%
Subordinate mortgage interest	Golf Courses	47,954		47,954		467,000		February 2006	LIBOR + 5.50%
Whole loan (3)	Other	28,723		29,094		—		November 2006	LIBOR + 3.50%
Subordinate mortgage interest	Office	4,952		5,000		68,000		August 2006	LIBOR + 7.00%
Subordinate mortgage interest
C Note	Office	17,402		17,500		85,000		November 2006	LIBOR + 2.75%
D Note	Office	17,402		17,500		102,500		November 2006	LIBOR + 7.25%
		34,804		35,000		187,500
Whole loan	Office/ Industrial	84,492		84,704		—		September 2007	LIBOR + 3.05%
		$	406,615	$	415,978	$	2,128,601

(1) Reflects the initial maturity of the investment and does not consider any options to extend that are at the discretion of the borrower.

(2) All variable-rate loans are based on 30-day LIBOR and reprice monthly.

(3) There is an obligation to fund an additional $11 million to the borrower. This obligation is contingent upon the borrower’s ability to obtain the appropriate approvals to continue their acquisition of parcels of land for development which would serve as additional collateral on the loan. Should the borrower not be granted these approvals, there is no future obligation to fund.

(4) The effective yield of the investment is 8.29% taking into consideration our purchase discount.

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For the period from April 12, 2004 through December 31, 2004 the Company’s investment income was generated by the following investment types:

Investment Type	Investment Income		% of Total
Subordinate mortgage interests	$	5,499	80	%
Whole loans	782		11	%
CMBS	560		9	%
	$	6,841	100	%

For the period from April 12, 2004 through December 31, 2004, the $44.5 million and $67.2 million investments generated more than 58% of our total investment revenue.  This is primarily attributable to the origination of these investments soon after the completion of the Company’s initial public offering.

At December 31, 2004, our investment portfolio had the following geographic diversification:

Region	Carrying Value		% of Total
Northeast	185,081		46	%
South	126,493		31	%
Midwest	26,284		6	%
West	20,804		5	%
Various	47,953		12	%
	$	406,615	100	%

Three investments originated during 2004, two of which were made in conjunction with each other, represented more than 10% of the asset value presented on our consolidated balance sheet as of December 31, 2004.  These investments are described more fully below.

On August 27, 2004 Gramercy originated a total investment of $68,879 (“PW/MS”) made up of two subordinate participation interests (the “C Note” and “D Note”), each of equal face value, in a first mortgage loan.  The loan is secured by a first mortgage against 29 office properties located in New Jersey, Illinois and Michigan.  The C Note bears interest at a rate of LIBOR plus 5.00% while the D Note, which is subordinate in right of interest and repayment of principal to the C Note, bears interest at a rate of LIBOR plus 12.50%.  The total investment has an initial term of three years.

On December 29, 2004, the Company invested in a $84,704 million loan (“CRT-SFV”) secured by a blanket first mortgage on 32 separate office and warehouse/distribution properties comprising 1.9 million rentable square feet, and one 22-acre land parcel. The properties are located in urban centers in Florida, Tennessee, North Carolina, and Georgia. The investment matures in 33 months and bears interest at a rate of LIBOR plus 305 basis points.

Summary unaudited financial information as of and for the period ended December 31, 2004 has been provided below for the properties securing each of these investments:

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Summary consolidated financial information for PW/MS:

Balance Sheet:

	December 31, 2004
	(Unaudited)
Assets:
Cash and cash equivalents	($3,028		)
Restricted cash	11,597
Fixed assets, net	363,935
Other assets	71,382
Total assets	$	443,886
Liabilities and Stockholders’ Equity:
Mortgage payable	$	324,344
Accounts payable and accrued expenses	13,334
Other liabilities	22,467
Equity	83,741
Total liabilities and stockholders’ equity	$	443,886

Statement of Operations:

	For the year ended December 31, 2004
	(Unaudited)
Revenues
Rental income	$	55,199
Reimbursement income	6,852
Other income	689
Total revenues	62,740
Expenses
Operating expenses	26,632
Interest expense	16,947
Depreciation and amortization	17,779
Other expenses	454
Total expenses	61,812
Net income from continuing operations before gain on sale and discontinued operations	928
Gain on sale of properties	271
Net income from discontinued operations	346
Net income	$	1,545

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Summary consolidated financial information for CRT-SFV:

Balance Sheet:

	December 31, 2004
	(Unaudited)
Assets:
Cash and cash equivalents	$	959
Restricted cash	3,738
Fixed assets, net	95,016
Other assets	7,483
Total assets	$	107,196
Liabilities and Stockholders’ Equity:
Mortgage payable	$	84,704
Accounts payable and accrued expenses	2,945
Other liabilities	1,149
Equity	18,398
Total liabilities and stockholders’ equity	$	107,196

Statement of Operations:

	For the year ended December 31, 2004
	(Unaudited)
Revenues
Rental income	$	16,297
Reimbursement income	3,084
Other income	28
Total revenues	19,409
Expenses
Operating expenses	10,193
Interest expense	3,661
Depreciation and amortization	5,580
Other expenses	181
Total expenses	19,615
Net income from continuing operations before gain on sale and discontinued operations	(206		)
Gain on sale of properties	3,188
Net income from discontinued operations
Net income	$	2,982

4.Unaudited Pro Forma Consolidated Financial Information (dollars in thousands)

Gramercy has originated ten investments which, at the time of their closing were, individually or aggregated with an investment made with the same seller and borrower, significant to the Company’s business.  On December 3, 2004 we sold 5,500,000 shares of common stock under a private placement exemption from the registration requirements of Section 5 of the Securities Act of 1933, as amended, for net proceeds of approximately $95.0 million.  The pro forma condensed consolidated interim financial information presented herein is limited to adjustments that are directly attributable to these ten investments and the private placement, are expected to have a continuing impact on Gramercy, and are factually supportable.  These adjustments assume that each of the ten investments were originated or acquired by the Company at the time of its formation on April 12, 2004, and were outstanding for the period through and including December 31, 2004.  These adjustments also include the assumption that our initial public offering occurred at the time of our formation and certain management, general and administrative expenses would have been incurred as a result of these investments.  Fees payable to GKK Manager LLC pursuant to our Management, Outsourcing and Asset Servicing agreements are also adjusted under the assumption that these arrangements would have been executed at the time of our formation.

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On August 27, 2004, Gramercy originated four investments totaling $113,879.  The first two investments of $45,000 were two subordinate participation interests (the “C Participation” and the “D Participation”) in a loan secured by a first leasehold mortgage against two midtown Manhattan office buildings comprising approximately 1.2 million square feet.  The C Participation of $25,000 bears interest at a rate of LIBOR plus 3.00%, while the D Participation of $20,000, which is subordinate in right of interest and repayment of principal to the C Participation, bears interest at a rate of LIBOR plus 7.50%.   The total investment has an initial term of two years.

The remaining two investments Gramercy closed on August 27, 2004 of $68,879 were two subordinate participation interests (the “C Note” and “D Note”), each of equal face value, in a first mortgage loan.  The loan is secured by first mortgage against 29 office properties located in New Jersey, Illinois and Michigan.  The C Note bears interest at a rate of LIBOR plus 5.00% while the D Note, which is subordinate in right of interest and repayment of principal to the C Note, bears interest at a rate of LIBOR plus 12.50%.  The total investment has an initial term of three years.

On November 4, 2004, Gramercy originated two investments totaling approximately $89,954.  The first investment of $47,954 represents the intermediate tranche of a subordinate participation interest in a loan secured by a first mortgage against a portfolio of 100 owned golf courses and a security interest in the common stock of an affiliated company whose subsidiaries operate 99 of the aforementioned golf courses pursuant to leases as well as operate an additional 136 golf courses pursuant to leases or management contracts with unrelated owners.  The investment has an initial maturity of 15 months and bears interest at a rate of LIBOR plus 550 basis points with a LIBOR floor of 1.55%.

Also on November 4, 2004, Gramercy closed on a $42,000 investment representing a loan secured by a first mortgage against a 760-room, full service hotel in Atlanta, GA.  This loan has an initial maturity of eight months and bears interest at a rate of LIBOR plus 525 basis points per annum with an aggregate floor interest rate of 7.50% per annum.

On December 29, 2004, we acquired the A and B participations in an $84,704 loan secured by a blanket first mortgage on 32 separate office and warehouse/distribution properties comprising 1.9 million rentable square feet, and one 22-acre land parcel. The properties are located in urban centers in Florida, Tennessee, North Carolina, and Georgia. The total investment matures in 33 months and bears interest at a rate of LIBOR plus 305 basis points.

On February 18, 2005 Gramercy Capital Corp. closed on a $36,511 mezzanine loan in connection with a planned conversion of a commercial property in New York City to residential condominiums and certain other uses.  The Company’s investment is secured by a pledge of the borrower’s equity ownership interest in the to-be-converted commercial property.  Gramercy Capital Corp.’s investment has in initial term of 20 months and bears interest at rate of LIBOR plus 1192 basis points.

On February 24, 2005, Gramercy Capital Corp. originated a $58,645 loan secured by a first mortgage on a portfolio of three office buildings located in San Jose, California. The properties comprise approximately 454,000 rentable square feet. The investment matures in 24 months, with three one-year extension options, and bears interest at a rate of LIBOR plus 300 basis points. Gramercy’s investment is secured by a cross-collateralized and cross-defaulted lien on the three properties.  The initial amount funded under the loan commitment was approximately $27,439.

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Gramercy Capital Corp.
Pro Forma Condensed Consolidated Statements of Operations
(Unaudited, and amounts in thousands, except per share data)

	For the Period April 12, 2004 (formation) through December 31, 2004
Revenues
Investment income	$	22,250
Other income	21
Total revenues	22,271
Expenses
Interest expense	3,639
Management fees	4,782
Depreciation and amortization	284
Marketing, general and administrative	2,536
Total expenses	11,241
Income from continuing operations	11,030
GKK formation costs	275
Net income available to common stockholders	$	10,755
Basic earnings per share:
Net income available to common stockholders	$	0.57
Diluted earnings per share:
Net income available to common stockholders	$	0.57
Basic weighted average common shares outstanding	18,813
Diluted weighted average common shares and common share equivalents outstanding	18,876

5.Debt Obligations

We have three facilities with Wachovia Capital Markets, LLC or one or more of its affiliates.  The first facility is a $350 million repurchase facility.  This facility, which was increased to $350 million from $250 million effective January 3, 2005, has a term of three years with one 12-month extension option.  The facility provides for a pricing rate of a spread of 1.25% to 3.50% over a 30-day LIBOR and, based on our expected investment activities, would provide for an advance rate that varies from 50% to 95% based upon the collateral provided under a borrowing base calculation.  The lender will have a consent right to the inclusion of investments in this facility, will determine periodically the market value of the investments, and will have the right to require additional collateral if the estimated market value of the included investments declines.  We can utilize the $25 million revolving credit facility described below to fund requirements for additional collateral pursuant to the warehouse financing or to fund the acquisition of assets, which could otherwise be funded under the $50 million credit facility described below.  At December 31, 2004 we had borrowings of $238.9 million under this facility.

The second facility is a $50 million credit facility with a term of two years and also has one 12-month extension option.  This facility bears interest at a spread over LIBOR of 225 basis points.  The advance rate on this facility varies with the collateral being acquired.  Amounts drawn under this facility must be repaid within 210 days.  At December 31, 2004 we had no borrowings under this facility.

The third facility is a $25 million revolving credit facility with a term of two years.  Amounts drawn under this facility for liquidity purposes bear interest at a rate equal to a spread over LIBOR of 525 basis points.  Amounts drawn under this facility for acquisition

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purposes bear interest at a spread over LIBOR of 225 basis points.  Amounts drawn under this facility for liquidity purposes must be repaid within 90-days.  Amounts drawn under this facility generally will be secured by assets established under a borrowing base calculation unless certain financial covenants are satisfied.  These covenants are generally more restrictive that those set forth below.  At December 31, 2004 we had no borrowings under this facility.

On January 3, 2005 we closed an additional repurchase facility of $200 million with Goldman Sachs Mortgage Company, an affiliate of Goldman Sachs & Co.  This facility has an initial term of three years with one six-month extension option.  This facility provides for a pricing rate of a spread of 1.125% to 2.75% over a 30-day LIBOR and, based on our expected investment activities, provides for an advance rate that varies from 75% to 90% based upon the collateral provided under a borrowing base calculation.  As with the Wachovia facility, the lender will have a consent right to the inclusion of investments in this facility, will determine periodically the market value of the investments, and will have the right to require additional collateral if the estimated market value of the included investments declines.

The terms of both of our repurchase facilities and our two credit facilities include covenants that(a) our maximum total liabilities ratio will not exceed 85%, (b) require us to maintain minimum liquidity of at least $10 million for the first two years and $15 million thereafter, (c) our fixed charge coverage ratio shall at no time be less than 1.50 to 1.00, (d) our minimum interest coverage ratio shall at no time be less than 1.75 to 1.00, (e) require us to maintain minimum tangible net worth of not less than the greater of (i) $129.75 million, or (i) plus (ii) 75% of the proceeds of our subsequent equity issuances and (f) restrict the maximum amount of our total indebtedness.  The covenants also restrict us from making distributions in excess of a maximum of 103% of our funds from operations (as defined by the National Association of Real Estate Investment Trusts) through July 2005 and 100% thereafter, except that we may in any case pay distributions necessary to maintain REIT status.  Under our facilities with Wachovia Capital Markets LP, an event of default will be triggered if GKK Manager LLC ceases to be the Manager.

The revolving credit facilities and the warehouse financing require that we pay down borrowings under these facilities as principal payments on our loans and investments are received.

At December 31, 2004 $238.9 million was outstanding under the Wachovia repurchase facility.  There were no outstanding balances under any other revolving credit facility.  Borrowings under the Wachovia repurchase facility were secured by the following investments (in thousands):

Investment Type	Carrying Value
Whole loans	$	113,216
Subordinate mortgage interests	200,745
CMBS	10,898
	$	324,859

6.     Operating Partnership Agreement

After the closing of our initial public offering, we owned all of the Class A limited partner interests in our Operating Partnership.  The Class B limited partner interests are owned 85% by SL Green Operating Partnership, L.P. and 15% by the Manager.  SL Green Operating Partnership, L.P. intends to own at least 70% of the Class B limited partner interests.

7.     Related Party Transactions (dollars in thousands)

Management Agreement

In connection with our initial public offering, we entered into a Management Agreement with GKK Manager LLC, which provides for an initial term through December 2007 with automatic one-year extension options and is subject to certain termination rights.  We pay the Manager an annual management fee equal to 1.75% of our gross stockholders equity (as defined in the Management Agreement).  For the period from April 12, 2004 through December 31, 2004, we paid or had payable an aggregate of approximately $1,349 to the Manager under this agreement.

The Manager and SL Green Operating Partnership, L.P., hold 15 units and 85 units, respectively, Class B limited partner interests of

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the Operating Partnership, which represents 100% of all Class B limited partner interests.  SL Green Operating Partnership, L.P. intends to own at least 70 units of the Class B limited partner interests. To provide an incentive for the Manager to enhance the value of the common stock, the Manager and SL Green Operating Partnership, L.P. are entitled through their ownership of Class B limited partner interests of the Operating Partnership to an incentive return equal to 25% of the amount by which funds from operations (as defined in the partnership agreement of the Operating Partnership) plus certain accounting gains exceed the product of our weighted average stockholders equity (as defined in the partnership agreement of the Operating Partnership) multiplied by 9.5% (divided by 4 to adjust for quarterly calculations).  We will record any distributions on the Class B limited partner interests as an incentive distribution expense in the period when earned and when payments of such amounts have become probable and reasonably estimable in accordance with the partnership agreement.  No amounts were earned or accrued under this agreement as of December 31, 2004.

Asset Servicing Agreement and Outsourcing Agreement

We are obligated to reimburse the Manager for its costs incurred under an Asset Servicing Agreement and a separate Outsourcing Agreement between the Manager and SL Green Operating Partnership, L.P.  The Asset Servicing Agreement provides for an annual fee payable by us of 0.15% of the carrying value of our investments, excluding certain defined investments for which other servicing arrangements are executed and further reduced by fees paid directly to outside servicers by Gramercy.  The Outsourcing Agreement provides a fee payable by us of $1,250 per year, increasing 3% annually over the prior year.  For the period from April 12, 2004 through December 31, 2004, we paid or had payable an aggregate of $521 and $95 to the Manager under the Outsourcing and Asset Servicing Agreements, respectively.

During that same period we reimbursed approximately $2.4 million to SL Green Operating Partnership, L.P. for organizational costs incurred in connection with the formation of Gramercy, the formation of its affiliates, the initial public offering, and to reimburse $800 in consulting fees paid by SL Green to Messrs. Hall and Foley, our Chief Operating Officer and Chief Financial Officer, respectively.

Messenger Services

Bright Star Couriers LLC, or Bright Star, provides messenger services to Gramercy.  Bright Star is owned by Gary Green, a son of Stephen L. Green.  The aggregate amount of fees paid by us for such services was less than $1 in 2004.

Investments

SL Green Operating Partnership, L.P. has invested $75,000 in a preferred equity interest that is subordinate to Gramercy’s $68,879 PW/MS investment.

8.     Deferred Costs

Deferred costs at December 31, 2004 consisted of the following (in thousands):

	2004
Deferred financing costs	$	2,334
Deferred acquisition costs	215
	2,549
Less accumulated amortization	(316		)
	$	2,233

Deferred financing costs relate to our three existing credit facilities with Wachovia and are amortized on a straight-line basis to interest expense based on the remaining term of the related facility.

Deferred acquisition costs consist of fees and direct costs incurred to originate our investments.

9.Fair Value of Financial Instruments

The following discussion of fair value was determined by our Manager, using available market information and appropriate valuation methodologies.  Considerable judgment is necessary to interpret market data and develop estimated fair value.  Accordingly, fair values are not necessarily indicative of the amounts we could realize on disposition of the financial instruments.  The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair value amounts.

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Cash equivalents, accrued interest, and accounts payable balances reasonably approximate their fair values due to the short maturities of these items.  Loans and commercial backed securities are carried at amounts which reasonably approximate their fair value as determined by our Manager.

Disclosure about fair value of financial instruments is based on pertinent information available to us at December 31, 2004.  Although we are not aware of any factors that would significantly affect the reasonable fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.

10.Stockholders’ Equity

Common Stock

Our authorized capital stock consists of 125,000,000 shares, $0.001 par value, of which we have authorized the issuance of up to 100,000,000 shares of common stock, $0.001 par value per share, and 25,000,000 shares of preferred stock, par value $0.001 per share.

As of the date of our formation, April 12, 2004, we had 500,000 shares of common stock outstanding valued at approximately $200,000.  On August 2, 2004 we completed our initial public offering of 12,500,000 shares of common stock resulting in net proceeds of approximately $177.6 million, which was used to fund investments and commence our operations.  As of December 31, 2004, 312,500 restricted shares had also been issued under our Equity Incentive Plan.  These shares have a vesting period of three to four years and are not entitled to receive distributions declared by the Company on its common stock until such time as the shares have vested.

On December 3, 2004 we sold 5,500,000 shares of common stock under a private placement exemption from the registration requirements of Section 5 of the Securities Act of 1933.  A total of 4,225,000 shares were sold to various institutional investors and an additional 1,275,000 were sold to SL Green Operating Partnership, L.P., an affiliate of SL Green Realty Corp., pursuant to its contractual right to choose to maintain a 25% ownership interest in the outstanding shares of common stock.  After the private placement, SL Green Operating Partnership, L.P. owned 4,710,000 shares of our common stock.  2,000,000 shares sold in the offering were issued on December 31, 2004 and are reflected in total common shares outstanding at December 31, 2004.  The remaining 3,500,000 shares were issued on January 3, 2005 and are not reflected in total common shares outstanding at December 31, 2004.  The value of the shares settled on January 3, 2005 is reflected as a stock subscription receivable for financial statement purposes as of December 31, 2004.

As of December 31, 2004, 18,812,500 shares of common stock, of which 3,500,000 represented a stock subscription receivable, and no shares of preferred stock were issued and outstanding.

Equity Incentive Plan (dollars in thousands except per share data)

As part of our initial public offering we instituted the 2004 Equity Incentive Plan, or the Equity Incentive Plan.  The Equity Incentive Plan, as amended, authorizes (i) the grant of stock options that qualify as incentive stock options under Section 422 of the Code, or ISOs, (ii) the grant of stock options that do not qualify, or NQSOs, (iii) the grant of stock options in lieu of cash directors’ fees and (iv) grants of shares of restricted and unrestricted common stock.  The exercise price of stock options will be determined by the compensation committee, but may not be less than 100% of the fair market value of the shares of common stock on the date of grant.  At December 31, 2004, approximately 1,881,250 shares of common stock were available for issuance under the Equity Incentive Plan.

Options granted under the Equity Incentive Plan are exercisable at the fair market value on the date of grant and, subject to termination of employment, expire ten years from the date of grant, are not transferable other than on death, and are exercisable in three to four annual installments commencing one year from the date of grant.

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A summary of the status of our stock options as of December 31, 2004 are presented below:

	2004
	Options Outstanding		Weighted Average Exercise Price
Balance at April 12, 2004	—		$	—
Granted	640,500		$	15.05
Exercised	—		$	—
Lapsed or cancelled	—		$	—
Balance at end of period	640,500		$	15.05
Options exercisable at end of year	—		$	—
Weighted average fair value of options granted during the year	$	194

All options were granted within a price range of $15.00 to $16.30.  The remaining weighted average contractual life of the options was 9.6 years.  Compensation expense of $23 was recorded during the year ended December 31, 2004 related to the issuance of stock options.

As of December 31, 2004, 312,500 restricted shares had been issued under the Equity Incentive Plan.  These shares have a vesting period of three to four years and are not entitled to receive distributions declared by Gramercy on its common stock until such time as the shares have vested.  Unvested shares may be entitled to receive dividends at the discretion of the Compensation Committee of Gramercy’s Board of Directors.  Holders of restricted shares are prohibited from selling such shares until they vest.  Compensation expense of $381 was recorded during the year ended December 31, 2004 related to the issuance of restricted shares.

Earnings Per Share

Earnings per share for the period from April 12, 2004 (formation) through December 31, 2004 is computed as follows (in thousands):

Numerator (Income)	For the Period April 12, 2004 (formation) through December 31, 2004
Basic Earnings:
Net income available to common stockholders	$	2,052
Effect of Dilutive Securities:
Stock options	(10		)
Diluted Earnings:
Net income available to common stockholders	$	2,042
Denominator (Weighted Average Shares)
Basic
Shares available to common stockholders	13,348
Effect of Diluted Securities:
Stock options	63
Diluted Shares	13,411

11.  Minority Interest

After the closing of our initial public offering, we owned all of the Class A limited partner interests in our Operating Partnership.  The Class B limited partner interests are owned 85% by SL Green Operating Partnership, L.P. and 15% by the Manager. SL Green Operating Partnership, L.P. intends to own at least 70% of the Class B limited partner interests.

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12.Benefit Plans

We do not maintain a defined benefit pension plan, post-retirement health and welfare plan, 401(K) plan or other benefits plans as we do not have any employees.  These benefits are provided by the Manager, a majority-owned subsidiary of SL Green Realty Corp.

13.Commitments and Contingencies (dollars in thousands)

Gramercy and the Operating Partnership are not presently involved in any material litigation nor, to our knowledge, is any material litigation threatened against us or our investments, other than routine litigation arising in the ordinary course of business.  Management believes the costs, if any, incurred by Gramercy and the Operating Partnership related to litigation will not materially affect our financial position, operating results or liquidity.

As of December 31, 2004, we did not have any operating leases or capital leases for which future minimum lease payments would be required.

14.Financial Instruments: Derivatives and Hedging (dollars in thousands)

FASB No. 133, or SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” which became effective January 1, 2001, requires Gramercy to recognize all derivatives on the balance sheet at fair value.  Derivatives that are not hedges must be adjusted to fair value through income.  If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings.  The ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings.  SFAS 133 may increase or decrease reported net income and stockholders’ equity prospectively, depending on future levels of LIBOR interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows, provided the contract is carried through to full term.

The following table summarizes the notional and fair value of our derivative financial instrument at December 31, 2004.  All derivative instruments have been designated as cash flow hedges.  For the period from April 12, 2004 through December 31, 2004 $2 was attributable to the ineffective portion of our derivative’s change in fair value and was recognized in interest expense.  The notional value is an indication of the extent of our involvement in this instrument at that time, but does not represent exposure to credit, interest rate or market risks (in thousands):

	Notional Value		Strike Rate		Effective Date		Expiration Date		Fair Value
Interest Rate Swap	$	10,729	3.36	%	8/2004		12/2007		$	69
Interest Rate Swap	$	31,686	2.25	%(1)	11/2004	(1)	4/2005	(1)	$	180

(1)This swap has a step-up component with a strike rate of 3.86%, an effective date of April 2005 and an expiration of November 2009.  The total fair value of the initial swap and the step-up provisions are reflected in the fair value.

On December 31, 2004, the derivative instruments were reported as an asset at their fair value of $249.  Offsetting adjustments are represented as deferred gains and are a component of Accumulated Other Comprehensive Income of $282.  Currently, all derivative instruments are designated as effective hedging instruments.  Over time, the realized and unrealized gains and losses held in Accumulated Other Comprehensive Loss will be reclassified into earnings as interest expense in the same periods in which the hedged interest payments affect earnings.

Gramercy is hedging exposure to variability in future interest payments on its debt facilities.

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15.Environmental Matters

Management of the Company believes it is in compliance in all material respects with applicable Federal, state and local ordinances and regulations regarding environmental issues.  Management is not aware of any environmental liability that it believes would have a materially adverse impact on the Gramercy’s financial position, results of operations or cash flows.

16.Segment Reporting

Statement of Financial Accounting Standard No. 131, or “SFAS No. 131,” establishes standards for the way that public entities report information about operating segments in their annual financial statements.  Gramercy is a REIT focused on originating and acquiring loans and securities related to real estate and currently operate in only one segment.

17.Supplemental Disclosure of Non-Cash Investing and Financing Activities

The following table represents non-cash investing and financing activities (in thousands):

	2004
Derivative instruments at fair value	$	249

18.Quarterly Financial Data (unaudited)

Quarterly data for the quarters since our initial public offering are presented below (dollars in thousands except for per share data).

2004 Quarter Ended	December 31		September 30
Total revenues	$	5,679	$	1,472
Income available to common stockholders	$	2,041	$	11
Net income per common share-Basic	$	0.15	$	0.00
Net income per common share-Diluted	$	0.15	$	0.00

19.Subsequent Events (dollars in thousands)

On December 3, 2004 we sold 5,500,000 shares of common stock, at a price of $17.27 per share, through a private placement exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.  A total of 4,225,000 shares were sold to various institutional investors and an additional 1,275,000 were sold to SL Green Operating Partnership, L.P., an affiliate of SL Green Realty Corp., pursuant to its contractual right to choose to maintain a 25% ownership interest in the outstanding shares of our common stock.  After the private placement, SL Green Operating Partnership, L.P. owned 4,710,000 shares of our common stock.  2,000,000 shares sold in the offering were issued on December 31, 2004.  The remaining 3,500,000 shares were issued on January 3, 2005.  The value of the shares settled on January 3, 2005 is reflected as a stock subscription receivable for financial statement purposes as of December 31, 2004.

On January 3, 2005 our repurchase facility with Wachovia Capital Markets LLC or one or more of its affiliates was increased from $250,000 to $350,000.  All other terms of the facility remained the same.

Also on January 3, 2005 we closed on a repurchase facility of $200,000 with Goldman Sachs Mortgage Company, an affiliate of Goldman Sachs & Co.  This facility has an initial term of three years with one six-month extension option.  This facility provides for a pricing rate of a spread of 1.125% to 2.75% over a 30-day LIBOR and, based on our expected investment activities, provides for an advance rate that varies from 75% to 90% based upon the collateral provided under a borrowing base calculation.  As with the Wachovia facility, the lender will have a consent right to the inclusion of investments in this facility, will determine periodically the market value of the investments, and will have the right to require additional collateral if the estimated market value of the included investments declines.

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On February 18, 2005 Gramercy Capital Corp. closed on a $36,511 mezzanine loan in connection with a planned conversion of a commercial property in New York City to residential condominiums and certain other uses.  Gramercy’s investment is secured by a pledge of the borrower’s equity ownership interest in the to-be-converted commercial property.  Gramercy’s investment has in initial term of 20 months and bears interest at rate of LIBOR plus 1192 basis points.

On February 24, 2005, Gramercy Capital Corp. originated a $58,645 loan secured by a first mortgage on a portfolio of three office buildings located in San Jose, California. The properties comprise approximately 454,000 rentable square feet. The investment matures in 24 months, with three one-year extension options, and bears interest at a rate of LIBOR plus 300 basis points. Gramercy’s investment is secured by a cross-collateralized and cross-defaulted lien on the three properties.  The initial amount funded under the loan commitment was approximately $27,439.

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Gramercy Capital Corp.
Schedule IV – Mortgage Loans on Real Estate
December 31, 2004

(Dollars in thousands)

Description	Location	Interest Rate (1)	Final Maturity Date (2)	Periodic Payment Terms	Prior Liens	Carrying Amount of Loans	Principal Amount Subject to Delinquent Principal or Interest (3)
Whole Loans:
Hotel	Atlanta, GA	LIBOR + 5.25%	April 2005	Interest only	$ —	$ 42,000
Multi-family	New York, NY	LIBOR + 3.50%	November 2006	Interest only	—	28,723
Office, warehouse / distribution	Various states	LIBOR + 3.05%	September 2007	Interest only	—	84,492
					—	155,215
Subordinate Mortgage Interests:
Office:
C Note	Various states	LIBOR + 5.00%	July 2007	Interest only	275,405	34,286
D Note	Various states	LIBOR + 12.50%	July 2007	Interest only	309,900	32,875
					585,305	67,161
Office:
C Note	New York, NY	LIBOR + 3.00%	July 2006	Interest only	190,000	24,728
D Note	New York, NY	LIBOR + 7.50%	July 2006	Interest only	215,000	19,782
					405,000	44,510
Office:
C Note	Washington, DC	LIBOR + 2.75%	November 2006	Interest only	85,000	17,402
D Note	Washington, DC	LIBOR + 7.25%	November 2006	Interest only	102,500	17,402
					187,500	34,804
Office:
C Note	New York, NY	5.41% (4)	November 2009	Interest only	255,500	31,215
Leisure Interests:
B-2 tranche of B-Note	Various states	LIBOR + 5.50%	February 2006	Interest only	467,000	47,954
Subordinate mortgage interests < 3%	Various states	LIBOR + 6.30-7.00%	August 2006 – February 2007	Interest only	118,300	14,858
					2,018,605	240,502
					$ 2,018,605	$ 395,717

(1) All variable-rate loans are based on 30-day LIBOR and reprice monthly.

(2) Reflects the initial maturity of the investment and does not consider any options to extend that are at the discretion of the borrower.

(3) No mortgage loans are delinquent with respect to principal or interest.

(4) The effective yield of the investment is 8.29% taking into consideration our purchase discount.

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ITEM      9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM      9A.  CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e).  In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.  Also, we have investments in certain unconsolidated entities.  As we do not control these entities, our disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those we maintain with respect to our consolidated subsidiaries.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

There have been no significant changes in our internal controls that could significantly affect the internal controls subsequent to the date we completed our evaluation.

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PART III

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information set forth under the captions “Election of Directors” and “Principal and Management Stockholders – Compliance with Section 16(a) of the Securities Exchange Act of 1934” and the information regarding a code of ethics in our Definitive Proxy Statement for our 2005 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A under the Securities and Exchange Act of 1934, as amended, prior to April 30, 2005 (the “2005 Proxy Statement”), is incorporated herein by reference.

ITEM 11.       EXECUTIVE AND DIRECTOR COMPENSATION

The information set forth under the captions “Election of Directors – Director Compensation” and “Executive Compensation” in the 2005 Proxy Statement is incorporated herein by reference.

ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information set forth under the captions “Principal and Management Stockholders” and “Equity Compensation Plan Information” in the 2005 Proxy Statement is incorporated herein by reference.

ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information set forth under the caption “Certain Relationships and Related Transactions” in the 2005 Proxy Statement is incorporated herein by reference.

ITEM 14.       PRINCIPAL ACCOUNTING FEES AND SERVICES

The information regarding principal accounting fees and services and the audit committee’s pre-approval policies and procedures required by this Item 14 is incorporated herein by reference to the 2005 Proxy Statement.

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PART IV

ITEM 15.       EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1) Consolidated Financial Statements

GRAMERCY CAPITAL CORP.

Report of Independent Registered Public Accounting Firm

Condensed Consolidated Balance Sheet as of December 31, 2004 and April 12, 2004

Condensed Consolidated Statement of Income for the year ended December 31, 2004

Condensed Consolidated Statement of Stockholders’ Equity for the year ended December 31, 2004

Condensed Consolidated Statement of Cash Flows for the year ended December 31, 2004

Notes to Consolidated Financial Statements

(a)(2) Financial Statement Schedules

Schedules other than those listed are omitted as they are not applicable or the required or equivalent information has been included in the financial statements or notes thereto.

(a)(3) Exhibits

See Index to Exhibits on following page

56

INDEX TO EXHIBITS

3.1  Articles of Incorporation of the Company incorporated by reference to the Company’s Registration Statement on Form S-11 (No. 333-114673), declared effective by the Commission on July 27, 2004.

3.2  Bylaws of the Company incorporated by reference to the Company’s Registration Statement on Form S-11 (No. 333-114673), declared effective by the Commission on July 27, 2004.

4.1  Specimen Common Stock Certificate incorporated by reference to the Company’s Registration Statement on Form S-11 (No. 333-114673), declared effective by the Commission on July 27, 2004.

10.1  Form of Management Agreement by and between the Company. and GKK Manager LLC, incorporated by reference to the Company’s Registration Statement on Form S-11 (No. 333-114673), declared effective by the Commission on July 27, 2004.

10.2  Form of Origination Agreement by and between the Company and SL Green Realty Corp., incorporated by reference to the Company’s Registration Statement on Form S-11 (No. 333-114673), declared effective by the Commission on July 27, 2004.

10.3  Form of Agreement of Limited Partnership of GKK Capital LP, incorporated by reference to the Company’s Registration Statement on Form S-11 (No. 333-114673), declared effective by the Commission on July 27, 2004.

10.4  Form of Asset Servicing Agreement by and between GKK Manager LLC and SLG Gramercy Services LLC, incorporated by reference to the Company’s Registration Statement on Form S-11 (No. 333-114673), declared effective by the Commission on July 27, 2004.

10.5  Form of Outsource Agreement by and between GKK Manager LLC and SLG Operating Partnership, L.P. incorporated by reference to the Company’s Registration Statement on Form S-11 (No. 333-114673), declared effective by the Commission on July 27, 2004.

10.6  Form of 2004 Equity Incentive Plan, incorporated by reference to the Company’s Registration Statement on Form S-11 (No. 333-114673), declared effective by the Commission on July 27, 2004.

10.7  Form of Master Repurchase Agreement, incorporated by reference to the Company’s Registration Statement on Form S-11 (No. 333-114673), declared effective by the Commission on July 27, 2004.

10.8  Form of Acquisition Repurchase Agreement, incorporated by reference to the Company’s Registration Statement on Form S-11 (No. 333-114673), declared effective by the Commission on July 27, 2004.

10.9  Form of Credit Agreement, incorporated by reference to the Company’s Registration Statement on Form S-11 (No. 333-114673), declared effective by the Commission on July 27, 2004.

10.10Form of Master Repurchase Agreement dated as of January 3, 2005

10.11Annex to the Form of Master Repurchase Agreement dated as of January 3, 2005

10.12  Form of Employment Agreement by and between Hugh Hall and GKK Manager LLC.

10.13  Form of Employment Agreement by and between Robert R. Foley and GKK Manager LLC.

10.14  Form of Registration Rights Agreement, by and between various holders of the Company’s common stock and the Company, incorporated by reference to the Company’s Form 8-K, dated December 9, 2004, filed with the Commission on December 9, 2004.

10.15  Form of Amended and Restated Registration Rights Agreement, by and between SL Green Realty Corp. and the Company.

10.16  Form of Purchase Agreement, by and among the Company and various investors in the Company’s common stock, incorporated by reference to the Company’s Form 8-K, dated December 3, 2004 filed with the Commission on December 3, 2004.

57

21.1  Subsidiaries of the Registrant.

23.1.Consent of Ernst & Young

24.Power of Attorney (included on signature page)

31.1  Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.

31.2  Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.

32.1.  Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herewith.

32.2.  Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	GRAMERCY CAPITAL CORP.
Dated: March 17, 2005	By:	/s/ Robert R. Foley
	Robert R. Foley
	Chief Financial Officer

KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of Gramercy Capital Corp. hereby severally constitute Marc Holliday and Robert R. Foley, and each of them singly, our true and lawful attorneys and with full power to them, and each of them singly, to sign for us and in our names in the capacities indicated below, the Annual Report on Form 10-K filed herewith and any and all amendments to said Annual Report on Form 10-K, and generally to do all such things in our names and in our capacities as officers and directors to enable SL Green Realty Corp. to comply with the provisions of the Securities Exchange Act of 1934, and all requirements of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to said Annual Report on Form 10-K and any and all amendments thereto.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signatures	Title	Date
/s/ Stephen L. Green	Chairman of the Board of Directors	March 17, 2005
Stephen L. Green
/s/ Marc Holliday	Chief Executive Officer, President	March 17, 2005
Marc Holliday	and Director
/s/ Robert R. Foley	Chief Financial Officer	March 17, 2005
Robert R. Foley
/s/ Hugh F. Hall	Chief Operating Officer and Director	March 17, 2005
Hugh Hall
/s/ Allan J. Baum	Director	March 17, 2005
Allan J. Baum
/s/ Jeffrey E. Kelter	Director	March 17, 2005
Jeffrey E. Kelter
/s/ Paul J. Konigsberg	Director	March 17, 2005
Paul J. Konigsberg
/s/ Charles S. Laven	Director	March 17, 2005
Charles S. Laven

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EX-10.10

Exhibit 10.10

EXECUTION COPY

Master Repurchase Agreement

Bond Market Association September 1996 Version

Dated as of:  January 3, 2005

Between: Goldman Sachs Mortgage Company (“Buyer”)

and Gramercy Warehouse Funding II LLC (GWF-II) (“Seller”)

1.Applicability

From time to time the parties hereto may enter into transactions in which one party (“Seller”) agrees to transfer to the other (“Buyer”) securities or other assets (“Securities”) against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Securities at a date certain or on demand, against the transfer of funds by Seller. Each such transaction shall be referred to herein as a “Transaction” and, unless otherwise agreed in writing, shall be governed by this Agreement, including any supplemental terms or conditions contained in Annex I hereto and in any other annexes identified herein or therein as applicable hereunder.

2.Definitions

(a)“Act of Insolvency”, with respect to any party, (i) the commencement by such party as debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, moratori­um, dissolution, delinquency or similar law, or such party seeking the appointment or election of a receiver, conservator, trustee, custodian or similar official for such party or any substantial part of its property, or the convening of any meeting of creditors for purposes of commencing any such case or proceeding or seeking such an appointment or election, (ii) the commence­ment of any such case or proceeding against such party, or another seeking such an appoint­ment or election, or the filing against a party of an application for a protective decree under the provisions of the Securities Investor Protection Act of 1970, which (A) is consented to or not timely contested by such party, (B) results in the entry of an order for relief, such an appoint­ment or election, the issuance of such a protective decree or the entry of an order having a sim­ilar effect, or (C) is not dismissed within 15 days, (iii) the making by such party of a general assignment for the benefit of creditors, or (iv) the admission in writing by such party of such party’s inability to pay such party’s debts as they become due;

(b)“Additional Purchased Securities”, Securities provided by Seller to Buyer pursuant to Paragraph 4 (a) hereof,

(c)“Buyer’s Margin Amount”, with respect to any Transaction as of any date, the amount obtained by application of the Buyer’s Margin Percentage to the Repurchase Price for such Transaction as of such date;

(d)“Buyer’s Margin Percentage”, with respect to any Transaction as of any date, a percentage (which may be equal to the Seller’s Margin Percentage) agreed to by Buyer and Seller or, in the absence of any such agreement, the percentage obtained by

1

dividing the Market Value of the Purchased Securities on the Purchase Date by the Purchase Price on the Purchase Date for such Transaction;

(e)“Confirmation”, the meaning specified in Paragraph 3(b) hereof;

(f)“Income”, with respect to any Security at any time, any principal thereof and all interest, dividends or other distributions thereon;

(g)“Margin Deficit”, the meaning specified in Paragraph 4(a) hereof;

(h)“Margin Excess”, the meaning specified in Paragraph 4(b) hereof;

(i)“Margin Notice Deadline”, the time agreed to by the parties in the relevant Confirmation, Annex I hereto or otherwise as the deadline for giving notice requiring same-day satisfac­tion of margin maintenance obligations as provided in Paragraph 4 hereof (or, in the absence of any such agreement, the deadline for such purposes established in accordance with market practice);

(j)“Market Value”, with respect to any Securities as of any date, the price for such Securities on such date obtained from a generally recognized source agreed to by the parties or the most recent closing bid quotation from such a source, plus accrued Income to the extent not included therein (other than any Income credited or transferred to, or applied to the obligations of, Seller pursuant to Paragraph 5 hereof) as of such date (unless contrary to market practice for such Securities);

(k)“Price Differential”, with respect to any Transaction as of any date, the aggregate amount obtained by daily application of the Pricing Rate for such Transaction to the Purchase Price for such Transaction on a 360 day per year basis for the actual number of days during the period commencing on (and including) the Purchase Date for such Transaction and ending on (but excluding) the date of determination (reduced by any amount of such Price Differential previously paid by Seller to Buyer with respect to such Transaction);

(1)“Pricing Rate”, the per annum percentage rate for determination of the Price Differential;

(m)“Prime Rate”, the prime rate of U.S. commercial banks as published in The Wall Street Journal (or, if more than one such rate is published, the average of such rates);

(n)“Purchase Date”, the date on which Purchased Securities are to be transferred by Seller to Buyer;

(o)“Purchase Price”, (i) on the Purchase Date, the price at which Purchased Securities are transferred by Seller to Buyer, and (ii) thereafter, except where Buyer and Seller agree oth­erwise, such price increased by the amount of any cash transferred by Buyer to Seller pur­suant to Paragraph 4(b) hereof and decreased by the amount of any cash transferred by Seller to Buyer pursuant to Paragraph 4(a) hereof or applied to reduce Seller’s obligations under clause (ii) of Paragraph 5 hereof;

(p)“Purchased Securities”, the Securities transferred by Seller to Buyer in a Transaction here­under, and any Securities substituted therefor in accordance with Paragraph 9 hereof. The term “Purchased Securities” with respect to any Transaction at any time

2

also shall include Additional Purchased Securities delivered pursuant to Paragraph 4(a) hereof and shall exclude Securities returned pursuant to Paragraph 4(b) hereof;

(q)“Repurchase Date”, the date on which Seller is to repurchase the Purchased Securities from Buyer, including any date determined by application of the provisions of Paragraph 3(c) or 11 hereof;

(r)“Repurchase Price”, the price at which Purchased Securities are to be transferred from Buyer to Seller upon termination of a Transaction, which will be determined in each case (including Transactions terminable upon demand) as the sum of the Purchase Price and the Price Differential as of the date of such determination;

(s)“Seller’s Margin Amount”, with respect to any Transaction as of any date, the amount obtained by application of the Seller’s Margin Percentage to the Repurchase Price for such Transaction as of such date;

(t)“Seller’s Margin Percentage”, with respect to any Transaction as of any date, a percentage (which may be equal to the Buyer’s Margin Percentage) agreed to by Buyer and Seller or, in the absence of any such agreement, the percentage obtained by dividing the Market Value of the Purchased Securities on the Purchase Date by the Purchase Price on the Purchase Date for such Transaction.

3.Initiation; Confirmation; Termination

(a)An agreement to enter into a Transaction may be made orally or in writing at the initia­tion of either Buyer or Seller. On the Purchase Date for the Transaction, the Purchased Securities shall be transferred to Buyer or its agent against the transfer of the Purchase Price to an account of Seller.

(b)Upon agreeing to enter into a Transaction hereunder, Buyer or Seller (or both), as shall be agreed, shall promptly deliver to the other party a written confirmation of each Transaction (a “Confirmation”). The Confirmation shall describe the Purchased Securities (including CUSIP number, if any), identify Buyer and Seller and set forth (i) the Purchase Date, (ii) the Purchase Price, (iii) the Repurchase Date, unless the Transaction is to be terminable on demand, (iv) the Pricing Rate or Repurchase Price applicable to the Transaction, and (v) any additional terms or conditions of the Transaction not inconsistent with this Agreement. The Confirmation, together with this Agreement, shall constitute conclusive evidence of the terms agreed between Buyer and Seller with respect to the Transaction to which the Confirmation relates, unless with respect to the Confirmation specific objection is made promptly after receipt thereof. In the event of any conflict between the terms of such Confirmation and this Agreement, this Agreement shall prevail.

(c)In the case of Transactions terminable upon demand, such demand shall be made by Buyer or Seller, no later than such time as is customary in accordance with market prac­tice, by telephone or otherwise on or prior to the business day on which such termination will be effective. On the date specified in such demand, or on the date fixed for termina­tion in the case of Transactions having a fixed term, termination of the Transaction will be effected by transfer to Seller or its agent of the Purchased Securities and any Income in respect thereof received by Buyer (and not previously credited or transferred to, or applied to the obligations of, Seller pursuant to Paragraph 5 hereof) against the transfer of the Repurchase Price to an account of Buyer.

3

4.Margin Maintenance

(a)If at any time the aggregate Market Value of all Purchased Securities subject to all Transactions in which a particular party hereto is acting as Buyer is less than the aggre­gate Buyer’s Margin Amount for all such Transactions (a “Margin Deficit”), then Buyer may by notice to Seller require Seller in such Transactions, at Seller’s option, to transfer to Buyer cash or additional Securities reasonably acceptable to Buyer (“Additional Purchased Securities”), so that the cash and aggregate Market Value of the Purchased Securities, including any such Additional Purchased Securities, will thereupon equal or exceed such aggregate Buyer’s Margin Amount (decreased by the amount of any Margin Deficit as of such date arising from any Transactions in which such Buyer is acting as Seller).

(b)If at any time the aggregate Market Value of all Purchased Securities subject to all Transactions in which a particular party hereto is acting as Seller exceeds the aggregate Seller’s Margin Amount for all such Transactions at such time (a “Margin Excess”), then Seller may by notice to Buyer require Buyer in such Transactions, at Buyer’s option, to transfer cash or Purchased Securities to Seller, so that the aggregate Market Value of the Purchased Securities, after deduction of any such cash or any Purchased Securities so transferred, will thereupon not exceed such aggregate Seller’s Margin Amount (increased by the amount of any Margin Excess as of such date arising from any Transactions in which such Seller is acting as Buyer).

(c)If any notice is given by Buyer or Seller under subparagraph (a) or (b) of this Paragraph at or before the Margin Notice Deadline on any business day, the party receiving such notice shall transfer cash or Additional Purchased Securities as provided in such subpara­graph no later than the close of business in the relevant market on such day. If any such notice is given after the Margin Notice Deadline, the party receiving such notice shall transfer such cash or Securities no later than the close of business in the relevant market on the next business day following such notice.

(d)Any cash transferred pursuant to this Paragraph shall be attributed to such Transactions as shall be agreed upon by Buyer and Seller.

(e)Seller and Buyer may agree, with respect to any or all Transactions hereunder, that the respective rights of Buyer or Seller (or both) under subparagraphs (a) and (b) of this Paragraph may be exercised only where a Margin Deficit or Margin Excess, as the case may be, exceeds a specified dollar amount or a specified percentage of the Repurchase Prices for such Transactions (which amount or percentage shall be agreed to by Buyer and Seller prior to entering into any such Transactions).

(f)Seller and Buyer may agree, with respect to any or all Transactions hereunder, that the respective rights of Buyer and Seller under subparagraphs (a) and (b) of this Paragraph to require the elimination of a Margin Deficit or a Margin Excess, as the case may be, may be exercised whenever such a Margin Deficit or Margin Excess exists with respect to any single Transaction hereunder (calculated without regard to any other Transaction outstanding under this Agreement).

5.Income Payments

Seller shall be entitled to receive an amount equal to all Income paid or distributed on or in respect of the Securities that is not otherwise received by Seller, to the full extent it would be so entitled if the Securities had not been sold to Buyer. Buyer shall, as the parties may agree with respect to any Transaction (or, in the absence of any such agreement, as Buyer shall rea­sonably determine in its discretion), on the date such Income is paid or distributed

4

either (i) transfer to or credit to the account of Seller such Income with respect to any Purchased Securities subject to such Transaction or (ii) with respect to Income paid in cash, apply the Income payment or payments to reduce the amount, if any, to be transferred to Buyer by Seller upon termination of such Transaction. Buyer shall not be obligated to take any action pursuant to the preceding sentence (A) to the extent that such action would result in the cre­ation of a Margin Deficit, unless prior thereto or simultaneously therewith Seller transfers to Buyer cash or Additional Purchased Securities sufficient to eliminate such Margin Deficit, or (B) if an Event of Default with respect to Seller has occurred and is then continuing at the time such Income is paid or distributed.

6.Security Interest

Although the parties intend that all Transactions hereunder be sales and purchases and not loans, in the event any such Transactions are deemed to be loans, Seller shall be deemed to have pledged to Buyer as security for the performance by Seller of its obligations under each such Transaction, and shall be deemed to have granted to Buyer a security interest in, all of the Purchased Securities with respect to all Transactions hereunder and all Income thereon and other proceeds thereof.

7.Payment and Transfer

Unless otherwise mutually agreed, all transfers of funds hereunder shall be in immediately available funds. All Securities transferred by one party hereto to the other party (i) shall be in suitable form for transfer or shall be accompanied by duly executed instruments of transfer or assignment in blank and such other documentation as the party receiving possession may reasonably request, (ii) shall be transferred on the book-entry system of a Federal Reserve Bank, or (iii) shall be transferred by any other method mutually acceptable to Seller and Buyer.

8.Segregation of Purchased Securities

To the extent required by applicable law, all Purchased Securities in the possession of Seller shall be segregated from other securities in its possession and shall be identified as subject to this Agreement. Segregation may be accomplished by appropriate identification on the books and records of the holder, including a financial or securities intermediary or a clearing corpo­ration. All of Seller’s interest in the Purchased Securities shall pass to Buyer on the Purchase Date and, unless otherwise agreed by Buyer and Seller, nothing in this Agreement shall pre­clude Buyer from engaging in repurchase transactions with the Purchased Securities or other­wise selling, transferring, pledging or hypothecating the Purchased Securities, but no such transaction shall relieve Buyer of its obligations to transfer Purchased Securities to Seller pursuant to Paragraph 3, 4 or 11 hereof, or of Buyer’s obligation to credit or pay Income to, or apply Income to the obligations of, Seller pursuant to Paragraph 5 hereof.

Required Disclosure for Transactions in Which the Seller Retains Custody of the Purchased Securities

Seller is not permitted to substitute other securities for those subject to this Agreement and therefore must keep Buyer’s securities segregated at all times unless in this Agreement Buyer grants Seller the right to substitute other securities. If Buyer grants the right to substitute, this means that Buyer’s securities will likely be commingled with Seller’s own securities during the trading day. Buyer is advised that during any trading day that Buyer’s securities are commingled with Seller’s securities, they [will]* [may]** be subject to liens granted by Seller to [its clearing bank]* [third parties]” and may be used by Seller for deliveries on other securities transactions. Whenever the securities are commingled, Seller’s ability to resegregate substitute

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securities for Buyer will be subject to Seller’s ability to satisfy [the clear­ing] * [any]** lien or to obtain substitute securities.

*	Language to be used under 17 C.F.R, §403.4 (e) if Seller is a government securities broker or dealer other than a financial institution.
**	Language to be used under 17 C.F.R. §403.5 (d) if Seller is a financial institution.

9.Substitution

(a)Seller may, subject to agreement with and acceptance by Buyer, substitute other Securities for any Purchased Securities. Such substitution shall be made by transfer to Buyer of such other Securities and transfer to Seller of such Purchased Securities. After substitution, the substituted Securities shall be deemed to be Purchased Securities.

(b)In Transactions in which Seller retains custody of Purchased Securities, the parties expressly agree that Buyer shall be deemed, for purposes of subparagraph (a) of this Paragraph, to have agreed to and accepted in this Agreement substitution by Seller of other Securities for Purchased Securities; provided, however, that such other Securities shall have a Market Value at least equal to the Market Value of the Purchased Securities for which they are substituted.

10.Representations

Each of Buyer and Seller represents and warrants to the other that (i) it is duly authorized to execute and deliver this Agreement, to enter into Transactions contemplated hereunder and to perform its obligations hereunder and has taken all necessary action to authorize such exe­cution, delivery and performance, (ii) it will engage in such Transactions as principal (or, if agreed in writing, in the form of an annex hereto or otherwise, in advance of any Transaction by the other party hereto, as agent for a disclosed principal), (iii) the person signing this Agreement on its behalf is duly authorized to do so on its behalf (or on behalf of any such disclosed principal), (iv) it has obtained all authorizations of any governmental body required in connection with this Agreement and the Transactions hereunder and such autho­rizations are in full force and effect and (v) the execution, delivery and performance of this Agreement and the Transactions hereunder will not violate any law, ordinance, charter, by­law or rule applicable to it or any agreement by which it is bound or by which any of its assets are affected. On the Purchase Date for any Transaction Buyer and Seller shall each be deemed to repeat all the foregoing representations made by it.

11.Events of Default

In the event that (i) Seller fails to transfer or Buyer fails to purchase Purchased Securities upon the applicable Purchase Date, (ii) Seller fails to repurchase or Buyer fails to transfer Purchased Securities upon the applicable Repurchase Date, (iii) Seller or Buyer fails to com­ply with Paragraph 4 hereof, (iv) Buyer fails, after one business day’s notice, to comply with Paragraph 5 hereof, (v) an Act of Insolvency occurs with respect to Seller or Buyer, (vi) any representation made by Seller or Buyer shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated, or (vii) Seller or Buyer shall admit to the other its inability to, or its intention not to, perform any of its oblig­ations hereunder (each an “Event of Default”):

(a)The nondefaulting party may, at its option (which option shall be deemed to have been exercised immediately upon the occurrence of an Act of Insolvency), declare an Event of Default to have occurred hereunder and, upon the exercise or deemed exercise of

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such option, the Repurchase Date for each Transaction hereunder shall, if it has not already occurred, be deemed immediately to occur (except that, in the event that the Purchase Date for any Transaction has not yet occurred as of the date of such exercise or deemed exercise, such Transaction shall be deemed immediately canceled). The nondefaulting party shall (except upon the occurrence of an Act of Insolvency) give notice to the defaulting party of the exercise of such option as promptly as practicable.

(b)In all Transactions in which the defaulting party is acting as Seller, if the nondefaulting party exercises or is deemed to have exercised the option referred to in subparagraph (a) of this Paragraph, (i) the defaulting party’s obligations in such Transactions to repurchase all Purchased Securities, at the Repurchase Price therefor on the Repurchase Date deter­mined in accordance with subparagraph (a) of this Paragraph, shall thereupon become immediately due and payable, (ii) all Income paid after such exercise or deemed exercise shall be retained by the nondefaulting party and applied to the aggregate unpaid Repurchase Prices and any other amounts owing by the defaulting party hereunder, and (iii) the defaulting party shall immediately deliver to the nondefaulting party any Purchased Securities subject to such Transactions then in the defaulting party’s posses­sion or control.

(c)In all Transactions in which the defaulting party is acting as Buyer, upon tender by the nondefaulting party of payment of the aggregate Repurchase Prices for all such Transactions, all right, title and interest in and entitlement to all Purchased Securities subject to such Transactions shall be deemed transferred to the nondefaulting party, and the defaulting party shall deliver all such Purchased Securities to the nondefaulting party.

(d)If the nondefaulting party exercises or is deemed to have exercised the option referred to in subparagraph (a) of this Paragraph, the nondefaulting party, without prior notice to the defaulting party, may:

(i)as to Transactions in which the defaulting party is acting as Seller, (A) immediately sell, in a recognized market (or otherwise in a commercially reasonable manner) at such price or prices as the nondefaulting party may reasonably deem satisfactory, any or all Purchased Securities subject to such Transactions and apply the proceeds thereof to the aggregate unpaid Repurchase Prices and any other amounts owing by the defaulting party hereunder or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Securities, to give the defaulting party credit for such Purchased Securities in an amount equal to the price therefor on such date, obtained from a generally recognized source or the most recent closing bid quotation from such a source, against the aggregate unpaid Repurchase Prices and any other amounts owing by the defaulting party hereunder; and

(ii)as to Transactions in which the defaulting party is acting as Buyer, (A) immediately purchase, in a recognized market (or otherwise in a commercially reasonable man­ner) at such price or prices as the nondefaulting party may reasonably deem satisfac­tory, securities (“Replacement Securities”) of the same class and amount as any Purchased Securities that are not delivered by the defaulting party to the nondefault­ing party as required hereunder or (B) in its sole discretion elect, in lieu of purchas­ing Replacement Securities, to be deemed to have purchased Replacement Securities at the price therefor on such date, obtained from a generally recognized source or the most recent closing offer quotation from such a source.

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Unless otherwise provided in Annex 1, the parties acknowledge and agree that (1) the Securities subject to any Transaction hereunder are instruments traded in a recognized market, (2) in the absence of a generally recognized source for prices or bid or offer quo­tations for any Security, the nondefaulting party may establish the source therefor in its sole discretion and (3) all prices, bids and offers shall be determined together with accrued Income (except to the extent contrary to market practice with respect to the rel­evant Securities).

(e)As to Transactions in which the defaulting party is acting as Buyer, the defaulting party shall be liable to the nondefaulting party for any excess of the price paid (or deemed paid) by the nondefaulting party for Replacement Securities over the Repurchase Price for the Purchased Securities replaced thereby and for any amounts payable by the defaulting party under Paragraph 5 hereof or otherwise hereunder.

(f)For purposes of this Paragraph 11, the Repurchase Price for each Transaction hereunder in respect of which the defaulting party is acting as Buyer shall not increase above the amount of such Repurchase Price for such Transaction determined as of the date of the exercise or deemed exercise by the nondefaulting party of the option referred to in sub­paragraph (a) of this Paragraph.

(g)The defaulting party shall be liable to the nondefaulting party for (i) the amount of all reasonable legal or other expenses incurred by the nondefaulting party in connection with or as a result of an Event of Default, (ii) damages in an amount equal to the cost (including all fees, expenses and commissions) of entering into replacement transactions and entering into or terminating hedge transactions in connection with or as a result of an Event of Default, and (iii) any other loss, damage, cost or expense directly arising or resulting from the occurrence of an Event of Default in respect of a Transaction.

(h)To the extent permitted by applicable law, the defaulting party shall be liable to the non­defaulting party for interest on any amounts owing by the defaulting party hereunder, from the date the defaulting party becomes liable for such amounts hereunder until such amounts are (i) paid in full by the defaulting party or (ii) satisfied in full by the exercise of the nondefaulting party’s rights hereunder. Interest on any sum payable by the default­ing party to the nondefaulting party under this Paragraph 11(h) shall be at a rate equal to the greater of the Pricing Rate for the relevant Transaction or the Prime Rate.

(i)The nondefaulting party shall have, in addition to its rights hereunder, any rights other­wise available to it under any other agreement or applicable law.

12.Single Agreement

Buyer and Seller acknowledge that, and have entered hereinto and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been made in consideration of each other. Accordingly, each of Buyer and Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the perfor­mance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, (ii) that each of them shall be entitled to set off claims and apply property held by them in respect of any Transaction against obligations owing to them in respect of any other Transactions hereunder and (iii) that payments, deliveries and other transfers made by either of them in respect of any Transaction shall be deemed to have

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been made in consideration of payments, deliveries and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted.

13.Notices and Other Communications

Any and all notices, statements, demands or other communications hereunder may be given by a party to the other by mail, facsimile, telegraph, messenger or otherwise to the address specified in Annex 11 hereto, or so sent to such party at any other place specified in a notice of change of address hereafter received by the other. All notices, demands and requests hereun­der may be made orally, to be confirmed promptly in writing, or by other communication as specified in the preceding sentence.

14.Entire Agreement; Severability

This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.

15.Non-assignability; Termination

(a)The rights and obligations of the parties under this Agreement and under any Transaction shall not be assigned by either party without the prior written consent of the other party, and any such assignment without the prior written consent of the other party shall be null and void. Subject to the foregoing, this Agreement and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. This Agreement may be terminated by either party upon giving written notice to the other, except that this Agreement shall, notwithstanding such notice, remain applicable to any Transactions then outstanding.

(b)Subparagraph (a) of this Paragraph 15 shall not preclude a party from assigning, charging or otherwise dealing with all or any part of its interest in any sum payable to it under Paragraph 11 hereof.

16.Governing Law

This Agreement shall be governed by the laws of the State of New York without giving effect to the conflict of law principles thereof.

17.No Waivers, Etc.

No express or implied waiver of any Event of Default by either party shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall constitute a waiver of its right to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto. Without limitation on an of the foregoing, the failure to give a notice pursuant to Paragraph 4(a) or 4(b) hereof will not constitute a waiver of any right to do so at a later date.

18.Use of Employee Plan Assets

(a)If assets of an employee benefit plan subject to any provision of the Employee Retirement Income Security Act of 1974 (“ERISA) are intended to be used by either party hereto (the “Plan Party”) in a Transaction, the Plan Party shall so notify the other party prior to the Transaction. The Plan Party shall represent in writing to the other party that the Transaction does not constitute a prohibited transaction under ERISA or

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is otherwise exempt therefrom, and the other party may proceed in reliance thereon but shall not be required so to proceed.

(b)Subject to the last sentence of subparagraph (a) of this Paragraph, any such Transaction shall proceed only if Seller furnishes or has furnished to Buyer its most recent available audited statement of its financial condition and its most recent subsequent unaudited statement of its financial condition.

(c)By entering into a Transaction pursuant to this Paragraph, Seller shall be deemed (i) to represent to Buyer that since the date of Seller’s latest such financial statements, there has been no material adverse change in Seller’s financial condition which Seller has not dis­closed to Buyer, and (ii) to agree to provide Buyer with future audited and unaudited statements of its financial condition as they are issued, so long as it is a Seller in any out­standing Transaction involving a Plan Party.

19.Intent

(a)The parties recognize that each Transaction is a “repurchase agreement” as that term is defined in Section 101 of Title 11 of the United States Code, as amended (except insofar as the type of Securities subject to such Transaction or the term of such Transaction would render such definition inapplicable), and a “securities contract” as that term is defined in Section 741 of Title 11 of the United States Code, as amended (except insofar as the type of assets subject to such Transaction would render such definition inapplica­ble).

(b)It is understood that either party’s right to liquidate Securities delivered to it in connec­tion with Transactions hereunder or to exercise any other remedies pursuant to Paragraph 11 hereof is a contractual right to liquidate such Transaction as described in Sections 555 and 559 of Title 11 of the United States Code, as amended.

(c)The parties agree and acknowledge that if a party hereto is an “insured depository insti­tution,” as such term is defined in the Federal Deposit Insurance Act, as amended (“FDIA”), then each Transaction hereunder is a “qualified financial contract,” as that term is defined in FDIA and any rules, orders or policy statements thereunder (except insofar as the type of assets subject to such Transaction would render such definition inapplica­ble).

(d)It is understood that this Agreement constitutes a “netting contract” as defined in and subject to Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and each payment entitlement and payment obligation under any Transaction hereunder shall constitute a “covered contractual payment entitlement” or 11 “covered contractual payment obligation”, respectively, as defined in and subject to FDI­CIA (except insofar as one or both of the parties is not a “financial institution” as that term is defined in FDICIA).

20.Disclosure Relating to Certain Federal Protections

The parties acknowledge that they have been advised that:

(a)in the case of Transactions in which one of the parties is a broker or dealer registered with the Securities and Exchange Commission (“SEC”) under Section 15 of the Securities Exchange Act of 1934 (“1934 Act”), the Securities Investor Protection Corporation has taken the position that the provisions of the Securities Investor Protection Act of 1970 (“SIPA”) do not protect the other party with respect to any Transaction hereunder;

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(b)in the case of Transactions in which one of the parties is a government securities broker or a government securities dealer registered with the SEC under Section 15C of the 1934 Act, SIPA will not provide protection to the other party with respect to any Transaction hereunder; and

(c)in the case of Transactions in which one of the parties is a financial institution, funds held by the financial institution pursuant to a Transaction hereunder are not a deposit and therefore are not insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, as applicable.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]

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EXECUTION COPY

GRAMERCY WAREHOUSE FUNDING II LLC,
a Delaware limited liability company
By:	GKK CAPITAL LP,
	a Delaware limited partnership,
	its sole member and manager
	By:		GRAMERCY CAPITAL CORP.,
			a Maryland corporation, its general partner
		By:
				Name: Hugh Hall
				Its: Chief Operating Officer
GOLDMAN SACHS MORTGAGE COMPANY,
a New York limited liability partnership
By:	Goldman Sachs Real Estate Funding Corp.,
	its general partner
	By:
		Name:
		Title:
		Date:

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EX-10.11

Exhibit 10.11

EXECUTION COPY

ANNEX I to
MASTER REPURCHASE AGREEMENT

(GOLDMAN SACHS MORTGAGE COMPANY)

TABLE OF CONTENTS

1.	APPLICABILITY; OTHER APPLICABLE ANNEXES
2.	ADDITIONAL AND SUBSTITUTE DEFINITIONS
3.	INITIATION; CONFIRMATION; TERMINATION; FEES
4.	MANDATORY PAYMENT OR DELIVERY OF ADDITIONAL ASSETS
5.	INCOME PAYMENTS AND PRINCIPAL PAYMENTS
6.	CAUTIONARY SECURITY INTEREST
7.	PAYMENT, TRANSFER AND CUSTODY
8.	CERTAIN RIGHTS OF BUYER WITH RESPECT TO THE PURCHASED LOANS
9.	RESERVED
10.	REPRESENTATIONS
11.	NEGATIVE COVENANTS OF SELLER
12.	AFFIRMATIVE COVENANTS OF SELLER
13.	SINGLE-PURPOSE ENTITY
14.	EVENTS OF DEFAULT; REMEDIES
15.	SINGLE AGREEMENT
16.	NOTICES AND OTHER COMMUNICATIONS
17.	NON-ASSIGNABILITY
18.	GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
19.	NO RELIANCE; DISCLAIMERS
20.	INDEMNITY AND EXPENSES
21.	DUE DILIGENCE
22.	SERVICING
23.	TREATMENT FOR TAX PURPOSES
24.	INTENT
25.	MISCELLANEOUS

i

Supplemental Terms and Conditions

This Annex I forms a part of the Master Repurchase Agreement dated as of January 3, 2005 between Gramercy Warehouse Funding II LLC, as seller, and Goldman Sachs Mortgage Company, as buyer (together with Annex I, the “Agreement”).  Capitalized terms used in this Annex I without definition shall have the respective meanings assigned to such terms in the Agreement.  This Annex I is intended to supplement the Agreement and shall, wherever possible, be interpreted so as to be consistent with the Agreement; however, in the event of any conflict or inconsistency between the provisions of this Annex I, on the one hand, and the provisions of the Agreement, on the other, the provisions of this Annex I shall govern and control.  All references in the Agreement and in this Annex I to “the Agreement” shall be deemed to mean and refer to the Agreement, as supplemented and modified by this Annex I or as otherwise modified after the date hereof.

1.APPLICABILITY; OTHER APPLICABLE ANNEXES

(a)Paragraph 1 of the Agreement (“Applicability”) is hereby deleted and replaced with the following:

From time to time the parties hereto may enter into transactions in which Seller agrees to transfer to Buyer one or more Eligible Loans against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Eligible Loans at a date certain (or such earlier date, in accordance with the terms hereof), against the transfer of funds by Seller.  Each such transaction shall be referred to herein as a “Transaction” and, unless otherwise agreed in writing, shall be governed by the Agreement, including any supplemental terms or conditions contained in this Annex I and in any other annexes identified herein or therein as applicable hereunder.

(b)In addition to this Annex I and the Schedules hereto, the following Annexes and any Schedules thereto shall form a part of the Agreement and shall be applicable thereunder:

Annex II – Names and Addresses for Communications Between Parties.

2.ADDITIONAL AND SUBSTITUTE DEFINITIONS

(a)The following capitalized terms in Paragraph 2 of the Agreement (“Definitions”) are hereby deleted in their entirety:

(i)“Additional Purchased Securities”;

(ii)“Buyer’s Margin Amount”;

(iii)“Buyer’s Margin Percentage”;

(iv)“Margin Notice Deadline”;

(v)“Prime Rate”;

(vi)“Seller’s Margin Amount”; and

(vii)“Seller’s Margin Percentage”.

(b)The following capitalized terms shall have the respective meanings set forth below, in lieu of the meanings for such terms set forth in Paragraph 2 of the Agreement (“Definitions”):

“Act of Insolvency” shall mean, with respect to any party, (i) the commencement by such party as debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, moratorium, dissolution, delinquency or similar law, or such party seeking the appointment or election of a receiver, conservator, trustee, custodian or similar official for such party or any substantial part of its property, or the convening of any meeting of creditors for purposes of commencing any such case or proceeding or seeking such an appointment or election, (ii) the making by such party of a general assignment for the benefit of creditors, or (iii) the admission in writing by such party of such party’s inability to pay such party’s debts as they become due.

“Confirmation” shall have the meaning specified in Section 3(d) of this Annex I.

“Income” shall mean, with respect to any Purchased Loan at any time, any payment or other cash distribution thereon of principal, interest, dividends, fees, reimbursements or proceeds or other cash distributions thereon (including casualty or condemnation proceeds).

“Margin Deficit” shall have the meaning specified in Section 4(a) of this Annex I.

“Margin Excess” shall have the meaning specified in Section 4(b) of this Annex I.

“Market Value” shall mean, with respect to any Purchased Loan as of any relevant date, the lesser of (x) market value of such Purchased Loan on such date, as determined by Buyer in its good faith but sole discretion, and (y) the par amount of such Purchased Loan.

For purposes of Buyer’s determination, (i) the Market Value may be determined by reference to an Appraisal, discounted cash flow analysis or other method (which method shall be selected by Buyer in good faith), (ii) any amounts or claims secured by related Eligible Property or Properties ranking senior to or pari passu with the lien of the Purchased Loan may be deducted from the Market Value of the Purchased Loan, (iii) the Market Value of any Defaulted Loan or Delinquent Loan shall be zero (unless Buyer otherwise specifies), (iv) Buyer may consider the representations and warranties set forth in Exhibit V (including a breach thereof), and exceptions thereto in its determination of the Market Value of the Purchased Loans and (iv) for the avoidance of doubt, Buyer may reduce Market Value for any actual or potential risks (including risk of delay) posed by any liens or claims on the related Eligible Property or Properties.  Seller shall cooperate in good faith with Buyer in its in good faith determination of the market value of each item of underlying collateral (including, without limitation, providing all information and documentation in the possession of Seller regarding such item of underlying collateral or otherwise required by Buyer).

“Pricing Rate” shall mean, for any Purchased Loan and any Pricing Rate Period, an annual rate equal to the LIBOR Rate for such Pricing Rate Period plus the Applicable Spread for the applicable Loan Type and shall be subject to adjustment and/or conversion as provided in Sections 3(j), 3(k) and 3(s) of this Annex I.  The Pricing Rate shall be computed on the basis of a 360-day year and the actual number of days elapsed.

“Purchase Price” shall mean, with respect to any Purchased Loan the price at which such Purchased Loan is transferred by Seller to Buyer on the applicable Purchase Date.  The Purchase Price as of any Purchase Date for any Purchased Loan of a particular Loan Type shall be an amount (expressed in dollars) equal to the product obtained by multiplying (i) the Market Value of such Purchased Loan by (ii) the Purchase Percentage for the related Loan Type.

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“Purchase Date” shall mean, with respect to any Purchased Loan, the date on which such Purchased Loan is transferred by Seller to Buyer.

“Purchased Securities” shall mean, the “Purchased Securities” as defined in the Securities Repurchase Agreement.

“Repurchase Date” with respect to any Purchased Loan shall mean the Facility Termination Date or such earlier date specified in the related Confirmation, or if applicable, the related Early Repurchase Date or Accelerated Repurchase Date.

“Repurchase Price” shall mean, with respect to any Purchased Loan as of any date, the price at which such Purchased Loan is to be transferred from Buyer to Seller upon termination of the related Transaction; in each case, such price shall equal the sum of the Purchase Price of such Purchased Loan and the accrued Price Differential with respect to such Purchased Loan as of the date of such determination, minus all Income and cash actually received by Buyer in respect of such Transaction and applied towards the Repurchase Price and/or Price Differential pursuant to this Annex I.

(c)In addition to the terms defined in Paragraph 2 of the Agreement  (“Definitions”) not otherwise deleted pursuant to Section 2(a) of this Annex I and the terms defined in Section 2(b) of this Annex I, the following capitalized terms shall have the respective meanings set forth below:

“Accelerated Repurchase Date” shall have the meaning specified in Section 14(b)(i) of this Annex I.

“Accepted Servicing Practices” shall mean with respect to any Purchased Loan, in conformity with those accepted and prudent servicing practices in the industry for loans of the same type and in a manner at least equal in quality to the servicing the applicable servicer provides for assets similar to such Purchased Loans that it owns.

“Affiliate” shall mean, when used with respect to any specified Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person.  Control shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise and “controlling” and “controlled” shall have meanings correlative thereto.

“Aggregate Repurchase Price” shall mean, as of any date of determination, the aggregate Repurchase Price (excluding any accrued and unpaid Price Differential) of all Transactions outstanding as of such date.

“Agreement” shall have the meaning specified in the introductory paragraph of this Annex I.

“Alternative Rate” shall have the meaning specified in Section 3(k) of this Annex I.

“Alternative Rate Transaction” shall mean, with respect to any Pricing Rate Period, any Transaction with respect to which the Pricing Rate for such Pricing Rate Period is determined with reference to the Alternative Rate.

“Applicable Spread” shall mean, (i) with respect to a Purchased Loan, so long as no Event of Default shall have occurred and be continuing, the per annum rate specified in Schedule 1 attached hereto as being the “Applicable Spread” for the Purchased Loans in such Loan Type, and (ii) in each case, after

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the occurrence and during the continuance of an Event of Default, the applicable per annum rate described in clause (i) of this definition, plus 400 basis points (4.0%).

“Appraisal” shall mean an appraisal of any Eligible Property prepared by a licensed appraiser approved by Buyer in its reasonable discretion, in accordance with the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation, in compliance with the requirements of Title 11 of the Financial Institution Reform, Recovery and Enforcement Act and utilizing customary valuation methods such as the income, sales/market or cost approaches, as any of the same may be updated by recertification from time to time by the appraiser performing such Appraisal.

“Asset Base” shall mean, as of any date of determination, the aggregate Asset Base Components of all Purchased Loans transferred by the Seller to the Buyer hereunder as of such date.

“Asset Base Component” shall mean, as of any date of determination, with respect to each Purchased Loan, the product of its Market Value multiplied by the Purchase Percentage applicable to such Purchased Loan as of such date.

“Assignment of Leases” shall mean, with respect to any Purchased Loan which is a mortgage loan, any assignment of leases, rents and profits or equivalent instrument, whether contained in the related Mortgage or executed separately, assigning to the holder or holders of such Mortgage all of the related Mortgagor’s interest in the leases, rents and profits derived from the ownership, operation, leasing or disposition of all or a portion of the related Mortgaged Property as security for repayment of such Purchased Loan.

“Assignment of Mortgage” shall mean, with respect to any Mortgage, an assignment of the mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related property is located to reflect the assignment and pledge of the Mortgage.

“Bailee” shall mean Dechert LLP or such other third party as Buyer and Seller shall mutually approve in their sole discretion.

“Bailee Agreement” shall mean the Bailee Agreement among Seller, Buyer and Bailee in the form of Exhibit VII hereto.

“Bankruptcy Code” shall mean the United State Bankruptcy Code of 1978, as amended from time to time.

“Blocked Account” shall have the meaning specified in Section 5 of this Annex I.

“Blocked Account Agreement” shall mean the Blocked Account Agreement, in the form attached hereto as Exhibit VI (or such other form as shall have been approved by Buyer, such approval not to be unreasonably withheld, delayed or conditioned), dated as of the date hereof and executed by Buyer, Seller and the Depository Bank (and any successor thereto or replacement thereof executed by Buyer, Seller and the Depository Bank).

“Business Day”shall meanany day other than (i) a Saturday or Sunday or (ii) a day on which the New York Stock Exchange, the Federal Reserve Bank of New York or the Custodian is authorized or obligated by law or executive order to be closed.

“Buyer” shall mean Goldman Sachs Mortgage Company, and any successor or assign.

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“Capital Lease Obligations” shall mean, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of the Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.

“Change of Control” shall mean the occurrence of any of the following with respect to any Person:

(i)a Transfer of all or substantially all of such Person’s assets (excluding any such Transfer in connection with any securitization transaction involving, or the sale of,  Repurchased Loans or Repurchased Securities or other assets of Seller used in other repurchase or other similar transactions in the ordinary course of such Person’s business); or

(ii)a merger, consolidation or other transaction in which more than 50% of the voting common equity of such Person or the surviving entity immediately after such merger, consolidation or such other transaction is not owned, directly or indirectly, by persons who were, directly or indirectly, equityholders of such Person immediately prior thereto; or

(iii)a majority of the members of the board of directors of such Person changes during any twelve (12) month period after the date hereof.

“Collection Period” shall mean with respect to the Remittance Date in any month, the period beginning on but excluding the Cut-off Date in the month preceding the month in which such Remittance Date occurs and continuing to and including the Cut-off Date immediately preceding such Remittance Date.

“Costs”shall mean, with respect to any Purchased Loan, all out-of-pocket obligations, costs, fees, indemnities and expenses in respect of such Purchased Loan actually incurred by Buyer.

“Custodial Agreement” shall mean the Custodial Agreement entered into by and among Custodian, Seller and Buyer.

“Custodial Delivery Certificate” shall mean the delivery certificate, a form of which is attached hereto as Exhibit III, executed by Seller in connection with its delivery of a Purchased Loan File to Buyer or its designee (including the Custodian) pursuant to Section 7 of this Annex I.

“Custodian” shall mean Wells Fargo Bank, N.A. or any successor Custodian appointed by Buyer.

“Cut-off Date” shall mean the last Business Day of the calendar month preceding each Remittance Date.

“Debt to Equity Ratio” shall mean the ratio of Total Indebtedness to Tangible Net Worth without regard to the application of FAS 140 or FIN 46).

“Default” shall mean any event which, with the giving of notice, the passage of time, or both, would constitute an Event of Default.

“Defaulted Loan” shall mean any Purchased Loan as to which (A) there is a material breach beyond any applicable cure period of a material representation, warranty or covenant by the related borrower or obligor under the applicable Purchased Loan Documents or by Seller under Exhibit V,

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(B) there is a material default beyond any applicable cure period under the related Purchased Loan Documents in the payment when due of interest, principal or any other amounts which material default continues, (C) any other material “Event of Default” under the related Purchased Loan Document, (D) to the extent that the related Transaction is deemed a loan under federal, state or local law Buyer ceases to have a first priority perfected security interest or (E) the related Purchased Loan File or any portion thereof has been released from the possession of the Custodian under the Custodial Agreement to anyone other than Buyer or any Affiliate of Buyer except in accordance with the terms of the Custodial Agreement.

“Delinquent Loan” shall mean any Purchased Loan as to which the payment of principal and/or interest owed thereunder by the underlying obligor is 30 days or more past due.

“Depository Bank” shall mean such depository bank appointed by Seller with the prior written consent of Buyer which delivers a deposit account agreement in the form of the Blocked Account Agreement or another form reasonably acceptable to Buyer.

“Diligence Fee” shall mean fees (so long as no Event of Default is continuing, not to exceed $50,000 annually with respect to this Agreement and the Securities Repurchase Agreement) payable by Seller to Buyer in respect of Buyer’s out-of-pocket expenses (other than legal expenses) incurred in connection with its review of the Diligence Materials hereunder and under the Securities Repurchase Agreement.

“Diligence Materials” shall mean the Preliminary Due Diligence Package together with the Supplemental Due Diligence List.

“Draft Appraisal” shall mean a short form appraisal, “letter opinion of value,” or any other form of draft appraisal reasonably acceptable to Buyer.

“Early Repurchase Date” shall have the meaning specified in Section 3(g) of this Annex I.

“Early Repurchase Deposit” shall have the meaning specified in Section 3(j) of this Annex I.

“Early Repurchase Deposit Application Date” shall have the meaning specified in Section 3(j) of this Annex I.

“Early Repurchase Deposit Funding Date” shall have the meaning specified in Section 3(j) of this Annex I.

“EBITDA” shall mean, for each fiscal quarter, with respect to Guarantor and its consolidated Subsidiaries, an amount equal to (a) Net Income for such period (excluding the effect of any extraordinary gains or losses resulting from the sale of property or non-cash gains or losses outside the ordinary course of business) plus (b), without duplication, an amount which, in the determination of Net Income for such period, has been deducted for (i) interest expense for such period, (ii) total federal, state, foreign or other income or franchise taxes for such period, and (iii) all depreciation and amortization for such period, all as determined with respect to any consolidated Subsidiary in accordance with the methodology specified in the definition of Net Income, plus (c) any nonrecurring fees and expenses incurred on or prior to the date of the execution and delivery of the Agreement, less (d) any non-cash reserve activity.

“Eligible Loans” shall mean any of the following types of transitional or stabilized loans listed in (i) through (iv) below, (v) acceptable to Buyer in the exercise of its sole and absolute discretion, (w)

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secured directly or indirectly by an Eligible Property, (x) which has a loan term equal to or less than 10 years (assuming exercise of all extension options), (y) as to which the applicable representations and warranties set forth in Exhibit V are true and correct in all material respects as of the applicable Purchase Date, and (z) has a maximum LTV  specified in Schedule 1 for the related Loan Type:

(i)performing Mezzanine Loans (or participation interests therein).

(ii)performing Mortgage Loans secured by first liens on Eligible Properties (“First Mortgage Loans”).

(iii)senior subordinate participation interests (or a senior subordinate promissory note that is, in effect, similar in nature to a senior subordinate participation interest) in performing First Mortgage Loans that also secures a senior promissory note (or senior interest) in such loan and may also secure a junior subordinate promissory note (or junior subordinate interest) in such loan (“Senior First Mortgage B Notes”).

(iv)junior participation interests (or a junior promissory note that is, in effect, similar in nature to a junior participation interest) in performing First Mortgage Loans that also secure a senior (or senior subordinate) promissory note (or senior (or senior subordinate) interest) in such loan (“Junior First Mortgage B Notes”).

Buyer may, in its sole and absolute discretion, consider sub-performing and non-performing loans of the types listed in (i) through (iv) above.

“Eligible Property” shall mean a property that is a multifamily, retail, office, industrial, warehouse, condominium or hospitality property or such other property type acceptable to Buyer in the exercise of its good faith business judgment; provided, however, that healthcare related properties, such as assisted living, nursing homes, acute care, rehabilitation centers, diagnostic centers and psychiatric centers, shall not qualify as an Eligible Property.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder.  Section references to ERISA are to ERISA, as in effect at the date of this Annex I and, as of the relevant date, any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

“ERISA Affiliate” means any corporation or trade or business (whether or not incorporated) that is a member of any group of organizations described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b) of ERISA of which Seller is a member at any relevant time.

“Event of Default” shall have the meaning specified in Section 14(a) of this Annex I.

“Extended Repurchase Monthly Amount” means the quotient of (i) the aggregate Repurchase Price of the Purchased Loans as of the Facility Termination Date, divided by (ii) 6; provided, that to the extent Seller pays the aggregate Repurchase Price in an amount in excess of the Extended Repurchase Monthly Amount in any month, Seller shall receive a credit against the next month’s required payment amount (and any subsequent months’ payments, if applicable) in an aggregate amount equal to such excess.

“Facility Amount” shall mean, as of any date of determination, $200,000,000 less the Securities Aggregate Repurchase Price outstanding under the Securities Repurchase Agreement as of such date.

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“Facility Termination Date” shall mean January 3, 2008 unless extended pursuant to Section 3(q) of this Annex I.

“Federal Funds Rate” shall mean, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day, (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10 a.m. (New York time) on such day or such transactions received by the Buyer from three Federal funds brokers of recognized standing selected by the Buyer in its sole discretion.

“Fee Letter” shall mean that certain letter agreement, dated the date hereof between Buyer, Goldman, Sachs & Co. and Seller, as the same may be amended, supplemented or otherwise modified from time to time.

“Filings” shall have the meaning specified in Section 6(b) of this Annex I.

“Financial Covenant Compliance Certificate” shall mean an Officer’s Certificate to be delivered by Guarantor within 45 days after the end of each fiscal quarter confirming that: (i) as of the fiscal quarter most recently ended, (w) Guarantor’s Debt to Equity Ratio is less than or equal to 5:1; (x) Guarantor’s Tangible Net Worth is equal to or greater than the sum of (i) $129,750,000 and (ii) 75% of the proceeds of any equity issuances after Guarantor’s initial public offering, (y) Guarantor’s Fixed Charge Coverage Ratio equals or exceeds 1.50:1, and  (z) Guarantor’s Minimum Liquidity equals or exceeds, during the first two years after the date of this Agreement, $10,000,000 and, thereafter, $15,000,000; and (ii) Guarantor has cumulative positive EBITDA for the three fiscal quarters most recently ended.

“Financing Transaction” shall mean a repurchase transaction or a financing transaction between Buyer (or an Affiliate of Buyer) and any counterparty.

“First Mortgage B Note” shall mean any Senior First Mortgage B Note or Junior First Mortgage B Note.

“Fitch” means Fitch Inc.

“Fixed Charge Coverage Ratio” shall mean, with respect to any Person and any period of determination, the quotient of (i) EBITDA of such Person for such period of determination divided by (ii) the Fixed Charges for such period.

“Fixed Charges” shall mean, with respect to any Person and any period of determination, the sum of (a) debt service (including interest expense and principal payments), (b) preferred dividends on any preferred securities and all distributions due to the holders of any preferred limited partnership interests, (c) the amortized portion of any capital lease obligations paid or accrued during such period, (d) capital expenditures, and (e) any amounts payable under any ground lease.  Fixed Charges shall include a proportionate share of items (a), (b), (c), (d) and (e) of all unconsolidated affiliates.

“GAAP” shall mean United States generally accepted accounting principles consistently applied as in effect from time to time.

“Governmental Authority” shall mean any national or federal government, any state, regional, local or other political subdivision thereof with jurisdiction and any Person with jurisdiction exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

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“Guarantee” shall mean, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise); provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.  The amount of any Guarantee of a Person shall be deemed to be an amount equal to the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith in accordance with GAAP.  The terms “Guarantee” and “Guaranteed” used as verbs shall have correlative meanings.

“Guarantor” shall mean Gramercy Capital Corp., a Maryland corporation.

“Guaranty” shall mean that certain Guaranty dated as of the date hereof, made by Guarantor in favor of Buyer, as the same may be amended, supplemented or otherwise modified from time to time.

“Hedging Transactions” shall mean, with respect to any or all of the Purchased Loans, any short sale of U.S. Treasury Securities or mortgage-related securities, futures contract (including Eurodollar futures) or options contract or any interest rate swap, cap or collar agreement or similar arrangements providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies, entered into by Seller or the underlying obligor with respect to any Purchased Loan and pledged to Seller as collateral for such Purchased Loan, with one or more counterparties whose unsecured debt is rated at least AA (or its equivalent) by any Rating Agency or, with respect to any Hedging Transaction pledged to Seller as additional collateral for a Purchased Loan, such other rating requirement applicable to such Hedging Transaction set forth in the related Purchased Loan Documents or which is otherwise reasonably acceptable to Buyer; provided that Seller shall not grant or permit any liens, security interests, charges, or encumbrances with respect to any such hedging arrangements for the benefit of any Person other than Buyer.

“Indebtedness” shall mean, for any Person:  (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within 90 days of the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a lien on the property of such Person, whether or not the respective Indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person; (e) Capital Lease Obligations of such Person; (f) obligations of such Person under repurchase agreements or like arrangements; (g) Indebtedness of others Guaranteed by such Person; (h) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person; and (i) Indebtedness of general partnerships of which such Person is a general partner.

“Indemnified Amounts” and “Indemnified Parties” shall have the meaning specified in Section 20 of this Annex I.

“Independent Director” of any corporation or limited liability company means an individual who is duly appointed as a member of the board of directors or board of managers of such corporation or limited liability company and who is not, and has never been, and will not while serving as Independent Director, be any of the following:

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(i)a member, partner, equityholder, manager, director, officer or employee of Seller or any of its equityholders or affiliates (other than as an independent director or manager of an affiliate of Seller that is not in the direct chain of ownership of Seller and that is required by a creditor to be a single purpose bankruptcy remote entity, provided that such independent director or manager is employed by a company that routinely provides professional independent directors or managers);

(ii)a creditor, supplier or service provider (including provider of professional services) to Seller or any of its equityholders or affiliates (other than a company that routinely provides professional independent managers or directors and which also provides lien search and other similar services to Seller or any of its equityholders or affiliates in the ordinary course of business);

(iii)a family member of any such member, partner, equityholder, manager, director, officer, employee, creditor, supplier or service provider; or

(iv)a Person that controls (whether directly, indirectly or otherwise) any of (i), (ii) or (iii) above.

“Insured Closing Letter and Escrow Instructions” shall mean a letter addressed to Seller and Buyer from the title insurance underwriter (or any agent thereof) acting as an agent for each Table Funded Purchased Loan and related escrow instructions, which letter and instructions shall be in form and substance reasonably acceptable to Buyer and Seller.

“LIBOR Rate” shall mean, with respect to any Pricing Rate Period pertaining to a Transaction, a rate per annum determined for such Pricing Rate Period in accordance with the following formula (rounded upward to the nearest 1/100th of 1%):

LIBOR

1 - Reserve Requirement

“LIBOR” shall mean the rate per annum calculated as set forth below:

(i)On each Pricing Rate Determination Date, LIBOR for the next Pricing Rate Period will be the rate for deposits in United States dollars for a one-month period which appears on Telerate Page 3750 as of 11:00 a.m., London time, on such date; or

(ii)On any Pricing Rate Determination Date on which no such rate appears on Telerate Page 3750 as described above, LIBOR for the next Pricing Rate Period will be determined on the basis of the arithmetic mean of the rates at which deposits in United States dollars are offered by the Reference Banks at approximately 11:00 a.m., London time, on such date to prime banks in the London interbank market for a one-month period.

All percentages resulting from any calculations or determinations referred to in this definition will be rounded upwards, if necessary, to the nearest multiple of 1/100th of 1% and all U.S. dollar amounts used in or resulting from such calculations will be rounded to the nearest cent (with one-half cent or more being rounded upwards).

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“LIBOR Transaction” shall mean, with respect to any Pricing Rate Period, any Transaction with respect to which the Pricing Rate for such Pricing Rate Period is determined with reference to the LIBOR Rate.

“Loan Type” shall mean, with respect to any Purchased Loan, each of the loan types listed in Schedule 1 attached hereto.

“LTV” shall mean, with respect to any Eligible Property or Properties, the ratio of the aggregate outstanding debt (which shall include the related Eligible Loan and all debt senior to or pari passu with such Eligible Loan) secured, directly or indirectly, by such Eligible Property or Properties, taking into consideration, in Buyer’s sole discretion, reserves, letters of credit, and recourse to third parties acceptable to Buyer, to the aggregate value of such Eligible Property or Properties as determined by Buyer in its sole and absolute discretion.  For purposes of Buyer’s determination, (i) the value may be determined by reference to an Appraisal, discounted cash flow analysis or other commercially reasonable method and (ii) for the avoidance of doubt, Buyer may reduce value for any actual or potential risks (including risk of delay) posed by any liens on the related Eligible Property or Properties.

“Material Adverse Effect” shall mean a material adverse effect on (a) the property, business, operations, financial condition or prospects of Seller or Guarantor, (b) the ability of Seller or Guarantor to perform its obligations under any of the Transaction Documents to which it is a party, (c) the validity or enforceability of any of the Transaction Documents, (d) the rights and remedies of Buyer under any of the Transaction Documents, (e) the timely payment of the Repurchase Price of or accrued Price Differential in respect of the Purchased Loans or other amounts payable in connection therewith, or (f) the aggregate Market Value of the Purchased Loans.

“Mezzanine Loan” shall mean any loan (including any participation interest therein) secured by a pledge of the direct or indirect equity ownership interests in a Person that owns a Mortgaged Property that also secures a Mortgage Note.

“Mezzanine Note” shall mean a note or other evidence of indebtedness of the owner or owners of direct or indirect equity ownership interests in an underlying real property owner secured by a pledge of such ownership interests.

“Minimum Liquidity” shall mean, for any Person and any date of determination, the sum of such Person’s Cash, Cash Equivalents and actual borrowing availability under any credit facilities, as of such date of determination.

“Monthly Statement” shall mean, for each calendar month during which the Agreement shall be in effect, Seller’s or Servicer’s, as applicable, reconciliation in arrears of beginning balances, interest and principal paid to date and ending balances for each Purchased Loan, together with a certified written report describing (a) any developments or events that are reasonably likely to have a Material Adverse Effect, (b) any and all written modifications to any Purchased Loan Documents not previously described in a written report, (c) loan status, collection performance and any delinquency and loss experience with respect to any Purchased Loan, (d) an update as to the expected repurchase for all Purchased Loans in the facility and (e) such other information as mutually agreed by Seller and Buyer which report shall be delivered to Buyer for each calendar month during the term of the Agreement within ten (10) days following the end of each such calendar month.

“Moody’s” shall mean Moody’s Investor Service, Inc.

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“Mortgage” shall mean the mortgage, deed of trust, deed to secure debt or other instruments, creating a valid and enforceable first or second lien, as applicable, on or a first or second priority ownership interest in a Mortgaged Property.

“Mortgage Loan” shall mean a commercial mortgage loan secured by a lien on real property, and includes any First Mortgage Loan, Senior First Mortgage B Note and Junior First Mortgage B Note.

“Mortgage Note” shall mean a note or other evidence of indebtedness of a Mortgagor secured by a Mortgage.

“Mortgaged Property” shall mean the real property or properties securing repayment of the debt evidenced by a Mortgage Note, or, in the case of any Mezzanine Loan, owned indirectly by the related obligor.

“Mortgagor” shall mean the obligor on a Mortgage Note, the grantor of the related Mortgage and the owner of the related Mortgaged Property.

“Net Income” shall mean, with respect to any Person, for any period, the consolidated net income for such period of such Person as reported in such Person’s financial statements prepared in accordance with GAAP.

“New Loan” shall mean an Eligible Loan that Seller proposes to be included as a Purchased Loan.

“Officer’s Certificate” shall mean, as to any Person, a certificate of the chief executive officer, any vice chairman and the chief financial officer of such Person or, for the purpose of executing certificates, the president, the vice president and counsel responsible therefor.

“Originated Loan” shall mean any loan that is an Eligible Loan and whose related loan documents were prepared by Seller or an Affiliate controlled by Seller.

“Person” shall mean an individual, corporation, limited liability company, business trust, partnership, joint tenant or tenant-in-common, trust, unincorporated organization, or other entity, or a federal, state or local government or any agency or political subdivision thereof.

“Plan” shall mean an employee benefit or other plan established or maintained during the five year period ended prior to the date of the Agreement or to which Seller or any ERISA Affiliate makes, is obligated to make or has, within the five year period ended prior to the date of the Agreement, been required to make contributions and that is covered by Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code.

“Plan Assets” shall mean assets of any (i) employee benefit plan (as defined in Section 3(3) of ERISA) subject to Title I of ERISA, (ii) plan (as defined in Section 4975(e)(l) of the Code) subject to Section 4975 of the Code, or (iii) governmental plan (as defined in Section 3(32) of ERISA) subject to any other federal, state or local laws, rules or regulations substantially similar to Title I of ERISA or Section 4975 of the Code.

“Portfolio Loans” shall mean all of the Purchased Loans.  As of the date of the Agreement, the Eligible Loans identified on Schedule 2 hereto have been approved by Buyer as suitable for inclusion as Portfolio Loans, subject to satisfaction of the conditions in this Annex I.

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“Portfolio Securities” has the meaning specified in the Securities Repurchase Agreement.

“Pre-Existing Loans” shall mean any loan that is an Eligible Loan and is not an Originated Loan.

“Preliminary Due Diligence Package” shall mean with respect to any New Loan, the following due diligence information relating to such New Loan to be provided by Seller to Buyer pursuant to this Annex I:

(i)Seller’s internal investment committee memorandum, among other things, outlining the proposed transaction, including potential transaction benefits and all material underwriting risks, and Underwriting Issues, anticipated exit strategies and all other characteristics of the proposed transaction that a prudent buyer would consider material;

(ii)current rent roll, if applicable;

(iii)cash flow pro-forma, plus historical information, if available;

(iv)indicative interest coverage ratios;

(v)indicative loan-to-value ratio;

(vi)Seller’s or any Affiliate’s relationship with its potential underlying borrower or any affiliate;

(vii)third party reports, to the extent available and applicable, including:

(a)engineering and structural reports;

(b)current Appraisal;

(c)Phase I environmental report (including asbestos and lead paint report) and, if applicable, Phase II or other follow-up environmental report if recommended in Phase I;

(d)seismic reports; and

(e)operations and maintenance plan with respect to asbestos containing materials;

(viii)documents evidencing such New Loan, or current drafts thereof, including, without limitation, underlying debt and security documents, guaranties, underlying borrower’s organizational documents, warrant agreements, loan and collateral pledge agreements, and intercreditor agreements, as applicable;

(ix)a list that specifically identifies any Purchased Loan Documents that relate to such Purchased Loan but are not in Seller’s possession;

(x)in the case of a participation interest, all information described in this definition which would otherwise be provided for the underlying Mortgage Loan if it constituted an Eligible Loan except that, as to items set forth in subparagraphs (vii) and (xii), to the extent Seller possesses such information or has access to such information because it was provided to the

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related lead lender and made available to Seller, and in addition, all documentation evidencing the participation interest;

(xi)insurance documentation as shall be reasonably satisfactory to Buyer; and

(xii)analyses and reports with respect to such other matters concerning the New Loan as Buyer may in its reasonable discretion require.

“Pricing Rate Determination Date” shall mean with respect to any Pricing Rate Period, the second (2^nd) Business Day preceding the first day of the Pricing Rate Period.

“Pricing Rate Period” shall mean (a) in the case of the first Pricing Rate Period with respect to any Transaction, the period commencing on and including the Purchase Date for such Transaction and ending on and including the last day of the calendar month in which the Purchase Date occurs, (b) in the case of any subsequent Pricing Rate Period, the period commencing on and including the first day of a calendar month and ending on and including the last day of such calendar month, and (c) in the case where the Remittance Date is not the first day of a calendar month, the period commending on and including the Remittance Date and ending on (but excluding) the subsequent Remittance Date; provided, however, that in no event shall any Pricing Rate Period end subsequent to the Repurchase Date.

“Principal Payment” shall mean, with respect to any Purchased Loans, any payment or prepayment of principal received in respect thereof (including casualty or condemnation proceeds to the extent such proceeds are required under the applicable Purchase Loan Documents to be applied toward the balance of the underlying loan, or are not otherwise required under the underlying loan documents to be reserved, escrowed, readvanced or applied for the benefit of the obligor or the underlying real property).  For purposes of clarification, prepayment premiums, fees or penalties shall not be deemed principal.

“Purchase Percentage” shall mean, with respect to any Purchased Loan, the “Purchase Percentage” specified in Schedule 1 for the related Loan Type (or as otherwise specified in the applicable Confirmation).

“Purchased Loan Documents” shall mean, with respect to a Purchased Loan, the documents comprising the Purchased Loan File for such Purchased Loan.

“Purchased Loan File” shall mean the documents specified as the “Purchased Loan File” in Section 7(b) of this Annex I, together with any additional documents and information required to be delivered to Buyer or its designee (including the Custodian) pursuant to this Annex I.

“Purchased Loan Information” shall mean, with respect to each Purchased Loan, the information set forth in Schedule 3 attached hereto.

“Purchased Loan Schedule” shall mean a schedule of Purchased Loans, together with the Purchased Loan Information for each such loan attached to each Trust Receipt and Custodial Delivery Certificate.

“Purchased Loans” shall mean (i) with respect to any Transaction, the Eligible Loans sold by Seller to Buyer in such Transaction and (ii) with respect to the Transactions in general, all Eligible Loans sold by Seller to Buyer and any additional cash and/or other assets delivered by Seller to Buyer pursuant to Section 4 of this Annex I.

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“Quarterly Report” shall mean, for each fiscal quarter during which the Agreement shall be in effect, Seller’s or Servicer’s, as applicable, certified written report summarizing, with respect to the Mortgaged Properties securing each Purchased Loan (or, in the case of a Purchased Loan secured (directly or indirectly) by a portfolio of Mortgaged Properties, such information on a consolidated basis), the net operating income, debt service coverage, occupancy, the revenues per room (for hospitality properties) and sales per square footage (for retail properties) and such other information as mutually agreed by Seller and Buyer which report shall be delivered to Buyer for each fiscal quarter during the term of the Agreement within 60 days following the end of each such fiscal quarter.

“Rating Agency” shall mean any of Fitch, Moody’s and Standard & Poor’s.

“Reference Banks” shall mean banks each of which shall (i) be a leading bank engaged in transactions in Eurodollar deposits in the international Eurocurrency market and (ii) have an established place of business in London.  Initially, the Reference Bank shall be JPMorgan Chase Bank.  If any such Reference Bank should be unwilling or unable to act as such or if Buyer shall terminate the appointment of any such Reference Bank or if any of the Reference Banks should be removed from the Reuters Monitor Money Rates Service or in any other way fail to meet the qualifications of a Reference Bank, Buyer in the exercise of its good faith business judgment may designate alternative banks meeting the criteria specified in clauses (i) and (ii) above.

“Regulations T, U and X” shall mean Regulations T, U and X of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time.

“Remittance Date” shall mean the first (1st) calendar day of each month, or the next succeeding Business Day, if such calendar day shall not be a Business Day.

“Repurchased Loan” shall mean any Purchased Loan which has been repurchased by Seller pursuant to the terms hereof.

“Repurchased Security” shall have the meaning set forth in the Securities Repurchase Agreement.

“Requirement of Law” shall mean any law, treaty, rule, regulation, code, directive, policy, order or requirement or determination of an arbitrator or a court or other governmental authority whether now or hereafter enacted or in effect.

“Reserve Requirement” shall mean, with respect to any Pricing Rate Period, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect during such Pricing Rate Period (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other governmental authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of such Board of Governors) maintained by Buyer.

“Reset Date” shall mean, with respect to any Pricing Rate Period, the second Business Day preceding the first day of such Pricing Rate Period with respect to any Transaction.

“Scheduled Purchase Date” shall mean the date agreed between the parties or specified in the applicable Confirmation as the “Purchase Date” or the “Scheduled Purchase Date”.

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“Securities Aggregate Repurchase Price” shall mean, as of any date of determination, the “Aggregate Repurchase Price” (as defined in the Securities Repurchase Agreement) as of such date.

“Securities Repurchase Agreement” shall mean the Master Repurchase Agreement dated as of the date hereof between Seller and Goldman, Sachs & Co., as amended supplemented or otherwise modified from time to time.

“Seller” shall mean Gramercy Warehouse Funding II LLC, a Delaware limited liability company and its permitted successors and assigns.

“Servicer” shall mean GKK Manager LLC or an affiliate thereof, or such other servicer mutually acceptable to Buyer and Seller.

“Servicing Agreement” shall mean that certain servicing agreement entered into by Seller and Servicer or such other servicing agreement in each case approved by Buyer in its reasonable discretion.

“Servicing Records” has the meaning specified in Section 22(b) of this Annex I.

“Significant Modification” shall mean (a) any modification or amendment of a Purchased Loan which:

(i)reduces the principal amount of the Purchased Loan in question other than (1) with respect to a dollar-for-dollar principal payment or (2) reductions of principal to the extent of deferred, accrued or capitalized interest added to principal which additional amount was not taken into account by Buyer in determining the related Purchase Price;

(ii)increases the principal amount of a Purchased Loan other than increases which are derived from accrual or capitalization of deferred interest which is added to principal or protective advances;

(iii)modifies the payments of principal and interest when due of the Purchased Loan in question;

(iv)changes the frequency of scheduled payments of principal and interest in respect of a Purchased Loan;

(v)subordinates the lien priority of the Purchased Loan or the payment priority of the Purchased Loan other than subordinations expressly required under the then existing terms and conditions of the Purchased Loan (provided, however, the foregoing shall not preclude the execution and delivery of subordination, nondisturbance and attornment agreements with tenants, subordination to tenant leases, easements, plats of subdivision and condominium declarations and similar instruments which in the commercially reasonable judgment of Seller do not materially adversely affect the rights and interest of the holder of the Purchased Loan in question);

(vi)releases (1) any collateral for the Purchased Loan other than releases required under the then existing Purchased Loan Documents or releases in connection with eminent domain or under threat of eminent domain or (2) any underlying obligor with respect to a Purchased Loan;

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(vii)waives, amends or modifies any cash management or reserve account requirements of the Purchased Loan other than changes required under the then existing Purchased Loan Documents;

(viii)waives any due-on-sale or due-on-encumbrance provisions of the Purchased Loan other than waivers required to be given under the then existing Purchased Loan Documents; and

(b)any modification, amendment or other material action with respect to a Purchased Loan (or the related mortgage loan, if such Purchased Loan is a Mezzanine Loan) which under the terms of the related intercreditor agreement or participation agreement, as the case may be, requires the consent of Seller or its “operating advisor” or the agent (as distinct from consultation rights).

“Single-Purpose Entity” shall mean a Person, other than an individual, which is formed or organized solely for the purpose of holding, directly or indirectly and subject to this Agreement and the Securities Repurchase Agreement, the Purchased Loans and the Portfolio Securities, does not engage in any business unrelated to the Purchased Loans and the Portfolio Securities, does not have any assets other than the Purchased Loans and the Portfolio Securities or any indebtedness other than as permitted by the Agreement and the Securities Repurchase Agreement, has its own separate books and records and its own accounts, in each case which are separate and apart from the books and records and accounts of any other Person, holds itself out as being a Person, separate and apart from any other Person and provides in its partnership agreement or limited liability company agreement (as applicable) for the inclusion of at least one Independent Director.  If  the foregoing entity is a limited partnership or limited liability company, its partnership agreement or limited liability company agreement (as applicable) shall provide that that the dissolution and winding up or bankruptcy or insolvency filing of such partnership or limited liability company shall require the unanimous consent of all partners or members (including the affirmative vote of the independent directors) and if the foregoing entity is a single-member limited liability company whose single member is not itself a Single-Purpose Entity, its limited liability company agreement shall provide that upon the occurrence of any event that causes its sole member to cease to be a member during the term of this Agreement, at least one of its independent directors shall automatically be admitted as the sole member and shall preserve and continue the existence of the entity without dissolution.

“Standard & Poor’s” shall mean Standard & Poor’s Ratings Services, Inc., a division of the McGraw Hill Companies Inc.

“Subsidiary” shall mean, with respect to any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person.

“Supplemental Due Diligence List” shall mean, with respect to any New Loan, information or deliveries concerning such New Loan that Buyer shall request in addition to the Preliminary Due Diligence Package, including, without limitation, a credit approval memorandum representing the final terms of the underlying transaction, a loan-to-value ratio computation and a final debt service coverage ratio computation for such proposed New Loan.

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“Survey” shall mean a certified ALTA/ACSM (or applicable state standards for the state in which a Mortgaged Property is located) survey of a Mortgaged Property prepared by a registered independent surveyor and in form and content reasonably satisfactory to Buyer and the company issuing the Title Policy for such Mortgaged Property.

“Table Funded Purchased Loan” shall mean a Purchased Loan which is sold to Buyer simultaneously with the origination or acquisition thereof, which origination or acquisition is financed with the Purchase Price, pursuant to Seller’s request, paid directly to a title company or other settlement agent, in each case, approved by Buyer, for disbursement in connection with such origination or acquisition.  A Purchased Loan shall cease to be a Table Funded Purchased Loan after the Custodian has delivered a Trust Receipt to Buyer certifying its receipt of the Purchased Loan File therefor.

“Tangible Net Worth” shall mean, with respect to any Person, as of any date of determination, (a) all amounts which would be included under capital on the balance sheet of such Person at such date, determined in accordance with GAAP as of such date, less (b)(i) amounts owing to such Person from Affiliates and (ii) intangible assets of such Person as of such date.

“Telerate Page 3750” shall mean the display page currently so designated on the Dow Jones Telerate Service (or such other page as may replace that page on that service for the purpose of displaying comparable rates or prices).

“Title Policy” shall have the meaning specified in paragraph 2(d) of Exhibit V.

“Total Indebtedness” shall mean, with respect to any Person, as of any date of determination, the aggregate Indebtedness of such Person as of such date less the amount of any nonspecific balance sheet reserves maintained in accordance with GAAP as of such date.

“Transaction” shall have the meaning specified in Section 1(a) of this Annex I.

“Transaction Conditions Precedent” shall have the meaning specified in Section 3(e) of this Annex I.

“Transaction Costs” shall mean, with respect to any Purchased Loan, all actual out-of-pocket reasonable costs and expenses paid or incurred by Buyer and payable by Seller relating to the purchase of such Purchased Loan (including legal fees and other fees described in Section 20(b) of this Annex I).  Transaction Costs shall not include costs incurred by Buyer for overhead and general administrative expenses.

“Transaction Documents” shall mean, collectively, the Agreement (including this Annex I and any other annexes and schedules attached to the Agreement), the Blocked Account Agreement, the Custodial Agreement, the Fee Letter, the Servicing Agreement, all Transfer Documents, all Confirmations executed pursuant to this Annex I in connection with specific Transactions and all other documents executed in connection herewith and therewith.

“Transfer” shall mean, with respect to any Person, any sale or other whole or partial conveyance of all or any portion of such Person’s assets, or any direct or indirect interest therein to a third party (other than in connection with the transfer of a Purchased Loan to Buyer in accordance herewith), including granting of any purchase options, rights of first refusal, rights of first offer or similar rights in respect of any portion of such assets or the subjecting of any portion of such assets to restrictions on transfer.

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“Transfer Documents” shall mean, with respect to any Purchased Loan, all applicable documents described in Section 7(b) of this Annex I necessary to transfer all of Seller’s right, title and interest in such Purchased Loan to Buyer in accordance with the terms of this Annex I.

“Trust Receipt” shall mean a trust receipt issued by the Custodian, or the Bailee, as applicable, to Buyer confirming the Bailee’s or the Custodian’s, as applicable, possession of certain Purchased Loan Files which are the property of and held by the Bailee or the Custodian, as applicable, on behalf of Buyer (or any other holder of such trust receipt) in the form required under the Custodial Agreement or the Bailee Agreement.

“UCC” shall mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of any security interest is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, “Uniform Commercial Code” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions of this Annex I relating to such perfection or effect of perfection or non-perfection.

“Underwriting Issues” shall mean, with respect to any Eligible Loan as to which Seller intends to request a Transaction, all material information that has come to Seller’s attention that, based on the making of commercially reasonable inquiries and the exercise of reasonable care and diligence by a reasonable institutional mortgage or mezzanine loan buyer in determining whether to originate or acquire the Eligible Loan in question under the circumstances, would, in the context of the totality of the Transaction in question, be considered a materially “negative” factor (either separately or in the aggregate with other information), (including, but not limited to, whether any of the Eligible Loans were repurchased from any warehouse loan facility or a repurchase transaction due to the breach of a representation and warranty or a material defect in loan documentation or closing deliveries (such as any absence of any material Purchased Loan Document(s)).

3.INITIATION; CONFIRMATION; TERMINATION; FEES

The provisions of Paragraph 3 of the Agreement (“Initiation; Confirmation; Termination”) are hereby deleted and replaced in their respective entireties by the following provisions of this Section 3:

(a)Seller may, from time to time, prior to the Facility Termination Date, request that Buyer enter into a Transaction with respect to one or more New Loans.  Seller shall initiate each request by submitting a Preliminary Due Diligence Package for Buyer’s review and approval.  Notwithstanding anything to the contrary herein, Buyer shall have no obligation to consider for purchase any proposed Transaction that has an aggregate Repurchase Price (excluding the Price Differential with respect to the Purchased Loans as of the date of determination) that when combined with all Purchased Loans which have not been repurchased by Seller hereunder exceeds the Facility Amount.  Buyer shall have the right to review all New Loans proposed to be sold to Buyer in any Transaction and to conduct its own due diligence investigation of such New Loans as Buyer determines is reasonably necessary.  Seller agrees to promptly reimburse Buyer for its Diligence Fees upon request for payment or reimbursement thereof.  Notwithstanding any provision to the contrary herein or any other Transaction Document, Buyer shall be entitled to make a determination, in its sole and absolute discretion, whether a New Loan qualifies as an Eligible Loan and whether to reject any or all of the New Loans proposed to be sold to Buyer by Seller.  Buyer shall have no obligation to consider for purchase any New Loans proposed by Seller after the original Facility Termination Date or during the Facility Extension Period (if applicable).

(b)Upon Buyer’s receipt of a complete Preliminary Due Diligence Package with respect to a proposed Transaction, Buyer shall have the right within two (2) Business Days, to request in a

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Supplemental Due Diligence List such additional Diligence Materials and deliveries that Buyer deems necessary to properly evaluate the New Loans.  Upon Buyer’s receipt of such additional Diligence Materials or Buyer’s waiver thereof, Buyer shall within five (5) Business Days either (i) notify Seller of Buyer’s intent to proceed with the Transaction and of its determination with respect to the Purchase Price and the Market Value for the related New Loans (such notice, a “Preliminary Approval”) or (ii) deny, in Buyer’s sole and absolute discretion, Seller’s request for the applicable Transaction.  Buyer’s failure to respond to Seller within five (5) Business Days, as applicable, shall be deemed to be a denial of Seller’s request to enter into the proposed Transaction, unless Buyer and Seller have agreed otherwise in writing.

(c)Upon Seller’s receipt of Buyer’s Preliminary Approval with respect to a Transaction, Seller shall, if Seller desires to enter into such Transaction with respect to the related New Loans upon the terms set forth by Buyer in its Preliminary Approval, deliver the documents set forth below in this Section 3(c) with respect to each New Loan and related Eligible Property or Properties (to the extent not already delivered in the Preliminary Due Diligence Package or pursuant to a Supplemental Due Diligence List) as a condition precedent to Buyer’s Final Approval and issuance of a Confirmation (as defined below), all in a manner reasonably satisfactory to Buyer and pursuant to documentation reasonably satisfactory to Buyer:

(i)Delivery of Purchased Loan Documents.  Seller shall deliver to Buyer: (x) with respect to any New Loan that is a Pre-Existing Loan, copies of the Purchased Loan Documents, except for such Purchased Loan Documents that Seller expressly and specifically disclosed in Seller’s Preliminary Due Diligence Package were not in Seller’s possession; and (y) with respect to any New Loan that is an Originated Loan, drafts of the Purchased Loan Documents.

(ii)Environmental and Engineering.  Buyer shall have received a “Phase 1” (and, if necessary, “Phase 2”) environmental report, an asbestos survey, if applicable, and an engineering report, each in form reasonably satisfactory to Buyer, by an engineer and an environmental consultant, approved by Buyer in its reasonable discretion.

(iii)Appraisal.  If obtained by Seller, Buyer shall have received either an Appraisal (from the closing of the financing of the related Eligible Property or Properties) or a Draft Appraisal of the related Eligible Property or Properties.  If Buyer receives only a Draft Appraisal prior to entering into a Transaction, Seller shall use its best efforts to deliver an Appraisal on or before thirty (30) days after the Purchase Date.

(iv)Insurance.  Buyer shall have received certificates or other evidence of insurance detailing insurance coverage in respect of the related Eligible Property or Properties of types (including but not limited to casualty, general liability and terrorism insurance coverage (consistent with market standard requirements)), in amounts, with insurers and otherwise in compliance with the terms, provisions and conditions set forth in the Purchased Loan Documents and otherwise reasonably satisfactory to Buyer.  Such certificates or other evidence shall indicate that Seller (or as to a New Loan that is a participation interest, the lead lender on the related whole loan in which Seller is a participant) will be named as an additional insured as its interest may appear and shall contain a loss payee endorsement in favor of such additional insured with respect to the policies required to be maintained under the Purchased Loan Documents.

(v)Survey.  Buyer shall have received all surveys of the related Eligible Property or Properties that are in Seller’s possession.

(vi)Lien Search Reports.  Buyer or Buyer’s counsel shall have received, as reasonably requested by Buyer, satisfactory reports of UCC, tax lien, judgment and litigation

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searches and any existing Title Policies relating to the New Loan, Eligible Property or Properties, Seller and related underlying obligor, such searches to be conducted in each location Buyer shall reasonably designate; provided that such materials were a part of the closing file for the financing of such Eligible Property or Properties.

(vii)Opinions of Counsel.  Buyer shall have received copies of all legal opinions with respect to the New Loan which shall be in form and substance reasonably satisfactory to Buyer.

(viii)Title Policy.

(a)With respect to any New Loan that is a Mortgage Loan, Seller shall have delivered to Buyer (1) an unconditional commitment to issue a Title Policy or Policies in favor of Seller and Seller’s successors and/or assigns with respect to Seller’s interest in the related real property with an amount of insurance that shall be not less than the related Repurchase Price or such other amount as Buyer shall require in its reasonable discretion or (2) an endorsement or confirmatory letter from the existing title company to an existing Title Policy (in an amount not less than the related Repurchase Price or such other amount as Buyer shall require in its reasonable discretion) in favor of Seller and Seller’s successors and/or assigns that adds such parties as an additional insured.

(b)With respect to any New Loan that is a First Mortgage B-Note, Seller shall have delivered to Buyer a copy of an unconditional commitment to issue a Title Policy or endorse an existing Title Policy in favor of the lead lender to whom the related obligor issued the related Mortgage Note, in an amount not less than the amount of such Mortgage Note and, if the First Mortgage B-Note is evidenced by a separate promissory note rather than a participation certificate, in an amount not less than the amount of all Mortgage Notes secured by the Mortgage that secures the related promissory notes.

(c)With respect to a Mezzanine Loan, (i) Seller shall have delivered to Buyer such evidence as Buyer on a case-by-case basis, in its sole discretion, shall require of the ownership of the real property underlying the New Loan including, without limitation, a copy of a Title Policy, issued by a title insurer and with such endorsements (including, without limitation, a “Mezzanine Lender’s Endorsement”, if obtained by Seller), in each case acceptable to Buyer in its sole discretion, showing that title is vested in the related obligor or in an entity in whom such obligor holds an equity interest and (ii) if obtained by Seller, Seller shall have delivered to Buyer an Eagle 9 UCC Title Policy which policy shall (x) provide an amount of insurance that shall be not less than the related Repurchase Price or such other amount as Buyer shall require in its sole discretion, (y) shall insure Seller’s security interest in the equity interests pledged and (z) be assignable by its terms with a transfer of the Mezzanine Loan, as applicable.

(ix)Additional Real Estate Matters.  To the extent obtained by Seller, Seller shall have delivered to Buyer such other real estate related certificates and documentation as may have been requested by Buyer, such as: (y) certificates of occupancy issued by the appropriate Governmental Authority and either letters certifying that the related Eligible Property or Properties is in compliance with all applicable zoning laws issued by the appropriate Governmental Authority or evidence that the related Title Policy includes a zoning endorsement and (z) abstracts of all leases in effect at the Mortgaged Property delivered in connection with the New Loan.

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(x)            First Mortgage B Notes.  In the case of a First Mortgage B Note, in addition to the delivery of the items in clauses (vi), (vii) and (viii), Buyer shall have received all documentation specified in clauses (i) through (v) and (ix) as if the underlying Mortgage Loan were the direct collateral to the extent Seller possesses such documentation or has access to such documentation because it was provided to the related lead lender and made available to Seller and, to the extent applicable, all documents evidencing a participation interest, including, but not limited to, an original participation certificate, if applicable, and the related participation agreement and/or the related intercreditor agreement.

(xi)           Other Documents.  Buyer shall have received such other documents as Buyer or its counsel shall reasonably deem necessary.

Within five (5) Business Days of Seller’s delivery of the documents and materials contemplated in clauses (i) through (xi) above, Buyer shall either (A) if the Purchased Loan Documents with respect to the New Loan are not reasonably satisfactory in form and substance to Buyer, notify Seller that Buyer has not approved the New Loan or (B) notify Seller that Buyer agrees to purchase the New Loan, subject to satisfaction (or waiver by Buyer) of the Transaction Conditions Precedent (a “Final Approval”) set forth in Section 3(e), below.  Buyer’s failure to respond to Seller within five (5) Business Days shall be deemed to be a denial of Seller’s request that Buyer purchase the New Loan, unless Buyer and Seller have agreed otherwise in writing.

(d)           Buyer shall promptly deliver to Seller a written confirmation of any Final Approval in the form of Exhibit I attached hereto of each proposed Transaction (a “Confirmation”); provided, that unless otherwise agreed by Seller, Buyer shall deliver a separate Confirmation with respect to each New Loan which will be the subject of a Transaction.  Each Confirmation shall be deemed incorporated herein by reference with the same effect as if set forth herein at length.  With respect to any Transaction, the Pricing Rate shall be determined initially on the Pricing Rate Determination Date applicable to the first Pricing Rate Period for such Transaction, and shall be reset on each Reset Date for the next succeeding Pricing Rate Period for such Transaction.  Buyer or its agent shall determine in accordance with the terms of the Agreement the Pricing Rate on each Pricing Rate Determination Date for the related Pricing Rate Period and notify Seller of such rate for such period on the Reset Date.

(e)           Provided each of the Transaction Conditions Precedent set forth in this Section 3(e) shall have been satisfied (or waived by Buyer), and subject to Seller’s rights under Section 3(f), Buyer shall transfer the Purchase Price to Seller with respect to each New Loan for which it has issued a Confirmation on the Purchase Date specified in such Confirmation (provided Seller has not objected to such Confirmation within the time frame permitted under Section 3(f)), and the related Purchased Loan shall be concurrently transferred by Seller to Buyer or its nominee.  For purposes of this Section 3(e), the “Transaction Conditions Precedent” shall be satisfied with respect to any proposed Transaction if:

(1)           No (A) monetary or material non-monetary Default or (B) Event of Default under the Agreement shall have occurred and be continuing as of the Purchase Date for such proposed Transaction;

(2)           Guarantor shall have delivered a true and accurate Financial Covenant Compliance Certificate in a timely manner with respect to the most recently ended fiscal quarter;

(3)           Seller shall have delivered to the Buyer an Officer’s Certificate of the Seller certifying that (A) the representations and warranties made by Seller in any of the Transaction Documents are true and correct in all material respects as of the Purchase Date for such Transaction and unless waived by Buyer (except such representations which by their terms speak

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as of a specified date).  If requested by Buyer, Seller shall also deliver an Officer’s Certificate covering such matters as Buyer may request with respect to matters relating to the Agreement or the other Transaction Documents;

(4)Buyer shall have (A) determined, in accordance with the applicable provisions of Section 3(a) of this Annex I that the New Loan proposed to be sold to Buyer by Seller in such Transaction is an Eligible Loan and (B) obtained internal credit approval for the inclusion of such New Loan as a Purchased Loan in a Transaction;

(5)The applicable Purchased Loan File described in Section 7(b) shall have been delivered to Custodian or Bailee and Buyer shall have received a Trust Receipt from Custodian or Bailee with respect to such Purchased Loan File;

(6)Seller shall have delivered to each Mortgagor or obligor or related servicer or lead lender under any Purchased Loan a direction letter in accordance with Section 5(a) of this Annex I unless such Mortgagor or obligor or related servicer or lead lender is already remitting payments to the Servicer whereupon Seller shall direct the Servicer to remit all such amounts into the Blocked Account in accordance with Section 5(a) of this Annex I and to service such payments in accordance with the Servicing Agreement and the provisions of this Annex I;

(7)Seller shall have paid to Buyer (i) any fees then due and payable under the Fee Letter and (ii) any unpaid Diligence Fees and Transaction Costs in respect of such Purchased Loan (which amounts, at Seller’s option, may be held back from funds remitted to Seller by Buyer on the Purchase Date);

(8)No Purchased Loan shall be a Delinquent Loan or a Defaulted Loan;

(9)Buyer shall have received fully executed originals of all Transfer Documents and an opinion of counsel of Seller, in form and substance reasonably satisfactory to Buyer, covering the enforceability, authority, execution, delivery and perfection of the assignment of the Purchased Loan and all Transfer Documents, and such other matters as Buyer may reasonably require;

(10)Buyer shall have determined that after giving effect to the proposed Transaction, (i) the Repurchase Price (exclusive of accrued and unpaid Price Differential) of no single Purchased Loan exceeds 25% of the Aggregate Repurchase Price and (ii) the aggregate Repurchase Price (exclusive of accrued and unpaid Pricing Differential) of Purchased Loans secured directly or indirectly by Eligible Properties which are hotels, lodging or hospitality properties does not exceed 35% of the Aggregate Repurchase Price;

(11)No event shall have occurred or circumstance shall exist which has a Material Adverse Effect;

(12)There shall not have occurred (i) a material adverse change in the financial condition of the Buyer which affects (or can reasonably be expected to affect) materially and adversely the ability of the Buyer to fund its obligations under this Agreement; (ii) a material change in financial markets, an outbreak or escalation of hostilities or a material change in national or international political, financial or economic conditions; (iii) a general suspension of trading on major stock exchanges or suspension of trading in Guarantor’s stock; or (iv) a disruption in or moratorium on commercial banking activities or securities settlement services.

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(f)Each Confirmation, together with the Agreement, shall be conclusive evidence of the terms of the Transaction covered thereby unless objected to in writing by Seller no more than two (2) Business Days after the date such Confirmation is received by Seller.  An objection sent by Seller with respect to any Confirmation must state specifically that the writing is an objection, must specify the provision(s) of such Confirmation being objected to by Seller, must set forth such provision(s) in the manner that Seller believes such provisions should be stated, and must be received by Buyer no more than two (2) Business Days after such Confirmation is received by Seller.  Buyer, in its sole discretion, may issue another Confirmation addressing Seller’s objections or may elect not to proceed with the proposed Transaction.

(g)Seller shall be entitled to terminate a Transaction on demand, and repurchase the related Purchased Loan on any Business Day prior to the Repurchase Date (an “Early Repurchase Date”); provided, however, that:

(i)No Event of Default shall be continuing or would occur or result from such early repurchase,

(ii)Seller notifies Buyer in writing of its intent to terminate such Transaction and repurchase the related Purchased Loan no later than five (5) Business Days prior to the Early Repurchase Date, and

(iii)Seller shall pay to Buyer on the Early Repurchase Date, an amount equal to the sum of the Repurchase Price for such Transaction, all Costs and any other amounts payable by Seller and outstanding under the Agreement (including, without limitation, Section 3(m) of this Annex I) with respect to such Transaction against transfer to Seller or its agent of the related Purchased Loan.

(h)On the Repurchase Date (or the Early Repurchase Date, as applicable), termination of the applicable Transactions will be effected by transfer to Seller or, if requested by Seller, its designee of the related Purchased Loans, and any Income in respect thereof received by Buyer (and not previously credited or transferred to, or applied to the obligations of, Seller pursuant to Section 4 or Section 5) against the simultaneous transfer of the Repurchase Price, all Costs and any other amounts payable and outstanding under the Agreement (including without limitation, Sections 3(m), 3(n) and 3(o) of this Annex I, if any) to an account of Buyer.

(i)So long as no Default or Event of Default has occurred and is then continuing, the Repurchase Price with respect to one or more Purchased Loans may be paid in part at any time upon two (2) Business Days prior written notice; provided, however, that any such payment shall be accompanied by an amount representing accrued Price Differential with respect to such Purchased Loan(s) on the amount of such payment and all other amounts then due under the Transaction Documents.  Each partial payment of the Repurchase Price that is voluntary (as opposed to mandatory under the terms of the Agreement) shall be in an amount of not less than One Hundred Thousand Dollars ($100,000).

(j)In lieu of repaying the Repurchase Price, in whole or in part, with respect to the Transactions when and as otherwise required or permitted by the Agreement, Seller may elect to deposit any such amount (the “Early Repurchase Deposit”) with Buyer (the date of such deposit, the “Early Repurchase Deposit Funding Date”) until such date as the application of the Early Repurchase Deposit towards the Repurchase Price would not cause Buyer to incur the costs described in Section 3(m) hereof (the “Early Repurchase Deposit Application Date”).  The Early Repurchase Deposit shall be held in an interest-bearing account controlled by Buyer and, at Buyer’s option, shall be accompanied by a payment

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(as estimated by Buyer) equal to the difference between the interest earned on the Early Repurchase Deposit and the Price Differential that will accrue on a portion of the relevant Transaction equal to the Early Repurchase Deposit during the period from the Early Repurchase Deposit Funding Date to the Early Repurchase Deposit Application Date.

(k)If prior to the first day of any Pricing Rate Period with respect to any Transaction, Buyer shall have reasonably determined (which determination shall be conclusive and binding upon Seller absent manifest error) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBOR Rate for such Pricing Rate Period.  If such notice is given, the Pricing Rate with respect to such Transaction for such Pricing Rate Period, and for any subsequent Pricing Rate Periods until such notice has been withdrawn by Buyer, shall be a per annum rate equal to the sum of (i) the Federal Funds Rate, (ii) 0.25% and (iii) the Applicable Spread (the “Alternative Rate”).

(l)Notwithstanding any other provision herein, if after the date of the Agreement, the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for Buyer to effect LIBOR Transactions as contemplated by the Transaction Documents, (a) the commitment of Buyer hereunder to enter into new LIBOR Transactions and to continue LIBOR Transactions as such shall forthwith be canceled, and (b) the LIBOR Transactions then outstanding shall be converted automatically to Alternative Rate Transactions on the last day of the then current Pricing Rate Period or within such earlier period as may be required by law.  If any such conversion of a LIBOR Transaction occurs on a day that is not the last day of the then current Pricing Rate Period with respect to such LIBOR Transaction, Seller shall pay to Buyer such amounts, if any, as may be required pursuant to Section 3(n).

(m)Upon demand by Buyer, Seller shall indemnify Buyer and hold Buyer harmless from any net loss or expense (not to include any lost profit or opportunity) (including, without limitation, reasonable attorneys’ fees and disbursements) which Buyer actually sustains or incurs as a consequence of (i) default by Seller in terminating any Transaction after Seller has given a notice in accordance with Section 3(g) of a termination of a Transaction, (ii) any payment of all or any portion of the Repurchase Price, as the case may be, on any day other than a Remittance Date (including, without limitation, any such loss or expense arising from the reemployment of funds obtained by Buyer to maintain Transactions hereunder or from fees payable to terminate the deposits from which such funds were obtained, provided Seller shall not be obligated to reimburse Buyer for the incremental cost of reemploying funds or terminating deposits which arise solely as a result of Buyer depositing funds or employing funds at a rate calculated other than by reference to LIBOR (as defined herein)) or (iii) default by Seller in selling Eligible Loans after Seller has notified Buyer of a proposed Transaction and Buyer has agreed to purchase such Eligible Loans in accordance with the provisions of the Agreement.  A certificate as to such costs, losses, damages and expenses, setting forth the calculations therefor shall be submitted promptly by Buyer to Seller and shall be conclusive and binding on Seller in the absence of manifest error.

(n)If (A) the Transactions are characterized by a U.S. Federal, state or local taxing authority in a manner other than as described in Section 23 of this Annex I, or (B) after the date of the Agreement, the adoption of or any change in any Requirement of Law or in the interpretation or application thereof by any Governmental Authority or compliance by Buyer with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority having jurisdiction over Buyer made subsequent to the date hereof:

(i)shall subject Buyer to any tax of any kind whatsoever with respect to the Transaction Documents, any Purchased Loan or any Transaction, or change the basis of taxation

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of payments to Buyer in respect thereof (except for changes in the rate of tax on Buyer’s overall net income);

(ii)shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of Buyer which is not otherwise included in the determination of the LIBOR Rate hereunder; or

(iii)shall impose on Buyer any other condition due to the Agreement or the Transactions;

and the result of any of the foregoing is to increase the cost to Buyer of entering into, continuing or maintaining Transactions or to reduce any amount receivable under the Transaction Documents in respect thereof; then, in any such case, Seller shall pay Buyer, within ten (10) Business Days after written demand therefor is received by Seller, any additional amounts necessary to compensate Buyer for such increased cost payable or reduced amount receivable.  If Buyer becomes aware that it is entitled to claim any additional amounts pursuant to this Section 3(o), it shall notify Seller in writing of the event by reason of which it has become so entitled within a reasonable period after Buyer becomes aware thereof.  A certificate as to the calculation of any additional amounts payable pursuant to this subsection shall be submitted by Buyer to Seller and shall be conclusive and binding upon Seller in the absence of manifest error.  This covenant shall survive the termination of the Agreement and the repurchase by Seller of any or all of the Purchased Loans.

(o)If Buyer shall have reasonably determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by Buyer or any corporation controlling Buyer with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof does have the effect of reducing the rate of return on Buyer’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which Buyer or such corporation could have achieved but for such adoption, change or compliance (taking into consideration Buyer’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by Buyer to be material, then from time to time, within five (5) Business Days after submission by Buyer to Seller of a written request therefor, Seller shall pay to Buyer such additional amount or amounts as will compensate Buyer for such reduction.  A certificate as to the calculation of any additional amounts payable pursuant to this subsection shall be submitted by Buyer to Seller and shall be conclusive and binding upon Seller in the absence of manifest error.  This covenant shall survive the termination of the Agreement and the repurchase by Seller of any or all of the Purchased Loans.

(p)If any of the events described in Section 3(k), Section 3(l), Section 3(n) or Section 3(o) result in Buyer’s election to use the Alternative Rate or Buyer’s request for additional amounts, then Seller shall have the option to notify Buyer in writing of its intent to terminate the Transactions and repurchase the Purchased Loans no later than one (1) Business Day after notice is given to Buyer in accordance with Section 3(g).  The election by Seller to terminate the Transactions in accordance with this Section 3(p) shall not relieve Seller for liability with respect to any additional amounts or increased costs actually incurred by Buyer prior to the actual repurchase of the Purchased Loans.

(q)The facility under the Agreement shall terminate on January 3, 2008, unless extended as provided herein. Provided that (i) no Event of Default has occurred and is continuing, (ii) Seller shall have paid to Buyer the applicable fees in accordance with the Fee Letter and (iii) Seller shall have exercised its extension option under the Securities Repurchase Agreement, Seller may elect by written

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notice not later than 45 days prior to such Facility Termination Date to extend the Facility Termination Date for a period ending on the Remittance Date that is six months after the initial Facility Termination Date (such period, the “Facility Extension Period”).  During the Facility Extension Period, the Applicable Spread with respect to each Transaction shall be increased as set forth in Schedule 1.  On each Remittance Date during the Facility Extension Period, Seller shall be obligated to pay the Extended Repurchase Monthly Amount, in addition to payments in respect of the accrued Price Differential and any other amounts due and payable under this Agreement, which shall be applied to reduce the Repurchase Price of each Purchased Loan pro rata.

(r)From and after the Facility Termination Date (including during the Facility Extension Period, if applicable), Buyer shall have no further obligation to purchase any New Loans.  On the Facility Termination Date, Seller shall be obligated to repurchase all of the Purchased Loans and transfer payment of the aggregate Repurchase Price for each such Purchased Loan, together with the accrued and unpaid Price Differential and all Costs and other amounts due and payable to Buyer hereunder.  Following the Facility Termination Date, Buyer shall not be obligated to transfer any Purchased Loans to Seller until payment in full to Buyer of all amounts due hereunder; provided, however, upon Seller’s request, Buyer shall transfer to Seller the Purchased Loans with respect to which Buyer shall have received the full Repurchase Price and such other amounts payable to Buyer in respect of such Purchased Loans in accordance with the requirements of this Annex I, provided an Event of Default is not then continuing and the transfer of such Purchased Loans would not result in a Margin Deficit.

4.MANDATORY PAYMENT OR DELIVERY OF ADDITIONAL ASSETS

Paragraphs 4 (a) through (f) of the Agreement (“Margin Maintenance”) shall be deleted in their entirety and replaced with the following provisions of this Section 4:

(a)Buyer may determine and re-determine the Asset Base on any Business Day and on as many Business Days as it may elect.  If at any such time the aggregate Repurchase Price of the Portfolio Loans is greater than the aggregate Asset Base as determined by Buyer in its sole discretion and notified to Seller on any Business Day (a “Margin Deficit”), then Seller shall, no later than one (1) Business Day after receipt of such notice, either deliver to Buyer (A) cash (which shall be applied to reduce the Repurchase Price of each Purchased Loan to be determined by Seller) or (B) additional assets acceptable to Buyer in its sole and absolute discretion in such amounts that after giving effect to such delivery of cash or other assets, the aggregate Repurchase Price of the Portfolio Loans does not exceed the Asset Base as re-determined by Buyer after giving effect to the delivery of cash (or other assets) by Seller to Buyer pursuant to this Section 4.

(b)If at any time the aggregate Repurchase Price of the Portfolio Loans is less than the aggregate Asset Base as determined by Buyer in its sole discretion and notified to Seller on any Business Day Seller requests such notification (a “Margin Excess”), then Seller may, upon providing written notice to Buyer by 3 p.m. on the Business Day prior to the date funds are requested, request that Buyer advance additional funds (not to exceed such Margin Excess) (a “Margin Excess Advance”) to Seller in respect of the Purchased Loans.  On the date set forth in such request, Buyer shall transfer cash to Seller in the amount of such Margin Excess Advance.  Each Margin Excess Advance by Buyer to Seller shall increase the Repurchase Price of one or more Purchased Loans (such aggregate increase not to exceed such Margin Excess Advance) as Buyer shall determine in its sole discretion.

5.INCOME PAYMENTS AND PRINCIPAL PAYMENTS

Paragraph 5 of the Agreement (“Income Payments”) is hereby deleted and replaced in its entirety by the following provisions of this Section 5:

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(a)On or before the date hereof, Seller and Buyer shall establish and maintain with the Depository Bank a deposit account owned by, in the name of and under the sole control of Buyer with respect to which the Blocked Account Agreement shall have been executed (such account, together with any replacement or successor thereof, the “Blocked Account”).  Seller shall cause all Income with respect to the Purchased Loans or other assets (if cash) delivered under Section 4 to be deposited in the Blocked Account no later than the next Business Day following its collection and receipt thereof.  Simultaneously with the transfer of any Purchased Loan under Section 3, Seller shall deliver to each Mortgagor or obligor (or the related collection account bank, as applicable), or the related lead lender or servicer under a Purchased Loan an irrevocable direction letter in form and substance satisfactory to Buyer instructing such Person to remit to the Blocked Account all amounts payable to Seller under the related Purchased Loan (unless such Mortgagor or obligor or related servicer or lender is already remitting payments to the Servicer, whereupon Seller shall direct Servicer to remit all such amounts into the Blocked Account and service such payments in accordance with the Servicing Agreement and the provisions hereof) and shall provide to Buyer written proof of such delivery.  If a Mortgagor or obligor (or the related collection account bank) or the related lead lender or servicer under a Purchased Loan forwards any Income with respect to such Purchased Loan to Seller rather than directly to the Blocked Account, Seller shall (i) deliver an additional irrevocable direction letter to the applicable Person and cause such Person to forward such amounts directly to the Blocked Account and (ii) hold such amounts in trust for Buyer and immediately deposit in the Blocked Account any such amounts.  All Income in respect of the Portfolio Loans, which may include payments in respect of associated Hedging Transactions, shall be deposited directly into, or, if applicable, remitted directly from the applicable underlying collection account to, the Blocked Account.

(b)So long as no Event of Default shall have occurred and be continuing, all Income on deposit in the Blocked Account in respect of the Portfolio Loans and the associated Hedging Transactions during each Collection Period shall be applied by the Buyer on the related Remittance Date as follows:

(i)first, to Buyer an amount equal to the Price Differential which has accrued and is outstanding in respect of the Transactions as of such Business Day;

(ii)second, to Buyer an amount equal to all Costs and other amounts payable by Seller and outstanding hereunder and under the other Transaction Documents (other than the Repurchase Price);

(iii)third, if a Principal Payment in respect of any Purchased Loan has been made during such Collection Period, to Buyer in respect of the Repurchase Price an amount equal to the greater of (i) the product of the amount of such Principal Payment multiplied by the Purchase Percentage and (ii) such greater amount, such that after giving effect to such payment of the applicable Repurchase Price, the aggregate Repurchase Price of the Portfolio Loans is less than or equal to the Asset Base, as determined by Buyer after giving effect to such payment;

(iv)fourth, during the Facility Extension Period, to Buyer the Extended Repurchase Monthly Amount;

(v)fifth, during the Facility Extension Period, to Buyer in respect of the Aggregate Repurchase Price until the Aggregate Repurchase Price for all of the Purchased Loans has been reduced to zero; and

(vi)sixth, to remit to Seller the remainder, if any.

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If on any Remittance Date, the amounts deposited in the Blocked Account shall be insufficient to make the payments required under clauses (i) through (iv) of this Section 5(b), the same shall constitute an Event of Default hereunder.

(c)If an Event of Default shall have occurred and be continuing, all Income on deposit in the Blocked Account in respect of the Purchased Loans and the associated Hedging Transactions shall be applied on the Business Day next following the Business Day on which such funds are deposited in the Blocked Account as follows:

(i)first, to Buyer, an amount equal to the Price Differential which has accrued and is outstanding in respect of the Transactions as of such Business Day;

(ii)second, to Buyer, all Costs and all other amounts payable by Seller and outstanding hereunder and under the other Transaction Documents (other than the Repurchase Price);

(iii)third, to Buyer, an amount equal to the aggregate Repurchase Price of the Purchased Loans, until the Aggregate Repurchase Price for all of the Purchased Loans has been reduced to zero; and

(iv)fourth, to Seller, the remainder.

(d)If at any time during the term of any Transaction any Income is distributed to Seller or Seller has otherwise received such Income and has made a payment in respect of such Income to Buyer pursuant to this Section 5, and for any reason such amount is required to be returned by Buyer to an obligor under such Purchased Loan (either before or after the Repurchase Date), Buyer may provide Seller with notice of such required return, and Seller shall pay the amount of such required return to Buyer by 11:00 a.m., New York time, on the Business Day following Seller’s receipt of such notice.

(e)Subject to the other provisions hereof, Seller shall be responsible for all Costs in respect of any Purchased Loans to the extent it would be so obligated if the Purchased Loans had not been sold to Buyer.  Buyer shall provide Seller with notice of any Costs promptly upon receiving such notice, and Seller shall pay the amount of any Costs to Buyer by 11:00 a.m., New York time, on the later of (i) five (5) Business Days after Buyer has informed Seller that such amount is due under the Purchased Loan Documents and (ii) three (3) Business Days following Seller’s receipt of such notice.

6.CAUTIONARY SECURITY INTEREST

Paragraph 6 of the Agreement (“Security Interest”) is hereby deleted and replaced in its entirety by the following provisions of this Section 6:

(a)Buyer and Seller intend that all Transactions hereunder be sales to Buyer of the Purchased Loans for all purposes (other than for U.S. Federal, state and local income or franchise tax purposes) and not loans from Buyer to Seller secured by the Purchased Loans.  However, in the event any Transaction is deemed to be a loan, Seller shall be deemed to have pledged to Buyer as security for the performance by Seller of its obligations under such Transaction and shall be deemed to have granted to Buyer a security interest in (i) the Blocked Account, (ii) all of the Purchased Loans, (iii) all “general intangibles,” “accounts” and “chattel paper” as defined in the UCC relating to or constituting any and all of the foregoing, (iv) all Income from the Purchased Loans and (v) all replacements, substitutions or distributions on or proceeds, payments and profits of, and records and files relating to, any and all of the foregoing (excluding any Margin Excess Advances).

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(b)To the extent Buyer is deemed to have a security interest with respect to the Purchased Loans as provided in Section 6(a) hereof, and with respect to the security interests granted in subsection (c) of this Section 6, Buyer shall have all of the rights and may exercise all of the remedies of a secured creditor under the UCC and any other applicable law.  In furtherance of the foregoing, (i) Seller, at its sole cost and expense, shall cause to be filed as a protective filing with respect to the Purchased Loans and as a UCC filing with respect to the security interests granted in subsection (c)) of this Section 6 one or more UCC financing statements in form satisfactory to Buyer (to be filed in the filing office indicated therein), in such locations as may be necessary to perfect and maintain perfection and priority of the outright transfer and the security interest granted hereby (including under Section 22 of this Annex I) and, in each case, continuation statements and any amendments thereto (collectively, the “Filings”), and shall forward copies of such Filings to Buyer upon completion thereof, and (ii) Seller shall from time to time, at its own expense, deliver and cause to be duly filed all such further filings, instruments and documents and take all such further actions as may be necessary or desirable or as may be requested by Buyer with respect to the perfection and priority of the outright transfer of the Purchased Loans and the security interest deemed granted hereunder and in the Purchased Loans and the rights and remedies of the Buyer with respect to the Purchased Loans (including under Section 22 of this Annex I) (including the payments of any fees and taxes required in connection with the execution and delivery of the Agreement).

(c)Seller hereby pledges to Buyer, as security for the performance by Seller of its obligations under all Transactions, all Hedging Transactions relating to Purchased Loans entered into by Seller and all proceeds thereof.  Seller shall take all action as is necessary or desirable to obtain consent to assignment of any such Hedging Transaction to Buyer and shall cause the counterparty under each such Hedging Transaction to enter into such document or instrument satisfactory to Buyer, Seller and such counterparty, pursuant to which such counterparty will covenant and agree to accept notice from Buyer to redirect payments under such Hedging Transaction as Buyer may direct.  So long as no Event of Default shall be continuing, Buyer agrees that it will not redirect payments under any Hedging Transaction pledged to Buyer pursuant to the terms of this Section 6(c).

(d)In connection with the repurchase by Seller of any Purchased Loan in accordance herewith, upon receipt of the Repurchase Price by Buyer, Buyer will deliver to Seller, at Seller’s expense, such documents and instruments as may be reasonably necessary to reconvey such Purchased Loan and any income related thereto to Seller.

7.PAYMENT, TRANSFER AND CUSTODY

Paragraph 7 of the Agreement (“Payment and Transfer”) is hereby deleted and replaced in its entirety by the following provisions of this Section 7:

(a)Subject to the terms and conditions of the Agreement, on the Purchase Date for each Transaction, ownership of the Purchased Loans and all rights thereunder shall be transferred to Buyer or its designee (including the Custodian) against the simultaneous transfer of the Purchase Price to an account of Seller specified in the Confirmation relating to such Transaction.  On the Purchase Date for the first Transaction, Buyer will provide Seller with a power of attorney, substantially in the form attached as Exhibit IV-2 hereto, in recordable form, allowing Seller to administer, operate and service such Purchased Loans.  Provided no Event of Default beyond any applicable cure period shall have occurred and be continuing, the power of attorney shall be binding upon Buyer and Buyer’s successors and assigns.

(b)With respect to each Table Funded Purchased Loan, Seller shall cause the Bailee to deliver to the Custodian (with a copy to Buyer) by no later than 1:00 p.m. (New York time), on the Purchase Date, by facsimile the related promissory note (or the participation certificate, as applicable), the Insured Closing Letter and Escrow Instructions, if any, the Bailee Agreement and a Trust Receipt issued

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by the Bailee thereunder on or before the related Purchase Date.  In connection with the sale of each Purchased Loan, not later than 1:00 p.m., two (2) Business Days prior to the related Purchase Date (or on the related Purchase Date, as may be agreed by Buyer and Seller on a case by case basis) (or with respect to a Table Funded Purchased Loan not later than 1:00 p.m. (New York time) on the third Business Day following the applicable Purchase Date), Seller shall deliver or cause Bailee to deliver (with a copy to Buyer) and release to the Custodian (together with the Custodial Delivery Certificate in the form attached hereto as Exhibit III), and shall cause the Custodian to deliver a Trust Receipt on the Purchase Date (or in the case of a Table Funded Purchased Loan, not later than two (2) Business Days following the receipt by the Custodian) confirming the receipt of the following original documents (collectively, the “Purchased Loan File”), pertaining to each of the Purchased Loans identified in the Custodial Delivery Certificate delivered therewith:

(i)With respect to each Purchased Loan that is a Mortgage Loan (including a First Mortgage B Note), the following documents, as applicable:

(A)The original Mortgage Note bearing all intervening endorsements, endorsed “Pay to the order of               without recourse” and signed in the name of the last endorsee (the “Last Endorsee”) by an authorized Person (in the event that the Purchased Loan was acquired by the Last Endorsee in a merger, the signature must be in the following form:  “[Last Endorsee], successor by merger to [name of predecessor]”; in the event that the Purchased Loan was acquired or originated by the Last Endorsee while doing business under another name, the signature must be in the following form:  “[Last Endorsee], formerly known as [previous name]”) or a lost note affidavit in a form reasonably approved by Buyer, with a copy of the applicable Mortgage Note attached thereto.

(B)The original or a copy of the loan agreement and the guarantee, if any, executed in connection with the Purchased Loan.

(C)The original Mortgage with evidence of recording thereon, or a copy thereof together with an officer’s certificate of Seller certifying that such represents a true and correct copy of the original and that such original has been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(D)The originals of all assumption, modification, consolidation or extension agreements with evidence of recording thereon, or copies thereof together with an officer’s certificate of Seller certifying that such represent true and correct copies of the originals and that such originals have each been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(E)The original Assignment of Mortgage to Buyer for each Purchased Loan, in form and substance acceptable for recording and signed in the name of the Last Endorsee (in the event that the Purchased Loan was acquired by the Last Endorsee in a merger, the signature must be in the following form:  “[Last Endorsee], successor by merger to [name of predecessor]”; in the event that the Purchased Loan was acquired or originated while doing business under another name, the signature must be in the following form: “[Last Endorsee], formerly known as [previous name]”).

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(F)The originals of all intervening assignments of mortgage with evidence of recording thereon, or copies thereof together with an officer’s certificate of Seller certifying that such represent true and correct copies of the originals and that such originals have each been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(G)The original Title Policy, or if the original Title Policy has not been issued, the original irrevocable marked commitment to issue the same.

(H)The original of any security agreement, chattel mortgage or equivalent document executed in connection with the Purchased Loan.

(I)The original Assignment of Leases, if any, with evidence of recording thereon, or a copy thereof together with an officer’s certificate of Seller, certifying that such copy represents a true and correct copy of the original that has been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(J)The originals of all intervening assignments of assignment of leases and rents, if any, or copies thereof, with evidence of recording thereon, or copies thereof together with an officer’s certificate of Seller certifying that such represent true and correct copies of the originals and that such originals have each been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.

(K)A copy of the UCC financing statements, certified as true and correct by Seller, and all necessary UCC continuation statements with evidence of filing thereon or copies thereof certified by Seller to have been sent for filing, and UCC assignments to Buyer, which UCC assignments shall be in form and substance acceptable for filing in the applicable jurisdictions.

(L)The original environmental indemnity agreement or similar guaranty or indemnity, whether stand-alone or incorporated into the applicable loan documents (if any).

(M)The original omnibus assignment to Buyer or such other documents necessary and sufficient to transfer to Buyer all of Seller’s right, title and interest in and to the Purchased Loan (if any).

(N)A disbursement letter from the Mortgagor to the original mortgagee or other evidence that the Purchased Loan has been fully disbursed (if applicable).

(O)Mortgagor’s certificate or title affidavit (if any).

(P)A survey of the Mortgaged Property (if any) as accepted by the title company for issuance of the Title Policy.

(Q)The original of any participation agreement, intercreditor agreement and/or servicing agreement executed in connection with such Purchased Loan.

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(R)A copy of all servicing agreements and Servicing Records related to such Purchased Loan, which Seller shall deliver to Servicer (with a copy to Buyer).

(S)A copy of the Mortgagor’s opinions of counsel.

(T)An assignment of any management agreements, permits, contracts and other material agreements (if any).

(U)Reports of UCC, tax lien, judgment and litigation searches as requested by Buyer, conducted by search firms reasonably acceptable to Buyer with respect to the Purchased Loan, Seller and the related underlying obligor, such searches to be conducted in each location Buyer shall reasonably designate and such reports reasonably satisfactory to Buyer.

(V)The original or a copy of the intercreditor or loan coordination agreement (if any) executed in connection with the Purchased Loan to the extent the subject borrower, or an affiliate thereof, has encumbered its assets with senior, junior or similar financing, whether mortgage financing or mezzanine loan financing.

(W)Copies of all documents relating to the formation and organization of the related obligor under such Purchased Loan, together with all consents and resolutions delivered in connection with such obligor’s obtaining such Purchased Loan.

(X)All other material documents and instruments evidencing, guaranteeing, insuring or otherwise constituting or modifying or otherwise affecting such Purchased Loan, or otherwise executed or delivered in connection with, or otherwise relating to, such Purchased Loan, including all documents establishing or implementing any lockbox pursuant to which Seller is entitled to receive any payments from cash flow of the underlying real property.

(Y)Evidence that the Purchased Loan has been fully disbursed (if applicable).

If Seller cannot deliver, or cause to be delivered, any of the documents and/or instruments required above to be delivered as originals, Seller shall deliver a photocopy thereof and, unless waived by Buyer, an Officer’s Certificate of Seller certifying that such copy represents a true and correct copy of the original.  Seller shall then, in the event that Seller has a legitimate and reasonable opportunity to obtain the original documents in question if the document in question exists in original form (1) use reasonable efforts to obtain and deliver the original document within 180 days after the related Purchase Date (or such longer period after the related Purchase Date as Buyer may consent to, which consent shall not be unreasonably withheld so long as Seller is, as certified in writing to Buyer no less often than monthly, in good faith attempting to obtain the original) and (2) after the expiration of such reasonable efforts period, deliver to Buyer a certification that states, despite Seller’s reasonable efforts, Seller was unable to obtain such original document.

(ii)With respect to each Purchased Loan which is a Mezzanine Loan secured by a pledge of the equity ownership interests in an entity that owns Eligible Property, the following, as applicable:

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(A)The original Mezzanine Note signed in connection with the Purchased Loan bearing all intervening endorsements, endorsed “Pay to the order of                     without recourse” and signed in the name of the Last Endorsee by an authorized Person (in the event that the Mezzanine Note was acquired by the Last Endorsee in a merger, the signature must be in the following form:  “[Last Endorsee], successor by merger to [name of predecessor]”; in the event that the Purchased Loan was acquired or originated by the Last Endorsee while doing business under another name, the signature must be in the following form:  “[Last Endorsee], formerly known as [previous name]”) or a lost note affidavit in a form reasonably approved by Buyer with a copy of the applicable Mezzanine Note attached thereto.

(B)The original or a copy of the loan agreement and the guarantee, if any, executed in connection with the Purchased Loan.

(C)The original or a copy of the intercreditor or loan coordination agreement executed in connection with the Purchased Loan to the extent the subject borrower, or an affiliate thereof, has encumbered its assets with senior, junior or similar financing, whether mortgage financing or mezzanine loan financing.

(D)The original security agreement executed in connection with the Purchased Loan.

(E)Copies of all documents relating to the formation and organization of the borrower under such Purchased Loan, together with all consents and resolutions delivered in connection with such borrower’s obtaining the Purchased Loan.

(F)All other material documents and instruments evidencing, guaranteeing, insuring or otherwise constituting or modifying or otherwise affecting such Purchased Loan, or otherwise executed or delivered in connection with, or otherwise relating to, such Purchased Loan, including all documents establishing or implementing any lockbox pursuant to which Seller is entitled to receive any payments from cash flow of the underlying real property.

(G)An omnibus assignment to Buyer or other documents necessary and sufficient to transfer to Buyer all of Seller’s right, title and interest in and to the Purchased Loan.

(H)The original of any participation agreement executed in connection with such Purchased Loan.

(I)A copy of all servicing agreements and Servicing Records related to such Purchased Loan, which Seller shall deliver to Servicer (with a copy to Buyer).

(J)A copy of the borrower’s opinions of counsel.

(K)A copy of the UCC financing statements, certified as true and correct by Seller, and all necessary UCC continuation statements with evidence of filing thereon or copies thereof certified by Seller to have been sent for filing, and UCC assignments to Buyer, which UCC assignments shall be in form and substance acceptable for filing in the applicable jurisdictions.

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(L)The original certificates representing the pledged equity interests to the extent such interests are in certificated form.

(M)Stock or similar powers relating to each pledged equity interest, executed in blank, if such equity interests are in certificated form.

(N)Assignment of any management agreements, agreements among equity interest holders or other material contracts.

(O)If the pledged equity interests are not certificated, evidence (which may be an Officer’s Certificate confirming such circumstances or in the form of an executed instruction to register such pledge by the mezzanine borrower and acknowledgment by the entity in which such pledged equity interests are held) that the pledged equity interests have been transferred to, or otherwise made subject to a first priority security interest in favor of, Seller.

(P)Copies of all material documents evidencing or securing the related mortgage loan and any other documents affecting the related mortgaged property to the extent in possession of Seller.

(Q)If the mezzanine borrower is an Affiliate of Seller, a pledge agreement and any UCC financing statements, executed by the owner(s) of all the equity interests of the mezzanine borrower as debtor in favor of Seller as secured party (which pledge agreement and UCC financing statements shall be transferred by Seller to Buyer), covering all equity interests in the mezzanine borrower, if not previously delivered to Buyer, together with any related original certificates of equity ownership and blank assignments thereof, all to give Buyer a security interest in such equity as additional collateral for Seller’s obligations.

(R)Evidence that the Purchased Loan has been fully disbursed (if applicable).

In connection with the transfer of any Purchased Loan, if Seller cannot deliver, or cause to be delivered, any of the documents and/or instruments referred to above, required to be delivered as originals, Seller shall deliver a photocopy thereof and, unless waived by Buyer, an Officer’s Certificate of Seller certifying that such copy represents a true and correct copy of the original.  Seller shall then, in the event that Seller has a legitimate and reasonable opportunity to obtain the original documents in question if the document in question exists in original form (1) use reasonable efforts to obtain and deliver the original document within 180 days after the related Purchase Date (or such longer period after the related Purchase Date as Buyer may consent to, which consent shall not be unreasonably withheld so long as Seller is, as certified in writing to Buyer no less often than monthly, in good faith attempting to obtain the original) and (2) after the expiration of such reasonable efforts period, deliver to Buyer a certification that states, despite Seller’s reasonable efforts, Seller was unable to obtain such original document.

(c)From time to time, Seller shall forward to the Custodian additional original documents or additional documents evidencing any assumption, modification, consolidation or extension of a Purchased Loan approved in accordance with the terms of the Agreement, and upon receipt of any such other documents, the Custodian shall hold such other documents on behalf of Buyer and as Buyer shall request from time to time.  With respect to any documents which have been delivered or are being delivered to recording offices for recording and have not been returned to Seller in time to permit their delivery

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hereunder at the time required, in lieu of delivering such original documents, Seller shall deliver to Buyer a true copy thereof with an officer’s certificate certifying that such copy is a true, correct and complete copy of the original, which has been transmitted for recordation.  Seller shall deliver such original documents to the Custodian promptly when they are received.  With respect to all of the Purchased Loans delivered by Seller to Buyer or its designee (including the Custodian), Seller shall execute an omnibus power of attorney substantially in the form of Exhibit IV-1 attached hereto irrevocably appointing Buyer its attorney-in-fact with full power to (i) complete and record any Assignment of Mortgage, (ii) complete the endorsement of any Mortgage Note or Mezzanine Note and (iii) take such other steps as may be necessary or desirable to enforce Buyer’s rights against any Purchased Loans and the related Purchased Loan Files and the Servicing Records.  Buyer shall deposit the Purchased Loan Files representing the Purchased Loans, or cause the Purchased Loan Files to be deposited directly, with the Custodian to be held by the Custodian on behalf of Buyer.  The Purchased Loan Files shall be maintained in accordance with the Custodial Agreement.  Any Purchased Loan Files not delivered to Buyer or its designee (including the Custodian) are and shall be held in trust by Seller or its designee for the benefit of Buyer as the owner thereof.  Seller or its designee shall maintain a copy of the Purchased Loan File and the originals of the Purchased Loan File not delivered to Buyer or its designee.  The possession of the Purchased Loan File by Seller or its designee is at the will of Buyer for the sole purpose of servicing the related Purchased Loan, and such retention and possession by Seller or its designee is in a custodial capacity only.  The books and records (including, without limitation, any computer records or tapes) of Seller or its designee shall be marked appropriately to reflect clearly the transfer, subject to the terms and conditions of the Agreement, of the related Purchased Loan to Buyer.  Seller or its designee (including the Custodian) shall release its custody of the Purchased Loan File only in accordance with written instructions from Buyer, unless such release is required as incidental to the servicing of the Purchased Loans or is in connection with a repurchase of any Purchased Loan by Seller or is pursuant to the order of a court of competent jurisdiction.

(d)In addition to any documents or instruments that are required to be delivered by Seller to Buyer hereunder in connection with the transfer of Purchased Loans by Seller to Buyer, on the date of the Agreement, Buyer shall have received all of the following items and documents, each of which shall be satisfactory to Buyer in form and substance:

(i)Transaction Documents.

(A)The Agreement (including this Annex I), duly executed and delivered by Seller and Buyer;

(B)The Guaranty, duly executed and delivered by the Guarantor;

(C)The Custodial Agreement, duly executed and delivered by Seller, Buyer and Custodian;

(D)The Blocked Account Agreement, duly executed and delivered by Seller, Buyer and Depository Bank;

(E)The Servicing Agreement, duly executed and delivered by Seller, Buyer and Servicer; and

(F)The Fee Letter, duly executed and delivered by Seller, Buyer and Goldman, Sachs & Co.

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(ii)Organizational Documents. Certified copies of the Seller’s and Guarantor’s organizational documents and resolutions or other documents evidencing the authority of Seller and Guarantor with respect to the execution, delivery and performance of the Transaction Documents to which it is a party and each other document to be delivered by Seller and Guarantor from time to time in connection with the Transaction Documents (and Buyer may conclusively rely on such certifications until it receives notice in writing from Seller to the contrary);

(iii)Legal Opinion.  Opinions of counsel to the Seller and Guarantor in form and substance satisfactory to Buyer as to (i) authority, enforceability of the Transaction Documents to which it is a party and such other matters as may be requested by Buyer and (ii) nonconsolidation; and

(iv)Other Documents.  Such other documents as Buyer may reasonably request.

8.CERTAIN RIGHTS OF BUYER WITH RESPECT TO THE PURCHASED LOANS

Paragraph 8 of the Agreement (“Segregation of Purchased Securities”) is hereby deleted and replaced in its entirety by the following provisions of this Section 8:

(a)Subject to the terms and conditions of the Agreement, title to all Purchased Loans shall pass to Buyer on the applicable Purchase Date, and Buyer shall have free and unrestricted use of its interest in the Purchased Loans in accordance with the terms and conditions of the Purchased Loans.  Nothing in the Agreement or any other Transaction Document shall preclude Buyer from engaging in repurchase transactions with the Purchased Loans with Persons in conformity with the terms and conditions of the Purchased Loans or otherwise selling, transferring, pledging, repledging, hypothecating, or rehypothecating all or a portion of its interest in the Purchased Loans to Persons in conformity with the terms and conditions to the Purchased Loans, but no such transaction shall relieve Buyer of its obligations to transfer the Purchased Loans to Seller pursuant to Section 3 of this Annex I or of Buyer’s obligation to credit or pay Income to, or apply Income to the obligations of, Seller pursuant to Section 5 of this Annex I or otherwise affect the rights, obligations and remedies of any party to the Agreement.

(b)Subject to the terms and conditions of the Agreement, any documents delivered to the Custodian pursuant to Section 7(b) and 7(c) of this Annex I shall only be released in accordance with the terms and conditions of the Custodial Agreement.

9.RESERVED.

10.REPRESENTATIONS

Paragraph 10 of the Agreement (“Representations”) is hereby supplemented by the following:

(a)Seller represents and warrants to Buyer that as of the Purchase Date for the purchase of any Purchased Loan by Buyer from Seller and any Transaction thereunder and as of the date of the Agreement and at all times while the Agreement and any Transaction thereunder is in full force and effect:

(i)Organization.  Seller is duly organized, validly existing and in good standing under the laws and regulations of the state of Seller’s organization and is duly licensed, qualified, and in good standing in every state where such licensing or qualification is necessary for the transaction of Seller’s business, except where lack of such licenses or qualifications would not be

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reasonably likely to result in a Material Adverse Effect.  Seller has the power to own and hold the assets it purports to own and hold, and to carry on its business as now being conducted and proposed to be conducted, and has the power to execute, deliver, and perform its obligations under the Agreement and the other Transaction Documents.

(ii)Due Execution; Enforceability.  The Transaction Documents have been duly executed and delivered by Seller, for good and valuable consideration.  The Transaction Documents constitute the legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms subject to bankruptcy, insolvency, and other limitations on creditors’ rights generally and to equitable principles.

(iii)Non-Contravention; Consents.  Neither the execution and delivery of the Transaction Documents, nor consummation by Seller of the transactions contemplated by the Transaction Documents (or any of them), nor compliance by Seller with the terms, conditions and provisions of the Transaction Documents (or any of them) will (x) conflict with or result in a breach or violation of any of the terms, conditions or provisions of any judgment or order, writ, injunction, decree or demand of any court applicable to Seller, or (y) result in the creation or imposition of any lien or any other encumbrance upon any of the assets of Seller, other than pursuant to the Transaction Documents.  Seller has all necessary licenses, permits and other consents from Governmental Authorities necessary to acquire, own and sell the Portfolio Loans and for the performance of its obligations under the Transaction Documents except where the failure to have any such license, permit or consent would not be reasonably likely to result in a Material Adverse Effect.

(iv)Litigation; Requirements of Law.  There is no action, suit, proceeding, investigation, or arbitration pending or, to the best knowledge of Seller, threatened against Seller, or any of its assets which may result in any Material Adverse Effect, or which may have an adverse effect on the validity of the Transaction Documents or any action taken or to be taken in connection with the obligations of Seller under any of the Transaction Documents.  Seller is in compliance in all material respects with all Requirements of Law.  Seller is not in default in any material respect with respect to any judgment, order, writ, injunction, decree, rule or regulation of any arbitrator or Governmental Authority.

(v)No Broker.  Seller has not dealt with any broker, investment banker, agent or other Person (other than Buyer or an Affiliate of Buyer) who may be entitled to any commission or compensation in connection with the sale of the Purchased Loans pursuant to any Transaction Documents.

(vi)Good Title to Purchased Loans.  Immediately prior to the purchase of any Purchased Loans by Buyer from Seller, such Purchased Loans are free and clear of any lien, security interest, claim, option, charge, encumbrance or impediment to transfer (including any “adverse claim” as defined in Section 8-102(a)(1) of the UCC but excluding any liens or encumbrances to be released simultaneously with the sale to Buyer hereunder), and are not subject to any rights of setoff, any prior sale, transfer, assignment, or participation by Seller or any agreement by Seller to assign, convey, transfer or participate, in whole or in part, and Seller is the sole legal record and beneficial owner of and owns and has the right to sell and transfer such Purchased Loans to Buyer and, upon transfer of such Purchased Loans to Buyer, Buyer shall be the owner of such Purchased Loans (other than for U.S. Federal, state and local income and franchise tax purposes) free of any adverse claim, subject to Seller’s rights pursuant to the Agreement.  In the event the related Transaction is recharacterized as a secured financing of the Purchased Loans and with respect to the security interests granted in Sections 6(a) and 6(c), the

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provisions of the Agreement are effective to create in favor of Buyer a valid security interest in all rights, title and interest of Seller in, to and under the Purchased Loans and the collateral specified in Sections 6(a) and 6(c), Buyer shall have a valid, perfected and enforceable first priority security interest in the Purchased Loans and such other collateral, subject to no lien or rights of others other than as granted herein.

(vii)No Default.  No Default or Event of Default exists under or with respect to the Transaction Documents.

(viii)Representations and Warranties Regarding Purchased Loans; Delivery of Purchased Loan File.  Seller represents and warrants to Buyer that each Purchased Loan sold hereunder, as of the applicable Purchase Date for the Transaction in question conforms to the applicable representations and warranties set forth in Exhibit V attached hereto, except as have been disclosed to Buyer in writing prior to Buyer’s issuance of a Confirmation with respect to the related Purchased Loan.  It is understood and agreed that the representations and warranties set forth in Exhibit V hereto, if any, shall survive delivery of the respective Purchased Loan File to Buyer or its designee (including the Custodian).  With respect to each Purchased Loan, the Mortgage Note or Mezzanine Note, the Mortgage (if any), the Assignment of Mortgage (if any) and any other documents required to be delivered under the Agreement and the Custodial Agreement for such Purchased Loan have been delivered (or with respect to Table Funded Loans shall be delivered in accordance with Section 7(b)) to Buyer or the Custodian on its behalf or such requirement will have been expressly waived in writing by Buyer.  Seller or its designee is in possession of a complete, true and accurate Purchased Loan File with respect to each Purchased Loan, except for such documents the originals of which have been delivered to the Custodian.

(ix)Adequate Capitalization; No Fraudulent Transfer.  Seller has, as of such Purchase Date, adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations.  Seller is generally able to pay, and as of the date hereof is paying, its debts as they come due.  Seller has not become, or is presently, financially insolvent nor will Seller be made insolvent by virtue of Seller’s execution of or performance under any of the Transaction Documents within the meaning of the bankruptcy laws or the insolvency laws of any jurisdiction.  Seller has not entered into any Transaction Document or any Transaction pursuant thereto in contemplation of insolvency or with intent to hinder, delay or defraud any creditor.  Seller has not received any written notice that any payment or other transfer made to or on account of Seller from or on account of any Mortgagor or any other person obligated under any Purchased Loan Documents is or may be void or voidable as an actual or constructive fraudulent transfer or as a preferential transfer.

(x)Organizational Documents.  Seller has delivered to Buyer certified copies of its organizational documents, together with all amendments thereto.

(xi)No Encumbrances.  There are (i) no outstanding rights, options, warrants or agreements on the part of Seller for a purchase, sale or issuance, in connection with the Purchased Loans and (ii) no agreements on the part of Seller to issue, sell or distribute the Purchased Loan.

(xii)Federal Regulations.  Seller is not (A) an “investment company,” or a company “controlled by an investment company,” within the meaning of the Investment Company Act of 1940, as amended, or (B) a “holding company,” or a “subsidiary company of a holding company,” or an “affiliate” of either a “holding company” or a “subsidiary company of a holding

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company,” as such terms are defined in the Public Utility Holding Company Act of 1935, as amended.

(xiii)Taxes.  Seller has filed or caused to be filed all tax returns which would be delinquent if they had not been filed on or before the date hereof and has paid all taxes due and payable on or before the date hereof and all other taxes, fees or other charges imposed on it and any of its assets by any Governmental Authority; no tax liens have been filed against any of Seller’s assets and, to Seller’s knowledge, no claims are being asserted with respect to any such taxes, fees or other charges.

(xiv)ERISA.  Neither Seller nor any ERISA Affiliate (a) sponsors or maintains any Plans or (b) makes any contributions to or has any liabilities or obligations (direct or contingent) with respect to any Plans. Seller does not, and would not be deemed to, hold Plan Assets and the consummation of the transactions contemplated by the Agreement will not constitute or result in any non-exempt prohibited transaction under Section 406 of ERISA, Section 4975 of the Code or substantially similar provisions under any other federal, state or local laws, rules or regulations.

(xv)Judgments/Bankruptcy.  Except as disclosed in writing to Buyer, there are no judgments against Seller or unsatisfied of record or docketed in any court located in the United States of America and no Act of Insolvency has ever occurred with respect to Seller.

(xvi)Full and Accurate Disclosure.  No information contained in the Transaction Documents, or any written statement furnished by or on behalf of Seller pursuant to the terms of the Transaction Documents, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of the circumstances under which they were made when such statements and omissions are considered in the totality of the circumstances in question.

(xvii)Financial Information.  All financial data concerning Seller and to Seller’s knowledge after due inquiry, the Purchased Loans that has been delivered by or on behalf of Seller to Buyer is true, complete and correct in all material respects and has been prepared in accordance with GAAP.  Since the delivery of such data, except as otherwise disclosed in writing to Buyer, there has been no change in the financial position of Seller or the Purchased Loans, or in the results of operations of Seller, which change is reasonably likely to have in a Material Adverse Effect on Seller.

(xviii)Jurisdiction of Organization.  The Seller’s jurisdiction of organization is the State of Delaware.

(xix)Location of Books and Records.  The location where Seller keeps its books and records, including all computer tapes and records relating to the Purchased Securities is its chief executive office at 420 Lexington Avenue, New York, New York 10170.

(xx)Regulation T, U and X.  Neither the entering into nor consummation of any Transaction hereunder, nor the use of the proceeds thereof, will violate any provisions of Regulation T, U or X. If requested by Buyer, Seller, any applicable Affiliate of Seller and the recipient of any portion of the proceeds of, or any portion of, any Transaction shall furnish to Buyer a statement on Federal Reserve Form G-3 referred to in Regulation U.

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(b)On the Purchase Date for any Transaction, Seller shall be deemed to have made all of the representations set forth in Paragraph 10 of the Agreement and Section 10(a) of this Annex I as of such Purchase Date.

11.NEGATIVE COVENANTS OF SELLER

On and as of the date hereof and each Purchase Date and until the Agreement is no longer in force with respect to any Transaction, Seller shall not without the prior written consent of Buyer:

(a)subject to Seller’s right to repurchase, take any action which would directly or indirectly impair or adversely affect Buyer’s title to the Purchased Loans;

(b)transfer, assign, convey, grant, bargain, sell, set over, deliver or otherwise dispose of, or pledge or hypothecate, directly or indirectly, any interest in the Purchased Loans (or any of them) to any Person other than Buyer, or engage in repurchase transactions or similar transactions with respect to the Purchased Loans (or any of them) with any Person other than Buyer, except where the Purchased Loans in question are simultaneously repurchased from Buyer;

(c)create, incur or permit to exist any lien, encumbrance or security interest in or on the Purchased Loans, except as described in Section 6 of this Annex I;

(d)create, incur or permit to exist any lien, encumbrance or security interest in or on any of the other collateral subject to the security interest granted by Seller pursuant to Section 6 of this Annex I;

(e)create, incur or permit any lien, security interest, charges, or encumbrances with respect to any Hedging Transaction for the benefit of any Person other than Buyer;

(f)materially modify or terminate any of the organizational documents of Seller or take any action which would cause it to cease to be a Single-Purpose Entity;

(g)consent or assent to a Significant Modification or any extension or termination of any note, loan agreement, mortgage, pledge agreement or guaranty relating to the Purchased Loans or other material agreement or instrument relating to the Purchased Loans without the prior written consent of Buyer;

(h)take any action or permit such action to be taken which would result in a Change in Control;

(i)after the occurrence and during the continuation of any Event of Default or monetary Default, make any distribution, payment on account of, or set apart assets for, a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of any equity or ownership interest of Seller, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Seller; or

(j)sponsor or maintain any Plans or make any contributions to, or have any liability or obligation (direct or contingent) with respect to any Plan and shall not permit any ERISA Affiliate to sponsor or maintain any Plans or make any contributions to, or have any liability or obligation (direct or contingent) with respect to any Plan;

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(k)engage in any transaction that would cause any obligation or action taken or to be taken hereunder (or the exercise by Buyer of any of its rights under the Agreement, the Purchased Loans or any Transaction Document) to be a non-exempt prohibited transaction under Section 406 of ERISA, Section 4975of the Code or substantially similar provisions under any other federal, state or local laws, rules or regulations; or

(l)make any future advances under any Purchased Loan to any underlying obligor which are not permitted by the related Purchased Loan Documents.

12.AFFIRMATIVE COVENANTS OF SELLER

(a)Seller shall promptly notify Buyer of any event and/or condition which is likely to have a Material Adverse Effect.

(b)Seller shall give notice to Buyer of the following (accompanied by an Officer’s Certificate setting forth details of the occurrence referred to therein and stating what actions Seller has taken or proposes to take with respect thereto):

(i)promptly upon receipt of notice or knowledge of the occurrence of any Default or Event of Default;

(ii)with respect to any Purchased Loan sold to Buyer hereunder, immediately upon receipt of any Principal Payment (in full or in part);

(iii)with respect to any Purchased Loan sold to Buyer hereunder, immediately upon receipt of notice or knowledge that the related Mortgaged Property has been damaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty, or otherwise damaged so as to affect adversely the value of such Mortgaged Property;

(iv)promptly upon receipt of notice or knowledge of (i) any Purchased Loan which becomes a Defaulted Loan, (ii) any lien or security interest (other than security interests created hereby) on, or claim asserted against, any Purchased Loan or, to Seller’s knowledge, the underlying collateral therefor or (iii) any event or change in circumstances that has or could reasonably be expected to have an adverse affect on the Market Value of a Purchased Loan; and

(v)promptly, and in any event within 10 days after service of process on any of the following, give to Buyer notice of all litigation, actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are pending or threatened) or other legal or arbitrable proceedings affecting Seller or affecting any of the assets of Seller before any Governmental Authority that (i) questions or challenges the validity or enforceability of any of the Transaction Documents or any action to be taken in connection with the transactions contemplated hereby, (ii) makes a claim or claims in an aggregate amount greater than $5,000,000, or (iii) which, individually or in the aggregate, if adversely determined could reasonably be likely to have a Material Adverse Effect.

(c)Seller shall provide Buyer with copies of such documents as Buyer may reasonably request evidencing the truthfulness of the representations set forth in Section 10.

(d)Seller shall defend the right, title and interest of Buyer in and to the Purchased Loans against, and take such other action as is necessary to remove, the liens, security interests, claims,

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encumbrances, charges and demands of all Persons (other than security interests granted to Buyer hereunder).

(e)Seller will permit Buyer or its designated representative to inspect any of Seller’s records with respect to all or any portion of the Purchased Loans and the conduct and operation of its business related thereto, at such reasonable times and with reasonable frequency requested by Buyer or its designated representative, and to make copies of extracts of any and all thereof.

(f)If any amount payable under or in connection with any of the Purchased Loans shall be or become evidenced by any promissory note, other instrument or chattel paper (as each of the foregoing is defined under the UCC), such note, instrument or chattel paper shall be immediately delivered to Buyer or its designee, duly endorsed in a manner satisfactory to Buyer or if any collateral or other security shall subsequently be delivered to Seller in connection with any Purchased Loan, Seller shall immediately deliver or forward such item of collateral or other security to Buyer or its designee, together with such instruments of assignment as Buyer may request.

(g)Seller shall provide (or cause to be provided to) Buyer with the following financial and reporting information:

(i)the Monthly Statement;

(ii)within 10 days of Seller’s receipt, all operating statements and occupancy information that Seller or Servicer has received relating to the Portfolio Loans;

(iii)the Quarterly Report;

(iv)the Financial Covenant Compliance Certificate;

(v)as soon as available and in any event within fifty-five (55) days after the end of each of the first three quarterly fiscal periods of each fiscal year of Seller, the unaudited, consolidated balance sheets of Seller, which shall incorporate its consolidated subsidiaries, as at the end of such period and the related unaudited, consolidated statements of income and retained earnings and of cash flows for Seller, which shall incorporate its consolidated Subsidiaries, for such period and the portion of the fiscal year through the end of such period, accompanied by an Officer’s Certificate of Seller, which certificate shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations Seller and its consolidated Subsidiaries in accordance with GAAP, consistently applied, as at the end of, and for, such period (subject to normal year-end audit adjustments);

(vi)within sixty (60) days following the end of each quarter, or within one hundred twenty (120) days following the end of each fiscal year, as the case may be, an Officer’s Certificate of Seller in form and substance reasonably satisfactory to Buyer that Seller during such fiscal period or year has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in the Agreement and the other Transaction Documents to be observed, performed or satisfied by it, and that there has been no Event of Default and no event or circumstance has occurred that is reasonably likely to result in a Material Adverse Effect;

(vii)as soon as available and in any event within one hundred (100) days after the end of each fiscal year of Seller, the consolidated balance sheets of Seller, which shall incorporate its consolidated Subsidiaries, if any, as at the end of such fiscal year and the related consolidated

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statements of income and retained earnings and of cash flows for Seller, which shall incorporate its consolidated Subsidiaries, if any, for such year, accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall not be qualified as to scope of audit or going concern and shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of Seller and its consolidated Subsidiaries as at the end of, and for, such fiscal year in accordance with GAAP;

(viii)within ten (10) Business Days after Buyer’s reasonable request, such further information with respect to the operation of any Mortgaged Property, Purchased Loan, the financial affairs of the Seller and any Plan and Multiemployer Plan as may be requested by Buyer, including all business plans prepared by or for Seller; provided, however, that with respect to information not previously known to, or in the possession of, Seller relating to any Multiemployer Plan, Seller shall only be required to provide such information as may be obtained through good faith efforts;

(ix)within sixty (60) Business Days after the end of each calendar year, such information as may be reasonably requested by Buyer, its successors and assigns, and transferees, in connection with the Portfolio Loans, and that are necessary for the party requesting such information in preparing its tax return and paying taxes in any country or jurisdiction where such tax return or taxes are due; and

(x)such other reports as Buyer shall reasonably require.

(h)Seller shall at all times comply in all material respects with all laws, ordinances, rules and regulations of any federal, state, municipal or other public authority having jurisdiction over Seller or any of its assets and Seller shall do or cause to be done all things reasonably necessary to preserve and maintain in full force and effect its legal existence, and all licenses material to its business.

(i)Seller shall at all times keep proper books of records and accounts in which full, true and correct entries shall be made of its transactions in accordance with GAAP and set aside on its books from its earnings for each fiscal year all such proper reserves in accordance with GAAP.

(j)Seller shall advise Buyer in writing of the opening of any new chief executive office or the closing of any such office and of any change in Seller’s name or the places where the books and records pertaining to the Purchased Securities are held not less than the later of fifteen (15) Business Days prior to taking any such action or 90 days before any financial statement filing will lapse, lose perfection or become materially misleading.

(k)Seller shall observe, perform and satisfy all the terms, provisions, covenants and conditions required to be observed, performed or satisfied by it, and shall pay when due all costs, fees and expenses required to be paid by it, under the Transaction Documents.  Seller shall pay and discharge all taxes, levies, liens and other charges, if any, on its assets and on the Purchased Loans that, in each case, in any manner would create any lien or charge upon the Purchased Loans, except for any such taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided in accordance with GAAP.

(l)Seller shall maintain its existence as a limited liability company, organized solely and in good standing under the law of the State of Delaware and shall not dissolve, liquidate, merge with or into any other Person or otherwise change its organizational structure or identity or incorporate in any other jurisdiction.

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(m)Seller shall maintain all records with respect to the Purchased Loans and the conduct and operation of its business with no less a degree of prudence than if the Purchased Loans were held by Seller for its own account and will furnish Buyer, upon request by Buyer or its designated representative, with information reasonably obtainable by Seller with respect to the Purchased Loans and the conduct and operation of its business.

(n)Seller shall provide Buyer with notice of each modification of any Purchased Loan Documents consented to by Seller (including such modifications which do not constitute a Significant Modification).

(o)Seller shall provide Buyer with notice of the occurrence of any “appraisal reduction event”, “control appraisal period” or similar event under any participation agreement related to any Purchased Loan.

(p)Seller shall provide Buyer with reasonable access to operating statements, the occupancy status and other property level information, with respect to the Mortgaged Properties, plus any such additional reports as Buyer may reasonably request.

(q)Seller may propose, and Buyer will consider but shall be under no obligation to approve, strategies for the foreclosure or other realization upon the security for any Purchased Loan that has become a Defaulted Loan.

(r)Seller shall not cause any Purchased Loan to be serviced by any servicer other than a servicer expressly approved in writing by Buyer.

13.SINGLE-PURPOSE ENTITY

Seller hereby represents and warrants to Buyer and covenants with Buyer, that as of the date hereof and so long as any of the Transaction Documents shall remain in effect:

(a)It is and intends to remain solvent and it has paid and will pay its debts and liabilities (including employment and overhead expenses) from its own assets as the same shall become due.

(b)It has complied and will comply with the provisions of its certificate of formation and its limited liability company agreement.

(c)It has done or caused to be done and will do all things necessary to observe limited liability company formalities and to preserve its existence.

(d)It has maintained and will maintain all of its books, records, financial statements and bank accounts separate from those of its affiliates, its members and any other Person, and it will file its own tax returns (except to the extent consolidation is required under GAAP or as a matter of law).

(e)It has been, is and will be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate), shall correct any known misunderstanding regarding its status as a separate entity, shall conduct business in its own name, shall not identify itself or any of its Affiliates as a division or part of the other and shall maintain and utilize separate stationery, invoices and checks.

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(f)It has not owned and will not own any property or any other assets other than the Purchased Loans and Portfolio Securities, cash and its interest under any associated Hedging Transactions.

(g)It has not engaged and will not engage in any business other than the origination, acquisition, ownership, financing and disposition of the the Purchased Loans and Portfolio Securities and the associated Hedging Transactions in accordance with the applicable provisions of the Transaction Documents and the Securities Repurchase Agreement.

(h)It has not entered into, and will not enter into, any contract or agreement with any of its affiliates, except upon terms and conditions that are intrinsically fair and substantially similar to those that would be available on an arm’s-length basis with Persons other than such affiliate.

(i)It has not incurred and will not incur any indebtedness or obligation, secured or unsecured, direct or indirect, absolute or contingent (including guaranteeing any obligation), other than (A) obligations under the Transaction Documents and the Securities Repurchase Agreement, (B) obligations under the documents evidencing the Purchased Loans and Portfolio Securities and (C) unsecured trade payables, in an aggregate amount not to exceed $100,000 at any one time outstanding, incurred in the ordinary course of acquiring, owning, financing and disposing of the the Purchased Loans and Portfolio Securities; provided, however, that any such trade payables incurred by Seller shall be paid within 30 days of the date incurred.

(j)It has not made and will not make any loans or advances to any other Person, and shall not acquire obligations or securities of any member or affiliate of any member or any other Person (other than in connection with the origination or acquisition of Purchased Loans and Portfolio Securities).

(k)It will maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations.

(l)Neither it nor Guarantor will seek its dissolution, liquidation or winding up, in whole or in part, or suffer any Change of Control, consolidation or merger.

(m)It will not commingle its funds and other assets with those of any of its Affiliates or any other Person.

(n)It has maintained and will maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any of its Affiliates or any other Person.

(o)It has not held and will not hold itself out to be responsible for the debts or obligations of any other Person.

(p)It has no liabilities, contingent or otherwise, other than those normal and incidental to the acquisition, origination, ownership, servicing, administration, enforcement, financing and disposition of the Purchased Loans and Portfolio Securities.

(q)It has conducted and shall conduct its business consistent with the requirements of being a Single-Purpose Entity.

(r)It shall not maintain any employees.

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14.EVENTS OF DEFAULT; REMEDIES

Paragraph 11 (“Events of Default”) of the Agreement is hereby amended by the deletion in their entirety of the first paragraph thereof (other than the clauses referenced in Section 14(a) below) and Paragraphs 11(a) through (i) thereof and by the addition of the provisions (a) through (c) of Section 14 of this Annex I:

(a)Together with clauses (iii) through (v) and (vii) of the first paragraph of Paragraph 11 of the Agreement, the following shall constitute an event of default hereunder (each an “Event of Default”):

(i)failure of Seller to repurchase or the failure of Buyer to transfer the Purchased Loan on the applicable Repurchase Date (except when such failure to transfer is a result of Buyer’s inability to obtain necessary consents to, or fulfill restrictions on, such transfer);

(ii)failure of Seller to apply any Income received by Seller in accordance with the provisions hereof;

(iii)(A) the Transaction Documents shall for any reason not cause, or shall cease to cause, Buyer to be the owner or, if recharacterized as a secured financing, a secured party with respect to any of the Purchased Loans or the collateral specified in Section 6(a) and 6(c) free of any adverse claim, liens and other rights of others (other than as granted herein) or (B) if a Transaction is recharacterized as a secured financing, the Transaction Documents with respect to any Transaction shall for any reason cease to create a valid first priority security interest in favor of Buyer in any of the Purchased Loans or the collateral specified in Sections 6(a) and 6(c) or (C) if the Transaction Documents shall cease to be in full force and effect or if their enforceability is challenged by Seller;

(iv)failure of Seller to make the payments required under Section 4 or Section 5(b) on any Remittance Date which failure is not remedied within one (1) Business Day;

(v)failure of Seller to make any other payment owing to Buyer which has become due, whether by acceleration or otherwise, under the terms of the Agreement which failure is not remedied within the applicable period (in the case of a failure pursuant to Section 4) or, if no period is specified, five (5) Business Days after notice thereof to Seller; provided, however, that Buyer shall not be required to provide notice in the event of a failure by Seller to repurchase on the Repurchase Date;

(vi)breach by Seller in the due performance or observance of any term, covenant or agreement contained in Section 11(k) of this Annex I;

(vii)Change of Control shall have occurred with respect to the Seller or Guarantor;

(viii)any representation made by Seller or Buyer shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated; provided that the representations and warranties set forth in Section 10(a) (vi) or (viii) (in the case of (vi), with respect to the affected or Purchased Loans only) made by Seller shall not be considered an Event of Default if incorrect or untrue in any material respect, if Buyer terminates the related Transaction and Seller repurchases the related Purchased Loans on an Early Repurchase Date no later than ten (10) Business Days after receiving written notice of such incorrect or untrue representation;  provided, however, that if Seller shall have made any such representation with

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knowledge that it was materially incorrect or untrue at the time made, such misrepresentation shall constitute an Event of Default;

(ix)a final judgment by any competent court in the United States of America for the payment of money (in the case of Seller) or for the payment of money in an amount greater than $5,000,000 (in the case of Guarantor) shall have been rendered against Seller or Guarantor, as the case may be, and remained undischarged or unpaid for a period of forty-five (45) days, during which period execution of such judgment is not effectively stayed;

(x)Guarantor shall have defaulted or failed to perform under any note, indenture, loan agreement, guaranty, swap agreement or any other contract, agreement or transaction to which it is a party, and which default (A) involves the failure to pay a matured obligation in excess of $10,000,000, or (B) involving an obligation of at least $10,000,000 is a monetary default or a material non-monetary default and results in acceleration or permits the acceleration of the obligation by any other party to or beneficiary of such note, indenture, loan agreement, guaranty, swap agreement or other contract agreement or transaction; provided, however, that any such default, failure to perform or breach shall not constitute an Event of Default if Guarantor cures such default, failure to perform or breach, as the case may be, within the grace period, if any, provided under the applicable agreement;

(xi)As of the end of any fiscal quarter (A) Guarantor’s (1) Debt to Equity Ratio is greater than 5:1, (2) Tangible Net Worth is less than the sum of (x) $129,750,000 and (y) 75% of the proceeds of any equity issuances occurring after Guarantor’s initial public offering, (3) Fixed Charge Coverage Ratio is less than 1.50:1, or (4) Minimum Liquidity is less than $10,000,000, for the first two years after the date of this Agreement, and less than $15,000,000 thereafter; or (B) Guarantor fails to maintain cumulative positive EBITDA for the three fiscal quarters most recently ended.

(xii)if Seller or Buyer shall breach or fail to perform any of the terms, covenants, obligations or conditions of the Agreement, other than as specifically otherwise referred to in this definition of “Event of Default”, and such breach or failure to perform is not remedied within ten (10) Business Days, or if such breach is not curable by the payment of a sum of money, thirty (30) days after notice thereof to Seller or Buyer from the applicable party or its successors or assigns;

(xiii)an Act of Insolvency shall have occurred with respect to the Seller or Guarantor;

(xiv)an “event of default” beyond any applicable notice and cure period shall have occurred under (A) the Securities Repurchase Agreement, (B) any repurchase facility or loan facility entered into by Seller and Buyer or any affiliate thereof or (C) any facility with Buyer or any affiliate thereof in which Seller is a guarantor; or

(xv)(A) any of the representations, warranties and covenants of Guarantor in the Guaranty or any Financial Covenant Compliance Certificate shall have been incorrect or untrue in any material respect when made or repeated or deemed to have been made or repeated and such misrepresentation or breach of warranty or covenant has not been cured within ten (10) Business Days of after receiving written notice of such incorrect or untrue representation or such breach of covenant or (B) Guarantor shall have defaulted or failed to perform under the Guaranty.

(b)If an Event of Default shall occur and be continuing with respect to Seller, the following rights and remedies shall be available to Buyer:

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(i)At the option of Buyer, exercised by written notice to Seller (which option shall be deemed to have been exercised, even if no notice is given, immediately upon the occurrence of an Act of Insolvency), the Repurchase Date for each Transaction hereunder shall, if it has not already occurred, be deemed immediately to occur (the date on which such option is exercised or deemed to have been exercised being referred to hereinafter as the “Accelerated Repurchase Date”) (and any Transaction for which the related Purchase Date has not yet occurred shall be canceled).

(ii)If Buyer exercises or is deemed to have exercised the option referred to in Section 14(b)(i):

(A)Seller’s obligations hereunder to repurchase all Purchased Loans shall become immediately due and payable on and as of the Accelerated Repurchase Date and all Income deposited in the Blocked Account shall be retained by Buyer and applied to the aggregate unpaid Repurchase Price and any other amounts owing by Seller hereunder; and

(B)to the extent permitted by applicable law, the Repurchase Price with respect to each Transaction (determined as of the Accelerated Repurchase Date) shall be increased by the aggregate amount obtained by daily application of, on a 360 day per year basis for the actual number of days during the period from and including the Accelerated Repurchase Date to but excluding the date of payment of the Repurchase Price (as so increased), (x) the Pricing Rate applicable upon an Event of Default for such Transaction multiplied by (y) the Repurchase Price for such Transaction (decreased by (I) any amounts actually remitted to Buyer by Seller from time to time pursuant to Section 5 and applied to such Repurchase Price to the extent such amounts are not already included in the computation of the Repurchase Price and (II) any amounts applied to the Repurchase Price pursuant Section 14(b)(iii) of this Annex I); and

(C)the Custodian shall, upon the request of Buyer (with simultaneous copy of such request to Seller), deliver to Buyer all instruments, certificates and other documents then held by the Custodian relating to the Purchased Loans.

(iii)Buyer may, after ten (10) days notice to Seller of Buyer’s intent to take such action (provided that no such notice shall be required in the circumstances set forth in Section 9-611(d) of the UCC), (A) immediately sell, at a public or private sale in a commercially reasonable manner and at such price or prices as Buyer may reasonably deem satisfactory any or all of the Purchased Loans or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Loans, to give Seller credit for such Purchased Loans in an amount equal to the Market Value of such Purchased Loans against the aggregate unpaid Repurchase Price for such Purchased Loans and any other amounts owing by Seller under the Transaction Documents.  The proceeds of any disposition of Purchased Loans effected pursuant to this Section 14(b)(iii) shall be applied, (v) first, to the costs and expenses incurred by Buyer in connection with Seller’s default; (w) second, to costs of cover and/or Hedging Transactions, if any; (x) third, to the Repurchase Price; (y) fourth, to any other outstanding obligation of Seller to Buyer or its Affiliates pursuant to the Transaction Documents, and (z) the balance, if any, to Seller.

(iv)The parties recognize that it may not be possible to purchase or sell all of the Purchased Loans on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Purchased Loans may not be liquid.  In view of the nature of the Purchased Loans, the parties agree that, to the extent permitted by applicable law,

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liquidation of a Transaction or the Purchased Loans shall not require a public purchase or sale and that a good faith private purchase or sale shall be deemed to have been made in a commercially reasonable manner.  Accordingly, Buyer may elect, in its sole discretion, the time and manner of liquidating any Purchased Loans, and nothing contained herein shall (A) obligate Buyer to liquidate any Purchased Loans on the occurrence and during the continuance of an Event of Default or to liquidate all of the Purchased Loans in the same manner or on the same Business Day or (B) constitute a waiver of any right or remedy of Buyer.

(v)Seller shall be liable to Buyer for the amount of all reasonable expenses, including reasonable legal fees and expenses, actually incurred by Buyer in connection with or as a consequence of an Event of Default with respect to Seller, (B) all costs incurred in connection with covering transactions or Hedging Transactions (including short sales) or entering into replacement transactions (C) all damages, losses, judgment costs and expenses of any kind which may be imposed on, incurred by or asserted against Buyer relating to or arising out of such Hedging Transactions or covering transactions and (D) any other loss, damage, cost or expense directly arising or resulting from the occurrence of an Event of Default with respect to Seller.

(vi)Buyer may exercise any or all of the remedies available to Buyer immediately upon the occurrence of an Event of Default and at any time during the continuance thereof.  All rights and remedies arising under the Transaction Documents, as amended from time to time, are cumulative and not exclusive of any other rights or remedies which Buyer may have.

(vii)Buyer may enforce its rights and remedies hereunder without prior judicial process or hearing, and Seller hereby expressly waives any defenses Seller might otherwise have to require Buyer to enforce its rights by judicial process.  Seller also waives any defense Seller might otherwise have arising from the use of nonjudicial process, disposition of any or all of the Purchased Loans, or from any other election of remedies.  Seller recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm’s length.

(viii)Without limiting any other rights or remedies of Buyer, Buyer shall have the right to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by or for account of Buyer or Buyer’s Affiliates on behalf of Seller to any obligations of Seller hereunder to Buyer, irrespective of whether Buyer shall have made any demand under the Agreement or the other Transaction Documents.

(ix)Buyer shall have, in addition to its rights and remedies under the Transaction Documents, all of the rights and remedies provided by applicable federal, state, foreign, and local laws (including, without limitation, if the Transactions are recharacterized as secured financings, the rights and remedies of a secured party under the UCC of the State of New York, to the extent that the UCC is applicable, and the right to offset any mutual debt and claim), in equity, and under any other agreement between Buyer and Seller, exercisable upon ten (10) days notice from Buyer to Seller.  Without limiting the generality of the foregoing, Buyer shall be entitled to set off the proceeds of the liquidation of the Purchased Loans against all of Seller’s obligations to Buyer, whether or not such obligations are then due, without prejudice to Buyer’s right to recover any deficiency.

(c)If an Event of Default occurs and is continuing with respect to Buyer, the following rights and remedies shall be available to Seller:

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(i)Upon tender by Seller of payment of the aggregate Repurchase Price for all Purchased Loans, together with all other amounts due hereunder to Buyer, Buyer’s right, title and interest in such Purchased Loans shall be deemed transferred to Seller, and Buyer shall simultaneously deliver such Purchased Loans to Seller.

(ii)Seller shall have all the rights and remedies provided herein or provided by applicable federal, state, foreign, local and any other applicable laws, in equity, and under any other agreement between Buyer and Seller (including the right to offset any debt or claim).

(iii)If Seller exercises the option referred to in Section 14(c)(i) hereof and Buyer fails to deliver any Purchased Loans to Seller, after three (3) Business Days’ notice to Buyer, Seller may purchase loans that are in as similar an amount and interest rate as is reasonably practicable and in the same Loan Type as such Purchased Loans.

15.SINGLE AGREEMENT

Clause (ii) of Paragraph 12 of the Agreement (“Single Agreement”) is hereby deleted.

16.NOTICES AND OTHER COMMUNICATIONS

Paragraph 13 of the Agreement (“Notices and Other Communications”) is hereby deleted and replaced in its entirety by the following provisions of this Section 16:

All notices, consents, approvals and requests required or permitted hereunder shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) hand delivery, with proof of attempted delivery, (b) certified or registered United States mail, postage prepaid, (c) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, or (d) by telecopier (with answerback acknowledged); provided that such telecopied notice must also be delivered by one of the means set forth in (a), (b) or (c) above, to the addresses specified in Annex II hereto or at such other address and person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section 16.  A notice shall be deemed to have been given:  (a) in the case of hand delivery, at the time of delivery, (b) in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day, (c) in the case of expedited prepaid delivery upon the first attempted delivery on a Business Day; or (d) in the case telecopier, upon receipt of answerback confirmation, provided that such telecopied notice was also delivered as required in this Section.  A party receiving a notice which does not comply with the technical requirements for notice under this Section may elect to waive any deficiencies and treat the notice as having been properly given.

17.NON-ASSIGNABILITY

The provisions of Paragraph 15 of the Agreement (“Nonassignability; Termination”) are hereby deleted and replaced in their respective entireties by the following provisions of this Section 17:

(a)The rights and obligations of Seller under the Transaction Documents, the Hedging Transactions and under any Transaction shall not be assigned by Seller without the prior written consent of Buyer.  Buyer may assign or participate its rights and obligations under the Transaction Documents and under any Transaction and its rights and interests in any Hedging Transaction, in each case, without the prior written consent of Seller.  Seller agrees to use its good faith efforts to include in the participation agreement or intercreditor agreement, as applicable, relating to each Purchased Loan a provision

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expressly recognizing Goldman Sachs Mortgage Company, together with its successors and assigns, as a permitted transferee of each such Purchased Loan.

Notwithstanding anything to the contrary contained herein, with respect to Seller, (A) Buyer shall remain responsible for reviewing and determining the eligibility of any New Loan for purposes of any Transaction and (B) Seller shall continue to deal solely and directly with Buyer in connection with any Transaction.  As long as an Event of Default on the part of Seller shall have occurred and be continuing, Buyer may assign or participate its rights and obligations under the Transaction Documents and/or any Transaction to any Person.

(b)The Buyer shall maintain a record of ownership identifying all assignees.  If any assignee is a non-U.S. Person, such assignee shall timely provide Seller with such forms as may be required to establish the assignee’s status for U.S. withholding tax purposes.

(c)With respect to any issuance by Buyer of a participation in any Transaction, (i) Buyer shall act as agent for all participants in any dealings with Seller in connection with such Transactions and will maintain, on behalf of Seller, a record of ownership that identifies all participants, and (ii) Seller shall not be obligated to deal directly with any party other than Buyer in connection with such Transactions, or to pay or reimburse Buyer for any costs that would not have been incurred by Buyer had no participation interests in such Transactions been issued.

(d)Subject to the foregoing, the Transaction Documents and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and permitted assigns.  Nothing in the Transaction Documents, express or implied, shall give to any Person, other than the parties to the Transaction Documents and their respective successors, any benefit or any legal or equitable right, power, remedy or claim under the Transaction Documents.

18.GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

The language in Paragraph 16 of the Agreement (“Governing Law”) which reads “without giving effect to the conflict of law principals thereof” is hereby deleted. Paragraph 18 of the Agreement (“Use of Employee Plan Assets”) is hereby deleted in its entirety.  Paragraph 17 (“No Waivers, Etc.”) is hereby deleted and replaced in its entirety by the following provisions of this Section 18:

(a)Each party irrevocably and unconditionally submits to the non-exclusive jurisdiction of any United States Federal or New York State court sitting in Manhattan, and any appellate court from any such court, solely for the purpose of any suit, action or proceeding brought to enforce its obligations under the Agreement or relating in any way to the Agreement or any Transaction under the Agreement.

(b)To the extent that either party has or hereafter may acquire any immunity (sovereign or otherwise) from any legal action, suit or proceeding, from jurisdiction of any court or from set off or any legal process (whether service or notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) with respect to itself or any of its property, such party hereby irrevocably waives and agrees not to plead or claim such immunity in respect of any action brought to enforce its obligations under the Agreement or relating in any way to the Agreement or any Transaction under the Agreement.

(c)Each party hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court and any right of jurisdiction on account of its place of residence or domicile and irrevocably consents to the service of any summons and complaint and any other process by the mailing of copies of such process to

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them at their respective address specified herein.  Each party hereby agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Nothing in this Section 18 shall affect the right of Buyer to serve legal process in any other manner permitted by law or affect the right of Buyer to bring any action or proceeding against Seller or its property in the courts of other jurisdictions.

(d)EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THE AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR THEREUNDER.

19.NO RELIANCE; DISCLAIMERS

(a)Each of Buyer and Seller hereby acknowledges, represents and warrants to the other that, in connection with the negotiation of, the entering into, and the performance under, the Transaction Documents and each Transaction thereunder:

(i)It is not relying (for purposes of making any investment decision or otherwise) upon any advice, counsel or representations (whether written or oral) of the other party to the Transaction Documents, other than the representations expressly set forth in the Transaction Documents;

(ii)It has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisors to the extent that it has deemed necessary, and it has made its own investment, hedging and trading decisions (including decisions regarding the suitability of any Transaction) based upon its own judgment and upon any advice from such advisors as it has deemed necessary and not upon any view expressed by the other party;

(iii)It is a sophisticated and informed Person that has a full understanding of all the terms, conditions and risks (economic and otherwise) of the Transaction Documents and each Transaction thereunder and is capable of assuming and willing to assume (financially and otherwise) those risks;

(iv)It is entering into the Transaction Documents and each Transaction thereunder for the purposes of managing its borrowings or investments or hedging its underlying assets or liabilities and not for purposes of speculation;

(v)It is not acting as a fiduciary or financial, investment or commodity trading advisor for the other party and has not given the other party (directly or indirectly through any other Person) any assurance, guaranty or representation whatsoever as to the merits (either legal, regulatory, tax, business, investment, financial accounting or otherwise) of the Transaction Documents or any Transaction thereunder;

(b)Each determination by Buyer of the Market Value with respect to each New Loan or Purchased Loan or the communication to Seller of any information pertaining to Market Value under the Agreement shall be subject to the following disclaimers:

(i)Buyer has assumed and relied upon, with Seller’s consent and without independent verification, the accuracy and completeness of the information provided by Seller and reviewed by Buyer.  Buyer has not made any independent inquiry of any aspect of the New Loans or Purchased Loans or the underlying collateral.  Buyer’s view is based on economic,

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market and other conditions as in effect on, and the information made available to Buyer as of, the date of any such determination or communication of information, and such view may change at any time without prior notice to Seller.

(ii)Market Value determinations and other information provided to Seller constitute a statement of Buyer’s view of the value of one or more loans or other assets at a particular point in time and neither (x) constitute a bid for a particular trade, (y) indicate a willingness on the part of Buyer or any Affiliate thereof to make such a bid, nor (z) reflect a valuation for substantially similar assets at the same or another point in time, or for the same assets at another point in time.

(iii)Market Value determinations and other information provided to Seller may vary significantly from valuation determinations and other information which may be obtained from other sources.

(iv)Market Value determinations and other information provided to Seller are communicated to Seller solely for its use and may not be relied upon by any other person and may not be disclosed or referred to publicly or to any third party without the prior written consent of Buyer, which consent Buyer may withhold or delay in its sole and absolute discretion.

(v)Buyer makes no representations or warranties with respect to any Market Value determinations or other information provided to Seller. Buyer shall not be liable for any incidental or consequential damages arising out of any inaccuracy in such valuation determinations and other information provided to Seller, including as a result of any act of gross negligence or breach of any warranty.

(vi)Market Value indications and other information provided to Seller in connection with Section 3(b) are only indicative of the initial Market Value of the New Loan submitted to Buyer for consideration thereunder, and may change without notice to Seller prior to, or subsequent to, the transfer by Seller of the New Loan pursuant to Section 3(e).  No indication is provided as to Buyer’s expectation of the future value of such Purchased Loan or the underlying collateral.

(vii)Initial Market Value indications and other information provided to Seller in connection with Section 3(b) are to be used by Seller for the sole purpose of determining whether to proceed in accordance with Section 3 and for no other purpose.

20.INDEMNITY AND EXPENSES

(a)Seller hereby agrees to hold Buyer and its Affiliates and each of their respective officers, directors, employees and agents (“Indemnified Parties”) harmless from and indemnify the Indemnified Parties against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, taxes (including stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Purchased Loans or in connection with any of the transactions contemplated by the Agreement (or the recharacterization of any Transaction) and the documents delivered in connection herewith and therewith, other than net income taxes of Buyer), fees, costs, expenses (including reasonable attorneys fees and disbursements and any and all servicing and enforcement costs with respect to the Purchased Loans) or disbursements (all of the foregoing, collectively “Indemnified Amounts”) which may at any time (including, without limitation, such time as the Agreement shall no longer be in effect and the Transactions shall have been repaid in full) be imposed on or asserted against any Indemnified Party in any way whatsoever arising out of or in connection with, or relating to, the Agreement or any Transactions thereunder or any action taken or omitted to be taken by any Indemnified Party under or in

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connection with any of the foregoing; provided, that Seller shall not be liable for Indemnified Amounts resulting from the gross negligence or willful misconduct of any Indemnified Party.  Without limiting the generality of the foregoing, Seller agrees to hold Buyer harmless from and indemnify Buyer against all Indemnified Amounts with respect to all Purchased Loans relating to or arising out of any violation or alleged violation of any environmental law, rule or regulation or any consumer credit laws, including without limitation ERISA, that, in each case, results from anything other than Buyer’s gross negligence or willful misconduct.  In any suit, proceeding or action brought by Buyer in connection with any Purchased Loan for any sum owing thereunder, or to enforce any provisions of any Purchased Loan Documents, Seller will save, indemnify and hold Buyer harmless from and against all expense, loss or damage suffered by reason of any defense, set-off, counterclaim, recoupment or reduction or liability whatsoever of the account debtor or obligor thereunder, arising out of a breach by Seller of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or obligor or its successors from Seller.  Seller also agrees to reimburse an Indemnified Party as and when billed by such Indemnified Party for all such Indemnified Party’s costs and expenses incurred in connection with the enforcement or the preservation of such Indemnified Party’s rights under the Agreement and any other Transaction Document or any transaction contemplated hereby or thereby, including without limitation the reasonable fees and disbursements of its counsel.  Seller hereby acknowledges its obligations hereunder are recourse obligations of Seller.

(b)Seller agrees to pay as and when billed by Buyer all of the out-of-pocket costs and expenses incurred by Buyer in connection with the development, preparation and execution of, and any amendment, supplement or modification to, the Agreement, this Annex I and the other Transaction Documents or any other documents prepared in connection herewith or therewith.  Seller agrees to pay as and when billed by Buyer all of the out-of-pocket costs and expenses incurred in connection with the consummation and administration of the transactions contemplated hereby and thereby including without limitation (i) all the reasonable fees, disbursements and expenses of counsel to Buyer, not to exceed $15,000 for each Transaction and (ii) all the Due Diligence Fees, testing and review costs and expenses incurred by Buyer in connection with the evaluation of any New Loan and with respect to any Transaction.

21.DUE DILIGENCE

Seller acknowledges that Buyer has the right to perform continuing due diligence reviews with respect to the Purchased Loans, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, or determining or re-determining the Asset Base for purposes of Section 4 of this Annex I, or otherwise, and Seller agrees that Buyer, at its option, has the right at any time to conduct a partial or complete due diligence review on any or all of the Purchased Loans, including, without limitation, ordering new credit reports and Appraisals on the applicable collateral and otherwise regenerating the information used to originate such Purchased Loans.  Upon reasonable (but no less than one (1) Business Day) prior notice to Seller, Buyer or its authorized representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of, the Purchased Loan Files and any and all documents, records, agreements, instruments or information relating to any Purchased Loan in the possession or under the control of Seller, any servicer or sub-servicer and/or Custodian.  Seller also shall make available to Buyer a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Purchased Loan Files and the Purchased Loans. Seller agrees to cooperate with Buyer and any third party underwriter designated by Buyer in connection with such underwriting, including, but not limited to, providing Buyer and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Purchased Loans in the possession, or under the control, of such Seller.

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22.SERVICING

(a)Notwithstanding the purchase and sale of the Purchased Loans by Seller to Buyer hereunder, GKK Manager LLC or such other Servicer shall continue to service the Purchased Loans at Seller’s sole cost and for the benefit of Buyer and, if Buyer shall exercise its rights to pledge or hypothecate the Purchased Loans prior to the Repurchase Date pursuant to Section 8 or 17 of this Annex I, Buyer’s assigns; provided, however, that the obligations of Seller to service any of the Purchased Loans shall cease automatically upon the earliest of (i) an Event of Default, (ii) the date on which the aggregate Repurchase Price for the Portfolio Loans together with all accrued and unpaid Price Differential, unpaid Costs and other amounts payable by Seller to Buyer hereunder have been paid in full or (iii) the transfer of servicing approved by Seller and Buyer, which Buyer’s consent shall not be unreasonably withheld.  Seller shall service and shall cause the Servicer to service the Purchased Loans in accordance with Accepted Servicing Practices.

(b)Seller agrees that Buyer is the owner of all servicing records, including but not limited to any and all servicing agreements (the “Servicing Agreements”), files, documents, records, data bases, computer tapes, copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records, and any other records relating to or evidencing the servicing of Purchased Loans (the “Servicing Records”) so long as the Purchased Loans are subject to the Agreement.  Seller covenants to safeguard such Servicing Records and to deliver them promptly to Buyer or its designee (including the Custodian) at Buyer’s request.

(c)Upon the occurrence and continuance of an Event of Default, Buyer may, in its sole discretion, (i) sell its right to the Purchased Loans on a servicing released basis or (ii) terminate Servicer or any sub-servicer of the Purchased Loans with or without cause, in each case without payment of any termination fee or such other costs or expenses to Buyer, it being agreed that Seller will pay any and all fees, costs and expenses required to terminate the Servicing Agreement and to effectuate a transfer of servicing to a designee of the Buyer; provided, however, that Buyer shall cause any successor servicer to deliver to Seller reports generated for Buyer relating to the Purchased Loans.

(d)Seller shall not, and shall not permit Servicer to, employ sub-servicers to service the Purchased Loans without the prior written approval of Buyer which shall not be unreasonably withheld.  If the Purchased Loans are serviced by a sub-servicer, Seller shall irrevocably assign all rights, title and interest in the Servicing Agreements with such sub-servicer to Buyer.

(e)Seller shall cause Servicer and any sub-servicers engaged by Seller to execute a letter agreement with Buyer acknowledging Buyer’s security interest in the Purchased Loans and the Servicing Agreements and agreeing that each such sub-servicer shall deposit all Income with respect to the Purchased Loans in the Blocked Account, all in such manner as shall be reasonably acceptable to Buyer.

(f)In the event Seller or its Affiliate is servicing any Purchased Loan, Seller shall permit Buyer to inspect Seller’s or its Affiliate’s servicing facilities, as the case may be, for the purpose of satisfying Buyer that Seller or its Affiliate, as the case may be, has the ability to service such Purchased Loans as provided in the Agreement.

(g)Seller shall cause the Servicer to provide a copy of each report and notice sent to Seller to be sent to Buyer concurrently therewith.

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23.TREATMENT FOR TAX PURPOSES

It is the intention of the parties that, for U.S. Federal, state and local income and franchise tax purposes, the Transactions constitute a financing, and that the Seller is, and, so long as no Event of Default shall have occurred and be continuing, will continue to be, treated as the owner of the Purchased Loans for such purposes.  Unless prohibited by applicable law, Seller and Buyer agree to treat the Transactions as described in the preceding sentence on any and all filings with any U.S. Federal, state or local taxing authority.

24.INTENT

The provisions of Paragraph 19 of the Agreement (“Intent”) are hereby deleted and replaced in their respective entireties by the following provisions of this Section 24:

The parties recognize that each Transaction is a “repurchase agreement” as that term is defined in Section 101 of Title 11 of the United States Code, as amended (except in so far as the type of asset subject to the Transaction or the term of that Transaction would render such definition inapplicable).  The parties recognize that each Transaction is a “securities contract” as that term is defined in Section 741 of Title 11 of the United States Code, as amended.

25.MISCELLANEOUS

The provisions of Paragraph 20 of the Agreement (“Disclosure Relating to Certain Federal Protections”) are hereby deleted in their entirety and replaced by the following provisions of this Section 26:

(a)Time is of the essence under the Transaction Documents and all Transactions thereunder and all references to a time shall mean New York time in effect on the date of the action unless otherwise expressly stated in the Transaction Documents.

(b)All rights, remedies and powers of Buyer hereunder and in connection herewith are irrevocable and cumulative, and not alternative or exclusive, and shall be in addition to all other rights, remedies and powers of Buyer whether under law, equity or agreement.  In addition to the rights and remedies granted to it in the Agreement to the extent applicable, Buyer shall have all rights and remedies of a secured party under the UCC and any other applicable law.

(c)The Transaction Documents may be executed in counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument.

(d)The headings in the Transaction Documents are for convenience of reference only and shall not affect the interpretation or construction of the Transaction Documents.

(e)Each provision of the Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Agreement shall be prohibited by or be invalid under such law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of the Agreement.

(f)This Annex I, together with the Agreement contain a final and complete integration of all prior expressions by the parties with respect to the subject matter hereof and thereof and shall constitute

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the entire agreement among the parties with respect to such subject matter, superseding all prior oral or written understandings.

(g)The parties understand that the Agreement is a legally binding agreement that may affect such party’s rights.  Each party represents to the other that it has received legal advice from counsel of its choice regarding the meaning and legal significance of the Agreement and that it is satisfied with its legal counsel and the advice received from it.

(h)Should any provision of the Agreement require judicial interpretation, it is agreed that a court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against any Person by reason of the rule of construction that a document is to be construed more strictly against the Person who itself or through its agent prepared the same, it being agreed that all parties have participated in the preparation of the Agreement.

(i)Buyer agrees not to seek before any court or governmental agency to have any director or officer of the Seller held personally liable for any action or inactions of the Seller or any obligations of the Seller under the Agreement or the related Transaction Documents, except if such actions or inactions are the result of the gross negligence, fraud or willful misconduct of such director or officer.

[SIGNATURES COMMENCE ON NEXT PAGE]

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IN WITNESS WHEREOF, the parties have executed this Annex I as of the        day of December 2004.

BUYER:
GOLDMAN SACHS MORTGAGE COMPANY, a New York limited partnership
By:	Goldman Sachs Real Estate Funding Corp., its general partner
	By:
		Name:
		Title:
SELLER:
GRAMERCY WAREHOUSE FUNDING II LLC,
a Delaware limited liability company
By:		GKK CAPITAL LP,
		a Delaware limited partnership,
		its sole member and manager
By:			GRAMERCY CAPITAL CORP.,
			a Maryland corporation, its general partner
			By:
				Name: Hugh Hall
				Its: Chief Operating Officer

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EX-10.12

Exhibit 10.12

EMPLOYMENT AND NONCOMPETITION AGREEMENT

This EMPLOYMENT AND NONCOMPETITION AGREEMENT (“Agreement”) is made as of the       day of July, 2004 between Hugh Hall (“Executive”) and GKK Manager LLC (the “Employer”).

1.Term.  The term of this Agreement shall commence on July [ ], 2004 and, unless earlier terminated as provided in Section 6 below, shall terminate on the fourth anniversary of the date of this Agreement (the “Original Term”);provided, however, that Sections 4, 7 and 8 (and any enforcement or other procedural provisions hereof affecting Sections 4, 7 and 8) hereof shall survive the termination of this Agreement as provided therein.  The Original Term may be extended for such period or periods, if any, as may be mutually agreed to in writing by Executive and the Employer (each a “Renewal Term”).  If either party intends not to extend the Original Term, such party shall give the other party at least three months’ written notice of such intention.  If either party gives such notice with less than three months remaining in the Original Term, the term of this Agreement shall be extended until the date which is three months after the date on which the notice is given.  The period of Executive’s employment hereunder consisting of the Original Term and all Renewal Terms (and any period of extension under the foregoing sentence), if any, is herein referred to as the “Employment Period.”

2.Employment and Duties.

(a)Duties.  During the Employment Period, Executive shall be employed in the business of the Employer and its affiliates.  Executive shall serve the Employer as a senior executive and shall have the title of Managing Director of the Employer. In such capacity, Executive, in conjunction with other senior officers and managers of the Employer, shall be responsible for, among other things, structuring and pricing investments, sourcing investments, sourcing credit facilities and selling, syndicating and securitizing investments in whole or in part.  In addition, Executive shall serve as Chief Operating Officer of Gramercy Capital Corp. (the “Corporation”), and shall initially be a member of the Board of Directors of the Corporation (the “Board”).  In such capacity, Executive shall have the general powers and duties of management usually vested in the chief operating officer of a comparable company in the same industry, including, without limitation, responsibility for the day-to-day operations of the Corporation, overseeing service contracts with third parties and management of any employees of the Corporation.  Executive’s duties and authority shall be as further set forth by the Employer.    Executive will report to the managing member of the Employer (the “Managing Member”) with respect to functions as Managing Director and to the President and Chief Executive Officer of the Corporation (the “CEO”) with respect to functions as Chief Operating Officer.

(b)Best Efforts.  Executive agrees to his employment as described in this Section 2 and agrees to devote substantially all of his business time and efforts to the performance of his duties under this Agreement, except as otherwise approved by the Managing Member and the CEO; provided, however, that nothing herein shall be interpreted to preclude Executive, so long as there is no material interference with his duties hereunder, from (i) participating as an officer or director of, or advisor to, any charitable or other tax-exempt organization or otherwise engaging in charitable, fraternal or trade group activities; (ii) investing and managing his assets as a passive investor in other entities or business ventures; provided that he performs no management or similar role (or, in the case of investments other than real estate investments, he performs a management role comparable to the role that a significant

limited partner would have, but performs no day-to-day management or similar role) with respect to such entities or ventures and such investment does not violate Section 8 hereof; and provided, further, that, in any case in which another party involved in the investment has a material business relationship with the Employer, Executive shall give notice prior written notice to the Managing Member and the CEO; or (iii) serving as a member of the Board of Directors of a for-profit corporation with the approval of the CEO and the Managing Member.

(c)Travel.  In performing his duties hereunder, Executive shall be available for all reasonable travel as the needs of the Employer’s business may require.

3.Compensation and Benefits.  In consideration of Executive’s services hereunder, the Employer shall compensate Executive as provided in this Agreement, and the Corporation shall have the obligations as set forth herein.

(a)Base Salary.  The Employer shall pay Executive an aggregate minimum annual salary at the rate of $350,000 per annum during the Employment Period (“Base Salary”).  Base Salary shall be payable bi-weekly in accordance with the Employer’s normal business practices and shall be reviewed by the Managing Member at least annually (for purposes of possible, upward, but not downward, adjustment).

(b)Incentive Compensation/Bonuses.  In addition to Base Salary, during the Employment Period, Executive shall be eligible for and shall receive from the Employer such discretionary annual bonuses as the Managing Member, in its sole discretion, may deem appropriate to reward Executive for job performance; provided, however, that Executive’s annual performance bonus shall not be less than $250,000 (the “Minimum Bonus”).  In addition, Executive shall be eligible to participate in any other bonus or incentive compensation plans in effect with respect to senior executive officers of the Employer.  If the term of this Agreement is extended under the penultimate sentence of Section 1, and Executive’s employment terminates as of the expiration of the term as so extended, then (i) upon such termination of employment, Executive shall receive (without duplication) an amount equal to (A) $250,000 multiplied by (B) a fraction (x) the numerator of which is the number of days in the fiscal year of termination during which Executive was employed and (y) the denominator of which is 365, and (ii) no other bonus-related amounts shall be payable under this Section 3(b) for the fiscal year of termination.

(c)Equity-Based Awards.  In the discretion of the Board or the Compensation Committee thereof, Executive shall be eligible to participate in any current or future equity incentive plan that has been or may be established by the Corporation for senior executive officers.  It is acknowledged that Executive has been previously granted 25,000 shares of restricted stock under that certain Gramercy Capital Corp. 2004 Equity Incentive Plan Restricted Stock Award Agreement between the Corporation and Executive, and 125,000 options under that certain Gramercy Capital Corp. 2004 Equity Incentive Plan Option Award Agreement between the Corporation and Executive, both dated          , 2004, copies of each are attached hereto as Exhibits A and B, respectively.

(d)Expenses.  Executive shall be reimbursed for all reasonable business related expenses incurred by Executive at the request of or on behalf of the Employer or the Corporation, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Employer or the Corporation.  Any expenses incurred during the Employment Period but not

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reimbursed by the Employer or the Corporation by the end of the Employment Period, shall remain the obligation of the Employer or the Corporation, as applicable to so reimburse Executive.

(e)Health and Welfare Benefit Plans.  During the Employment Period, Executive and Executive’s immediate family shall be entitled to participate in such health and welfare benefit plans as the Employer shall maintain from time to time for the benefit of senior executive officers of the Employer and their families, on the terms and subject to the conditions set forth in such plan.  Nothing in this Section shall limit the Employer’s right to change or modify or terminate any benefit plan or program as it sees fit from time to time in the normal course of business so long as it does so for all senior executives of the Employer.

(f)Vacations.  Executive shall be entitled to paid vacations in accordance with the then regular procedures of the Employer governing senior executive officers.

(g)Other Benefits.  During the Employment Period, the Employer shall provide to Executive such other benefits, as generally made available to other senior executives of the Employer.

4.Indemnification and Liability Insurance.  The Employer and Corporation together and severally agree to indemnify Executive to the full extent permitted by applicable law, as the same exists and may hereafter be amended, from and against any and all losses, damages, claims, liabilities and expenses asserted against, or incurred or suffered by, Executive (including the costs and expenses of legal counsel retained by the Employer or the Corporation to defend Executive and judgments, fines and amounts paid in settlement actually and reasonably incurred by or imposed on such indemnified party) with respect to any action, suit or proceeding, whether civil, criminal administrative or investigative (a “Proceeding”) in which Executive is made a party or threatened to be made a party or is otherwise involved, either with regard to his entering into this Agreement with the Employer or in his capacity as an officer or director, or former officer or director, of the Employer, the Corporation or any affiliate thereof for which he may serve in such capacity.  The Employer and the Corporation also agree to secure promptly and maintain officers and directors liability insurance providing coverage for Executive, the coverage shall be reasonably comparable to the coverage maintained by SL Green Realty Corp., for such time as SL Green Realty Corp. controls the Employer, to the extent that coverage can be obtained on reasonable efforts at a comparable rate.  The provisions of this Section 4 shall remain in effect after this Agreement is terminated irrespective of the reasons for termination.

5.Employer’s Policies.  Executive agrees to observe and comply with the reasonable rules and regulations of the Employer and the Corporation from time to time regarding the performance of his duties and to carry out and perform orders, directions and policies communicated to him from time to time by the Employer and the Corporation, so long as same are otherwise consistent with this Agreement.

6.Termination.  Executive’s employment hereunder may be terminated under the following circumstances:

(a)Termination by the Employer.

(i)Death.  Executive’s employment hereunder shall terminate upon his death.

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(ii)Disability.  If, as a result of Executive’s incapacity due to physical or mental illness or disability, Executive shall have been incapable of performing his duties hereunder even with a reasonable accommodation on a full-time basis for the entire period of four consecutive months or any 120 days in a 180-day period, and within 30 days after written Notice of Termination (as defined in Section 6(d)) is given he shall not have returned to the performance of his duties hereunder on a full-time basis, the Employer may terminate Executive’s employment hereunder.

(iii)Cause.  The Employer may terminate Executive’s employment hereunder for Cause.  For purposes of this Agreement, “Cause” shall mean:  (i) Executive’s engaging in conduct which is a felony; (ii) Executive’s engaging in conduct constituting a material breach of fiduciary duty, gross negligence or willful and material misconduct, material fraud or willful and material misrepresentation; (iii) Executive’s material breach of any of his obligations under Section 8(a) through 8(e) of this Agreement; or (iv) Executive’s failure to competently perform his duties after receiving notice from the Employer specifically identifying the manner in which Executive has failed to perform (it being understood that, for this purpose, the manner and level of Executive’s performance shall not be determined based on the financial performace of the Employer or the Corporation (including, without limitation, the performance of the stock of the Corporation)).

(iv)Without Cause.  Executive’s employment hereunder may be terminated by the Employer at any time with or without Cause (as defined in Section 6(a)(iii) above), by the Managing Member (or, in the case of the Corporation, by a majority vote of all of the members of the Board) upon written notice to Executive, subject only to the severance provisions specifically set forth in Section 7.

(b)Termination by Executive.

(i)Disability.  Executive may terminate his employment hereunder for Disability within the meaning of Section 6(a)(ii) above.

(ii)With Good Reason.  Executive’s employment hereunder may be terminated by Executive with Good Reason effective immediately by written notice to the Employer.  For purposes of this Agreement, with “Good Reason” shall mean, without Executive’s prior written consent, (i) a failure by the Employer to pay compensation in accordance with the provisions of Section 3, which failure has not been cured within 14 days after the notice of the failure (specifying the same) has been given by Executive to the Employer; (ii) a material breach by the Employer of any other provision of this Agreement which has not been cured within 30 days after notice of noncompliance (specifying the nature of the noncompliance) has been given by Executive to the Employer, (iii) the Employer requires Executive to relocate his principal office more than 60 miles outside of Manhattan other than in connection with a change of the Employer’s principal office to the same new location; or (iv) the Employer enters into an employment agreement with any person pursuant to which such person will receive an annual base salary or guaranteed bonus in excess of the highest salary and guaranteed bonus payable to Executive, and the entering into of such employment agreement is in contravention of Section 6.4.11 of the LLC Agreement (as defined in Section 6(c) below).  On and after

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the occurrence of a Change-in-Control (as defined in Section 6(c) below), “Good Reason” shall also include, in addition to the foregoing:

(A)a change in duties, responsibilities, status or positions with the Employer that does not represent a promotion from or maintaining of Executive’s duties, responsibilities, status or positions as in effect immediately prior to the Change-in-Control, or any removal of Executive from or any failure to reappoint or reelect Executive to such positions, except in connection with the termination of Executive’s employment for Cause, disability, retirement or death;

(B)a reduction by the Employer in Executive’s Base Salary or bonus compensation as in effect immediately prior to the Change-in-Control;

(C)the failure by the Employer to continue in effect any of the benefit plans including, but not limited to ongoing stock option and equity awards, in which Executive is participating at the time of the Change-in-Control of the Employer (unless Executive is permitted to participate in any substitute benefit plan with substantially the same terms and to the same extent and with the same rights as Executive had with respect to the benefit plan that is discontinued) other than as a result of the normal expiration of any such benefit plan in accordance with its terms as in effect at the time of the Change-in-Control, or the taking of any action, or the failure to act, by the Employer which would adversely affect Executive’s continued participation in any of such benefit plans on at least as favorable a basis to Executive as was the case on the date of the Change-in-Control or which would materially reduce Executive’s benefits in the future under any of such benefit plans or deprive Executive of any material benefits enjoyed by Executive at the time of the Change-in-Control; provided, however, that any such action or inaction on the part of the Employer, including any modification, cancellation or termination of any benefits plan, undertaken in order to maintain such plan in compliance with any federal, state or local law or regulation governing benefits plans, including, but not limited to, the Employment Retirement Income Security Act of 1974, as amended, shall not constitute Good Reason for the purposes of this Agreement;

(D)the failure by the Employer to obtain from any successor to the Employer an agreement to be bound by this Agreement pursuant to Section 17 hereof, which has not been cured within 30 days after the notice of the failure (specifying the same) has been given by Executive to the Employer.

(iii)Without Good Reason.  Executive shall have the right to terminate his employment hereunder without Good Reason, subject to the terms and conditions of this Agreement.

(c)Definitions.  The following terms shall be defined as set forth below.

(i)“Change-in-Control” shall mean the happening of any of the following:

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(A)any “person,” including a “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding the Employer or the Corporation, any entity controlling, controlled by or under common control with the Employer or the Corporation, any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Employer or the Corporation or any such entity, and Executive and any “group” (as such term is used in Section 13(d)(3) of the Exchange Act) of which Executive is a member), is or becomes the “beneficial owner” (as defined in Rule 13(d)(3) under the Exchange Act), directly or indirectly, of securities of the Employer or the Corporation representing 25% or more of either (A) the combined voting power of the Employer’s or the Corporation’s then outstanding securities or (B) the then outstanding common stock (or other similar equity interest, in the case of  a company other than a corporation) of the Employer or the Corporation (in either such case other than as a result of an acquisition of securities directly from the Employer or the Corporation); provided, however, that, in no event shall a Change-in-Control be deemed to have occurred upon an initial public offering of the common stock (or such other equity interest) of the Employer or the Corporation under the Securities Act; or

(B)any consolidation or merger of the Employer or the Corporation where the shareholders of the Employer or the Corporation, as applicable, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, shares representing in the aggregate 50% or more of the combined voting power of the securities of the corporation issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any); or

(C)there shall occur (A) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Employer or the Corporation, other than a sale or disposition by the Employer or the Corporation of all or substantially all of the Employer’s or the Corporation’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by “persons” (as defined above) in substantially the same proportion as their ownership of the Employer or the Corporation, as applicable, immediately prior to such sale or (B) the approval by shareholders of the Employer or the Corporation, as applicable, of any plan or proposal for the liquidation or dissolution of the Employer or the Corporation, as applicable; or

(D)the members of the Board (the “Directors”) at the beginning of any consecutive 24-calendar-month period (the “Incumbent Directors”) cease for any reason other than due to death to constitute at least a majority of the members of the Board; provided that any Director whose election, or nomination for election by the Corporation’s shareholders was approved or ratified by a vote of at least a majority of the members of the Board then still in office who were members of the Board at the beginning of such 24-calendar-month period shall be deemed to be an Incumbent Director.

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Notwithstanding the foregoing, (i) a Change-in-Control with respect to the Employer or the Corporation shall not be deemed to have occurred if SL Green Realty Corp. controls the Employer or the Corporation, respectively, at the applicable time (provided, that, at such time, in the case of the Employer, SL Green Realty Corp. beneficially owns at least 15% of the outstanding voting or total equity interests of the Employer, and in the case of the Corporation, SL Green Realty Corp. beneficially owns at least 10% of the voting or total outstanding equity interests of the Corporation (it being expressly understood that the existence of the foregoing 15% and 10% levels of ownership do not establish a presumption of control by SL Green Realty Corp. for these purposes)) and a Change-in-Control with respect to the Employer shall not be deemed to have occurred if the Corporation controls the Employer, at the applicable time; and (ii) in no event shall a Change-in-Control be deemed to have occurred upon an initial public offering of the common stock of the Corporation under the Securities Act of 1933, as amended.

(ii)“LLC Agreement” means the Limited Liability Company Operating Agreement of GKK Manager LLC, dated as of July      , 2004, among Employer, Managing Member, Executive and the other parties specified therein.

(iii)“Vesting Agreement” means the Membership Interest Vesting and Repurchase Agreement, dated as of July      , 2004, among Employer, Managing Member and Executive.

(d)Notice of Termination.  Any termination of Executive’s employment by the Employer (or the Corporation) or by Executive (other than on account of death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 13 of this Agreement.  For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and, as applicable, shall set forth in reasonable detail the fact and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.

(e)Resignation Upon Termination.  In the event that Executive’s employment with the Employer is terminated, Executive (i) shall, within five business days of receipt of a written request for resignation, resign as an officer of the Corporation, and shall resign all other positions (including, without limitation, as officer, employee, director and member of any committee) with the Employer and the Corporation and their subsidiaries and affiliates, and (ii) shall provide such written confirmation thereof as may be reasonably required by the Employer or the Corporation.  In the event that Executive’s service with the Corporation is terminated other than as contemplated by the foregoing sentence, Executive (i) shall, within five business days of receipt of a written request for resignation, resign all other positions (including, without limitation, as officer, employee, director and member of any committee) with the Corporation and its subsidiaries, and (ii) shall provide such written confirmation thereof as may be reasonably required by the Corporation.

7.Compensation Upon Termination.

(a)Termination By Employer Without Cause or By Executive With Good Reason.  If (i) Executive is terminated without Cause pursuant to Section 6(a)(iv) above, or (ii) Executive shall terminate his employment hereunder with Good Reason pursuant to Section (6)(b)(ii) above, then, if Executive has fully complied with Section 6(e) above, the Employment Period shall terminate as of the

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effective date set forth in the written notice of such termination (the “Termination Date”) and Executive shall be entitled to the following payment and benefits:

(i)Executive shall receive any earned and accrued but unpaid Base Salary on the Termination Date, and any earned and accrued but unpaid incentive compensation and bonuses payable at such times as would have applied without regard to such termination.

(ii)The Employer shall continue to pay Executive’s Base Salary (at the rate in effect on the date of his termination) and the Minimum Bonus for a period of two years commencing on the date of such termination, on the same periodic payment dates as payment would have been made to Executive had the Employment Period not been terminated.

(iii)Any issued but unvested equity awards (i.e., shares then still subject to restrictions under the applicable award agreement) granted to Executive by the Employer or the Corporation that would otherwise become vested and exercisable during the two-year period following the date of Executive’s termination shall become vested (i.e., free from such restrictions), and any unexerciseable or unvested stock options granted to Executive by the Employer or the Corporation that would otherwise become vested and exercisable during the two-year period following the date of Executive’s termination shall become vested and exercisable on the date of Executive’s termination.  Any unexercised stock options granted to Executive by the Employer or the Corporation that have become vested and exercisable shall remain exercisable for six months following the Termination Date or, if earlier, the expiration of the initial applicable term stated at the time of the grant.

Other than as may be provided under Section 4 or as expressly provided in this Section 7(a), the Employer shall have no further obligations hereunder following such termination.

(b)Termination By the Employer For Cause or By Executive Without Good Reason.  If (i) Executive is terminated for Cause pursuant to Section 6(a)(iii) above, or (ii) Executive voluntarily terminates his employment hereunder without Good Reason pursuant to Section 6(b)(ii) above, then the Employment Period shall terminate as of the Termination Date and Executive shall be entitled to receive his earned and accrued but unpaid Base Salary at the rate then in effect until the Termination Date.  In addition, in such event, Executive shall be entitled to exercise any options which have vested as of the termination of Executive’s employment, but only for a period of three months after the Termination Date (but in no event after the expiration of the initial applicable term stated at the time of grant) and otherwise in accordance with the terms of the applicable option grant agreement or plan.  Notwithstanding the foregoing, and without limiting such other forfeitures as may be provided under the documentation controlling the applicable grants or other acquisitions, (i) in the case of a termination for Cause under clause (i), (ii) or (iii) of the second sentence of Section 6(a)(iii), all vested options shall expire on the Termination Date and all unvested equity interests in the Corporation which have been awarded under a compensatory arrangement, including without limitation the restricted stock (or equivalent) granted on or before the date hereof, shall automatically be forfeited, and (ii) in the case of a termination for Cause under clause (iv) of the second sentence of Section 6(a)(iii), all vested options shall be exercisable for three months from the Termination Date; provided, however, that nothing in this sentence shall extend the term of any option.  Other than as may be provided under Section 4 or as expressly provided in this Section 7(b), the Employer shall have no further obligations hereunder following such termination.

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(c)Termination by Reason of Death.     If Executive’s employment terminates due to his death, the Employer shall pay Executive’s Base Salary plus any applicable pro rata portion of the annual performance bonus described in Section 3(b) above for a period of six months from the date of his death, or such longer period as the Employer may determine, to Executive’s estate or to a beneficiary designated by Executive in writing prior to his death.  In the case of such a termination, (i) Executive shall be credited with six months after termination under any provisions governing restricted stock (or its equivalent) or options relating to the vesting or initial exercisability thereof, and (ii) if such six months of credit would fall within a vesting period, a pro rata portion of the unvested shares of restricted stock (or its equivalent) granted to Executive that otherwise would have become vested upon the conclusion of such vesting period shall become vested on the date of Executive’s termination due to his death, and a pro rata portion of the unexercisable stock options granted to Executive that otherwise would have become exercisable upon the conclusion of such vesting period shall become exercisable on the date of Executive’s termination due to such death.  Furthermore, upon such death, any vested unexercised stock options granted to Executive shall remain vested and exercisable until the earlier of (A) the date on which the term of such stock options otherwise would have expired, or (B) the second January 1 after the date of Executive’s termination due to his death.  Other than as may be provided under Section 4 or as expressly provided in this Section 7(c), the Employer shall have no further obligations hereunder following such termination.

(d)Termination by Reason of Disability.  In the event that Executive’s employment terminates due to his disability as defined in Section 6(a)(ii) above, Executive shall be entitled to be paid his Base Salary plus any applicable pro rata portion of the annual performance bonus described in Section 3(b) above for a period of six months from the date of such termination, or for such longer period as such benefits are then provided with respect to other senior executives of the Employer.  In the case of such a termination, if Executive has fully complied with Section 6(e) above, (i) Executive shall be credited with six months after termination under any provisions governing restricted stock (or its equivalent) or options relating to the vesting or initial exercisability thereof, and (ii) if such six months of credit would fall within a vesting period, a pro rata portion of the unvested shares of restricted stock (or its equivalent) granted to Executive that otherwise would have become vested upon the conclusion of such vesting period shall become vested on the date of Executive’s termination due to his disability, and a pro rata portion of the unvested or unexercisable stock options granted to Executive that otherwise would have become vested or exercisable upon the conclusion of such vesting period shall become vested and exercisable on the date of Executive’s termination due to such disability.  Furthermore, upon such disability, any vested unexercised stock options granted to Executive shall remain vested and exercisable until the earlier of (A) the date on which the term of such stock options otherwise would have expired, or (B) the second January 1 after the date of Executive’s termination due to his disability.  Other than as expressly provided in this Section 7(d), the Employer shall have no further obligations hereunder following such termination.

8.Confidentiality; Prohibited Activities.  Executive and the Employer (which, for purposes of this Section 8, and any related enforcement provisions hereof, except at the context requires otherwise, shall include not only GKK Manager LLC, but shall also severally include the Corporation) recognize that due to the nature of his employment and relationship with the Employer, Executive has access to and develops confidential business information, proprietary information, and trade secrets relating to the business and operations of the Employer.  Executive acknowledges that (i) such information is valuable to the business of the Employer, (ii) disclosure to, or use for the benefit of, any person or entity other than the Employer, would cause irreparable damage to the Employer, (iii) the principal businesses of the Employer are originating and acquiring real estate related loans and securities associated with commercial

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and multi-family properties (collectively, the “Business”), (iv) the Employer is one of the limited number of persons who have developed a business such as the Business, and (v) the Business is national in scope.  Executive further acknowledges that his duties for the Employer include the duty to develop and maintain client, customer, employee, and other business relationships on behalf of the Employer; and that access to and development of those close business relationships for the Employer render his services special, unique and extraordinary.  In recognition that the good will and business relationships described herein are valuable to the Employer, and that loss of or damage to those relationships would destroy or diminish the value of the Employer, and in consideration of the compensation (including severance) arrangements hereunder, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged by Executive, Executive agrees as follows:

(a)Confidentiality.  During the term of this Agreement (including any renewals), and at all times thereafter, Executive shall maintain the confidentiality of all confidential or proprietary information of the Employer (“Confidential Information”), and, except in furtherance of the business of the Employer or as specifically required by law or by court order, he shall not directly or indirectly disclose any such information to any person or entity; nor shall he use Confidential Information for any purpose except for the benefit of the Employer.  For purposes of this Agreement, “Confidential Information” includes, without limitation:  client or customer lists, identities, contacts, business and financial information (excluding those of Executive prior to employment with Employer); investment strategies; pricing information or policies, fees or commission arrangements of the Employer; marketing plans, projections, presentations or strategies of the Employer; financial and budget information of the Employer; new personnel acquisition plans; and all other business related information which has not been publicly disclosed by the Employer.  This restriction shall apply regardless of whether such Confidential Information is in written, graphic, recorded, photographic, data or any machine readable form or is orally conveyed to, or memorized by, Executive.

(b)Prohibited Activities.  Because Executive’s services to the Employer are essential and because Executive has access to the Employer’s Confidential Information, Executive covenants and agrees that:

(i)during the Employment Period, and for the one-year period following the termination of Executive by either party for any reason including the expiration of the term of this Agreement, Executive will not, anywhere in the United States, without the prior written consent of the Employer and the unanimous consent of the Directors other than any other officer of the Employer, directly or indirectly (individually, or through or on behalf of another entity as owner, partner, agent, employee, consultant, or in any other capacity), engage, participate or assist, as an owner, partner, employee, consultant, director, officer, trustee or agent, in any element of the Business, subject, however, to Section 8(c) below.  Notwithstanding the forgoing, in the event that the Employer extends the term of its existing management agreement by matching a bona fide third-party offer which provides for materially less fees than the existing agreement, then such period of restriction shall only apply during the remaining period of the term of this Agreement; and

(ii)during the Employment Period, and during (x) the two-year period following the termination of Executive by either party for any reason (including the expiration of the term of the Agreement) in the case of clause (A) below, or (y) the one-

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year period following such termination in the case of clause (B) below, Executive will not, without the prior written consent of the Employer and the unanimous consent of the Directors other than any other officer of the Employer, directly or indirectly (individually, or through or on behalf of another entity as owner, partner, agent, employee, consultant, or in any other capacity), (A) solicit, encourage, or engage in any activity to induce any employee of the Employer to terminate employment with the Employer, or to become employed by, or to enter into a business relationship with, any other person or entity; provided, however, that the two-year period otherwise set forth in clause (x) above shall be one-year in the case of an employee hired after the date hereof by Executive with whom as of the date hereof, Executive has a material pre-existing relationship; or (B) engage in any activity intentionally to interfere with, disrupt or damage the Business of the Employer, or its relationships with any client, supplier or other business relationship of the Employer.  For purposes of this subsection, the term “employee” means any individual who is an employee of or consultant to the Employer (or any affiliate) during the six-month period prior to Executive’s last day of employment.

(c)Other Investments.  Notwithstanding anything contained herein to the contrary, Executive is not prohibited by this Section 8 from making investments, (i) expressly disclosed to the Employer and to the CEO in writing before the date hereof; (ii) solely for investment purposes and without participating in the business in which the investments are made, in any entity that engages, directly or indirectly, in the acquisition, development, construction, operation, management, financing or leasing of office real estate properties, regardless of where they are located, if (x) Executive’s aggregate investment in each such entity constitutes less than one percent of the equity ownership of such entity, (y) the investment in the entity is in securities traded on any national securities exchange or the National Association of Securities Dealers, Inc. Automated Quotation System, and (z) Executive is not a controlling person of, or a member of a group which controls, such entity; or (iii) if (A) except with the prior written consent of the Employer and the CEO, he has less than a 25% interest in the investment in question, (B) except with the prior written consent of the Employer and the CEO, he does not have the role of a general partner or managing member, or any similar role, (C) the investment is not an appropriate investment opportunity for the Employer, and (D) the investment activity is not directly competitive with the businesses of the Employer.

(d)Employer Property.  Executive acknowledges that all originals and copies of materials, records and documents generated by him or coming into his possession during his employment by the Employer are the sole property of the Employer (“Employer Property”).  During his employment, and at all times thereafter, Executive shall not remove, or cause to be removed, from the premises of the Employer, copies of any record, file, memorandum, document, computer related information or equipment, or any other item relating to the business of the Employer, except in furtherance of his duties under this Agreement.  When Executive terminates his employment with the Employer, or upon request of the Employer at any time, Executive shall promptly deliver to the Employer all originals and copies of Employer Property in his possession or control and shall not retain any originals or copies in any form.

(e)No Disparagement.  For one year following termination of Executive’s employment for any reason, Executive shall not intentionally disclose or cause to be disclosed any negative, adverse or derogatory comments or information about (i) the Employer and its parent, affiliates or subsidiaries, if any; (ii) any product or service provided by the Employer and its parent, affiliates

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or subsidiaries, if any; or (iii) the Employer’s and its parent’s, affiliates’ or subsidiaries’ prospects for the future.  For one year following termination of Executive’s employment for any reason, the Employer shall not disclose or cause to be disclosed any negative, adverse or derogatory comments or information about Executive.  Nothing in this Section shall prohibit either the Employer or Executive from testifying truthfully in any legal or administrative proceeding.

(f)Remedies.  Executive declares that the foregoing limitations in Sections 8(a) through 8(f) above are reasonable and necessary for the adequate protection of the business and the goodwill of the Employer.  If any restriction contained in this Section 8 shall be deemed to be invalid, illegal or unenforceable by reason of the extent, duration or scope thereof, or otherwise, then the court making such determination shall have the right to reduce such extent, duration, scope, or other provisions hereof to make the restriction consistent with applicable law, and in its reduced form such restriction shall then be enforceable in the manner contemplated hereby.  In the event that Executive breaches any of the promises contained in this Section 8, Executive acknowledges that the Employer’s remedy at law for damages will be inadequate and that the Employer will be entitled to specific performance, a temporary restraining order or preliminary injunction to prevent Executive’s prospective or continuing breach and to maintain the status quo.  The existence of this right to injunctive relief, or other equitable relief, or the Employer’s exercise of any of these rights, shall not limit any other rights or remedies the Employer may have in law or in equity, including, without limitation, the right to arbitration contained in Section 9 hereof and the right to compensatory and monetary damages.  Executive hereby agrees to waive his right to a jury trial with respect to any action commenced to enforce the terms of this Agreement.  Executive shall have remedies comparable to those of the Employer as set forth above in this Section 8(f) if the Employer breaches Section 8(e).

(g)Transition.  Regardless of the reason for his departure from the Employer, Executive agrees that at the Employer’s sole costs and expense, for a period of not more than 30 days after termination of Executive, he shall take all steps reasonably requested by the Employer to effect a successful transition of client and customer relationships to the person or persons designated by the Employer, subject to Executive’s obligations to his new employer.

(h)Cooperation with Respect to Litigation.  During the Employment period and at all times thereafter, Executive agrees to give prompt written notice to the Employer of any claim relating to the Employer and to cooperate fully, in good faith and to the best of his ability with the Employer in connection with any and all pending, potential or future claims, investigations or actions which directly or indirectly relate to any action, event or activity about which Executive may have knowledge in connection with or as a result of his employment by the Employer hereunder.  Such cooperation will include all assistance that the Employer, its counsel or its representatives may reasonably request, including reviewing documents, meeting with counsel, providing factual information and material, and appearing or testifying as a witness; provided, however, that the Employer will reimburse Executive for all reasonable expenses, including travel, lodging and meals, incurred by him in fulfilling his obligations under this Section 8(h) and, except as may be required by law or by court order, should Executive then be employed by an entity other than the Employer, such cooperation will not materially interfere with Executive’s then current employment.

(i)Survival.  The provisions of this Section 8 shall survive termination of Executive’s employment any other provisions relating to the enforcement thereof.

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9.Equity Interest in the Employer.  It is expressly acknowledged that Executive has been granted an equity interest in the Employer by that certain Membership Interest Issuance, Vesting and Repurchase Agreement between Executive and Employer, dated as of the date hereof.

10.Arbitration.  Any controversy or claim arising out of or relating to this Agreement or the breach of this Agreement (other than a controversy or claim arising under Section 8, to the extent necessary for the Employer or the Corporation (or their affiliates, where applicable) to avail themselves of the rights and remedies referred to in Section 8(f)) that is not resolved by Executive and the Employer or the Corporation (or their affiliates, where applicable) shall be submitted to arbitration in New York, New York in accordance with New York law and the procedures of the American Arbitration Association.  The determination of the arbitrator(s) shall be conclusive and binding on the Employer and the Corporation (or their affiliates, where applicable) and Executive and judgment may be entered on the arbitrator(s)’ award in any court having jurisdiction.

11.Conflicting Agreements.  Executive hereby represents and warrants that the execution of this Agreement and the performance of his obligations hereunder will not breach or be in conflict with any other agreement to which he is a party or is bound, and that he is not now subject to any covenants against competition or similar covenants which would affect the performance of his obligations hereunder.

12.No Duplication of Payments.  Executive shall not be entitled to receive duplicate payments under any of the provisions of this Agreement.

13.Notices.  All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand and or sent by prepaid telex, cable or other electronic devices or sent, postage prepaid, by registered or certified mail or telecopy or overnight courier service and shall be deemed given when so delivered by hand, telexed, cabled or telecopied, or if mailed, three days after mailing (one business day in the case of express mail or overnight courier service), as follows:

(a)if to Executive:

Hugh Hall, at the address shown on the execution page hereof.

With a copy to:

Friedman Kaplan Seiler & Adelman LLP

1633 Broadway

New York, NY 10019

Attn: Edward A. Friedman

(b)if to the Employer:

Gramercy Manager LLC

420 Lexington Avenue

New York, New York 10170

Attn:  Marc Holliday

with a copy to:

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Clifford Chance US LLP

31 West 52nd Street

New York, New York  10019

Attention:  Robert E. King, Jr.

(c)if to the Corporation:

Gramercy Capital Corp.

420 Lexington Avenue

New York, New York 10170

Attn: Corporate Secretary

with copies to:

Gramercy Manager LLC

420 Lexington Avenue

New York, New York 10170

Attn:  Marc Holliday

and:

Clifford Chance US LLP

31 West 52nd Street

New York, New York  10019

Attention:  Robert E. King, Jr.

or such other address as either party may from time to time specify by written notice to the other party hereto.

14.Amendments.  No amendment, modification or waiver in respect of this Agreement shall be effective unless it shall be in writing and signed by the party against whom such amendment, modification or waiver is sought.

15.Severability.  If any provision of this Agreement (or any portion thereof) or the application of any such provision (or any portion thereof) to any person or circumstances shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof (or the remaining portion hereof) or the application of such provision to any other persons or circumstances.

16.Withholding.  The Employer shall be entitled to withhold from any payments or deemed payments any amount of tax withholding it reasonably determines to be required by law.

17.Successors and Assigns; Third-Party Beneficiary.  This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any corporation with which or into which the Employer may be merged or which may succeed to its assets or business, provided, however, that the obligations of Executive are personal and shall not be assigned by him.  This Agreement shall inure to the benefit of and be enforceable by Executive’s personal and legal representatives, executors, administrators, assigns, heirs, distributees, devisees and legatees.  It is

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expressly acknowledged and agreed that (i) the Corporation is a third-party beneficiary of any provision hereof running in favor of the Corporation; (ii) the Employer may assign this Agreement in its entirety, and its rights under this Agreement, to the Corporation in connection with a “Sale Event” (as defined in the LLC Agreement); and (iii) at the request of the Employer, Executive shall execute an employment agreement with the Corporation on substantially the same terms as are contained herein with respect to the Employer.

18.Counterparts.  This Agreement may be executed in one or more  counterparts, all of which shall be considered one and the same  agreement, and shall become effective when one or more such  counterparts have been signed by each of the parties and  delivered to the other party.

19.Governing Law.  This Agreement shall be governed by and  construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within  such State, without regard to the conflicts of law principles of such State.

20.Choice of Venue.  Executive agrees to submit to the  jurisdiction of the United States District Court for the Southern District of New York or the Supreme Court of the State of New York, New York County, for the purpose of any action to enforce any of the terms of this Agreement.

21.Entire Agreement.  This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter, including without limitation anything contained in the exhibits to that certain Consulting Agreement between Executive and SL Green Realty Corp. dated as of February 23, 2004.  The parties hereto shall not be liable or bound to any other party in any manner by any representations, warranties or covenants relating to such subject matter except as specifically set forth herein.

22.Paragraph Headings.  Section headings used in this  Agreement are included for convenience of reference only and will  not affect the meaning of any provision of this agreement.

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IN WITNESS WHEREOF, this Agreement is entered into as of the date and year first written above, and is being executed on             , 2004.

GRAMERCY MANAGER LLC
By:
	Name:
	Title:
	Hugh Hall

Agreed, as to the rights and obligations of

the Corporation:  GRAMERCY CAPITAL CORP.

By:
	Name:
	Title:

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EX-10.13

Exhibit 10.13

EMPLOYMENT AND NONCOMPETITION AGREEMENT

This EMPLOYMENT AND NONCOMPETITION AGREEMENT (“Agreement”) is made as of the            day of July, 2004 between Robert R. Foley (“Executive”) and GKK Manager LLC (the “Employer”).

1.Term.  The term of this Agreement shall commence on July [ ], 2004 and, unless earlier terminated as provided in Section 6 below, shall terminate on the fourth anniversary of the date of this Agreement (the “Original Term”);provided, however, that Sections 4, 7 and 8 (and any enforcement or other procedural provisions hereof affecting Sections 4, 7 and 8) hereof shall survive the termination of this Agreement as provided therein.  The Original Term may be extended for such period or periods, if any, as may be mutually agreed to in writing by Executive and the Employer (each a “Renewal Term”).  If either party intends not to extend the Original Term, such party shall give the other party at least three months’ written notice of such intention.  If either party gives such notice with less than three months remaining in the Original Term, the term of this Agreement shall be extended until the date which is three months after the date on which the notice is given.  The period of Executive’s employment hereunder consisting of the Original Term and all Renewal Terms (and any period of extension under the foregoing sentence), if any, is herein referred to as the “Employment Period.”

2.Employment and Duties.

(a)Duties.  During the Employment Period, Executive shall be employed in the business of the Employer and its affiliates.  Executive shall serve the Employer as a senior executive and shall have the title of Managing Director of the Employer.  In such capacity, Executive, in conjunction with other senior officers and managers of the Employer, shall be responsible for, among other things: sourcing investments; sourcing credit facilities; underwriting, credit and risk management; asset and portfolio management; and general administrative functions.  In addition, Executive shall serve as Chief Financial Officer of Gramercy Capital Corp. (the “Corporation).  Executive shall have the general powers and duties of management usually vested in the chief financial officer of a comparable company in the same industry, including but not limited to: managing liquidity;  arranging financing; raising equity capital for the business; oversight of accounting and internal control; financial, risk and management reporting; investor relatations; and general administrative functions.  Executive will report to the managing member of the Employer (the “Managing Member”) with respect to functions as Managing Director and to the President and Chief Executive Officer of the Corporation (the “CEO”) with respect to functions as Chief Financial Officer.  Executive’s duties and authority shall be as further set forth by the Employer.

(b)Best Efforts.  Executive agrees to his employment as described in this Section 2 and agrees to devote substantially all of his business time and efforts to the performance of his duties under this Agreement, except as otherwise approved by the Managing Member and the CEO; provided, however, that nothing herein shall be interpreted to preclude Executive, so long as there is no material interference with his duties hereunder, from (i) participating as an officer or director of, or advisor to, any charitable or other tax-exempt organization or otherwise engaging in charitable, fraternal or trade group activities; (ii) investing and managing his assets as a passive investor in other entities or business ventures; provided that he performs no management or similar role (or, in the case of investments other than real estate investments, he performs a management role comparable to the role that a significant limited partner

would have, but performs no day-to-day management or similar role) with respect to such entities or ventures and such investment does not violate Section 8 hereof; and provided, further, that, in any case in which another party involved in the investment has a material business relationship with the Employer, Executive shall give notice prior written notice to the Managing Member and the CEO; or (iii) serving as a member of the Board of Directors of a for-profit corporation with the approval of the CEO and the Managing Member.

(c)Travel.  In performing his duties hereunder, Executive shall be available for all reasonable travel as the needs of the Employer’s business may require.

3.Compensation and Benefits.  In consideration of Executive’s services hereunder, the Employer shall compensate Executive as provided in this Agreement, and the Corporation shall have the obligations as set forth herein.

(a)Base Salary.  The Employer shall pay Executive an aggregate minimum annual salary at the rate of $350,000 per annum during the Employment Period (“Base Salary”).  Base Salary shall be payable bi-weekly in accordance with the Employer’s normal business practices and shall be reviewed by the Managing Member at least annually (for purposes of possible, upward, but not downward, adjustment).

(b)Incentive Compensation/Bonuses.  In addition to Base Salary, during the Employment Period, Executive shall be eligible for and shall receive from the Employer such discretionary annual bonuses as the Managing Member, in its sole discretion, may deem appropriate to reward Executive for job performance; provided, however, that Executive’s annual performance bonus shall not be less than $250,000 (the “Minimum Bonus”).  In addition, Executive shall be eligible to participate in any other bonus or incentive compensation plans in effect with respect to senior executive officers of the Employer.  If the term of this Agreement is extended under the penultimate sentence of Section 1, and Executive’s employment terminates as of the expiration of the term as so extended, then (i) upon such termination of employment, Executive shall receive (without duplication) an amount equal to (A) $250,000 multiplied by (B) a fraction (x) the numerator of which is the number of days in the fiscal year of termination during which Executive was employed and (y) the denominator of which is 365, and (ii) no other bonus-related amounts shall be payable under this Section 3(b) for the fiscal year of termination.

(c)Equity-Based Awards.  In the discretion of the Board or the Compensation Committee thereof, Executive shall be eligible to participate in any current or future equity incentive plan that has been or may be established by the Corporation for senior executive officers.  It is acknowledged that Executive has been previously granted 10,000 shares of restricted stock under that certain Gramercy Capital Corp. 2004 Equity Incentive Plan Restricted Stock Award Agreement between the Corporation and Executive, and 140,000 options under that certain Gramercy Capital Corp. 2004 Equity Incentive Plan Option Award Agreement between the Corporation and Executive, both dated           , 2004, copies of each are attached hereto as Exhibits A and B, respectively.

(d)Expenses.  Executive shall be reimbursed for all reasonable business related expenses incurred by Executive at the request of or on behalf of the Employer or the Corporation, provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Employer or the Corporation.  Any expenses incurred during the Employment Period but not reimbursed by the Employer or the Corporation by the end of the Employment Period, shall remain the obligation of the Employer or the Corporation, as applicable to so reimburse Executive.

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(e)Health and Welfare Benefit Plans.  During the Employment Period, Executive and Executive’s immediate family shall be entitled to participate in such health and welfare benefit plans as the Employer shall maintain from time to time for the benefit of senior executive officers of the Employer and their families, on the terms and subject to the conditions set forth in such plan.  Nothing in this Section shall limit the Employer’s right to change or modify or terminate any benefit plan or program as it sees fit from time to time in the normal course of business so long as it does so for all senior executives of the Employer.

(f)Vacations.  Executive shall be entitled to paid vacations in accordance with the then regular procedures of the Employer governing senior executive officers.

(g)Other Benefits.  During the Employment Period, the Employer shall provide to Executive such other benefits, as generally made available to other senior executives of the Employer.

4.Indemnification and Liability Insurance.  The Employer and Corporation together and severally agree to indemnify Executive to the full extent permitted by applicable law, as the same exists and may hereafter be amended, from and against any and all losses, damages, claims, liabilities and expenses asserted against, or incurred or suffered by, Executive (including the costs and expenses of legal counsel retained by the Employer or the Corporation to defend Executive and judgments, fines and amounts paid in settlement actually and reasonably incurred by or imposed on such indemnified party) with respect to any action, suit or proceeding, whether civil, criminal administrative or investigative (a “Proceeding”) in which Executive is made a party or threatened to be made a party or is otherwise involved, either with regard to his entering into this Agreement with the Employer or in his capacity as an officer or director, or former officer or director, of the Employer, the Corporation or any affiliate thereof for which he may serve in such capacity.  The Employer and the Corporation also agree to secure promptly and maintain officers and directors liability insurance providing coverage for Executive, the coverage shall be reasonably comparable to the coverage maintained by SL Green Realty Corp., for such time as SL Green Realty Corp. controls the Employer, to the extent that coverage can be obtained on reasonable efforts at a comparable rate.  The provisions of this Section 4 shall remain in effect after this Agreement is terminated irrespective of the reasons for termination.

5.Employer’s Policies.  Executive agrees to observe and comply with the reasonable rules and regulations of the Employer and the Corporation from time to time regarding the performance of his duties and to carry out and perform orders, directions and policies communicated to him from time to time by the Employer and the Corporation, so long as same are otherwise consistent with this Agreement.

6.Termination.  Executive’s employment hereunder may be terminated under the following circumstances:

(a)Termination by the Employer.

(i)Death.  Executive’s employment hereunder shall terminate upon his death.

(ii)Disability.  If, as a result of Executive’s incapacity due to physical or mental illness or disability, Executive shall have been incapable of performing his duties hereunder even with a reasonable accommodation on a full-time basis for the entire period of four consecutive months or any 120 days in a 180-day period, and within 30

3

days after written Notice of Termination (as defined in Section 6(d)) is given he shall not have returned to the performance of his duties hereunder on a full-time basis, the Employer may terminate Executive’s employment hereunder.

(iii)Cause.  The Employer may terminate Executive’s employment hereunder for Cause.  For purposes of this Agreement, “Cause” shall mean:  (i) Executive’s engaging in conduct which is a felony; (ii) Executive’s engaging in conduct constituting a material breach of fiduciary duty, gross negligence or willful and material misconduct, material fraud or willful and material misrepresentation; (iii) Executive’s material breach of any of his obligations under Section 8(a) through 8(e) of this Agreement; or (iv) Executive’s failure to competently perform his duties after receiving notice from the Employer specifically identifying the manner in which Executive has failed to perform (it being understood that, for this purpose, the manner and level of Executive’s performance shall not be determined based on the financial performace of the Employer or the Corporation (including, without limitation, the performance of the stock of the Corporation)).

(iv)Without Cause.  Executive’s employment hereunder may be terminated by the Employer at any time with or without Cause (as defined in Section 6(a)(iii) above), by the Managing Member (or, in the case of the Corporation, by a majority vote of all of the members of the Board) upon written notice to Executive, subject only to the severance provisions specifically set forth in Section 7.

(b)Termination by Executive.

(i)Disability.  Executive may terminate his employment hereunder for Disability within the meaning of Section 6(a)(ii) above.

(ii)With Good Reason.  Executive’s employment hereunder may be terminated by Executive with Good Reason effective immediately by written notice to the Employer.  For purposes of this Agreement, with “Good Reason” shall mean, without Executive’s prior written consent, (i) a failure by the Employer to pay compensation in accordance with the provisions of Section 3, which failure has not been cured within 14 days after the notice of the failure (specifying the same) has been given by Executive to the Employer; (ii) a material breach by the Employer of any other provision of this Agreement which has not been cured within 30 days after notice of noncompliance (specifying the nature of the noncompliance) has been given by Executive to the Employer, (iii) the Employer requires Executive to relocate his principal office more than 60 miles outside of Manhattan other than in connection with a change of the Employer’s principal office to the same new location; or (iv) the Employer enters into an employment agreement with any person pursuant to which such person will receive an annual base salary or guaranteed bonus in excess of the highest salary and guaranteed bonus payable to Executive, and the entering into of such employment agreement is in contravention of Section 6.4.11 of the LLC Agreement (as defined in Section 6(c) below).  On and after the occurrence of a Change-in-Control (as defined in Section 6(c) below), “Good Reason” shall also include, in addition to the foregoing:

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(A)a change in duties, responsibilities, status or positions with the Employer that does not represent a promotion from or maintaining of Executive’s duties, responsibilities, status or positions as in effect immediately prior to the Change-in-Control, or any removal of Executive from or any failure to reappoint or reelect Executive to such positions, except in connection with the termination of Executive’s employment for Cause, disability, retirement or death;

(B)a reduction by the Employer in Executive’s Base Salary or bonus compensation as in effect immediately prior to the Change-in-Control;

(C)the failure by the Employer to continue in effect any of the benefit plans including, but not limited to ongoing stock option and equity awards, in which Executive is participating at the time of the Change-in-Control of the Employer (unless Executive is permitted to participate in any substitute benefit plan with substantially the same terms and to the same extent and with the same rights as Executive had with respect to the benefit plan that is discontinued) other than as a result of the normal expiration of any such benefit plan in accordance with its terms as in effect at the time of the Change-in-Control, or the taking of any action, or the failure to act, by the Employer which would adversely affect Executive’s continued participation in any of such benefit plans on at least as favorable a basis to Executive as was the case on the date of the Change-in-Control or which would materially reduce Executive’s benefits in the future under any of such benefit plans or deprive Executive of any material benefits enjoyed by Executive at the time of the Change-in-Control; provided, however, that any such action or inaction on the part of the Employer, including any modification, cancellation or termination of any benefits plan, undertaken in order to maintain such plan in compliance with any federal, state or local law or regulation governing benefits plans, including, but not limited to, the Employment Retirement Income Security Act of 1974, as amended, shall not constitute Good Reason for the purposes of this Agreement;

(D)the failure by the Employer to obtain from any successor to the Employer an agreement to be bound by this Agreement pursuant to Section 17 hereof, which has not been cured within 30 days after the notice of the failure (specifying the same) has been given by Executive to the Employer.

(iii)Without Good Reason.  Executive shall have the right to terminate his employment hereunder without Good Reason, subject to the terms and conditions of this Agreement.

(c)Definitions.  The following terms shall be defined as set forth below.

(i)“Change-in-Control” shall mean the happening of any of the following:

(A)any “person,” including a “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding the Employer or the Corporation, any entity controlling, controlled by or under common control with the Employer or the Corporation, any trustee, fiduciary or other person or entity

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holding securities under any employee benefit plan or trust of the Employer or the Corporation or any such entity, and Executive and any “group” (as such term is used in Section 13(d)(3) of the Exchange Act) of which Executive is a member), is or becomes the “beneficial owner” (as defined in Rule 13(d)(3) under the Exchange Act), directly or indirectly, of securities of the Employer or the Corporation representing 25% or more of either (A) the combined voting power of the Employer’s or the Corporation’s then outstanding securities or (B) the then outstanding common stock (or other similar equity interest, in the case of  a company other than a corporation) of the Employer or the Corporation (in either such case other than as a result of an acquisition of securities directly from the Employer or the Corporation); provided, however, that, in no event shall a Change-in-Control be deemed to have occurred upon an initial public offering of the common stock (or such other equity interest) of the Employer or the Corporation under the Securities Act; or

(B)any consolidation or merger of the Employer or the Corporation where the shareholders of the Employer or the Corporation, as applicable, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, shares representing in the aggregate 50% or more of the combined voting power of the securities of the corporation issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any); or

(C)there shall occur (A) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Employer or the Corporation, other than a sale or disposition by the Employer or the Corporation of all or substantially all of the Employer’s or the Corporation’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by “persons” (as defined above) in substantially the same proportion as their ownership of the Employer or the Corporation, as applicable, immediately prior to such sale or (B) the approval by shareholders of the Employer or the Corporation, as applicable, of any plan or proposal for the liquidation or dissolution of the Employer or the Corporation, as applicable; or

(D)the members of the Board (the “Directors”) at the beginning of any consecutive 24-calendar-month period (the “Incumbent Directors”) cease for any reason other than due to death to constitute at least a majority of the members of the Board; provided that any Director whose election, or nomination for election by the Corporation’s shareholders was approved or ratified by a vote of at least a majority of the members of the Board then still in office who were members of the Board at the beginning of such 24-calendar-month period shall be deemed to be an Incumbent Director.

Notwithstanding the foregoing, (i) a Change-in-Control with respect to the Employer or the Corporation shall not be deemed to have occurred if SL Green Realty Corp. controls the Employer or the Corporation, respectively, at the applicable time (provided, that, at such time, in the case of the Employer, SL Green

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Realty Corp. beneficially owns at least 15% of the outstanding voting or total equity interests of the Employer, and in the case of the Corporation, SL Green Realty Corp. beneficially owns at least 10% of the voting or total outstanding equity interests of the Corporation (it being expressly understood that the existence of the foregoing 15% and 10% levels of ownership do not establish a presumption of control by SL Green Realty Corp. for these purposes)) and a Change-in-Control with respect to the Employer shall not be deemed to have occurred if the Corporation controls the Employer, at the applicable time; and (ii) in no event shall a Change-in-Control be deemed to have occurred upon an initial public offering of the common stock of the Corporation under the Securities Act of 1933, as amended.

(ii)“LLC Agreement” means the Limited Liability Company Operating Agreement of GKK Manager LLC, dated as of July           , 2004, among Employer, Managing Member, Executive and the other parties specified therein.

(iii)“Vesting Agreement” means the Membership Interest Vesting and Repurchase Agreement, dated as of July           , 2004, among Employer, Managing Member and Executive.

(d)Notice of Termination.  Any termination of Executive’s employment by the Employer (or the Corporation) or by Executive (other than on account of death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 13 of this Agreement.  For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and, as applicable, shall set forth in reasonable detail the fact and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.

(e)Resignation Upon Termination.  In the event that Executive’s employment with the Employer is terminated, Executive (i) shall, within five business days of receipt of a written request for resignation, resign as an officer of the Corporation, and shall resign all other positions (including, without limitation, as officer, employee, director and member of any committee) with the Employer and the Corporation and their subsidiaries and affiliates, and (ii) shall provide such written confirmation thereof as may be reasonably required by the Employer or the Corporation.  In the event that Executive’s service with the Corporation is terminated other than as contemplated by the foregoing sentence, Executive (i) shall, within five business days of receipt of a written request for resignation, resign all other positions (including, without limitation, as officer, employee, director and member of any committee) with the Corporation and its subsidiaries, and (ii) shall provide such written confirmation thereof as may be reasonably required by the Corporation.

7.Compensation Upon Termination.

(a)Termination By Employer Without Cause or By Executive With Good Reason.  If (i) Executive is terminated without Cause pursuant to Section 6(a)(iv) above, or (ii) Executive shall terminate his employment hereunder with Good Reason pursuant to Section (6)(b)(ii) above, then, if Executive has fully complied with Section 6(e) above, the Employment Period shall terminate as of the effective date set forth in the written notice of such termination (the “Termination Date”) and Executive shall be entitled to the following payment and benefits:

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(i)Executive shall receive any earned and accrued but unpaid Base Salary on the Termination Date, and any earned and accrued but unpaid incentive compensation and bonuses payable at such times as would have applied without regard to such termination.

(ii)The Employer shall continue to pay Executive’s Base Salary (at the rate in effect on the date of his termination) and the Minimum Bonus for a period of two years commencing on the date of such termination, on the same periodic payment dates as payment would have been made to Executive had the Employment Period not been terminated.

(iii)Any issued but unvested equity awards (i.e., shares then still subject to restrictions under the applicable award agreement) granted to Executive by the Employer or the Corporation that would otherwise become vested and exercisable during the two-year period following the date of Executive’s termination shall become vested (i.e., free from such restrictions), and any unexerciseable or unvested stock options granted to Executive by the Employer or the Corporation that would otherwise become vested and exercisable during the two-year period following the date of Executive’s termination shall become vested and exercisable on the date of Executive’s termination.  Any unexercised stock options granted to Executive by the Employer or the Corporation that have become vested and exercisable shall remain exercisable for six months following the Termination Date or, if earlier, the expiration of the initial applicable term stated at the time of the grant.

Other than as may be provided under Section 4 or as expressly provided in this Section 7(a), the Employer shall have no further obligations hereunder following such termination.

(b)Termination By the Employer For Cause or By Executive Without Good Reason.  If (i) Executive is terminated for Cause pursuant to Section 6(a)(iii) above, or (ii) Executive voluntarily terminates his employment hereunder without Good Reason pursuant to Section 6(b)(ii) above, then the Employment Period shall terminate as of the Termination Date and Executive shall be entitled to receive his earned and accrued but unpaid Base Salary at the rate then in effect until the Termination Date.  In addition, in such event, Executive shall be entitled to exercise any options which have vested as of the termination of Executive’s employment, but only for a period of three months after the Termination Date (but in no event after the expiration of the initial applicable term stated at the time of grant) and otherwise in accordance with the terms of the applicable option grant agreement or plan.  Notwithstanding the foregoing, and without limiting such other forfeitures as may be provided under the documentation controlling the applicable grants or other acquisitions, (i) in the case of a termination for Cause under clause (i), (ii) or (iii) of the second sentence of Section 6(a)(iii), all vested options shall expire on the Termination Date and all unvested equity interests in the Corporation which have been awarded under a compensatory arrangement, including without limitation the restricted stock (or equivalent) granted on or before the date hereof, shall automatically be forfeited, and (ii) in the case of a termination for Cause under clause (iv) of the second sentence of Section 6(a)(iii), all vested options shall be exercisable for three months from the Termination Date; provided, however, that nothing in this sentence shall extend the term of any option.  Other than as may be provided under Section 4 or as expressly provided in this Section 7(b), the Employer shall have no further obligations hereunder following such termination.

(c)Termination by Reason of Death.     If Executive’s employment terminates due to his death, the Employer shall pay Executive’s Base Salary plus any applicable pro rata portion of the annual performance bonus described in Section 3(b) above for a period of six months from the date of his death, or such longer period as the Employer may determine, to Executive’s estate or to a beneficiary designated

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by Executive in writing prior to his death.  In the case of such a termination, (i) Executive shall be credited with six months after termination under any provisions governing restricted stock (or its equivalent) or options relating to the vesting or initial exercisability thereof, and (ii) if such six months of credit would fall within a vesting period, a pro rata portion of the unvested shares of restricted stock (or its equivalent) granted to Executive that otherwise would have become vested upon the conclusion of such vesting period shall become vested on the date of Executive’s termination due to his death, and a pro rata portion of the unexercisable stock options granted to Executive that otherwise would have become exercisable upon the conclusion of such vesting period shall become exercisable on the date of Executive’s termination due to such death.  Furthermore, upon such death, any vested unexercised stock options granted to Executive shall remain vested and exercisable until the earlier of (A) the date on which the term of such stock options otherwise would have expired, or (B) the second January 1 after the date of Executive’s termination due to his death.  Other than as may be provided under Section 4 or as expressly provided in this Section 7(c), the Employer shall have no further obligations hereunder following such termination.

(d)Termination by Reason of Disability.  In the event that Executive’s employment terminates due to his disability as defined in Section 6(a)(ii) above, Executive shall be entitled to be paid his Base Salary plus any applicable pro rata portion of the annual performance bonus described in Section 3(b) above for a period of six months from the date of such termination, or for such longer period as such benefits are then provided with respect to other senior executives of the Employer.  In the case of such a termination, if Executive has fully complied with Section 6(e) above, (i) Executive shall be credited with six months after termination under any provisions governing restricted stock (or its equivalent) or options relating to the vesting or initial exercisability thereof, and (ii) if such six months of credit would fall within a vesting period, a pro rata portion of the unvested shares of restricted stock (or its equivalent) granted to Executive that otherwise would have become vested upon the conclusion of such vesting period shall become vested on the date of Executive’s termination due to his disability, and a pro rata portion of the unvested or unexercisable stock options granted to Executive that otherwise would have become vested or exercisable upon the conclusion of such vesting period shall become vested and exercisable on the date of Executive’s termination due to such disability.  Furthermore, upon such disability, any vested unexercised stock options granted to Executive shall remain vested and exercisable until the earlier of (A) the date on which the term of such stock options otherwise would have expired, or (B) the second January 1 after the date of Executive’s termination due to his disability.  Other than as expressly provided in this Section 7(d), the Employer shall have no further obligations hereunder following such termination.

8.Confidentiality; Prohibited Activities.  Executive and the Employer (which, for purposes of this Section 8, and any related enforcement provisions hereof, except at the context requires otherwise, shall include not only GKK Manager LLC, but shall also severally include the Corporation) recognize that due to the nature of his employment and relationship with the Employer, Executive has access to and develops confidential business information, proprietary information, and trade secrets relating to the business and operations of the Employer.  Executive acknowledges that (i) such information is valuable to the business of the Employer, (ii) disclosure to, or use for the benefit of, any person or entity other than the Employer, would cause irreparable damage to the Employer, (iii) the principal businesses of the Employer are originating and acquiring real estate related loans and securities associated with commercial and multi-family properties (collectively, the “Business”), (iv) the Employer is one of the limited number of persons who have developed a business such as the Business, and (v) the Business is national in scope.  Executive further acknowledges that his duties for the Employer include the duty to develop and maintain client, customer, employee, and other business relationships on behalf of the Employer; and that access to

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and development of those close business relationships for the Employer render his services special, unique and extraordinary.  In recognition that the good will and business relationships described herein are valuable to the Employer, and that loss of or damage to those relationships would destroy or diminish the value of the Employer, and in consideration of the compensation (including severance) arrangements hereunder, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged by Executive, Executive agrees as follows:

(a)Confidentiality.  During the term of this Agreement (including any renewals), and at all times thereafter, Executive shall maintain the confidentiality of all confidential or proprietary information of the Employer (“Confidential Information”), and, except in furtherance of the business of the Employer or as specifically required by law or by court order, he shall not directly or indirectly disclose any such information to any person or entity; nor shall he use Confidential Information for any purpose except for the benefit of the Employer.  For purposes of this Agreement, “Confidential Information” includes, without limitation:  client or customer lists, identities, contacts, business and financial information (excluding those of Executive prior to employment with Employer); investment strategies; pricing information or policies, fees or commission arrangements of the Employer; marketing plans, projections, presentations or strategies of the Employer; financial and budget information of the Employer; new personnel acquisition plans; and all other business related information which has not been publicly disclosed by the Employer.  This restriction shall apply regardless of whether such Confidential Information is in written, graphic, recorded, photographic, data or any machine readable form or is orally conveyed to, or memorized by, Executive.

(b)Prohibited Activities.  Because Executive’s services to the Employer are essential and because Executive has access to the Employer’s Confidential Information, Executive covenants and agrees that:

(i)during the Employment Period, and for the one-year period following the termination of Executive by either party for any reason including the expiration of the term of this Agreement, Executive will not, anywhere in the United States, without the prior written consent of the Employer and the unanimous consent of the Directors other than any other officer of the Employer, directly or indirectly (individually, or through or on behalf of another entity as owner, partner, agent, employee, consultant, or in any other capacity), engage, participate or assist, as an owner, partner, employee, consultant, director, officer, trustee or agent, in any element of the Business, subject, however, to Section 8(c) below.  Notwithstanding the forgoing, in the event that the Employer extends the term of its existing management agreement by matching a bona fide third-party offer which provides for materially less fees than the existing agreement, then such period of restriction shall only apply during the remaining period of the term of this Agreement; and

(ii)during the Employment Period, and during (x) the two-year period following the termination of Executive by either party for any reason (including the expiration of the term of the Agreement) in the case of clause (A) below, or (y) the one-year period following such termination in the case of clause (B) below, Executive will not, without the prior written consent of the Employer and the unanimous consent of the Directors other than any other officer of the Employer, directly or indirectly (individually, or through or on behalf of another entity as owner, partner, agent,

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employee, consultant, or in any other capacity), (A) solicit, encourage, or engage in any activity to induce any employee of the Employer to terminate employment with the Employer, or to become employed by, or to enter into a business relationship with, any other person or entity; provided, however, that the two-year period otherwise set forth in clause (x) above shall be one-year in the case of an employee hired after the date hereof by Executive with whom as of the date hereof, Executive has a material pre-existing relationship; or (B) engage in any activity intentionally to interfere with, disrupt or damage the Business of the Employer, or its relationships with any client, supplier or other business relationship of the Employer.  For purposes of this subsection, the term “employee” means any individual who is an employee of or consultant to the Employer (or any affiliate) during the six-month period prior to Executive’s last day of employment.

(c)Other Investments.  Notwithstanding anything contained herein to the contrary, Executive is not prohibited by this Section 8 from making investments, (i) expressly disclosed to the Employer and to the CEO in writing before the date hereof; (ii) solely for investment purposes and without participating in the business in which the investments are made, in any entity that engages, directly or indirectly, in the acquisition, development, construction, operation, management, financing or leasing of office real estate properties, regardless of where they are located, if (x) Executive’s aggregate investment in each such entity constitutes less than one percent of the equity ownership of such entity, (y) the investment in the entity is in securities traded on any national securities exchange or the National Association of Securities Dealers, Inc. Automated Quotation System, and (z) Executive is not a controlling person of, or a member of a group which controls, such entity; or (iii) if (A) except with the prior written consent of the Employer and the CEO, he has less than a 25% interest in the investment in question, (B) except with the prior written consent of the Employer and the CEO, he does not have the role of a general partner or managing member, or any similar role, (C) the investment is not an appropriate investment opportunity for the Employer, and (D) the investment activity is not directly competitive with the businesses of the Employer.

(d)Employer Property.  Executive acknowledges that all originals and copies of materials, records and documents generated by him or coming into his possession during his employment by the Employer are the sole property of the Employer (“Employer Property”).  During his employment, and at all times thereafter, Executive shall not remove, or cause to be removed, from the premises of the Employer, copies of any record, file, memorandum, document, computer related information or equipment, or any other item relating to the business of the Employer, except in furtherance of his duties under this Agreement.  When Executive terminates his employment with the Employer, or upon request of the Employer at any time, Executive shall promptly deliver to the Employer all originals and copies of Employer Property in his possession or control and shall not retain any originals or copies in any form.

(e)No Disparagement.  For one year following termination of Executive’s employment for any reason, Executive shall not intentionally disclose or cause to be disclosed any negative, adverse or derogatory comments or information about (i) the Employer and its parent, affiliates or subsidiaries, if any; (ii) any product or service provided by the Employer and its parent, affiliates or subsidiaries, if any; or (iii) the Employer’s and its parent’s, affiliates’ or subsidiaries’ prospects for the future.  For one year following termination of Executive’s employment for any reason, the Employer shall not disclose or cause to be disclosed any negative, adverse or derogatory

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comments or information about Executive.  Nothing in this Section shall prohibit either the Employer or Executive from testifying truthfully in any legal or administrative proceeding.

(f)Remedies.  Executive declares that the foregoing limitations in Sections 8(a) through 8(f) above are reasonable and necessary for the adequate protection of the business and the goodwill of the Employer.  If any restriction contained in this Section 8 shall be deemed to be invalid, illegal or unenforceable by reason of the extent, duration or scope thereof, or otherwise, then the court making such determination shall have the right to reduce such extent, duration, scope, or other provisions hereof to make the restriction consistent with applicable law, and in its reduced form such restriction shall then be enforceable in the manner contemplated hereby.  In the event that Executive breaches any of the promises contained in this Section 8, Executive acknowledges that the Employer’s remedy at law for damages will be inadequate and that the Employer will be entitled to specific performance, a temporary restraining order or preliminary injunction to prevent Executive’s prospective or continuing breach and to maintain the status quo.  The existence of this right to injunctive relief, or other equitable relief, or the Employer’s exercise of any of these rights, shall not limit any other rights or remedies the Employer may have in law or in equity, including, without limitation, the right to arbitration contained in Section 9 hereof and the right to compensatory and monetary damages.  Executive hereby agrees to waive his right to a jury trial with respect to any action commenced to enforce the terms of this Agreement.  Executive shall have remedies comparable to those of the Employer as set forth above in this Section 8(f) if the Employer breaches Section 8(e).

(g)Transition.  Regardless of the reason for his departure from the Employer, Executive agrees that at the Employer’s sole costs and expense, for a period of not more than 30 days after termination of Executive, he shall take all steps reasonably requested by the Employer to effect a successful transition of client and customer relationships to the person or persons designated by the Employer, subject to Executive’s obligations to his new employer.

(h)Cooperation with Respect to Litigation.  During the Employment period and at all times thereafter, Executive agrees to give prompt written notice to the Employer of any claim relating to the Employer and to cooperate fully, in good faith and to the best of his ability with the Employer in connection with any and all pending, potential or future claims, investigations or actions which directly or indirectly relate to any action, event or activity about which Executive may have knowledge in connection with or as a result of his employment by the Employer hereunder.  Such cooperation will include all assistance that the Employer, its counsel or its representatives may reasonably request, including reviewing documents, meeting with counsel, providing factual information and material, and appearing or testifying as a witness; provided, however, that the Employer will reimburse Executive for all reasonable expenses, including travel, lodging and meals, incurred by him in fulfilling his obligations under this Section 8(h) and, except as may be required by law or by court order, should Executive then be employed by an entity other than the Employer, such cooperation will not materially interfere with Executive’s then current employment.

(i)Survival.  The provisions of this Section 8 shall survive termination of Executive’s employment any other provisions relating to the enforcement thereof.

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9.Equity Interest in the Employer.  It is expressly acknowledged that Executive has been granted an equity interest in the Employer by that certain Membership Interest Issuance, Vesting and Repurchase Agreement between Executive and Employer, dated as of the date hereof.

10.Arbitration.  Any controversy or claim arising out of or relating to this Agreement or the breach of this Agreement (other than a controversy or claim arising under Section 8, to the extent necessary for the Employer or the Corporation (or their affiliates, where applicable) to avail themselves of the rights and remedies referred to in Section 8(f)) that is not resolved by Executive and the Employer or the Corporation (or their affiliates, where applicable) shall be submitted to arbitration in New York, New York in accordance with New York law and the procedures of the American Arbitration Association.  The determination of the arbitrator(s) shall be conclusive and binding on the Employer and the Corporation (or their affiliates, where applicable) and Executive and judgment may be entered on the arbitrator(s)’ award in any court having jurisdiction.

11.Conflicting Agreements.  Executive hereby represents and warrants that the execution of this Agreement and the performance of his obligations hereunder will not breach or be in conflict with any other agreement to which he is a party or is bound, and that he is not now subject to any covenants against competition or similar covenants which would affect the performance of his obligations hereunder.

12.No Duplication of Payments.  Executive shall not be entitled to receive duplicate payments under any of the provisions of this Agreement.

13.Notices.  All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand and or sent by prepaid telex, cable or other electronic devices or sent, postage prepaid, by registered or certified mail or telecopy or overnight courier service and shall be deemed given when so delivered by hand, telexed, cabled or telecopied, or if mailed, three days after mailing (one business day in the case of express mail or overnight courier service), as follows:

(a)if to Executive:

Robert R. Foley, at the address shown on the execution page hereof.

With a copy to:

Friedman Kaplan Seiler & Adelman LLP

1633 Broadway

New York, NY 10019

Attn: Edward A. Friedman

(b)if to the Employer:

Gramercy Manager LLC

420 Lexington Avenue

New York, New York 10170

Attn:  Marc Holliday

with a copy to:

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Clifford Chance US LLP

31 West 52nd Street

New York, New York  10019

Attention:  Robert E. King, Jr.

(c)if to the Corporation:

Gramercy Capital Corp.

420 Lexington Avenue

New York, New York 10170

Attn: Corporate Secretary

with copies to:

Gramercy Manager LLC

420 Lexington Avenue

New York, New York 10170

Attn:  Marc Holliday

and:

Clifford Chance US LLP

31 West 52nd Street

New York, New York  10019

Attention:  Robert E. King, Jr.

or such other address as either party may from time to time specify by written notice to the other party hereto.

14.Amendments.  No amendment, modification or waiver in respect of this Agreement shall be effective unless it shall be in writing and signed by the party against whom such amendment, modification or waiver is sought.

15.Severability.  If any provision of this Agreement (or any portion thereof) or the application of any such provision (or any portion thereof) to any person or circumstances shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereof (or the remaining portion hereof) or the application of such provision to any other persons or circumstances.

16.Withholding.  The Employer shall be entitled to withhold from any payments or deemed payments any amount of tax withholding it reasonably determines to be required by law.

17.Successors and Assigns; Third-Party Beneficiary.  This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any corporation with which or into which the Employer may be merged or which may succeed to its assets or business, provided, however, that the obligations of Executive are personal and shall not be assigned by him.  This Agreement shall inure to the benefit of and be enforceable by Executive’s personal and legal representatives, executors, administrators, assigns, heirs, distributees, devisees and legatees.  It is

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expressly acknowledged and agreed that (i) the Corporation is a third-party beneficiary of any provision hereof running in favor of the Corporation; (ii) the Employer may assign this Agreement in its entirety, and its rights under this Agreement, to the Corporation in connection with a “Sale Event” (as defined in the LLC Agreement); and (iii) at the request of the Employer, Executive shall execute an employment agreement with the Corporation on substantially the same terms as are contained herein with respect to the Employer.

18.Counterparts.  This Agreement may be executed in one or more  counterparts, all of which shall be considered one and the same  agreement, and shall become effective when one or more such  counterparts have been signed by each of the parties and  delivered to the other party.

19.Governing Law.  This Agreement shall be governed by and  construed in accordance with the laws of the State of New York applicable to agreements made and to be performed entirely within  such State, without regard to the conflicts of law principles of such State.

20.Choice of Venue.  Executive agrees to submit to the  jurisdiction of the United States District Court for the Southern District of New York or the Supreme Court of the State of New York, New York County, for the purpose of any action to enforce any of the terms of this Agreement.

21.Entire Agreement.  This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter, including without limitation anything contained in the exhibits to that certain Consulting Agreement between Executive and SL Green Realty Corp. dated as of February 23, 2004.  The parties hereto shall not be liable or bound to any other party in any manner by any representations, warranties or covenants relating to such subject matter except as specifically set forth herein.

22.Paragraph Headings.  Section headings used in this  Agreement are included for convenience of reference only and will  not affect the meaning of any provision of this agreement.

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IN WITNESS WHEREOF, this Agreement is entered into as of the date and year first written above, and is being executed on                                         , 2004.

GRAMERCY MANAGER LLC
By:
	Name:
	Title:
	Robert R. Foley

Agreed, as to the rights and obligations of

the Corporation:  GRAMERCY CAPITAL CORP.

By:
	Name:
	Title:

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EX-10.15

Exhibit 10.15

EXECUTION COPY

AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), is amended and restated as of December 3, 2004, and entered into by and among Gramercy Capital Corp., a Maryland corporation (the “Company”), and SL Green Operating Partnership, L.P., a Delaware limited partnership (the “Holder”).  Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in Section 1 hereto.

RECITAL

This AGREEMENT is made in connection with the Subscription Agreement for the purchase of the Company’s common stock, par value $0.001 per share (the “Common Shares”) between the Company and each Holder, dated the date hereof.  In order to induce each Holder to purchase Common Shares, the Company agrees to provide the registration rights provided for in this Agreement to each Holder and its direct and indirect transferees.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual promises and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

Section 1.Definitions.  As used in this Agreement, the following terms shall have the following meanings:

“Affiliate”  shall mean, when used with reference to a specified Person, (i) any Person that directly or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the specified Person; (ii) any Person who, from time to time, is a member of the Immediate Family of a specified Person; (iii) any Person who, from time to time, is an officer or director or manager of a specified Person; or (iv) any Person who, directly or indirectly, is the beneficial owner of 50% or more of any class of equity securities or other ownership interests of the specified Person, or of which the specified Person is directly or indirectly the owner of 50% or more of any class of equity securities or other ownership interests.

“Adverse Effect” shall have the meaning set forth in Section 3(e) hereof.

“Agreement” shall mean this Registration Rights Agreement as originally executed and as amended, supplemented or restated from time to time.

“Board” shall mean the Board of Directors of the Company.

“Business Day”  shall mean each day other than a Saturday, a Sunday or any other day on which banking institutions in the State of New York are authorized or obligated by law or executive order to be closed.

“Common Shares” shall mean the shares of common stock of the Company, par value $0.001 per share, held by Holders from time to time.

“Commission” shall mean the Securities and Exchange Commission and any successor thereto.

“Company” shall have the meaning set forth in the introductory paragraph hereof.

“Control” (including the terms “Controlling,” “Controlled by” and “under common Control with”) shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person through the ownership of Voting Power, by contract or otherwise.

“Demand Party” shall have the meaning set forth in Section 3(a) hereof.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended (or any corresponding provision of succeeding law) and the rules and regulations thereunder.

“Holders” shall mean SL Green Operating Partnership, L.P., in its capacity as a holder of Registrable Securities, and any transferree of the Registrable Securities.  For purposes of this Agreement, the Company may deem and treat the registered holder of a Registrable Security as each Holder and absolute owner thereof, unless notified to the contrary in writing by the registered Holder thereof.

“Person” shall mean any individual, partnership, corporation, limited liability company, joint venture, association, trust, unincorporated organization or other governmental or legal entity.

“Public Offering” shall mean any offering of Registrable Securities to the public pursuant to an effective registration statement filed with the Commission under the Securities Act, or any comparable document under any similar federal statute then in force.

“Registrable Securities” shall mean the Common Shares; provided, however, such Registrable Securities shall cease to be Registrable Securities when (A) a registration statement with respect to the sale of such Registrable Securities shall have become effective under the Securities Act and all such Registrable Securities shall have been disposed of in accordance with such registration statement, (B) such Registrable Securities shall have been sold in accordance with Rule 144 (or any successor provision) under the Securities Act, (C) such Registrable Securities become eligible to be publicly sold without limitation as to amount or manner of sale pursuant to Rule 144(k) (or any successor provision) under the Securities Act, or (D) such Registrable Securities have ceased to be outstanding.

“Registration Expenses” shall mean (i) the fees and disbursements of counsel and independent public accountants for the Company incurred in connection with the Company’s performance of or compliance with this Agreement, including the expenses of any special audits or “comfort” letters required by or incident to such performance and compliance, and any premiums and other costs of policies of insurance obtained by the Company against liabilities arising out of the sale of any securities and (ii) all registration, filing and stock exchange fees, all fees and expenses of complying with securities or “blue sky” laws, all fees and expenses of custodians, transfer agents and registrars, all printing expenses, messenger and delivery expenses; provided, however, “Registration Expenses” shall not include any out-of-pocket expenses of each Holder, legal fees and expenses of any counsel to a Holder, transfer taxes, underwriting or brokerage commissions or discounts associated with effecting any sales of Registrable Securities that may be offered, which expenses shall be borne by each Holder individually or on a pro rata basis with respect to the Registrable Securities so sold.

“Securities Act” shall mean the Securities Act of 1933, as amended (or any successor corresponding provision of succeeding law), and the rules and regulations thereunder.

“Shelf Registration Statement” shall have the meaning set forth in Section 2(a) hereof.

“Stand-Off Period” shall have the meaning set forth in Section 6 hereof.

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“Voting Power” shall mean voting securities or other voting interests ordinarily (and apart from rights accruing under special circumstances) having the right to vote in the election of board members or Persons performing substantially equivalent tasks and responsibilities with respect to a particular entity.

Section 2.Shelf Registrations.

a.Shelf Registration.  The Company agrees to file with the Commission no later than August 31, 2005 and during a period of time that the issuer of the Registrable Securities is eligible to use Form S-3 (or any similar or successor form), a registration statement under the Securities Act on Form S-3 (or any similar or successor form) for the offering on a continuous or delayed basis in the future of the Registrable Securities (the “Shelf Registration Statement”), and will use commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective by the Commission as soon as practicable thereafter.  The Shelf Registration Statement shall be on an appropriate form and the registration statement and any form of prospectus included therein (or prospectus supplement relating thereto) shall reflect the plan of distribution or method of sale as each Holder may from time to time notify the Company.

b.Effectiveness.  The Company shall use commercially reasonable efforts to keep the Shelf Registration Statement continuously effective for the period beginning on the date on which the Shelf Registration Statement is declared effective and ending on the date that all of the Registrable Securities registered under the Shelf Registration Statement cease to be Registrable Securities.  During the period that the Shelf Registration Statement is effective, the Company shall supplement or make amendments to the Shelf Registration Statement, if required by the Securities Act or if reasonably requested by each Holder (whether or not required by the form on which the securities are being registered), including to reflect any specific plan of distribution or method of sale, and shall use its commercially reasonable efforts to have such supplements and amendments declared effective, if required, as soon as practicable after filing.  Without limiting the foregoing, if there is an increase in the number of Registrable Securities and any of the Registrable Securities as so increased are not then registered under the Shelf Registration Statement (the “Unregistered Securities”), the Company shall promptly supplement or make amendments to the Shelf Registration Statement or file an additional Shelf Registration Statement to register the Unregistered Securities, and shall use its commercially reasonable efforts to have such supplements, amendments or additional Shelf Registration Statement declared effective, if required, as soon as practicable after filing.

Section 3.Registration on Request.

a.Request.  If, at any time after August 31, 2005, the Company (i) is not eligible to use Form S-3 or (ii) has failed to file the Shelf Registration, any Holder or the Holders (individually or collectively, as the case may be, the “Demand Party”) may request in writing that the Company effect the registration under the Securities Act of all of the Common Shares held by such Demand Party.  Any such request will specify (i) the number of Common Shares proposed to be sold and (ii) the intended method of disposition thereof.  Subject to the other provisions of this Section 3, the Company shall promptly give written notice of such requested registration to each Holder that is not a Demand Party, and thereupon will, as expeditiously as possible, use its commercially reasonable efforts to effect the registration under the Securities Act of the Common Shares which the Company has been so requested to register by the Demand Party.

b.Registration Statement Form.  The Company shall select the registration statement form for any registration pursuant to this Section 3; provided, however, that if any registration requested pursuant to this Section 3 which is proposed by the Company to be effected by the filing of a registration statement on Form S-3 (or any successor or similar short-form registration statement) shall be in

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connection with an underwritten public offering, and if the managing underwriter shall advise the Company in writing that, in its opinion, the use of another form of registration statement is of material importance to the success of such proposed offering, then such registration shall be effected on such other form.

c.Effective Registration Statement.  A registration requested pursuant to this Section 3 will not be deemed to have been effected:

(i)unless a registration statement with respect thereto has become effective and remained effective in compliance with the provisions of the Securities Act with respect to the disposition of all Common Shares covered by such registration statement until the earlier of (x) such time as all of such Common Shares have been disposed of in accordance with the intended methods of disposition thereof set forth in such registration statement or (y) one-hundred-eighty (180) days after the effective date of such registration statement, except with respect to any registration statement filed pursuant to Rule 415 under the Securities Act, in which case the Company shall use its commercially reasonable efforts to keep such registration statement effective until such time as all of the Common Shares cease to be Registrable Shares; provided,  that if the failure of any such registration statement to become or remain effective in compliance with this Section 3 is due solely to acts or omissions of the applicable Holders, such registration requested pursuant to this Section 3 will be deemed to have been effected;

(ii)if after it has become effective, the registration statement is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or authority and does not thereafter become effective; or

(iii)if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived, other than by reason of a failure on the part of the Demand Party or other Holders.

d.Underwritten Offering. If, at the election of the Demand Party, a requested registration pursuant to this Section 3 is to involve an underwritten offering, the investment banker(s), underwriter(s) and manager(s) for such registration shall be selected by the Holders of a majority of the Common Shares which the Company has been requested to register; provided, however, that such investment banker(s), underwriter(s) and manager(s) shall be reasonably satisfactory to the Company.

e.Priority in Requested Registrations.  If a requested registration pursuant to this Section 3 involves an underwritten offering and the managing underwriter advises the Company in writing that, in its opinion, the number of securities to be included in such registration would be likely to have an adverse effect on the price, timing or distribution of the securities to be offered in such offering as contemplated by the Holders (an “Adverse Effect”), then the Company shall include in such registration Common Shares requested to be included in such registration by the Demand Party and all other Holders of Common Shares pursuant to this Section 3 on a pro rata basis based on the number of Common Shares requested to be included, to the extent that the managing underwriter believes that such Common Shares can be sold in such offering without having an Adverse Effect.  If the managing underwriter of any underwritten offering shall advise the Holders participating in a registration pursuant to this Section 3 that the Common Shares covered by the registration statement cannot be sold in such offering within a price range acceptable to the Demand Party, then the Demand Party shall have the right to notify the Company that it has determined that the registration statement be abandoned or withdrawn, in which event the Company shall abandon or withdraw such registration statement.

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Section 4.Black-Out Periods.

Notwithstanding anything herein to the contrary, the Company shall have the right, exercisable from time to time by delivery of a notice authorized by the Board, on not more than two occasions in any 12-month period, to require each Holder not to sell pursuant to a registration statement or similar document under the Securities Act filed pursuant to this Agreement or to suspend the effectiveness thereof if at the time of the delivery of such notice, the Board has considered a plan to engage no later than 60 days following the date of such notice in a firm commitment underwritten public offering or if the Board has reasonably and in good faith determined that such registration and offering, continued effectiveness or sale would materially interfere with any material transaction involving the Company; provided, however, that in no event shall the black-out period extend for more than 60 days on any such occasion.  The Company, as soon as practicable, shall (i) give each Holder prompt written notice in the event that the Company has suspended sales of Registrable Securities pursuant to this Section 3, (ii) give each Holder prompt written notice of the completion of such offering or material transaction and (iii) promptly file any amendment necessary for any registration statement or prospectus of each Holder in connection with the completion of such event.

The Holder agrees by acquisition of the Registrable Securities that upon receipt of any notice from the Company of the happening of any event of the kind described in this Section 3, such Holder will forthwith discontinue its disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such Holder’s receipt of the notice of completion of such event.

Section 5.Registration Procedures.

a.In connection with the filing of any registration statement as provided in this Agreement, the Company shall, as expeditiously as reasonably practicable:

(i)prepare and, in any event within thirty (30) days after the end of the period within which a request for registration may be given to the Company, file with the Commission the requisite registration statement (including a prospectus therein and any supplement thereto) to effect such registration and use its commercially reasonable efforts to cause such registration statement to become effective; provided, however, that before filing such registration statement or any amendments or supplements thereto, the Company will furnish copies of all such documents proposed to be filed to counsel for the sellers of Registrable Securities covered by such registration statement and provide reasonable time for such sellers and their counsel to comment upon such documents if so requested by a Holder;

(ii)prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to maintain the effectiveness of such registration and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during the period in which such registration statement is required to be kept effective;

(iii)furnish to each Holder of the securities being registered, without charge, such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits) other than those which are being incorporated into such registration statement by reference, such number of copies of the prospectus contained in such registration statements (including each complete prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act in

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conformity with the requirements of the Securities Act, and such other documents, including documents incorporated by reference, as each Holder may reasonably request;

(iv)use its commercially reasonable efforts to register or qualify all Registrable Securities under such other securities or “blue sky” laws of such jurisdictions as each Holder and the underwriters of the securities being registered, if any, shall reasonably request, to keep such registration or qualification in effect for so long as such registration statement remains in effect, and take any other action which may be reasonably necessary or advisable to enable each Holder to consummate the disposition in such jurisdiction of the securities owned by each Holder, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign company or to register as a broker or dealer in any jurisdiction where it would not otherwise be required to qualify but for this Section 4(a)(iv), or to consent to general service of process in any such jurisdiction, or to be subject to any material tax obligation in any such jurisdiction where it is not then so subject;

(v)promptly notify each Holder at any time when the Company becomes aware that a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made, and, at the request of each Holder, promptly prepare and furnish to each Holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made;

(vi)use its commercially reasonable efforts to comply or continue to comply in all material respects with the Securities Act and the Exchange Act and with all applicable rules and regulations of the Commission thereunder so as to enable each Holder to sell its Registrable Securities pursuant to Rule 144 promulgated under the Securities Act, as further agreed to in Section 9 hereof;

(vii)make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least 12 months, but not more than 18 months, beginning with the first calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act;

(viii)provide a transfer agent and registrar and a CUSIP number for all Registrable Securities covered by such registration statement not later than the effective date of such registration statement;

(ix)use its commercially reasonable efforts to cooperate with each Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any Securities Act legend; and enable certificates for such Registrable Securities to be issued for such number of shares and registered in such names as each Holder may reasonably request in writing at least two Business Days prior to any sale of Registrable Securities;

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(x)use its commercially reasonable efforts to list all Registrable Securities covered by such registration statement on any securities exchange or national quotation system on which any such class of securities is then listed or quoted and cause to be satisfied all requirements and conditions of such securities exchange or national quotation system to the listing or quoting of such securities that are reasonably within the control of the Company including, without limitation, registering the applicable class of Registrable Securities under the Exchange Act, if appropriate, and using commercially reasonable efforts to cause such registration to become effective pursuant to the rules of the Commission;

(xi)in connection with any sale, transfer or other disposition by each Holder of any Registrable Securities pursuant to Rule 144 promulgated under the Securities Act, use its commercially reasonable efforts to cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing the Registrable Securities to be sold and not bearing any Securities Act legend, and enable certificates for such Registrable Securities to be for such number of shares and registered in such name as each Holder may reasonably request in writing at least three Business Days prior to any sale of Registrable Securities;

(xii)notify each Holder, promptly after it shall receive notice thereof, of the time when such registration statement, or any post-effective amendments to the registration statement, shall have become effective, or a supplement to any prospectus forming part of such registration statement has been filed or when any document is filed with the Commission which would be incorporated by reference into the prospectus;

(xiii)notify each Holder of any request by the Commission for the amendment or supplement of such registration statement or prospectus for additional information;

(xiv)advise each Holder, promptly after it shall receive notice or obtain knowledge thereof, of (A) the issuance of any stop order, injunction or other order or requirement by the Commission suspending the effectiveness of such registration statement or the initiation or threatening of any proceeding for such purpose and use all commercially reasonable efforts to prevent the issuance of any stop order, injunction or other order or requirement or to obtain its withdrawal if such stop order, injunction or other order or requirement should be issued, (B) the suspension of the registration of the subject shares of the Registrable Securities in any state jurisdiction and (C) the removal of any such stop order, injunction or other order or requirement or proceeding or the lifting of any such suspension;

(xv)use its commercially reasonable efforts (taking into account the interests of the Company) to make available the executive officers of the Company to participate with the Holders and any underwriters in “road shows” or other selling efforts that may be reasonably requested by the Holders in connection with the methods of distribution for the Registrable Securities; and

(xvi)if such offering is an underwritten offering, enter into such agreements (including an underwriting agreement in such form, scope and substance as is customary in underwritten offerings) and take all such other appropriate and reasonable actions requested by Holders (including those reasonably requested by the managing underwriters) in order to expedite or facilitate the disposition of such Registrable Securities, and in such connection, (i) use commercially reasonable efforts to obtain opinions of counsel to the Company and updates thereof (which opinions (in such form, scope and substance) shall be reasonably satisfactory to the managing underwriters and counsel to Holders), addressed to each Holder and each of the underwriters as to the matters customarily covered in opinions requested in underwritten offerings

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and such other matters as may be reasonably requested by such counsel and underwriters; (ii) use commercially reasonable efforts to obtain “comfort” letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each Holder (unless such accountants shall be prohibited from so addressing such letters by applicable standards of the accounting profession) and each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in “comfort” letters in connection with underwritten offerings; and (iii) if requested and if an underwriting agreement is entered into, provide indemnification provisions and procedures substantially to the effect set forth in Section 6 of this Agreement with respect to all parties to be indemnified pursuant to Section 6 of this Agreement.  The above shall be done at each closing under such underwriting or similar agreement, or as and to the extent required thereunder.

b.In connection with the filing of any registration statement covering Registrable Securities, each Holder shall furnish in writing to the Company such information regarding itself (and any of its Affiliates), the Registrable Securities to be sold, the intended method of distribution of such Registrable Securities and such other information requested by the Company as is necessary or advisable for inclusion in the registration statement relating to such offering pursuant to the Securities Act.  Such writing shall expressly state that it is being furnished to the Company for use in the preparation of a registration statement, preliminary prospectus, supplementary prospectus, final prospectus or amendment or supplement thereto, as the case may be.

Each Holder agrees by acquisition of the Registrable Securities that (i) upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(a)(v), such Holder will forthwith discontinue its disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 4(a)(v); (ii) upon receipt of any notice from the Company of the happening of any event of the kind described in clause (A) of Section 4(a)(xiv), such Holder will discontinue its disposition of Registrable Securities pursuant to such registration statement until such Holder’s receipt of the notice described in clause (C) of Section 4(a)(xiv); and (iii) upon receipt of any notice from the Company of the happening of any event of the kind described in clause (B) of Section 4(a)(xiv), each Holder will discontinue its disposition of Registrable Securities pursuant to such registration statement in the applicable state jurisdiction(s) until such Holder’s receipt of the notice described in clause (C) of Section 4(a)(xiv).

Section 6.Indemnification.

a.Indemnification by the Company. The Company agrees to indemnify and hold harmless each Holder, its partners, officers, directors, trustees, stockholders, employees, agents and investment advisers, and each Person, if any, who controls each Holder within the meaning of the Securities Act or the Exchange Act, together with the partners, officers, directors, trustees, stockholders, employees, agents and investment advisers of such controlling person, against any losses, claims, damages, liabilities and expenses (including, without limitation, reasonable attorneys’ fees), joint or several, to which each Holder or any such indemnitees may become subject under the Securities Act, the Exchange Act, any federal or state law or otherwise, insofar as such losses, claims, damages, liabilities and expenses (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the registration statement under which such Registrable Securities were registered and sold under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or

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any amendment or supplement thereto, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or any violation of the Securities Act or state securities laws or rules thereunder by the Company relating to any action or inaction by the Company in connection with such registration, and the Company will reimburse each Holder for any reasonable legal or any other expenses reasonably incurred by it in connection with investigating or defending any such loss, claim, liability, action or proceedings; provided, however, that the Company shall not be liable in any such case to a Holder to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Holder specifically stating that it is for use in the preparation thereof; and provided, further, that the Company shall not be liable to such Holder or any other Person who controls each Holder within the meaning of the Securities Act or the Exchange Act in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of such Person’s failure to send or give a copy of the final prospectus or supplement to the Persons asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final prospectus or supplement.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of each Holder or any such controlling Person and shall survive the transfer of such securities by each Holder.

b.Indemnification by each Holder. The Holder agrees to indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 5(a)) the Company, each member of the Board, each officer, employee, agent and investment adviser of the Company and each other Person, if any, who controls any of the foregoing within the meaning of the Securities Act or the Exchange Act, with respect to any untrue statement or alleged untrue statement of a material fact in or omission or alleged omission to state a material fact from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Holder regarding such Holder giving such indemnification specifically stating that it is for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such Board member, officer, employee, agent, investment adviser or controlling Person and shall survive the transfer of such securities by any Holder.  The obligation of a Holder to indemnify will be several and not joint, among the Holders and the liability of each such Holder of Registrable Securities will be in proportion to and limited in all events to the net amount received by such Holder from the sale of Registrable Securities pursuant to such registration statement.

c.Notices of Claims, etc.  Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding paragraphs of this Section 5, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 5, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice.  In case any such action is brought against an indemnified party, unless in such indemnified party’s reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to assume the defense thereof, for itself, if applicable, together

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with any other indemnified party similarly notified, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to the indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof.

d.Indemnification Payments.  To the extent that the indemnifying party does not assume the defense of an action brought against the indemnified party as provided in Section 5(c), the indemnified party (or parties if there is more than one) shall be entitled to the reasonable legal expenses of common counsel for the indemnified party (or parties).  In such event, however, the indemnifying party will not be liable for any settlement effected without the written consent of such indemnifying party, which consent shall not be unreasonably withheld.  The indemnification required by this Section 5 shall be made by periodic payments of the amount thereof during the course of an investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred.  The indemnifying party shall not settle any claim without the consent of the indemnified party unless such settlement involves a complete release of such indemnified party without any admission of liability by the indemnified party.

e.Contribution.  If, for any reason, the foregoing indemnity is unavailable, or is insufficient to hold harmless an indemnified party, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of the expense, loss, damage or liability, (i) in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other (determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission relates to information supplied by the indemnifying party or the indemnified party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission) or (ii) if the allocation provided by subclause (i) above is not permitted by applicable law or provides a lesser sum to the indemnified party than the amount hereinafter calculated, in the proportion as is appropriate to reflect not only the relative fault of the indemnifying party and the indemnified party, but also the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other, as well as any other relevant equitable considerations.  No indemnified party guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any indemnifying party who was not guilty of such fraudulent misrepresentation, and the liability for contribution of each Holder will be in proportion to and limited in all events to the net amount received by each Holder from the sale of Registrable Securities pursuant to such registration statement.

Section 7.Market Stand-Off Agreement.  The Holder hereby agrees that it shall not, to the extent requested by the Company or an underwriter of securities of the Company, directly or indirectly sell, offer to sell (including without limitation any short sale), grant any option or otherwise transfer or dispose of any Registrable Securities (other than to donees or partners of each Holder who agree to be similarly bound) within seven days prior to and for up to 90 days following the effective date of a registration statement of the Company filed under the Securities Act (except the Shelf Registration Statement filed for the benefit of the Holders pursuant to this Agreement) or the date of an underwriting agreement with respect to an underwritten public offering of the Company’s securities (the “Stand-Off Period”); provided, however, that:

a.with respect to the Stand-Off Period, such agreement shall not be applicable to the Registrable Securities to be sold on each Holder’s behalf to the public in an underwritten offering pursuant to such registration statement;

b.all executive officers and directors of the Company then holding Common Stock of the Company shall enter into similar agreements; and

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c.each Holder shall be allowed any concession or proportionate release allowed to any (i) officer, or (ii) director of the Company that entered into similar agreements.

In order to enforce the foregoing covenant, the Company shall have the right to place restrictive legends on the certificates representing the Registrable Securities subject to this Section 6 and to impose stop transfer instructions with respect to the Registrable Securities and such other Common Shares of each Holder (and the Common Shares or securities of every other person subject to the foregoing restriction) until the end of such period.

Once a registration statement covering the Registrable Securities is effective, the provisions of this Section 7 shall be of no further force and effect.

Section 8.Lock-Up Agreement.  The Company agrees (except pursuant to registration statements on Forms S-4 or S-8), if timely requested in writing by the underwriters in a public offering of Registrable Securities, not to (i) sell, offer to sell, contract or agree to sell, hypothecate, hedge, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, any Common Stock or any other equity security of the Company (or any security convertible into or exchangeable or exercisable for any equity security of the Company) or warrants or other rights to purchase Common Stock or any other equity security of the Company (or any security convertible into or exchangeable or exercisable for any equity security of the Company), or file or cause to be declared effective a registration statement under the Securities Act relating to the offer and sale of any shares of Common Stock or any other equity security of the Company (or any security convertible into or exchangeable or exercisable for any equity security of the Company), or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Common Stock or any other equity security of the Company (or any security convertible into or exchangeable or exercisable for any equity security of the Company), or warrants or other rights to purchase Common Stock or any other equity security of the Company (or any security convertible into or exchangeable or exercisable for any equity security of the Company), whether any such transaction is to be settled by delivery of such securities, in cash or otherwise, during the time period beginning 7 days prior to the effective date of the registration statement for Registrable Securities or, in the case of a Shelf Registration Statement, the date of an underwriting agreement and ending on the date thereafter reasonably requested by the underwriter (not to exceed 90 days thereafter), without the prior written consent of the underwriters.

Section 9.Covenants Relating To Rule 144.  At such times as the Company is obligated to file reports in compliance with either Section 13 or 15(d) of the Exchange Act, the Company covenants that it will file any reports required to be filed by it under the Securities Act and the Exchange Act and that it will take such further action as each Holder may reasonably request, all to the extent required from time to time to enable each Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such rule may be amended from time to time or (b) any similar rule or regulation hereafter adopted by the Commission.  Upon the request of each Holder, the Company will deliver to each Holder a written statement as to whether it has complied with such requirements.

Section 10.Miscellaneous.

a.Termination; Survival.  The rights of each Holder under this Agreement shall terminate upon the date that all of the Registrable Securities held by each Holder may be sold during any three-month period in a single transaction or series of transactions without volume limitations under Rule 144 (or any successor provision) under the Securities Act.  Notwithstanding the foregoing, the obligations

11

of the parties under Section 5 and paragraphs (d), (e) and (g) of this Section 10 shall survive the termination of this Agreement.

b.Expenses.  All Registration Expenses incurred in connection with any Shelf Registration Statement (including any prospectus or prospectus supplement) prepared and/or filed pursuant to this Agreement shall be borne by the Company, whether or not any registration statement related thereto becomes effective.

c.Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to each of the other parties.

d.Applicable Law; Jurisdiction.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York.  The parties consent to the exclusive jurisdiction of the United States District Court for the Southern District of New York in connection with any civil action concerning any controversy, dispute or claim arising out of or relating to this Agreement, or any other agreement contemplated by, or otherwise with respect to, this Agreement or the breach hereof, unless such court would not have subject matter jurisdiction thereof, in which event the parties consent to the jurisdiction of the State of New York.  The parties hereby waive and agree not to assert in any litigation concerning this Agreement the doctrine of forum non conveniens.

e.Waiver Of Jury Trial.  THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.

f.Prior Agreement; Construction; Entire Agreement.  This Agreement, including the exhibits and other documents referred to herein (which form a part hereof), constitutes the entire agreement of the parties with respect to the subject matter hereof, and supersedes all prior agreements and understandings between the parties, and all such prior agreements and understandings are merged herein and shall not survive the execution and delivery hereof.

g.Notices. All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service or be telecopier and shall be deemed given when so delivered by hand or, if mailed, three days after mailing (one Business Day in the case of express mail or overnight courier service), addressed as follows:

If to each Holder: SL Green Operating Partnership, L.P.
420 Lexington Avenue
New York, New York 10170
Attn: Andrew S. Levine

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If to the Company:	Gramercy Capital Corp. 420 Lexington Avenue New York, New York 10170 Attn: Robert R. Foley
	with a copy to:
	Clifford Chance US LLP 31 West 52nd Street New York, New York 10019 Attention: Robert E. King Jr. Facsimile: 212-878-8375

h.Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder.  The Company may assign its rights or obligations hereunder to any successor to the Company’s business or with the prior written consent of each Holder.  Notwithstanding the foregoing, no assignee of the Company shall have any of the rights granted under this Agreement until such assignee shall acknowledge its rights and obligations hereunder by a signed written agreement pursuant to which such assignee accepts such rights and obligations.  Each Holder may assign its rights or obligations hereunder in whole or in part in connection with the transfer, sale or other disposition of its Common Shares so long as such assignee shall acknowledge its rights and obligations hereunder by a signed written agreement pursuant to which such assignee accepts such rights and obligations, upon which assignee shall be deemed to be a “Holder” for all purposes hereunder.

i.Headings.  Headings are included solely for convenience of reference and if there is any conflict between headings and the text of this Agreement, the text shall control.

j.Amendments And Waivers.  The provisions of this Agreement may be amended or waived at any time only by the written agreement of the Company and the Holders of a majority of the Registrable Securities.  Any waiver, permit, consent or approval of any kind or character on the part of each Holder of any provision or condition of this Agreement must be made in writing and shall be effective only to the extent specifically set forth in writing.  Any amendment or waiver effected in accordance with this paragraph shall be binding upon each Holder and the Company.  This Agreement shall be effective upon approval of the Board.

k.Interpretation; Absence Of Presumption.  For the purposes hereof, (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) the terms “hereof,” “herein,” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, paragraph or other references are to the Sections, paragraphs, or other references to this Agreement unless otherwise specified, (iii) the word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless the context otherwise requires or unless otherwise specified, (iv) the word “or” shall not be exclusive and (v) provisions shall apply, when appropriate, to successive events and transactions.

This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instruments to be drafted.

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l.Severability.  If any provision of this Agreement shall be or shall be held or deemed by a final order by a competent authority to be invalid, inoperative or unenforceable, such circumstance shall not have the effect of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable, but this Agreement shall be construed as if such invalid, inoperative or unenforceable provision had never been contained herein so as to give full force and effect to the remaining such terms and provisions.

m.Specific Performance; Other Rights.  The parties recognize that various other rights rendered under this Agreement are unique and, accordingly, the parties shall, in addition to such other remedies as may be available to them at law or in equity, have the right to enforce the rights under this Agreement by actions for injunctive relief and specific performance.

n.Further Assurances.  In connection with this Agreement, as well as all transactions and covenants contemplated by this Agreement, each party hereto agrees to execute and deliver or cause to be executed and delivered such additional documents and instruments and to perform or cause to be performed such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and all such transactions and covenants contemplated by this Agreement.

o.No Waiver.  The waiver of any breach of any term or condition of this Agreement shall not operate as a waiver of any other breach of such term or condition or of any other term or condition, nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first written above.

GRAMERCY CAPITAL CORP.

a Maryland corporation

By:

Name:

Title:

HOLDER

SL GREEN OPERATING PARTNERSHIP,

a Delaware limited partnership

By:

Name:

Title:

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EX-21.1

Exhibit 21.1

Subsidiaries of Gramercy Capital Corp.

GKK Capital LP

GKK Trading Corp.

Gramercy 110 LLC

Gramercy Warehouse Funding I LLC

Gramercy Warehouse Funding II LLC

59 Fifth Hotel Investment LLC

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-121051) pertaining to the Equity Incentive Plan of Gramercy Capital Corp. of our report dated January 19, 2005 except for Note 19, as to which the date is February 24, 2005, with respect to the consolidated financial statements and schedule of Gramercy Capital Corp. included in this Annual Report (Form 10-K) for the period from April 12, 2004 (formation) through December 31, 2004.

/s/ Ernst & Young LLP

New York, New York

March 15, 2005

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Marc Holliday, Chief Executive Officer, certify that:

1.I, Marc Holliday, have reviewed this annual report on Form 10-K of Gramercy Capital Corp. (the “registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 17, 2005
/s/ Marc Holliday
Name:	Marc Holliday
Title:	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Robert R. Foley, Chief Financial Officer, certify that:

1.I, Robert R. Foley, have reviewed this annual report on Form 10-K of Gramercy Capital Corp. (the “registrant”);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(c)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 17, 2005
/s/ Robert R. Foley
Name:	Robert R. Foley
Title:	Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Gramercy Capital Corp. (the “Company”) on Form 10-K as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Marc Holliday, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Marc Holliday
Name:	Marc Holliday
Title:	Chief Executive Officer
March 17, 2005

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Gramercy Capital Corp. (the “Company”) on Form 10-K as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert R. Foley, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Robert R. Foley
Name:	Robert R. Foley
Title:	Chief Financial Officer
March 17, 2005