10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

(Mark One)

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2005
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 number 001-32290

GMH COMMUNITIES TRUST

(Exact Name of Registrant as Specified in Its Charter)

Maryland	201181390
(State or other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)
10 Campus Boulevard, Newtown Square, PA	19073
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code (610) 355-8000

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o   No  ý

On October 31, 2005, 39,699,843 of the registrant’s common shares of beneficial interest, $0.001 par value, were outstanding. This amount includes 33,854 restricted common shares that are considered outstanding for voting purposes and are eligible to receive dividend distributions payable to common shareholders, but are not considered outstanding under generally accepted accounting principles for purposes of the financial statements included in this report.

GMH COMMUNITIES TRUST

INDEX TO FORM 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosure About Market Risk

Item 4. Controls and Procedures

Part II — Other Information

Item 1. Legal Proceedings

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 3. Defaults Upon Senior Securities

Item 4. Submission of Matters to a Vote of Security Holders

Item 5. Other Information

Item 6. Exhibits

Signatures

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Our disclosure and analysis in this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements provide our current expectations or forecasts of future events and are not statements of historical fact. These forward-looking statements include information about possible or assumed future events, including, among other things, operating or financial performance, strategic plans and objectives, or regulatory or competitive environments. Statements regarding the following subjects are forward-looking by their nature:

•         our ability to successfully implement our business strategy, including our ability to acquire and manage student housing properties and to secure and operate military housing privatization projects;

•         our projected operating results and financial condition;

•         completion of any of our targeted acquisitions or development projects within our expected timeframe or at all;

•         our ability to obtain future financing arrangements on terms acceptable to us, or at all;

•         estimates relating to, and our ability to pay, future dividends;

•         our ability to qualify as a real estate investment trust (“REIT”) for federal income tax purposes;

•         our understanding of our competition, market opportunities and trends;

•         projected timing and amounts of capital expenditures; and

•         the impact of technology on our properties, operations and business.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Factors that could cause actual results to differ materially from our management’s current expectations include, but are not limited to:

•         the factors referenced in the 424(b) prospectus relating to our most recent public offering of common shares, as filed with the Securities and Exchange Commission (“SEC”) on September 28, 2005, including those sections of the prospectus titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Our Business and Properties;”

•         changes in our business strategy, including acquisition and development activities;

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•         availability, terms and deployment of capital, including equity and debt financing;

•         availability of qualified personnel;

•         unanticipated costs associated with the acquisition and integration of our student housing property acquisitions and development projects, and military housing privatization projects;

•         the effects of military base realignment and closures on installations covered by our military housing privatization projects;

•         high leverage on the entities that own the military housing privatization projects;

•         reductions in government military spending;

•         changes in student population enrollment at colleges and universities or adverse trends in the off-campus student housing market;

•         changes in the student and military housing industry, interest rates or the general economy;

•         changes in local real estate conditions (including changes in rental rates and the number of competing properties) and the degree and nature of our competition;

•         our failure to lease unoccupied space in accordance with management’s projections;

•         potential liability under environmental or other laws; and

•         the existence of complex regulations relating to our status as a REIT and the adverse consequences of our failure to qualify as a REIT.

When we use the words “believe,” “expect,” “may,” “potential,” “anticipate,” “estimate,” “plan,” “will,” “could,” “intend” or similar expressions, we intend to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. We are not obligated to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent otherwise required by law.

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PART I — FINANCIAL INFORMATION

Item 1.    Financial Statements

GMH COMMUNITIES TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands, except par value and number of shares)

	September 30, 2005			December 31, 2004
ASSETS
Real estate investments:
Student housing properties	$	1,080,304		$	638,635
Accumulated depreciation	(19,109		)	(3,905		)
	1,061,195			634,730
Corporate assets:
Corporate assets	7,686			11,625
Accumulated depreciation	(443		)	(241		)
	7,243			11,384
Cash and cash equivalents	33,248			60,926
Restricted cash	12,575			2,313
Accounts and other receivables, net:
Related party	21,912			9,309
Third party	5,365			2,257
Investments in military housing projects	37,220			39,482
Deferred contract costs	470			126
Deferred financing costs, net	4,064			2,820
Lease intangibles, net	3,244			4,994
Deposits	672			1,848
Other assets	6,080			2,872
Total assets	$	1,193,288		$	773,061
LIABILITIES AND BENEFICIARIES’ EQUITY
Notes payable	$	629,171		$	370,007
Line of credit	137,000			—
Accounts payable:
Related party	57			277
Third party	688			1,160
Accrued expenses	24,233			9,308
Dividends and distributions payable	14,107			9,583
Other liabilities	10,728			4,907
Total liabilities	815,984			395,242
Minority interest	197,120			182,118
Beneficiaries’ equity:
Common shares of beneficial interest, $0.001 par value; 500,000,000 shares authorized, 30,350,989 issued and outstanding at September 30, 2005 and December 31, 2004	30			30
Preferred shares—100,000,000 shares authorized, no shares issued or outstanding	—			—
Additional paid-in capital	200,367			200,276
Cumulative earnings	5,373			251
Cumulative dividends	(25,586		)	(4,856		)
Total beneficiaries’ equity	180,184			195,701
Total liabilities and beneficiaries’ equity	$	1,193,288		$	773,061

See accompanying notes to condensed consolidated and combined financial statements.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except share and per share information)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2005		2004			2005		2004
	(Company)		(Predecessor)			(Company)		(Predecessor)
Revenue:
Rent and other property income	$	35,429	$	6,753		$	91,033	$	7,023
Expense reimbursements:
Related party	20,744		8,702			42,475		16,669
Third party	1,299		1,906			3,876		5,475
Management fees:
Related party	1,838		967			5,350		2,683
Third party	1,364		752			3,015		3,430
Other fee income-related party	7,181		2,115			14,762		4,174
Other income	81		141			248		493
Total revenue	67,936		21,336			160,759		39,947
Operating Expenses:
Property operating expenses	17,306		5,808			39,900		9,851
Reimbursed expenses	22,043		10,608			46,351		22,144
Real estate taxes	3,428		490			8,003		490
Administrative expenses	2,983		2,172			8,657		4,488
Profits interest expense	—		33,180			—		33,180
Depreciation and amortization	7,719		1,770			22,563		2,188
Interest	8,981		1,722			21,228		1,880
Total operating expenses	62,460		55,750			146,702		74,221
Income (loss) before minority interest and income taxes	5,476		(34,414		)	14,057		(34,274		)
Minority interest	2,758		—			7,021		—
Income before income taxes	2,718		—			7,036		—
Income taxes	976		—			1,914		—
Net income (loss)	$	1,742	$	(34,414	)	$	5,122	$	(34,274	)
Earnings per common share—basic	$	0.06				$	0.17
Earnings per common share—diluted	$	0.05				$	0.16
Weighted-average shares outstanding during the period:
Basic	30,350,989					30,350,989
Diluted	32,786,617					32,458,633
Common share dividend declared per share	$	0.2275				$	0.6825

See accompanying notes to condensed consolidated and combined financial statements.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES

CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

	Nine Months Ended September 30,
	2005			2004
	(Company)			(Predecessor)
Cash flows from operating activities:
Net income (loss)	$	5,122		$	(34,274	)
Adjustments to reconcile net income (loss) to net cash from operating activities:
Depreciation	15,615			2,188
Amortization:
Lease intangibles	6,948			—
Notes payable fair value adjustment	(1,637		)	(266		)
Deferred loan costs	905			36
Restricted shares	78			—
Allowance for doubtful accounts	935			—
Equity in earnings of unconsolidated entities	—			(70		)
Income from investments in military housing projects	(1,113		)	—
Minority interest	7,021			—
Changes in operating assets and liabilities:
Restricted cash	(10,262		)	(1,966		)
Accounts and other receivables	(17,662		)	(346		)
Deferred contract costs	(344		)	(4,954		)
Due from related parties	—			(4,778		)
Other assets	(2,028		)	(4,972		)
Accounts payable	(693		)	—
Accrued expenses	14,594			14,171
Accrued profits interest	—			33,180
Other liabilities	5,821			1,030
Net cash from operating activities	23,300			(1,021		)
Cash flows from investing activities:
Property acquisitions	(329,160		)	(120,152		)
Capitalized expenditures	(3,300		)	(75		)
Military housing project equity distributions (investments)	4,459			(3		)
Purchase of management contracts	—			(1,186		)
Net cash from investing activities	(328,001		)	(121,416		)
Cash flows from financing activities:
Common share dividends	(18,661		)	—
Limited partnership unit distributions	(18,205		)	—
Owner distributions	—			(31,652		)
Owner contributions	—			90,688
Proceeds from line of credit	244,000			—
Repayment of line of credit	(107,000		)	—
Proceeds from notes payable	202,228			69,536
Repayment of notes payable	(23,190		)	(808		)
Short-term borrowings from owner	—			3,697
Payment of financing costs	(2,149		)	(663		)
Costs related to initial public offering	—			(5,443		)
Net cash from financing activities	277,023			125,355
Net (decrease) increase in cash and cash equivalents	(27,678		)	2,918
Cash and cash equivalents, beginning of period	60,926			515
Cash and cash equivalents, end of period	$	33,248		$	3,433
Supplemental information:
Real estate acquired by assuming debt	$	83,341		$	128,622
Issuance of units of limited partnership interest for purchase of student housing properties	$	28,528		$	—
Property distributed at net book value	$	3,854		$	381
Debt distributed at net book value	$	4,208		$	—
Cash paid for interest	$	20,846		$	1,880
Cash paid for taxes	$	2,272		$	—
Furniture and computers contributed at net book value	$	—		$	463

See accompanying notes to condensed consolidated and combined financial statements.

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GMH COMMUNITIES TRUST AND THE GMH PREDECESSOR ENTITIES

Notes to Condensed Consolidated and Combined Financial Statements

September 30, 2005

(Unaudited)

1. Organization and Basis of Presentation

Organization

Management of both GMH Communities Trust (the “Trust,” and collectively with its subsidiaries, “we” or the “Company) and The GMH Predecessor Entities (defined below) has prepared these condensed consolidated and combined financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or combined pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading. The condensed consolidated and combined financial statements should be read in conjunction with the audited financial statements and the notes thereto of the Trust and The GMH Predecessor Entities included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the SEC on March 31, 2005. In management’s opinion, all adjustments, consisting solely of normal recurring adjustments, necessary to present fairly the consolidated financial position of the Trust and the consolidated and combined results of operations and cash flows of the Trust and The GMH Predecessor Entities are included. The results of operations for such interim periods are not necessarily indicative of the results for the full year.

The Trust elected to qualify as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended (the “Code”) commencing with its taxable year ended December 31, 2004. The Trust was formed as a Maryland real estate investment trust in May 2004 and prior to completion of our initial public offering, had no operations. We completed our initial public offering on November 2, 2004, pursuant to which we sold an aggregate of 30,350,989 common shares of beneficial interest at an offering price of $12.00 per share, and raised an aggregate of $331.7 million in net proceeds, after deducting the underwriters’ discount and other offering-related expenses. We contributed the net proceeds from the offering to our operating partnership, GMH Communities, LP, a Delaware limited partnership (the “Operating Partnership”), in exchange for units of partnership interest. As of September 30, 2005, the Operating Partnership had 61,978,306 units of partnership interest outstanding, of which the Trust owned 29,769,820 units of limited partnership interest; and through a wholly-owned subsidiary, GMH Communities GP Trust, the Trust owned 581,169 units of general partnership interest, which represents 100% of the general partnership interest in the Operating Partnership. As of September 30, 2005, there were 31,627,317 units of limited partnership interest outstanding that were not owned by the Company.

In September 2005, we commenced a public offering of common shares. The offering was completed on October 4, 2005 with the sale of 9,315,000 common shares of beneficial interest, including 1,215,000 shares issued upon full exercise of the underwriters’ over-allotment option, at an offering price of $14.25 per share. The Company raised an aggregate of $124.7 million in net proceeds from the offering after deducting the underwriters’ discounts, payment of financial advisory fees and other offering-related expenses.  The net proceeds of this offering, which the Company contributed to the Operating Partnership in exchange for units of partnership interest, were used by the Operating Partnership to repay outstanding indebtedness under our credit facility.

We, through the Operating Partnership and its subsidiaries, are a self-advised, self-managed, specialty housing company that focuses on providing housing to college and university students residing off-campus and to members of the U.S. military and their families located on or near military bases throughout the United States. Through the Operating Partnership, we own and operate our student housing properties and the interests in joint ventures that own military housing privatization projects (“military housing projects”).

Formation Transactions

The Operating Partnership commenced operations on July 27, 2004, when Gary M. Holloway, Sr., our chairman, president, and chief executive officer, Vornado Realty Trust (“Vornado”), and certain entities affiliated with Mr. Holloway and Vornado, entered into an agreement to contribute various assets to the Operating Partnership. Under the terms of the contribution agreement, Mr. Holloway contributed equity interests relating to student housing properties and military housing projects owned by him and by entities affiliated with him, including College Park Management, Inc., GMH Military Housing, LLC, other entities owning a 10% interest in four student housing properties, and other related assets in exchange for 66,000 Class A partnership interests in the Operating Partnership. Vornado agreed to contribute up to $159.0 million to the Operating Partnership in exchange for 34,000 Class B partnership interests. In connection with its investment in the Operating Partnership, Vornado also purchased a warrant for $1.0 million to acquire, at its option, a number of units of limited partnership interest in the Operating Partnership, common shares in the Trust, or a combination of both, representing a 38.264% economic interest in the Operating Partnership or the Trust, as the case may be, immediately prior to completion of our initial public offering. The proceeds from sale of the warrant are included in minority interest on the accompanying consolidated balance sheets. In addition, in connection with the closing of our initial public offering on November 2, 2004, Mr. Holloway further contributed his interests in 353 Associates, L.P. and Corporate Flight Services, LLC, a student housing property and other related assets to the Operating Partnership. We collectively refer to College Park Management, Inc., GMH Military Housing, LLC, 353 Associates, L.P. and Corporate Flight Services, LLC, together with the Operating Partnership, as The GMH Predecessor Entities.  The exchange of contributed interests has been accounted for as a reorganization of entities under common control. Accordingly, the contributed assets and assumed liabilities have been recorded at the historical cost of The GMH Predecessor Entities.

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The following are descriptions of each of The GMH Predecessor Entities, other than the Operating Partnership:

•         353 Associates, L.P. owns and operates a 44,721 square foot commercial office building located in Newtown Square, Pennsylvania. In connection with the completion of our initial public offering on November 2, 2004, Mr. Holloway and an entity wholly-owned by him contributed 100% of the equity interests in 353 Associates, L.P. to the Operating Partnership. The building is currently used as the Company’s corporate headquarters. 353 Associates, L.P. historically leased the building to certain of The GMH Predecessor Entities and other entities owned or controlled by Mr. Holloway. We continue to lease a portion of the building to certain other entities owned or controlled by Mr. Holloway that were not contributed to the Company in connection with our initial public offering.

•         College Park Management, Inc. performed property management and asset management services for residential apartment properties leased to students at colleges and universities located throughout the United States. In connection with the formation of the Operating Partnership on July 27, 2004, Mr. Holloway consented to the merger of College Park Management, Inc. with and into College Park Management, LLC, a wholly-owned subsidiary of the Operating Partnership. College Park Management TRS, Inc., a subsidiary of College Park Management, LLC, has made an election to be treated for federal income tax purposes as a “taxable REIT subsidiary,” as defined in the Code.

•         GMH Military Housing, LLC, through its wholly-owned subsidiaries, engages in the development, construction, renovation and management of family military housing units located on or near military bases throughout the United States. In connection with the formation of the Operating Partnership on July 27, 2004, Mr. Holloway contributed 100% of the outstanding equity interests in GMH Military Housing, LLC and each of its wholly-owned subsidiaries to the Operating Partnership. GMH Military Housing, LLC has made an election to be treated as a corporation for federal income tax purposes as a “taxable REIT subsidiary,” as defined in the Code.

•         Corporate Flight Services, LLC (“Corporate Flight LLC”) owned and operated a corporate aircraft that had been leased to certain of The GMH Predecessor Entities and other entities owned or controlled by Mr. Holloway that were not contributed to the Company in connection with our initial public offering. In connection with the completion of our initial public offering on November 2, 2004, Mr. Holloway contributed 100% of the outstanding equity interests in Corporate Flight LLC to the Operating Partnership. In February 2005, the Company transferred its interest in Corporate Flight LLC, including the corporate aircraft and associated debt initially contributed to the Operating Partnership at the time of the initial public offering, back to Mr. Holloway.  See Note 8.

Redemption of Operating Partnership Interests

Prior to our initial public offering, Vornado and Mr. Holloway were the sole equity holders of the Operating Partnership and each held, through affiliated entities, general partnership interests in the Operating Partnership. Concurrent with the closing of the Company’s initial public offering on November 2, 2004, we became the sole general partner of the Operating Partnership. In accordance with the terms of the limited partnership agreement of the Operating Partnership and concurrent with the completion of our initial public offering on November 2, 2004, we paid approximately $77.3 million to Vornado relating to the redemption of all of Vornado’s Class B partnership interests in the Operating Partnership based on Vornado’s $113.8 million contribution to the Operating Partnership as of the date of the offering, plus a preferential return in the amount of $13.5 million, and after giving effect to the surrender by Vornado of $50.0 million in value of its pre-offering partnership interest in the Operating Partnership, as payment for the portion of its warrant required to be exercised upon completion of our initial public offering under the terms of the warrant. Upon closing of our initial public offering, Vornado exercised the warrant to purchase 6,666,667 units of limited partnership interest in our Operating Partnership at a price of $7.50 per unit, which represented a 20.972% economic interest in the Operating Partnership immediately prior to our initial public offering. As of September 30, 2005, the remaining portion of the warrant was exercisable for up to 5,857,164 units of limited partnership interest of the Operating Partnership or common shares, at an exercise price of $8.54 per unit or common share, at any time during the 18 months following the closing of our initial public offering.

In addition, in connection with the redemption of Vornado’s interests in the Operating Partnership and amendment to the partnership agreement for the Operating Partnership on November 2, 2004, Mr. Holloway’s Class A limited partnership interest and managing general partnership interest in the Operating Partnership were exchanged for 19,624,294 limited partnership units and Mr. Holloway contributed additional assets to the Operating Partnership, including interests in entities that own our corporate headquarters and aircraft and interests in an additional student housing property.

In recognition of past service, certain employees of The GMH Predecessor Entities and other entities affiliated with Gary M. Holloway were awarded profits interests by Gary M. Holloway. These employees were eligible to participate in the net proceeds or value received by Gary M. Holloway upon the sale or disposition of certain student housing properties and the military housing business in excess of Mr. Holloway’s equity investments in such assets.  These employees rendered all services and satisfied all conditions necessary to earn the right to benefit from these profits interests as of the date that such profits interests were awarded.  In accordance with Financial Accounting Standards Statement No.5, Accounting for Contingencies, compensation expense relating to the award of these profits interests was required to be recognized by The GMH Predecessor Entities when the sale or disposition of the assets resulting in proceeds received by Gary M. Holloway in an amount in excess of his equity investment in such assets became probable.  This amount became probable during the third quarter of 2004 when, in connection with the contribution of the ownership interests in GMH Military Housing LLC, College Park Management, Inc. and other assets by Mr. Holloway to our operating

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partnership in anticipation of the initial public offering of the Company, the remaining profits interests awards were amended to fix the value of such awards at $33.2 million to be paid to these employees unconditionally.  Accordingly, this amount was recognized in the third quarter of 2004 and Mr. Holloway’s obligations regarding the profits interests were satisfied upon the transfer of $33.2 million of units of limited partnership in our operating partnership to these employees on November 2, 2004, the closing date of our initial public offering.

Basis of Presentation

The financial statements of GMH Communities Trust included herein present the consolidated financial position of the Company and its subsidiaries as of September 30, 2005 and December 31, 2004, the consolidated results of their operations for the three and nine months ended September 30, 2005 and their consolidated cash flows for the nine months ended September 30, 2005. All intercompany items and transactions have been eliminated.

The financial statements of The GMH Predecessor Entities included herein present the combined results of their operations for the three and nine months ended September 30, 2004 and their combined cash flows for the nine months ended September 30, 2005. All intercompany items and transactions have been eliminated.

2. Summary of Significant Accounting Policies

Use of Estimates

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

Real Estate Investments and Corporate Assets

We carry real estate investments and corporate assets at cost, net of accumulated depreciation. Cost of acquired assets includes the purchase price and related closing costs. We allocate the cost of real estate investments to tangible and identified intangible assets based on relative fair values in accordance with Statement of Financial Accounting Standards No. 141 (“SFAS 141”), Business Combinations. We estimate fair value based on information obtained from a number of sources, including our due diligence, marketing and leasing activities, independent appraisals that may be obtained in connection with the acquisition or financing of the respective property, and other market data.

The value of in-place leases is based on the difference between (i) the property valued with existing in-place leases and (ii) the property valued as if vacant. As lease terms typically are 12 months or less, rates on in-place leases generally approximate market rental rates. Factors that we consider in the valuation of in-place leases include an estimate of incremental carrying costs during the expected lease-up periods considering current market conditions and nature of the tenancy. We amortize the value of in-place leases to expense over the remaining term of the respective leases. Accumulated amortization related to intangible lease costs was $9.2 million at September 30, 2005 and $2.3 million at December 31, 2004.

Purchase prices of student housing properties to be acquired are not expected to be allocated to tenant relationships considering the terms of the leases and the expected levels of renewals.

We expense routine repair and maintenance expenditures that do not improve the value of an asset or extend its useful life, including turnover costs such as cleaning and interior painting. We capitalize expenditures that improve the value and extend the useful life of an asset. We compute depreciation using the straight-line method over the estimated useful lives of the assets, which is 40 years for buildings including student housing properties and the commercial office building, and three to five years for residential furniture and appliances. During the third quarter of each fiscal year, the Company typically will experience an increase in property operating expenses over other quarters as a result of repair and maintenance expenditures relating to turnover of units at student housing properties. The Company's student housing lease terms generally commence in August or September to coincide with the beginning of the academic year. Accordingly, the Company expects to incur a majority of its repair and maintenance costs in the third quarter to prepare for new residents.

In accordance with Statement of Financial Accounting Standards No. 144 (“SFAS 144”), Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived assets, such as real estate investments and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. These circumstances may include, but are not limited to, operational performance, market conditions and competition from other off-campus properties and on-campus housing, legal and environmental concerns, and results of appraisals or other information obtained as part of a financing or disposition strategy. We review recoverability of assets to be held and used through a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying value of the asset exceeds the fair value of the asset determined using customary valuation techniques, such as the present value of expected future cash flows. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and no longer would be depreciated.

Cash Equivalents

All highly-liquid investments with an original maturity of three months or less are considered to be cash equivalents.

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Restricted Cash

Restricted cash consists of security deposits and cash held as escrows for real estate taxes and capital expenditures as required by the terms of various loan agreements.

Allowance for Doubtful Accounts

We estimate the collectibility of receivables generated by rental and other income as a result of the operation of our student housing properties. If we believe that the collectibility of certain amounts is questionable, we record a specific reserve for these amounts to reduce the amount outstanding to an amount we believe will be collectible and a reserve for all other accounts based on a range of percentages applied to aging categories, which is based on historical collection and write-off experience.

We also evaluate the collectibility of fee income and expense reimbursements generated by the management of student housing properties owned by others and through the provision of development, construction, renovation and management services to our military housing projects based upon the individual facts and circumstances, and record a reserve for specific amounts, if necessary.

Accounts receivable are stated net of an allowance for doubtful accounts of $409,000 at September 30, 2005 and $159,000 at December 31, 2004.

Deferred Financing Costs

Costs incurred in connection with obtaining financing are capitalized and amortized on a straight-line basis over the term of the related loan, which is not materially different than the effective interest method. Amortization of deferred financing costs is included in interest expense. Accumulated amortization of deferred financing costs was $915,000 at September 30, 2005 and $359,000 at December 31, 2004.

Deferred Contract Costs

Deferred contract costs represent costs attributable to a specific military housing project incurred in connection with seeking Congressional approval of a Community Development and Management Plan, or CDMP, subsequent to the project being awarded by the Department of Defense, or DoD. In addition, deferred contract costs also include transition and closing costs incurred that are expected to be reimbursed by the military housing project. Such amounts are evaluated as to the probability of recovery and costs that are not considered probable of recovery are written off. Revenue is recognized and the related costs are expensed at the time that the reimbursement for preparing the CDMP is approved by Congress or at closing of the military housing project.

Deposits

Deposits primarily consist of amounts paid to third parties in connection with planned student housing acquisitions and amounts paid to lenders that provide the related financing or the refinancing of existing loans.  At September 30, 2005, deposits for planned acquisitions and financings totaled less than $0.1 million and other deposits not related to acquisitions or financings totaled $0.6 million. At December 31, 2004, deposits for planned acquisitions totaled $0.8 million and deposits related to financings totaled $1.0 million.

Advertising Costs

Advertising costs are expensed as incurred. Advertising expense for the three and nine-month periods ended September 30, 2005 and 2004 was $513,000, $1,394,000, $21,000, and $41,000, respectively.

Revenue Recognition

Student Housing Segment

Rental revenue is recognized when due over the lease terms, which are generally 12 months or less.

Standard management fees are based on a percentage of monthly cash receipts or gross monthly rental and other revenues generated by the properties managed for others. We recognize these fees when the cash is received by the property or the revenue is earned by the managed property, depending upon whether the management agreement relating to a student housing property bases the earned management fee on cash versus accrual basis revenue recognition.

Incentive management fees are earned as a result of the achievement of certain operating performance criteria over a specified period of time by certain managed properties, including targeted annual debt service coverage ratios. Revenue is recognized at the amount that would be due under the contract if the contract was terminated on the balance sheet date.

Expense reimbursements are comprised primarily of salary and related costs of our employees working at certain properties we manage for others, the cost of which is reimbursed by the owners of the related properties. We accrue expense reimbursements as the related expenses are incurred.

Military Housing Segment

Standard management fees are based on a percentage of revenue generated by the military housing projects from the basic allowance for housing provided by the government to service members, referred to as BAH, and are recognized when the revenue is earned by

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the military housing projects. Incentive management fees are based upon the satisfaction of certain criteria including, among other things, satisfying designated benchmarks relating to emergency work order response, occupancy rates, home turnover and resident satisfaction surveys. Incentive management fees are recognized when the various criteria stipulated in the management contract have been satisfied.

Standard development and construction/renovation fees are based on a percentage of development and construction/renovation costs incurred by the military housing projects including hard and soft costs and financing costs, and are recognized on a monthly basis as the costs are incurred by the military housing projects. Hard costs consist of costs relating to goods such as building components, furniture and equipment and other tangible assets; and soft costs consist of costs incurred relating to intangible services such as consulting, architectural and design services. Incentive development and construction/renovation fees are based upon the satisfaction of certain criteria including, among other things, completing a number of housing units according to schedule, achieving specific safety records and implementing small business or minority subcontracting plans. Incentive development and construction/renovation fees are recognized when the various criteria stipulated in the contract have been satisfied.

Revenues on fixed-price renovation contracts are recorded on the percentage-of-completion method. When the percentage-of-completion method is used, contract revenue is recognized in the ratio that costs incurred to date bear to estimated costs at completion. Adjustments to cost estimates are made in the period in which the facts requiring such revisions become known. When the revised estimates indicate a loss, such loss is currently provided for in its entirety.

Business development fees are earned from companies with which we have relationships in recognition of business development efforts and expenses incurred by us in connection with pursuing military housing projects. The fees consist of (i) a base fee, which is a fee paid to the Company in consideration of the Company’s ongoing pursuit of additional projects, and is paid regardless of whether a project is awarded, and (ii) an incentive fee, which is paid over the course of an awarded project based on a percentage of certain development costs incurred by the project.  The base fees are recognized on a straight-line basis over the term of the related business development agreement.  The incentive fees are recognized as the related costs are incurred by the respective military housing projects.

Preferred returns are earned on our investments in military housing projects.  The preferred returns are based on a fixed percentage of our investment in military housing projects and are recognized at the rates specified in the agreements, subject to projected availability of funds in the underlying project.  Accrued preferred returns are periodically evaluated for collectibility.

Reimbursed Expenses

Expense reimbursements include payroll and related expenses, incurred for certain employees engaged in the operation of certain student housing properties and military housing projects under management, and other operating expenses that are reimbursed to the Company by the owner of the related student housing property or military housing project.

Minority Interest

Minority interest as initially recorded at the date of our initial public offering represented the net equity of the Operating Partnership, including the proceeds received from the sale of the warrant to Vornado, multiplied by the ownership percentage of holders of limited partnership units in the Operating Partnership other than the Company. The Operating Partnership is obligated to redeem, at the request of a holder, each unit of limited partnership interest for cash or common shares on a one-for-one basis, subject to adjustments for share splits, dividends, recapitalizations or similar events. If the minority interest unit holders’ share of a current year loss would cause the minority interest balance to be less than zero, the minority interest balance will be reported as zero unless there is an obligation of the minority interest holders to fund those losses. Any losses in excess of the minority interest will be charged against equity. If future earnings materialize, equity will be credited for all earnings up to the amount of those losses previously absorbed. Distributions to limited partnership unit holders other than the Company are recorded as a reduction to minority interest.

In March 2005, June 2005 and September 2005, the Company declared quarterly distributions of $0.2275 per outstanding unit of limited partnership interest. The March 2005 distribution to the holders of limited partnership units in the Operating Partnership of $6.7 million was recorded as a reduction to minority interest and was paid in April 2005. The June 2005 distribution to the holders of limited partnership units in the Operating Partnership of $6.8 million was recorded as a reduction to minority interest and was paid in July 2005. The September 2005 distribution to the holders of limited partnership units in the Operating Partnership of $7.2 million was recorded as a reduction to minority interest on the September 30, 2005 balance sheet and was paid in October 2005.

Investments in Military Housing Projects

We evaluate each of our investments in military housing projects to determine if the underlying entity is a variable interest entity (“VIE”) as defined under FASB Financial Interpretation No. 46 (as revised) (“FIN 46”). If an entity is deemed to be a VIE pursuant to FIN 46, the entity that absorbs a majority of the expected losses of the VIE is deemed to be the primary beneficiary and must consolidate the VIE. If the entity is not a VIE, it is evaluated for consolidation based on controlling voting interests. If we have the majority voting interest with the ability to control operations and where no approval, veto or other important rights have been granted to other holders, the entity would be consolidated. We are not the primary beneficiary of any VIEs, nor do we have controlling voting interests in any of our military housing projects. We record investments in military housing projects initially at our cost and subsequently adjust them to reflect our preferred return, and other distributions.

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Income Taxes

GMH Communities Trust elected to be taxed as a REIT under the Code when it filed its tax return for the year ended December 31, 2004 in September 2005 pursuant to an extension granted in March 2005. To continue to qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that we currently distribute at least 90% of our adjusted taxable income to our shareholders. We believe we are organized and operate in a manner that allows us to qualify for taxation as a REIT under the Code, and it is our intention to adhere to these requirements and maintain the Company’s REIT status in the future. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements, other than with respect to the Company’s taxable REIT subsidiaries.

In conformity with the Code and applicable state and local tax statutes, taxable income or loss of The GMH Predecessor Entities was required to be reported in the tax returns of Gary M. Holloway, Sr. and Vornado, as such entities were treated as pass-through entities for tax purposes. Accordingly, no income tax provision has been reflected in the accompanying combined statements of operations of The GMH Predecessor Entities.

Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board issued SFAS No. 123R, as revised, “Share-Based Payment.” SFAS No. 123R replaces SFAS No. 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” The scope of SFAS No. 123R includes a wide range of share-based compensation arrangements including stock options, restricted share plans, performance-based awards, stock appreciation rights, and employee stock purchase plans. SFAS No. 123R requires companies to recognize in their financial statements the compensation expense relating to share-based payment transactions. Prior to the effective date of this revision, SFAS No. 123 permitted entities the option of applying the guidance in APB Opinion No. 25, as long as the footnotes to the financial statements disclosed what net income (loss) would have been had the company used the preferable fair-value-based method. The Company will be required to implement SFAS No. 123R for the year beginning January 1, 2006. The Company does not expect the adoption of SFAS No. 123R to have a material impact on its financial statements.

In November 2004, the Company established an equity incentive plan (the “Plan”) that provides for the issuance of options, restricted shares, share appreciation rights, performance units and other equity based awards.  For the three and nine months ended September 30, 2005, the Company issued 8,126 and 33,854 restricted common shares under the Plan to non-employee members of the Company’s Board of Trustees. The restricted common shares vest over a three-year period from the grant date. The restricted common shares are entitled to the same dividend and voting rights during the vesting period as the issued and outstanding common shares. The fair value of the awards was calculated based on the closing market price of the Company’s common shares on the grant date and is expensed on a straight-line basis over the vesting period.  The Company recognized non-cash stock-based compensation expense related to the restricted common shares of $32,000 and $78,000 for the three and nine months ended September 30, 2005, respectively.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to be consistent with the current period presentation.

3.  Real Estate Investments and Acquisitions

As of September 30, 2005, the Company owned 52 student housing properties located near 39 colleges and universities in 24 states. These properties contain an aggregate of 9,657 units and 31,371 beds. The Company’s investment in student housing properties at September 30, 2005 and December 31, 2004 was as follows (in thousands):

	September 30, 2005		December 31, 2004
Land	$	212,098	$	124,656
Building and improvements	845,459		501,680
Residential furniture and appliances	22,747		12,299
	$	1,080,304	$	638,635

During the three months ended September 30, 2005, the Company acquired six student housing properties located near six colleges and universities in six states with an aggregate of 1,213 units and 3,237 beds for an aggregate acquisition cost of approximately $123.4 million.

During the three months ended June 30, 2005, the Company acquired eight student housing properties located near six colleges and universities in five states with an aggregate of 1,354 units and 4,300 beds for an aggregate acquisition cost of approximately $147.4 million.  In connection with the acquisition of two of these properties, the Company issued a total of 1,940,282 units of limited partnership interest in the Operating Partnership to the sellers with an aggregate fair value of $26.9 million.  The fair value of the limited partnership units was based on the closing price of the Company’s common shares on the acquisition date.  The fair value of the units of limited partnership interest was recorded as an increase to minority interest.

During the three months ended March 31, 2005, the Company acquired eight student housing properties located near six colleges and universities in six states with an aggregate of 1,607 units and 4,795 beds for an aggregate acquisition cost of approximately

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$172.8 million. Gary M. Holloway, Sr., four other employees of the Company, including two executive officers of the Company, and an employee of an entity owned by Mr. Holloway, held an ownership interest in two of these properties that were acquired for a total purchase price of $38.2 million.  The Company paid $36.6 million of cash to investors in the selling entity not affiliated with the Company and issued a total of 141,549 units of limited partnership interest in the Operating Partnership to Mr. Holloway and these individuals with an aggregate fair value of $1.6 million in connection with the purchase of the two properties.  The fair value of the limited partnership units was based on the closing price of the Company’s common shares on the acquisition date. The fair value of the units of limited partnership interest was recorded as an increase to minority interest.

In August 2005, the Company entered into a joint venture with an institutional investor to develop and construct two student housing properties. The joint venture plans to develop two 144 unit/576 bed purpose-built student housing communities located in Orono, Maine and Bowling Green, Ohio.  Construction is expected to be completed by August 2006, concurrent with the beginning of the 2006-2007 academic year.  Under the terms of the joint venture agreement, the Company contributed the two undeveloped land parcels on which the properties will be built in exchange for a 10% equity interest in the joint venture.  In addition, the Company will manage the development and construction of the joint venture properties and receive a fee for these services. The Company has the option to purchase the joint venture partners’ interest in the properties from the joint venture within one year of completion. The joint venture has obtained one construction loan and expects to obtain a second construction loan in the fourth quarter that will permit draws of up to $32.0 million to fund the construction of the properties. In addition to customary default provisions, the construction loans shall be deemed to be in default if there is a material default, after any applicable notice and cure period, under the Company’s $150.0 million senior unsecured revolving credit facility (see Note 7). The Company has guaranteed the repayment of up to $8.0 million of the construction loans. The guarantee is reduced to $4.8 million in the event that no event of default, as defined in the loan agreements, has occurred and certain other conditions are satisfied.  The Company accounts for its investment in the joint venture using the equity method of accounting.  The carrying value of the Company’s investment in the joint venture was $0.4 million at September 30, 2005 and is included in other assets on the accompanying consolidated balance sheet.

4.  Investments in Military Housing Projects

Investments in military housing projects are initially recorded at cost and are subsequently adjusted for preferred returns earned and other distributions received. Preferred returns earned on our investments in military housing projects are accrued at the rates specified in the agreements, subject to projected availability of funds in the underlying project. Accrued preferred returns are periodically evaluated for collectibility.

In November 2003, GMH Military Housing, LLC and FW Military Housing LLC formed a joint venture known as GMH Military Housing-Fort Carson LLC, which acquired the ownership interests of an unrelated bankrupt entity that was a member of Fort Carson Family Housing LLC, the entity that owns the Fort Carson military housing project. GMH Military Housing, LLC contributed approximately $2.4 million to GMH Military Housing-Fort Carson LLC in return for its 10% interest in the joint venture. The 10% ownership interest in the joint venture was accounted for using the equity method of accounting from the acquisition date in November 2003 through November 1, 2004. In connection with our initial public offering on November 2, 2004, the remaining 90% interest in the joint venture was acquired in exchange for the issuance to FW Military Housing LLC of 2,583,334 units of limited partnership interest in the Operating Partnership having a value of $31.0 million. This acquisition was recorded at the fair value of the consideration paid. During the three and nine months ended September 30, 2005, the Company received $0.1 million and $4.0 million, respectively, of equity distributions from Fort Carson Family Housing LLC.  The carrying value of this investment was $25.7 million at September 30, 2005 and $29.7 million at December 31, 2004. The Company earns a preferred return on its investment in Fort Carson Family Housing LLC, which is paid on a monthly basis.

In November 2004, the Company and Benham Military Communities, LLC formed a joint venture known as GMH/Benham Military Communities LLC for the purpose of investing in the Navy Northeast Region military housing project. The Company contributed $9.5 million to GMH/Benham Military Communities LLC in return for a 90% interest and Benham Military Communities, LLC invested $1.1 million for the remaining 10% interest. The Company consolidates GMH/Benham Military Communities LLC as it has a 90% economic interest and controls a majority of the voting interests. Benham Military Communities, LLC’s 10% interest is accounted for as minority interest and is included in accrued expenses on the consolidated balance sheet at September 30, 2005 and December 31, 2004.  In November 2004, GMH/Benham Military Communities, LLC invested $10.6 million in Northeast Housing LLC, which owns and operates the Navy Northeast Region military housing project. GMH/Benham Military Communities LLC earns a preferred return on its investment in Northeast Housing LLC. The preferred return will accrue, but not be paid, until the end of the initial development period for the project in October 2010. The carrying value of this investment was $11.5 million at September 30, 2005 and $10.8 million at December 31, 2004.

5.  Income Taxes

Current income tax expense of the Company’s taxable REIT subsidiaries was $1.9 million,  which includes $1.3 million of federal taxes and $0.6 million of state taxes, for the nine months ended September 30, 2005.  The federal statutory tax rate of the taxable REIT subsidiaries for the nine months ended September 30, 2005 was 34%.  The effective tax rate of the taxable REIT subsidiaries for the nine months ended September 30, 2005 was 32.5%. The Company’s effective tax rate is lower than the federal statutory rate as a result of the permanent depreciation and amortization differences between income subject to income tax for book and tax purposes.

6.  Notes Payable

During the three months ended September 30, 2005, a fixed-rate note payable in the amount of $6.6 million was assumed relating to

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the acquisition of a student housing property and fixed-rate notes payable totaling $72.6 million were obtained in connection with the acquisition of five other student housing properties and the refinancing of a previously acquired property. These notes require monthly payments of principal and/or interest, bear interest at fixed rates ranging from 4.76% to 5.30%, and mature at various dates through 2024. In conjunction with the purchase accounting for these properties, the net carrying value of the assumed note payable was increased by $0.2 million to record it at its estimated fair value. The fair value of the assumed note was calculated as the difference between the present value of the note using a current estimated market rate of interest and the outstanding principal amount. This amount is being amortized as an adjustment to interest expense over the term of the related debt.

During the three months ended June 30, 2005, fixed-rate notes payable totaling $28.8 million were assumed relating to the acquisition of two student housing properties and fixed-rate notes payable totaling $58.8 million were obtained in connection with the acquisition of five student housing properties. These notes require monthly payments of principal and/or interest, bear interest at fixed rates ranging from 4.50% to 5.46%, and mature at various dates through 2015. In conjunction with the purchase accounting for these properties, the net carrying value of the assumed notes payable was increased by $0.4 million to record them at their estimated fair value. The fair value of the assumed notes was calculated as the difference between the present value of the notes using a current estimated market rate of interest and the outstanding principal amount. This amount is being amortized as an adjustment to interest expense over the term of the related debt.

During the three months ended June 30, 2005, a variable-rate note payable in the amount of $6.8 million was obtained in connection with the acquisition of a student housing property. The note requires payments of interest only at LIBOR plus 2.05% (LIBOR on this loan was 3.56% at September 30, 2005) and matures in 2015.

On June 27, 2005,  we placed a total of $23.6 million of fixed-rate mortgage indebtedness on two student housing properties located in State College, Pennsylvania that serve Pennsylvania State University.  The mortgage debt has a fixed interest rate of 4.70% and a term of five years.  The properties were acquired by the Company in March 2005 for an aggregate purchase price of $38.2 million. Proceeds of this mortgage debt financing were used to repay outstanding borrowings under the Company’s line of credit that were originally drawn to acquire these properties.

During the three months ended March 31, 2005, fixed-rate notes payable totaling $48.0 million were assumed relating to the acquisition of four student housing properties and a fixed-rate note payable in the amount of $31.4 million was obtained in connection with the acquisition of another student housing property. These notes require monthly payments of principal and/or interest, bear interest at fixed rates ranging from 4.92% to 7.09%, and mature at various dates through 2014. In conjunction with the purchase accounting for these properties, the net carrying value of the assumed notes payable was increased by $2.1 million to record them at their estimated fair value. The fair value of the assumed notes was calculated as the difference between the present value of the notes using a current estimated market rate of interest and the outstanding principal amount. This amount is being amortized as an adjustment to interest expense over the term of the related debt.

During the three months ended March 31, 2005, a variable-rate note payable in the amount of $9.2 million was obtained in connection with the acquisition of a student housing property. The note requires payments of interest only at LIBOR plus 1.90% (LIBOR on this loan was 3.57% at September 30, 2005) and matures in 2007.

In February 2005, the Company completed the refinancing of variable-rate notes secured by seven of its student housing properties. In connection with the refinancing, the Company repaid approximately $20.4 million of the total $113.7 million of indebtedness secured by these seven properties, and replaced the remaining $93.3 million of variable-rate debt with an equal amount of fixed-rate debt with interest rates ranging from 4.24% to 4.7% and maturity terms ranging from five to seven years.

Prior to its contribution to the Company in connection with the completion of our initial public offering, Corporate Flight LLC financed the acquisition and refurbishments of the corporate aircraft with two notes payable. One loan required monthly payments of principal and interest at the commercial paper rate plus 1.8% through January 2011. The second loan required monthly payments of principal and interest at 9.5% through August 2006. On February 28, 2005, the Company sold and transferred its ownership of 100% of the outstanding membership interests in Corporate Flight LLC back to Gary M. Holloway, Sr. Corporate Flight LLC’s primary asset was the corporate aircraft which had a net book value of $3.8 million at February 28, 2005 and was secured by the two notes payable, which had an aggregate outstanding balance of $4.2 million at February 28, 2005.  Corporate Flight LLC’s net deficit of $171,000, net of $180,000 tax expense related to the taxable gain upon the transfer, was recorded as a capital contribution and allocated to additional paid-in capital and minority interest on the consolidated balance sheet.

At September 30, 2005, notes payable totaling $623.5 million were secured by 45 student housing properties with a cost and net book value of $907.5 million and $891.5 million, respectively. At December 31, 2004, notes payable totaling $359.8 million were secured by 23 student housing properties with a cost and net book value of $451.9 million and $449.1 million, respectively.

At September 30, 2005, the Company had a note payable in the amount of $5.7 million secured by the corporate headquarters, requiring monthly payments of principal and interest at LIBOR plus 2.25% (LIBOR on this loan was 3.56% at September 30, 2005).  In July 2005, the maturity date of the loan was extended from August 2005 to November 2005. The remaining principal balance was repaid in full in October 2005.

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The aggregate annual principal payments as of September 30, 2005 due on our notes payable and line of credit for the remainder of 2005, the five succeeding years and thereafter are as follows (in thousands):

2005	$	7,043
2006	5,188
2007	224,960
2008	4,708
2009	34,076
2010	65,954
Thereafter	424,242
	$	766,171

7.  Line of Credit

In November 2004, the Company entered into a $150 million three-year unsecured revolving credit facility, subject to increase to $250 million (the “Credit Facility”), with a consortium of banks. The Credit Facility provides for the issuance of up to $20 million of letters of credit, which is included in the $150 million available under the Credit Facility. The Company’s availability under the Credit Facility as of September 30, 2005 was limited to a borrowing base amount equal to the sum of 60% of the value of an unencumbered asset pool (which as of September 30, 2005 consisted of seven student housing properties, and in no event could contain fewer than five student housing properties) as of the end of the previous quarter and 50% of the annualized value of the Company’s cash flow from the management, development and construction/renovation fees received in connection with military housing projects and from the management of student housing properties in the previous quarter, provided that the total cash flow attributable to annualized management fees did not exceed 50% of the borrowing base.

The Company may elect to have amounts outstanding under the Credit Facility bear interest at a Eurodollar rate based on LIBOR or the prime rate, plus an applicable rate, ranging from 1.625% to 2.375% for Eurodollar rate loans or 0.75% to 1.75% for prime rate loans. The applicable rate is determined by the leverage ratio of total liabilities to total asset value of the Company, as defined in the Credit Facility. In addition, the Company pays fees for unused availability on the Credit Facility.

The Credit Facility contains affirmative and negative covenants and also contains financial covenants that, among other things, as of September 30, 2005, (i) required the Company to maintain a total leverage ratio equal to or less than 65% through December 31, 2005. At the end of the first quarter of 2006, the maximum leverage ratio will decrease to 60%, (ii) limited the aggregate amount of outstanding variable-rate indebtedness to 30% of total indebtedness commencing February 8, 2005, (iii) limited the payment of dividends by the Company to its shareholders to 110% of funds from operations as defined in the Credit Facility, (iv) limited the amount of recourse debt, exclusive of amounts outstanding under the Credit Facility, to $25 million, and in no event greater than $150 million in total, and (v) required the Company to maintain a consolidated tangible net worth, as defined in the Credit Facility, of at least $275 million plus an amount equal to 75% of the net proceeds from any equity issuances subsequent to the closing date of the Credit Facility in November 2004. The financial covenants as of September 30, 2005 also required the Company to operate in compliance with the following ratios as defined by the terms of the Credit Facility: (i) fixed charge coverage ratio equal to or greater than 1.75x; (ii) interest coverage ratio equal to or greater than 2.00x; and (iii) unsecured interest coverage ratio equal to or greater than 2.25x. The Company was in compliance with all covenants at September 30, 2005.

In January 2005, the Company paid a dividend to its shareholders in excess of 95% of funds from operations for the period November 2, 2004 to December 31, 2004.  The Company received a formal waiver of this instance of noncompliance with the financial covenant. The Company and the lenders also agreed to modify the covenant related to the payment of dividends to shareholders for the year ending December 31, 2005. Under the terms of the modification, the Company is now restricted from paying dividends to its shareholders in 2005 in excess of 110% of funds from operations. The dividend payment terms of the Credit Facility will revert to the original restriction against distributions in excess of 95% of funds from operations after 2005.

Additionally, the Company did not reduce the aggregate amount of its outstanding variable-rate indebtedness as a percentage of its total outstanding indebtedness below 30% by February 8, 2005, as required by the terms of the Credit Facility. On February 24, 2005, the Company converted certain variable-rate loans secured by seven student housing properties to fixed-rate loans. As a result of this refinancing, the Company lowered its outstanding variable-rate indebtedness as a percentage of fixed-rate indebtedness below the 30% limit. The Company received a formal waiver of this instance of noncompliance with the financial covenant for the period from February 8, 2005 through February 23, 2005.

At June 30, 2005, the Company’s leverage ratio exceeded the 60% ceiling set forth in the Credit Facility.  The Company received a formal waiver of this instance of noncompliance with the financial covenant.

In August 2005, the Company amended the Credit Facility (the “Amendment”).  Under the Amendment, the calculation of the borrowing base was revised to include cash flow from the military housing construction and development fees and to increase the total cash flow attributable to annualized fees from the management, construction and development of the military housing projects and student housing properties from 35% to 50%.  The Amendment also increased the applicable interest rate ranges on outstanding borrowings under the Credit Facility to the following: 1.625% to 2.375% for Eurodollar rate loans and 0.75% to 1.75% for prime rate loans.  In addition, the Amendment modified the calculation of the leverage ratio and increased the maximum leverage ratio from 60% to 65% through December 31, 2005.  At the end of the first quarter of 2006, the maximum leverage ratio will revert to 60%.

As of September 30, 2005, the Company had $137.0 million outstanding under the Credit Facility, bearing interest at a weighted-average rate of 5.90%, and an additional $13.0 million was available for draw under the facility. As of September 30, 2005, there were no letters of credit outstanding under the Credit Facility.

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8.  Transactions with Related Parties

In the ordinary course of its operations, the Company has on-going business relationships with Gary M. Holloway, Sr., entities affiliated with Mr. Holloway, and entities in which Mr. Holloway or the Company has an equity investment. These relationships and related transactions are summarized below. The operating results or financial position of the Company and The GMH Predecessor Entities could be significantly different from those that would have been reported if the entities were autonomous.

Through the completion of the Company’s initial public offering on November 2, 2004, common costs for human resources, information technology, office equipment and furniture, and certain management personnel were allocated to the various entities owned or controlled by Mr. Holloway, including The GMH Predecessor Entities, using assumptions based on headcount that management believed were reasonable. During the three and nine months ended September 30, 2004, such costs totaled $1.4 million and $2.9 million, respectively, and are included in administrative expenses in the accompanying combined statements of operations.  Subsequent to November 2, 2004, such costs were incurred directly by the Operating Partnership. The allocation of such costs to other entities owned or controlled by Mr. Holloway during the three and nine months ended September 30, 2005 totaled $21,000 and $232,000, respectively, and is reflected as expense reimbursements from related parties in the accompanying consolidated statements of operations.

The Company leases space in its corporate headquarters to entities wholly-owned by Mr. Holloway.  During the three and nine-month periods ended September 30, 2005 and 2004, rental income from these entities totaled $61,000, $183,000, $70,000, and $340,000, respectively, and is included in rent and other property income in the accompanying consolidated and combined statements of operations.

The Company provides property management consulting services to GMH Capital Partners Asset Services, LP, an entity wholly-owned by Mr. Holloway, in connection with property management services that GMH Capital Partners Asset Services, LP performs related to five student housing properties containing a total of 2,172 beds. The Company earns consulting fees equal to 80% of the net management fees that GMH Capital Partners Asset Services, LP earns for providing the property management services.  For the three and nine months ended September 30, 2005, such fees totaled $53,000 and $187,000, respectively.  No such fees were recognized in the comparable periods in 2004.

Through March 31, 2005 the Company earned management fees from properties in which Mr. Holloway was an investor.  As of September 30, 2005, the Company does not manage any properties in which Mr. Holloway is an investor and accordingly did not earn any such fees in the quarter then ended.  During the nine-month period ended September 30, 2005 and the three and nine-month periods ended September 30, 2004, such income totaled $0.2 million, $0.3 million and $1.2 million, respectively.

The Company is reimbursed by the owners of certain military housing projects and student housing properties under management, including certain student housing properties in which Mr. Holloway was an investor through March 31, 2005, for the cost of certain employees engaged in the daily operation of those military housing projects and student housing properties. The reimbursement of these costs is reflected as expense reimbursements from related parties in the accompanying consolidated and combined statements of operations.

The GMH Predecessor Entities previously paid management fees and reimbursed expenses to entities owned by Mr. Holloway that were not contributed to the Company in connection with its initial public offering. During the three and nine-month periods ended September 30, 2004, the management fees and reimbursed expenses totaled $22,000 and $77,000, respectively.

Denis J. Nayden, one of the Company’s trustees, is a senior vice president of General Electric Company, which is the parent company of General Electric Capital Corporation. At September 30, 2005, we had $248.0 million of indebtedness to General Electric Capital Corporation secured by properties or other assets that we own.

Mr. Holloway owns Bryn Mawr Abstract, Inc., an entity that provides title abstract services to third party title insurance companies, from which we have purchased title insurance with respect to student housing properties that we have acquired or refinanced in 2005. In connection with our purchase of title insurance for these student housing properties, we paid premiums to other title insurance companies, which fees in some cases are fixed according to statute. From these premiums, the other title companies paid to Bryn Mawr Abstract $162,000 and $345,000 during the three and nine-month periods ended September 30, 2005, respectively, for the provision of title abstract services.

Mr. Holloway owns GMH Capital Partners Commercial Realty LP, an entity that provides real estate consulting and brokerage services for real estate transactions. During the three months ended March 31, 2005, GMH Capital Partners Commercial Realty LP received aggregate commissions of $284,000 from the sellers of two student housing properties that the Company purchased.

In February 2005, the Company transferred its interest in Corporate Flight LLC, including the corporate aircraft and associated debt initially contributed to the Operating Partnership at the time of the initial public offering, back to Mr. Holloway.  Corporate Flight LLC had a net deficit of $171,000, net of $180,000 tax expense related to the taxable gain upon the transfer to Mr. Holloway, on the date it was transferred back to Mr. Holloway. This transfer was accounted for as a capital contribution and recorded as an $87,000 increase to additional paid-in capital and an $84,000 increase to minority interest.  During the three and nine months ended September 30, 2005, the Company paid Corporate Flight LLC $32,000 and $197,000, respectively, for use of an aircraft owned by Corporate Flight LLC.

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9. Commitments and Contingencies

As of September 30, 2005, we had an agreement to acquire one undeveloped parcel of land for an aggregate purchase price of $1.4 million.

In connection with finalizing the agreements with the DoD for the Company’s military housing projects, the Company has committed to contribute the following aggregate amounts as of September 30, 2005 (in thousands):

2006	$	2,000
2007	5,900
2010	3,600
2011 and thereafter	14,300
Total	$	25,800

In connection with the development, management, construction, and renovation agreements for certain of the military housing projects, the Company guarantees the completion of its obligations under the agreements. The guarantees require the Company to fund any costs in excess of the amounts budgeted in the underlying development, management, construction, and renovation agreements. Management believes that these guarantees will not have a material adverse impact on the Company’s financial position or results of operations.

The Company is subject to routine litigation, claims and administrative proceedings arising in the ordinary course of business. Management believes that the disposition of these matters will not have a material adverse impact on the Company’s financial position or results of operations.

The Company has entered into employment agreements with three of its executive officers. Each employment agreement is for an initial three-year term beginning in November 2004 and provides for base salaries aggregating $975,000 in each of the three years. The base salaries are increased annually effective January 1 of each year by a minimum amount equal to at least the percentage increase in the Consumer Price Index.

Under the provisions of FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34,” a guarantor is to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken by issuing the guarantee. The Company enters into indemnification agreements in the ordinary course of business that are subject to the provisions of FIN 45. Under these agreements, the Company indemnifies, holds harmless, and agrees to reimburse the indemnified party for losses suffered or incurred by the indemnified party. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company believes the estimated fair value of these agreements is immaterial. Accordingly, there were no liabilities recorded for these agreements as of September 30, 2005 and December 31, 2004.

During the three months ended September 30, 2005, the Company recognized a management fee of $0.8 million from a student housing property managed for a third party. The fee related to management services provided by the Company during 2004 and 2005 that had not been previously recognized because it was deemed to be uncollectible. The fee was collected in October 2005.

10. Segment Reporting

The Company is managed as individual entities that comprise two reportable segments: (1) student housing and (2) military housing. The Company’s management evaluates each segment’s performance based upon net income. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.  Corporate includes the activities of certain departments from a corporate level, which includes personnel that service GMH Communities Trust as a whole and support our overall operations.

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	Three Months Ended September 30,
	2005 (Company)									2004 (Predecessor)
	Student Housing		Military Housing		Corporate			Total		Student Housing			Military Housing		Corporate			Total
	(in thousands)
Revenue:
Rent and other property income	$	35,369	$	—	$	60		$	35,429	$	6,683		$	—	$	70		$	6,753
Expense reimbursements:
Related party	—		20,722		22			20,744		367			7,697		638			8,702
Third party	1,299		—		—			1,299		1,906			—		—			1,906
Management fees:
Related party	—		1,838		—			1,838		348			619		—			967
Third party	1,364		—		—			1,364		752			—		—			752
Other fee income-related party	625		6,556		—			7,181		—			2,115		—			2,115
Other income	34		45		2			81		14			24		103			141
Total revenue	38,691		29,161		84			67,936		10,070			10,455		811			21,336
Operating Expenses:
Property operating expenses	16,058		1,248		—			17,306		4,773			1,035		—			5,808
Reimbursed expenses	1,299		20,722		22			22,043		2,273			7,697		638			10,608
Real estate taxes	3,428		—		—			3,428		490			—		—			490
Administrative expenses	—		—		2,983			2,983		—			—		2,172			2,172
Profits interest expense	—		—		—			—		—			—		33,180			33,180
Depreciation and amortization	7,617		—		102			7,719		1,526			10		234			1,770
Interest	8,707		—		274			8,981		1,627			—		95			1,722
Total operating expenses	37,109		21,970		3,381			62,460		10,689			8,742		36,319			55,750
Income (loss) before minority interest and income taxes	1,582		7,191		(3,297		)	5,476		(619		)	1,713		(35,508		)	(34,414		)
Minority interest	864		3,502		(1,608		)	2,758		—			—		—			—
Income (loss) before income taxes	718		3,689		(1,689		)	2,718		(619		)	1,713		(35,508		)	(34,414		)
Income taxes	55		921		—			976		—			—		—			—
Net income (loss)	$	663	$	2,768	$	(1,689	)	$	1,742	$	(619	)	$	1,713	$	(35,508	)	$	(34,414	)

	Nine Months Ended September 30,
	2005 (Company)								2004 (Predecessor)
	Student Housing		Military Housing		Corporate		Total		Student Housing		Military Housing		Corporate		Total
	(in thousands)
Revenue:
Rent and other property income	$	90,851	$	—	$	182	$	91,033	$	6,683	$	—	$	340	$	7,023
Expense reimbursements:
Related party	186		42,057		232		42,475		1,089		14,845		735		16,669
Third party	3,876		—		—		3,876		5,475		—		—		5,475
Management fees:
Related party	197		5,153		—		5,350		1,163		1,520		—		2,683
Third party	3,015		—		—		3,015		3,430		—		—		3,430
Other fee income-related party	664		14,067		31		14,762		—		4,174		—		4,174
Other income	109		69		70		248		58		70		365		493
Total revenue	98,898		61,346		515		160,759		17,898		20,609		1,440		39,947
Operating Expenses:
Property operating expenses	35,813		4,087		—		39,900		6,683		3,168		—		9,851
Reimbursed expenses	4,062		42,057		232		46,351		6,564		14,845		735		22,144
Real estate taxes	8,003		—		—		8,003		490		—		—		490
Administrative expenses	—		—		8,657		8,657		—		—		4,488		4,488
Profits interest expense	—		—		—		—		—		—		33,180		33,180

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Depreciation and amortization	22,154		—		409			22,563		1,537		18		633			2,188
Interest	20,489		—		739			21,228		1,627		—		253			1,880
Total operating expenses	90,521		46,144		10,037			146,702		16,901		18,031		39,289			74,221
Income (loss) before minority interest and income taxes	8,377		15,202		(9,522		)	14,057		997		2,578		(37,849		)	(34,274		)
Minority interest	4,184		7,593		(4,756		)	7,021		—		—		—			—
Income (loss) before income taxes	4,193		7,609		(4,766		)	7,036		997		2,578		(37,849		)	(34,274		)
Income taxes	100		1,814		—			1,914		—		—		—			—
Net income (loss)	$	4,093	$	5,795	$	(4,766	)	$	5,122	$	997	$	2,578	$	(37,849	)	$	(34,274	)

	Student Housing		Military Housing		Corporate		Total
	(in thousands)
As of September 30, 2005:
Total assets	$	1,090,474	$	60,079	$	42,735	$	1,193,288
As of December 31, 2004:
Total assets	$	663,980	$	57,856	$	51,225	$	773,061

11.  Earnings Per Common Share

The following table details the number of shares and net income used to calculate basic and diluted earnings per share for the three and nine-month periods ended September 30, 2005 (in thousands, except share and per share amounts):

	Three months ended September 30, 2005				Nine months ended September 30, 2005
	Basic		Diluted		Basic		Diluted
Net income	$	1,742	$	1,742	$	5,122	$	5,122
Minority interest	—		—		—		—
Income available to common shareholders	$	1,742	$	1,742	$	5,122	$	5,122
Weighted-average common shares outstanding	30,350,989		30,350,989		30,350,989		30,350,989
Warrant	—		2,435,628		—		2,107,644
Units of limited partnership held by minority interest holders	—		—		—		—
Restricted common shares	—		—		—		—
Total weighted-average shares outstanding	30,350,989		32,786,617		30,350,989		32,458,633
Earnings per common share	$	0.06	$	0.05	$	0.17	$	0.16

The computation of diluted earnings per share for the three and nine month periods ended September 30, 2005 excludes the assumed conversion of the units of limited partnership interest held by minority interest holders, the related minority interest expense and the vesting of the restricted common shares because the assumed conversion and vesting has an anti-dilutive effect on earnings per share.

In March 2005, June 2005 and September 2005, the Company declared quarterly dividends of $0.2275 per outstanding common share. The March dividend of $6.9 million was paid in April 2005 to common shareholders of record on March 30, 2005. The June dividend of $6.9 million was paid in July 2005 to common shareholders of record on June 29, 2005.  The September dividend of $6.9 million was paid in October 2005 to common shareholders of record on September 22, 2005.

12. Acquisition of Real Estate Investments

During the year ended December 31, 2004, the three months ended September 30, 2005 and the nine months ended September 30, 2005, the Company acquired 30, six, and 22 student housing properties, respectively, for an aggregate acquisition cost of $1.1 billion. The results of operations for each of the acquired properties have been included in our statements of operations from the respective purchase dates.  All pro forma financial information presented within this footnote is not necessarily indicative of the results which actually would have occurred if the purchases had been consummated on January 1, 2004, nor does the pro forma information purport to represent the results of operations for future periods.

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The following unaudited student housing segment pro forma financial information for the three and nine month periods ended September 30, 2005 and 2004 gives effect to the acquisition of the 52 student housing properties as if the transactions had occurred on January 1, 2004 (in thousands).  The pro-forma financial information for the three and nine months ended September 30, 2004 excludes the $33.2 million of profits interest expense due to its material non-recurring nature.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005		2004
Pro forma rent and other property income	$	34,711	$	33,634	$	104,132	$	100,903
Pro forma net income	4,558		4,416		13,673		13,249

13. Subsequent Events

In September 2005, the Company commenced a public offering of common shares. The offering was completed on October 4, 2005 with the sale of 9,315,000 common shares of beneficial interest, including 1,215,000 shares issued upon full exercise of the underwriters’ over-allotment option, at an offering price of $14.25 per share. The Company raised an aggregate of $124.7 million in net proceeds from the offering after deducting the underwriters’ discounts, payment of financial advisory fees and other offering-related expenses.  The net proceeds of this offering, which the Company contributed to the Operating Partnership in exchange for units of partnership interest, were used by the Operating Partnership to repay outstanding indebtedness under the Company's credit facility.

In October 2005, the Company acquired two student housing properties, containing an aggregate 572 units and 1,620 beds, for an aggregate purchase price of $108.2 million. These acquisitions were partially financed with the assumption of a $35.6 million loan secured by one of the properties.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

GMH Communities Trust commenced operations on November 2, 2004, upon completion of its initial public offering and the simultaneous acquisition of the sole general partnership interest in GMH Communities, LP, referred to throughout this report as our Operating Partnership. The historical operations prior to completion of our initial public offering that are described in this report refer to the operations of College Park Management, Inc., GMH Military Housing, LLC, 353 Associates, L.P., and Corporate Flight Services, LLC, which are collectively referred to, together with our Operating Partnership, as The GMH Predecessor Entities or our predecessor entities.

In connection with the formation transactions completed prior to and simultaneously with completion of our initial public offering, the interests in The GMH Predecessor Entities were contributed to our Operating Partnership as described in Note 1 to the financial statements included in this report.  We have described our operations in this report as if the historical operations of our predecessor entities were conducted by us. The following discussion and analysis should be read in conjunction with the financial statements and notes thereto of GMH Communities Trust and The GMH Predecessor Entities appearing in Part I, Item 1of this report.

Overview

We are a self-advised, self-managed, specialty housing company that focuses on providing housing to college and university students residing off-campus and to members of the U.S. military and their families. As of September 30, 2005, we owned 52 student housing properties containing a total of 9,567 units, 31,371 beds, and four undeveloped parcels of land for development as student housing properties, and owned minority interests in joint ventures that own our military housing projects.  We also managed or provided consulting services for 18 student housing properties owned by others, containing a total of 4,225 units and 12,085 beds and an estimated 224 units and 718 beds currently under construction and we provided interim management services for an additional student housing property under construction. Additionally, our Operating Partnership has an ownership interest in, and through various wholly-owned subsidiaries operates, seven military housing projects comprising an aggregate of 15,857 housing units on 18 military bases.  As of September 30, 2005, we also were in exclusive negotiation process with the U.S. Department of the Army for the Fort Gordon project, containing an estimated 857 end-state housing units and were in the solicitation process with the U.S. Air Force for a military housing project that is expected to cover four bases and in excess of 2,000 end-state housing units. Through our taxable REIT subsidiaries, we provide development, construction, renovation and management services for our military housing projects, and property management services for student housing properties owned by others, including colleges, universities, and other private owners. In order to comply with the applicable requirements under the REIT provisions of the Internal Revenue Code, we must limit the operations of our taxable REIT subsidiaries so that securities issued to us by our taxable REIT subsidiaries do not represent more than 20% of our total assets as of the close of any quarter in our taxable year and so that dividends from our taxable REIT subsidiaries, together with our other non-qualifying gross income, do not exceed 25% of our gross income for any taxable year.

As a result of the various transactions and acquisitions completed in anticipation of, in connection with and subsequent to our initial public offering in November 2004, we expect our future results of operations to include significantly higher revenues and expenses than those reflected in our predecessor entity financial statements.

Currently, our operations are managed within two operating segments: (1) student housing and (2) military housing. This structure provides an effective platform for maximizing market penetration and optimizing operating economies of scale. In addition, we separately report the activities of certain departments from a corporate level, which includes personnel that service GMH Communities Trust as a whole and support our overall operations.

A summary of the activities in both of our student housing and military segments during the third quarter of 2005 is provided below. In addition to these events, we commenced an underwritten public offering of common shares of beneficial interest during the third quarter of 2005, which was completed on October 4, 2005. We sold an aggregate of 9,315,000 common shares in the offering, including 1,215,000 shares issued upon full exercise of the underwriters’ over-allotment option, at an offering price of $14.25 per share. We raised an aggregate of $124.7 million in net proceeds from the offering, after deducting the underwriters’ discounts, payment of financial advisory fees and other offering-related expenses.

Student Housing

The student housing segment acquires, owns and manages premiere off-campus student housing properties strategically located near college or university campuses throughout the United States. Since July 2004, our rental revenue has increased substantially as a result of our acquisition of a total of 52 properties as of September 30, 2005. While we manage the properties we own, we do not recognize any fee income from their management. Instead, the rent payments we receive as a result of our ownership of these properties are reflected in our revenue. Additionally, operating expenses, real estate taxes and depreciation and amortization have increased as a result of these acquisitions. Further, interest expense has increased related to the financing of these properties acquired.

We earn management fees as a percentage of cash receipts or gross rental revenues generated by the managed properties, according to the management agreements for the properties we manage. We also have the ability to earn incentive management fees by achieving specified property-level performance criteria for certain properties we manage for third parties. Further, certain operating expenses

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incurred related to properties we manage for others are reimbursed by the owners of the properties managed. We expect to continue generating fee income revenue and operating expense reimbursements from the properties that we manage for others although the amounts are expected to become less significant as rental income increases from the properties we own.

During the three months ended September 30, 2005, we acquired six student housing properties and two undeveloped parcels of land for an aggregate acquisition cost of approximately $123.4 million.  The acquisition cost includes total purchase price and capitalized acquisition costs which are allocated to student housing properties, lease intangibles, and any fair value debt adjustment. The six properties are located near six colleges and universities in six states and contain an aggregate of 1,213 units and 3,237 beds.  More specifically, these acquisitions included the following:

•    a student housing property, Seminole Suites, located in Tallahassee, Florida and serving Florida State University, Tallahassee Community College and Florida A&M University.  The property contains 264 units and 924 beds, and was acquired in July 2005 for an acquisition cost of approximately $33.4 million, including the placement of  $20.4 million in fixed-rate mortgage debt;

•    a student housing property, The Commons, located in Harrisonburg, Virginia and serving James Madison University. The property contains 132 units and 528 beds and was acquired in July 2005 for an acquisition cost of approximately $13.7 million, including the assumption of $6.6 million of indebtedness;

•    a student housing property, The Towers at 3rd (formerly known as Presidential Tower), located in Champaign, Illinois and serving the University of Illinois – Urbana/Champaign.  The property contains 136 units and 271 beds and was acquired in August 2005 for an acquisition cost of approximately $23.1 million, including the placement of $14.5 million in fixed-rate mortgage debt;

•    a student housing property, Campus Walk, located in Wilmington, North Carolina and serving University North Carolina-Wilmington.  The property contains 289 units and 290 beds and was acquired in August 2005 for an acquisition cost of approximately $10.4 million, including the placement of $6.7 million in fixed-rate mortgage debt;

•    a student housing property, Blanton Common, located in Valdosta, Georgia and serving Valdosta State University. The property contains 208 units and 608 beds and was acquired in September 2005 for an acquisition cost of approximately $25.1 million;

•    a student housing property, University Meadows, located in Mt. Pleasant, Michigan and serving Central Michigan University. The property contains 184 units and 616 beds and was acquired in September 2005 for an acquisition cost of approximately $14.1 million, including the placement of $9.6 million in fixed-rate mortgage debt; and

•    through a joint venture with an institutional partner, two undeveloped land parcels located in Orono, Maine and Bowling Green, Ohio and known as Orchard Trails and the Enclave-Phase II, respectively.  Orchard Trails consists of a 61-acre parcel of undeveloped land and the Enclave-Phase II consists of an 11-acre parcel of undeveloped land.  These development land parcels were initially acquired by us for an aggregate acquisition cost of approximately $1.7 million, and then in August 2005, were contributed into the joint venture entity in which we hold a 10% interest.  When developed, both Orchard Trails and the Enclave-Phase II are expected to consist of 144 units and 576 beds.  Construction on both properties began in August 2005 and is expected to be completed prior to the 2006/2007 academic year.  The estimated aggregate costs for acquiring the assets and development and construction is $43.5 million, with development and construction costs to be partially funded (up to 75% of total construction and development costs) by construction loans with lenders engaged by the joint venture entity, and the remaining amount (approximately $11.5 million) to be funded 10% by us and 90% by our joint venture partner. During the third quarter of 2005, the joint venture completed the placement of the construction loan with respect to the Orchard Trails property, and expects to complete the placement of the construction loan with respect to the Enclave – Phase II during the fourth quarter of 2005. We will manage these properties, including development, construction and pre-leasing activities, and we have an option to purchase our joint venture partner’s interest in the joint venture within one year after completion of the properties.

In addition to the acquisitions described above, in September 2005, we placed $21.3 million of fixed-rate mortgage indebtedness on a student housing property located in Lubbock, Texas that serves Texas Tech University.  We had acquired the property in November 2004 for an aggregate purchase price of $29.5 million. Proceeds from this mortgage debt financing were used to repay outstanding borrowings under our line of credit.

As of September 30, 2005, with regard to our student housing segment, we:

•    owned 52 student housing properties containing a total of 9,657 units and 31,371 beds; and

•    managed, or provided management consulting services for, a total of 18 student housing properties owned by others, containing a total of 4,225 units and 12,085 beds and an estimated 224 units and 718 beds currently under construction and we provided interim management services for an additional student housing property under construction. Specifically, we provided management consulting services with respect to five of these properties to GMH Capital Partners Asset Services, LP, an entity wholly-owned by Gary M. Holloway, Sr.

In the third quarter of 2005, we experienced an increase in property operating expenses as a result of repair and maintenance expenditures relating to turnover of our units at our student housing properties.  Our student housing lease terms generally commence in August or September to coincide with the beginning of the academic year.  As a result, we expect to incur a majority of our repair and

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maintenance costs in the third quarter to prepare the units for the new residents, and we expect our operating expenses, as a percentage of revenue, to decrease in the fourth quarter. During the third quarter, we expensed approximately $2.0 million of repair and maintenance costs relating to turnover of our student housing units. We also have experienced, and expect to continue to experience going forward, increases in operating expenses, including increased utility expenses resulting from national trends in higher energy-related costs and increased real estate taxes relating to more aggressive assessments performed by municipal taxing authorities with respect to certain of our student housing properties.

Subsequent Developments. In October 2005, we acquired two additional student housing properties, referred to as University Crossings and Pegasus Connection.  University Crossings, containing 260 units/690 beds, is located in Philadelphia, Pennsylvania and primarily serves Drexel University and the University of Pennsylvania. Pegasus Connection, a property that we managed prior to the acquisition and containing 312 units/930 beds, is located in Orlando, Florida and serves the University of Central Florida.

As of October 31, 2005, we had agreements to acquire three student housing properties and one land parcel for development, and non-binding letters of intent to acquire six student housing properties and one land parcel for development.  We will be continuing our due diligence process with respect to these transactions during the fourth quarter of 2005.   During the remainder of 2005, we also expect to continue to review potential transactions covering additional student housing properties that are located in the Company’s targeted markets and that meet management’s underwriting criteria for creating long-term growth potential.  The timing of any of these acquisitions will be dependent upon various factors, including the ability to complete satisfactory due diligence, obtain appropriate financing on the properties and the availability of capital.

Military Housing

Our military housing segment develops, constructs, renovates and manages military housing projects in which we acquire interests. Our military housing segment began generating revenue in the fourth quarter of 2003 with the initiation of our Fort Carson and Fort Stewart and Hunter Army Airfield projects. Revenue grew throughout 2004 and continues to grow during 2005 with the addition of various other projects. Excluding expense reimbursements, revenue from our military housing segment is comprised primarily of fee income for providing development, construction/renovation and management services to our military housing projects and, to a lesser extent, from returns on the equity we invest in the projects. Expense reimbursements consist primarily of payroll and related expenses, closing costs and transition costs we incur for the project in the 30 to 90-day period preceding the initiation of our management of the project. Typically, at the time we initiate management on a project, the project reimburses us for these amounts from the proceeds of the debt issued by the project to finance its operations.

As of September 30, 2005, we owned equity interests in the joint ventures that own seven military housing projects currently in operation. During the three months ended September 30, 2005, we earned fees for providing development, construction/renovation and management services to these seven military housing projects, which encompass 18 military bases totaling 15,857 end-state housing units. In addition, we were in negotiations with the U.S. Department of the Army for the Fort Gordon project located near Augusta, GA, and in the solicitation process with the U.S. Air Force regarding a project expected to cover four bases.

In July 2005, the Company officially partnered with the Department of the Army to design, build, manage and maintain the military family housing units at Fort Bliss, located in El Paso, Texas, and the White Sands Missile Range near Las Cruces, New Mexico. The finalized plans include a six-year initial development period with estimated project costs of $445.9 million and 3,277 end-state housing units.  Project financing was obtained and the initial development period for the project began in July 2005.

The Company and the U.S. Department of the Army also are continuing to review the possibility of refinancing the Fort Carson project to obtain additional project cost funding, possibly totaling up to $50.0 million for the construction of another 200 units.

With regard to trends and uncertainties in the military housing market, the effects of the base realignment and closure (BRAC) initiatives under the Defense Base Closure and Realignment Act of 1990, as amended, are being closely monitored by management.  Under these regulations, the federal government has previously undertaken four rounds of BRAC beginning in 1988, and again in 1991, 1993 and 1995. The fifth round of BRAC was initiated in 2004, and the final list of additional bases approved for realignment or closure became effective during the fourth quarter of 2005.

By way of background, the Department of Defense (DoD) released its initial recommendations for BRAC in May 2005, and the BRAC Commission then voted to amend the DoD’s initial list on July 19, 2005. Under the BRAC Commission’s revisions, several bases were removed from the DoD’s list of bases targeted for closure, including the Submarine Base in New London, CT and the Portsmouth Naval Shipyard in Kittery, Maine. In addition, the BRAC Commission also proposed a less significant realignment at the Fort Eustis base under our Fort Eustis/Fort Story project in Newport News, Virginia than was proposed by the DoD; and the BRAC Commission proposed to close the Naval Air station in Brunswick, Maine, which had been recommended by the DoD to be realigned.   Finally, the BRAC Commission voted to uphold the DoD’s recommendation to close the Walter Reed Army Medical Center in Washington, DC.  In September 2005, the BRAC Commission sent its report to the President regarding its findings and recommended changes to the DoD’s initial report, and President Bush accepted the BRAC Commission’s recommendations in their entirety. On November 9, 2005, the BRAC round was completed when Congress also approved the BRAC Commission’s recommendations in their entirety.

Under the final BRAC list versus the original DoD recommendations, the possible number of affected military housing units covered by our existing projects was reduced from 2,500 to 700 units, with these remaining 700 units located at the Naval Air Station in Brunswick, Maine.  We believe that the closure of the Walter Reed Army Medical Center will not result in the loss of housing units, as these housing units are likely to be utilized by personnel who will be relocated from serving at Walter Reed to serving at nearby military medical facilities.

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The military housing privatization initiative had not been undertaken at the time of previous BRAC rounds, and therefore there is no historical information regarding the impact of a base closure on a military housing privatization project. To date, there has been no indication from the DoD or the BRAC Commission that the federal government has factored into its analysis of the possible effects that a base closure or realignment resulting from BRAC could have with respect to the outstanding debt financing for a project. In addition, prior BRAC rounds have shown that even once a base is approved for closure or realignment, the actual closing or realignment of the base could take several years to be completed.  Accordingly, management currently expects that the closure of the Naval Air Station in Brunswick, Maine will not occur for at least three years.  We are unable to determine with any certainty, however, the specific impact, and the timing of any such impact, that base closures and realignments at our projects will have on our military housing operating results, other than the possible cessation or reduction of fees related to the affected bases.

Critical Accounting Policies

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements and The GMH Predecessor Entities’ combined financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While the estimates and judgments associated with the application of these accounting principles may be affected by different assumptions or conditions, we believe the estimates and judgments associated with the reported amounts are appropriate under the circumstances in which they were made. In addition, other companies in similar businesses may utilize different estimation policies and methodologies, which may impact the comparability of our results of operations and financial condition to those companies.

The following policies require significant judgments and estimates on our part in preparing the consolidated financial statements of the Company and the combined financial statements of The GMH Predecessor Entities. Changes in these judgments and estimates could have a material effect on these financial statements.

Revenue Recognition

Student Housing. Student housing revenue includes rental revenue and other property income, standard and incentive management fees and reimbursements of certain operating expenses. These sources of revenue are described in more detail below:

•    we recognize student housing rental revenue when due over the lease terms, which are generally 12 months or less;

•    standard management fees are based on a percentage of monthly cash receipts or gross monthly rental and other revenues generated by the properties managed for others. We recognize these fees when cash is received by the property or when revenue is earned by the managed property, depending upon whether the management agreement relating to a student housing property calls for cash versus accrual revenue recognition;

•    we earn incentive management fees as a result of the achievement of certain operating performance criteria over a specified period by certain managed properties, including targeted annual debt service coverage ratios, and recognize these fees at the amount that would be due under the contract if the contract was terminated on the balance sheet date;

•    expense reimbursements are comprised primarily of salary and related costs of our employees working at certain properties we manage for others, the cost of which is reimbursed by the owners of the related properties. We accrue operating expense reimbursements as the related expenses are incurred.

Military Housing.  We earn military housing revenues by providing services to our military housing projects which include the following:

•    standard management fees, based on a percentage of revenue generated by the military housing projects from the basic allowance for housing provided by the government to service members, referred to as BAH, are recognized when the revenue is earned by the military housing projects. Incentive management fees are based upon the satisfaction of certain criteria including, among other things, satisfying designated benchmarks relating to emergency work order response, occupancy rates, home turnover and resident satisfaction surveys. Incentive management fees are recognized when the various criteria stipulated in the management contract have been satisfied;

•    standard development and construction/renovation fees, based on a percentage of development and construction/renovation costs incurred by the military housing projects including hard and soft costs and financing costs, are recognized on a monthly basis as the costs are incurred by the military housing projects.  Hard costs consist of costs relating to goods such as building components, furniture and equipment and other tangible assets; and soft costs consist of costs incurred relating to intangible services such as consulting, architectural and design services. Incentive development and construction/renovation fees are based upon the satisfaction of certain criteria including, among other things, completing a number of housing units according to schedule, achieving specific safety records and implementing small business or minority subcontracting plans. Incentive development and construction/renovation

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fees are recognized when the various criteria stipulated in the contract have been satisfied;

•    revenues on fixed-price renovation contracts are recorded on the percentage-of-completion method. When the percentage-of-completion method is used, contract revenue is recognized in the ratio that costs incurred to date bear to estimated costs at completion. Adjustments to cost estimates are made in the period in which the facts requiring such revisions become known. When the revised estimates indicate a loss, such loss is currently provided for in its entirety;.

•    business development fees are earned from companies with which we have relationships in recognition of business development efforts and expenses incurred by us in connection with pursuing military housing projects. The fees consist of (i) a base fee, which is a fee paid to the Company in consideration of the Company’s ongoing pursuit of additional projects, and paid regardless of whether a project is awarded, and (ii) an incentive fee, which is paid over the course of an awarded project based on a percentage of certain development costs incurred by the project.  The base fees are recognized on a straight-line basis over the term of the related business development agreement.  The incentive fees are recognized as the related costs are incurred by the respective military housing projects;

•    preferred returns are earned on our investments in military housing projects.  The preferred returns are based on a fixed percentage of our investment in military housing projects and are recognized as accrued at the rates specified in the agreements, subject to projected availability of funds in the underlying project.  Accrued preferred returns are periodically evaluated for collectibility; and

Deferred costs are subject to estimation and judgment. Management makes determinations as to which costs are eligible for reimbursement and at what level they will be reimbursed. Management considers various factors in making these estimates and judgments, including the terms of the specific contract and historical experience as to which costs are recoverable. Costs that are not probable of recovery are expensed.

Real Estate Investments and Corporate Assets

We carry real estate investments and corporate assets at cost, net of accumulated depreciation. Cost for acquired assets includes the purchase price and related closing costs. We allocate the cost of real estate investments to tangible and identified intangible assets based on relative fair values in accordance with Statement of Financial Accounting Standards No. 141 (“SFAS 141”), Business Combinations. We estimate fair value based on information that we obtain from a number of sources, including our due diligence, marketing and leasing activities, independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data.

The value of in-place leases is based on the difference between (i) the property valued with existing in-place leases, and (ii) the property valued as if vacant. As lease terms typically are 12 months or less, rates on in-place leases generally approximate market rental rates. Factors that we consider in the valuation of in-place leases include an estimate of incremental carrying costs during the expected lease-up periods considering current market conditions, and the nature of the tenancy. We amortize the value of in-place leases to expense over the remaining term of the respective leases.

Purchase prices of student housing properties to be acquired are not expected to be allocated to tenant relationships considering the terms of the leases and the expected levels of renewals.

We expense routine repair and maintenance expenditures that do not improve the value of an asset or extend its useful life, including turnover costs such as cleaning and interior painting. We capitalize expenditures that improve the value and extend the useful life of an asset. We compute depreciation using the straight-line method over the estimated useful lives of the assets, which is 40 years for buildings including student housing properties and the commercial office building, and three to five years for residential furniture and appliances.

In accordance with Statement of Financial Accounting Standards No. 144 (“SFAS 144”), Accounting for the Impairment or Disposal of Long-Lived Assets, we review long-lived assets, such as real estate investments and purchased intangibles subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. These circumstances may include, but are not limited to, operational performance, market conditions and competition from other off-campus properties and on-campus housing, legal and environmental concerns, and results of appraisals or other information obtained as part of a financing or disposition strategy. We review recoverability of assets to be held and used through a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, we recognize an impairment charge in the amount by which the carrying value of the asset exceeds the fair value of the asset determined using customary valuation techniques, such as the present value of expected future cash flows. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and no longer would be depreciated.

Allowance for Doubtful Accounts

We estimate the collectibility of receivables generated by rental and other income as a result of the operation of our student housing properties. If we believe that the collectibility of certain amounts is questionable, we record a specific reserve for these amounts to reduce the amount outstanding to an amount we believe will be collectible and a reserve for all other accounts based on a range of percentages applied to aging categories. We determine the amount of this reserve based on historical collection and write-off experience.

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We also evaluate the collectibility of fee income and expense reimbursements generated by the management of student housing properties owned by others, and through the provision of development, construction, renovation and management services to our military housing projects, based upon the individual facts and circumstances of each situation and record a reserve for specific amounts, if necessary. Accounts receivable are stated net of the allowance for doubtful accounts.

Notes Payable

We record notes payable that we assume in connection with the acquisition of student housing properties at their estimated fair value, with the corresponding difference between the estimated fair value and assumed carrying value of the notes payable recorded as an adjustment to the purchase price of the related property. We determine fair value of assumed notes payable based on various assumptions related to market conditions, including the type, age and location of the acquired property and quoted interest rates for debt with similar terms.

Minority Interest

Minority interest as initially recorded at the date of our initial public offering represented the net equity of the Operating Partnership, including the proceeds received from the sale of the warrant to Vornado, multiplied by the ownership percentage of holders of limited partnership units in the Operating Partnership other than the Company. The Operating Partnership is obligated to redeem, at the request of a holder, each unit of limited partnership interest for common shares on a one-for-one basis, subject to adjustments for share splits, dividends, recapitalizations or similar events. If the minority interest unit holders’ share of a current year loss would cause the minority interest balance to be less than zero, the minority interest balance will be reported as zero unless there is an obligation of the minority interest holders to fund those losses. Any losses in excess of the minority interest will be charged against equity. If future earnings materialize, equity will be credited for all earnings up to the amount of those losses previously absorbed. Distributions to limited partnership unit holders other than the Company are recorded as a reduction to minority interest.

Investments in Military Housing Projects

We evaluate each of our investments in military housing projects to determine if the underlying entity is a variable interest entity (“VIE”) as defined under FASB Financial Interpretation No. 46 (as revised) (“FIN 46”). If an entity is deemed to be a VIE pursuant to FIN 46, the entity that absorbs a majority of the expected losses of the VIE is deemed to be the primary beneficiary and must consolidate the VIE. If the entity is not a VIE, it is evaluated for consolidation based on controlling voting interests. If we have the majority voting interest with the ability to control operations and where no approval, veto or other important rights have been granted to other holders, the entity would be consolidated. We are not the primary beneficiary of any VIEs, nor do we have controlling voting interests in any of our military housing projects. We record investments in military housing projects initially at our cost and subsequently adjust them to reflect our preferred return and other distributions.

Income Taxes

We elected to be taxed as a REIT in connection with the filing of our tax return for the taxable year ended on December 31, 2004. We have elected to treat certain subsidiaries of our Operating Partnership as taxable REIT subsidiaries, and may make such elections as to other subsidiaries in the future. In general, a taxable REIT subsidiary may perform real estate and non-real estate-related business, except for the operation or management of health care facilities or lodging facilities or the provision to any person, under a franchise, license or otherwise, of rights to any brand name under which any lodging facility or health care facility is operated.

If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate tax rates.

We have elected to treat GMH Military Housing, LLC and College Park Management TRS, Inc. as taxable REIT subsidiaries. College Park Management TRS, Inc. is a wholly-owned subsidiary of College Park Management, LLC (which is a successor through merger to College Park Management, Inc., one of The GMH Predecessor Entities). See Note 1 to the financial statements included in this report.

Results of Operations

Our results of operations represent the operations of our student housing and military housing operating segments. The following significant factors affected our results of operations for the three and nine months ended September 30, 2005 as compared to the three and nine months ended September 30, 2004:

•    In November 2004, we completed our initial public offering pursuant to which we sold an aggregate of 30,350,989 common shares and raised an aggregate of $331.7 million in net proceeds.

•    In 2004, subsequent to the formation of the Trust in May 2004, we acquired 30 student housing properties containing an aggregate of 5,529 units and 19,085 beds for an aggregate acquisition cost of $634.4 million.  During the three months ended March 31, 2005, we acquired eight student housing properties with an aggregate of 1,607 units and 4,795 beds for an aggregate acquisition cost of approximately $172.8 million.  During the three months ended June 30, 2005, we acquired eight student housing properties with an aggregate of 1,464 units and 4,740 beds for an aggregate acquisition cost of approximately $147.4 million.  During the three months ended September 30, 2005, we acquired six student housing properties with an aggregate of 1,213 units and 3,237 beds and two undeveloped parcels of land for an aggregate acquisition cost of approximately $123.4 million. These student housing properties

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contributed $35.3 million and $90.9 million of rent and other property income in the three and nine months ended September 30, 2005, respectively.

•    The Fort Stewart and Hunter Army Airfield and Fort Carson military housing projects both commenced operations in the fourth quarter of 2003; the Fort Hamilton military housing project commenced operations in the second quarter of 2004; the Walter Reed Army Medical Center and Fort Detrick military housing project commenced operations in the third quarter of 2004; the Fort Eustis/Fort Story and the Navy Northeast military housing projects both commenced operations in the fourth quarter of 2004; and the Fort Bliss/White Sands Missile Range military housing project commenced operations in the third quarter of 2005.  These military housing projects contributed $29.1 million and $61.3 million of revenue in the three and nine months ended September 30, 2005, respectively.

•    In November 2004, we entered into a $150 million three-year unsecured revolving credit facility with a consortium of banks. During the first, second and third quarters of 2005, the credit facility has been used to fund student housing acquisitions.

The results of operations presented below reflect the results of operations of The GMH Predecessor Entities for the three and nine months ended September 30, 2004, and our results of operations for the three and nine months ended September 30, 2005.

Comparison of the Three Months Ended September 30, 2005 to the Three Months Ended September 30, 2004

	Three Months Ended September 30,
	2005 (Company)									2004 (Predecessor)
	Student Housing		Military Housing		Corporate			Total		Student Housing			Military Housing		Corporate			Total
	(in thousands)
Revenue:
Rent and other property income	$	35,369	$	—	$	60		$	35,429	$	6,683		$	—	$	70		$	6,753
Expense reimbursements:
Related party	—		20,722		22			20,744		367			7,697		638			8,702
Third party	1,299		—		—			1,299		1,906			—		—			1,906
Management fees:
Related party	—		1,838		—			1,838		348			619		—			967
Third party	1,364		—		—			1,364		752			—		—			752
Other fee income-related party	625		6,556		—			7,181		—			2,115		—			2,115
Other income	34		45		2			81		14			24		103			141
Total revenue	38,691		29,161		84			67,936		10,070			10,455		811			21,336
Operating Expenses:
Property operating expenses	16,058		1,248		—			17,306		4,773			1,035		—			5,808
Reimbursed expenses	1,299		20,722		22			22,043		2,273			7,697		638			10,608
Real estate taxes	3,428		—		—			3,428		490			—		—			490
Administrative expenses	—		—		2,983			2,983		—			—		2,172			2,172
Profits interest expense	—		—		—			—		—			—		33,180			33,180
Depreciation and amortization	7,617		—		102			7,719		1,526			10		234			1,770
Interest	8,707		—		274			8,981		1,627			—		95			1,722
Total operating expenses	37,109		21,970		3,381			62,460		10,689			8,742		36,319			55,750
Income (loss) before minority interest and income taxes	1,582		7,191		(3,297		)	5,476		(619		)	1,713		(35,508		)	(34,414		)
Minority interest	864		3,502		(1,608		)	2,758		—			—		—			—
Income (loss) before income taxes	718		3,689		(1,689		)	2,718		(619		)	1,713		(35,508		)	(34,414		)
Income taxes	55		921		—			976		—			—		—			—
Net income (loss)	$	663	$	2,768	$	(1,689	)	$	1,742	$	(619	)	$	1,713	$	(35,508	)	$	(34,414	)

Student Housing

Revenue. Of the 52 student housing properties owned as of September 30, 2005, we acquired 30 of the properties during the six months ended December 31, 2004, eight properties during the three months ended March 31, 2005, eight properties during the three months ended June 30, 2005 and the remaining six properties during the three months ended September 30, 2005. Rent and other property income from these 52 properties totaled $35.3 million for the three months ended September 30, 2005.

Expense reimbursements from related parties totaled $0.4 million in 2004. There was not a corresponding amount in 2005 because we acquired two student housing properties to which the expense reimbursements related in March 2005.  In addition, we ceased managing one additional student housing property to which the expense reimbursements related in March 2005 because it was sold to a third party.

Expense reimbursements from third parties decreased to $1.3 million in 2005 from $1.9 million in 2004 primarily due to our ceasing

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to provide services to five third-party owned student housing properties following the sale of the properties. We expect expense reimbursements, which relate to properties we manage but do not own, to become less significant as a percentage of our overall revenue as rental revenue earned from the properties that we do own continues to increase.

Management fee income from related parties was $0.3 million in 2004. There was not a corresponding amount in 2005 because we acquired two student housing properties from related parties in March 2005 that we managed prior to purchase.  In addition, in March 2005 we ceased providing management services relating to an additional student housing property owned by a related party due to the sale of the property.

Management fee income from third parties increased to $1.4 million in 2005 from $0.8 million in 2004, primarily as a result of our recovery and ability to recognize a management fee of $0.8 million in 2005 that we were previously unable to recognize due to the fee being deemed uncollectible. This fee was offset by a $0.2 million decrease in management fees as a result of our ceasing to provide management services to five student housing properties owned by third parties due to the sale of the properties by the third parties. For the remainder of 2005, we expect management fees to contribute less significantly to total revenues given the expected growth in rental revenue from the operations of properties we own.

Other fee income from related parties totaled $0.6 million in 2005 as a result of fees earned from providing development and management services to a joint venture formed during the third quarter of 2005 with an institutional investor to develop and construct two student housing properties.  We expect these fees to decrease to approximately $0.3 million in the fourth quarter because of expected decrease in the amount of development and management services to be provided in the fourth quarter.

Expenses.  Property operating expenses increased to $16.0 million in 2005 from $4.8 million in 2004, primarily due to expenses attributable to the 52 properties acquired from July 2004 through September 2005.  We expect property operating expenses to increase significantly in the future as we acquire additional properties.

Reimbursed expenses decreased to $1.3 million in 2005 from $2.3 million in 2004, primarily due to our acquisition of the two student housing properties from related parties in March 2005 that we managed prior to our purchase.  In addition, we ceased providing management services relating to five additional student housing properties owned by third parties due to the sale of the properties by the third parties.

Real estate taxes increased to $3.4 million in 2005 from $0.5 million in 2004 due to the acquisition of 52 properties from July 2004 through September 2005. We expect real estate taxes to increase significantly in the future as we acquire additional properties.

Depreciation and amortization increased to $7.6 million in 2005 from $1.5 million in 2004 as a result of acquiring 52 properties for an aggregate acquisition cost of $1,078.0 million from July 2004 through September 2005. The $7.6 million in 2005 is comprised of $5.9 million of depreciation and $1.7 million of lease intangible amortization.  We expect depreciation and amortization to increase significantly in the future as we acquire additional properties.

Interest expense increased to $8.7 million in 2005 from $1.6 million in 2004 as a result of incurring debt, including placement of new mortgage debt and the assumption of existing mortgage debt and borrowings under our line of credit, in connection with the acquisition of 52 properties from July 2004 through September 2005.   During the three months ended September 30, 2005, we placed $72.6 million of new mortgage debt and assumed $6.6 million of existing mortgage debt. We expect interest expense to increase in the future as we incur additional debt to fund acquisitions and as interest rates rise.

Income taxes of less than $0.1 million in 2005 related to taxable income in the Company’s taxable REIT subsidiary.  There were no taxable REIT subsidiaries during the comparable period in 2004.

Military Housing

Revenue. Expense reimbursements totaled $20.7 million in 2005 compared to $7.7 million in 2004. Of the 2005 amount, $1.9 million related to the Fort Stewart and Hunter Army Airfield project and $2.3 million related to the Fort Carson project, both of which commenced operations in the fourth quarter of 2003; $0.1 million related to the Fort Hamilton project, which commenced operations in the second quarter of 2004; $0.8 million related to the Walter Reed Army Medical Center and Fort Detrick project, which commenced operations in the third quarter of 2004; $1.8 million related to the Fort Eustis/Fort Story project and $10.4 million related to the Navy Northeast project, both of which commenced operations in the fourth quarter of 2004; and $3.4 million related to the Fort Bliss/White Sands Missile Range project, which commenced operations in the third quarter of 2005.  Of the 2004 amount, $5.7 million related to the Fort Carson project, $0.9 million related to the Fort Stewart and Hunter Army Airfield project, $0.1 million related to the Fort Hamilton project, $0.6 million related to the Walter Reed Army Medical Center and Fort Detrick project and $0.4 million related to costs incurred in the development of CDMP for the Fort Eustis/Fort Story project.

Management fees from related parties totaled $1.8 million in 2005 compared to $0.6 million in 2004.  Of the 2005 amount, $0.2 million related to the Fort Stewart and Hunter Army Airfield project and $0.3 million related to the Fort Carson project, both of which commenced operations in the fourth quarter of 2003; $0.1 million related to the Fort Hamilton project, which commenced operations in the second quarter of 2004; $0.1 million related to the Walter Reed Army Medical Center and Fort Detrick project which commenced operations in the third quarter of 2004; $0.1 million related to the Fort Eustis/Fort Story project and $0.8 million related to the Navy Northeast project, both of which commenced operations in the fourth quarter of 2004; and $0.2 million related to the Fort Bliss/White Sands Missile Range project, which commenced operations in the third quarter of 2005. Of the 2004 amount $0.2 million

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related to the Fort Stewart and Hunter Army Airfield project, $0.3 million related to the Fort Carson project and $0.1 million related to the Fort Hamilton, Walter Reed Army Medical Center and Fort Detrick projects.

Other fee income totaled $6.6 million in 2005 compared to $2.1 million in 2004. Of the 2005 amount, $4.7 million related to development and construction/renovation fees, $0.9 million related to business development fees, and $1.0 million related to preferred returns on the military housing investments. Of the $4.7 million development and construction/renovation fees, $1.0 million related to the Fort Stewart and Hunter Army Airfield project, which commenced operations in the fourth quarter of 2003; $0.2 million related to the Fort Hamilton project, which commenced operations in the second quarter of 2004; $0.4 million related to the Walter Reed Army Medical Center and Fort Detrick project which commenced operations in the third quarter of 2004; $0.3 million related to the Fort Eustis/Fort Story project and $1.7 million related to the Navy Northeast project, both of which commenced operations in the fourth quarter of 2004; and $1.1 million related to the Fort Bliss/White Sands Missile Range project, which commenced operations in the third quarter of 2005. Of the $1.0 million of preferred returns, $0.2 million related to the Navy Northeast investment and $0.8 million related to the Fort Carson investment.  The 2004 amount consisted of $1.8 million of development and construction/renovation fees and $0.3 million of business development fees. Of the development and construction/renovation fees, $0.7 million related to the Fort Stewart and Hunter Army Airfield project, $0.3 million related to the Fort Carson project, $0.1 million related to the Fort Hamilton project and $0.7 million related to the Walter Reed Army Medical Center and Fort Detrick.

Expenses.  Property operating expenses include costs related to operating the military housing segment of our business. These costs increased to $1.2 million in 2005 from $1.0 million in 2004, primarily due to costs associated with operating the Fort Eustis/Fort Story project and the Navy Northeast project, both of which commenced operations in the fourth quarter of 2004 and the Fort Bliss/White Sands Missile Range project, which commenced operations in the third quarter of 2005.

Reimbursed expenses increased to $20.7 million in 2005 from $7.7 million in 2004 primarily due to increases in payroll and renovation expenses related to the seven military housing projects in operation as of September 30, 2005 and closing costs and transition expenses for the Fort Bliss/White Sands Missile Range project.

Corporate

Rental revenue and expense reimbursements, which were recognized with respect to the portion of our corporate headquarters leased to entities affiliated with Gary M. Holloway, Sr., and payroll and related expenses reimbursed by entities affiliated with Mr. Holloway for the provision of common services, decreased to $0.1 million in 2005 from $0.7 million in 2004.  The decrease is a result of increased expense reimbursements in 2004 related to our initial public offering.

Administrative expenses, primarily relating to management of our corporate office, accounting, legal, human resources and information technology, increased to $3.0 million in 2005 from $2.2 million in 2004 primarily due to increased staffing and additional costs incurred in connection with becoming a public company and growth in our operating segments.

Depreciation and amortization, relating primarily to our corporate headquarters and related mortgage, decreased slightly to $0.1 million in 2005 from $0.2 million in 2004 primarily due to the sale and transfer of an interest in a corporate aircraft in February 2005.

Interest expense increased to $0.3 million in 2005 from $0.1 million in 2004 primarily due to an increase in the interest rate on our corporate headquarters loan.

Compensation expense was recorded in the three-month period ended September 30, 2004 related to profits interests awarded to certain employees.  These employees were eligible to participate in the net proceeds or value received in excess of the equity investments in such assets upon their sale or disposition.   These assets included certain student housing properties and the military business included in The GMH Predecessor Entities.  These employees rendered all services and satisfied all conditions necessary to earn the right to benefit from these profits interests prior to September 30, 2004. In accordance with Financial Accounting Standards Statement No.5, Accounting for Contingencies, compensation expense relating to the award of these profits interests is required to be recognized by The GMH Predecessor Entities when the sale or disposition of the assets resulting in proceeds received by Gary M. Holloway in an amount in excess of his equity investment in such assets becomes probable.  This amount became probable during the third quarter of 2004 when, in connection with the contribution of the ownership interests in GMH Military Housing LLC, College Park Management, Inc. and other assets by Mr. Holloway to our operating partnership in anticipation of the initial public offering of the Company, the remaining profits interests awards were amended to fix the value of such awards at $33.2 million to be paid to these employees unconditionally.  Accordingly, this amount was recognized in the third quarter of 2004 and Mr. Holloway’s obligations regarding the profits interests were satisfied upon the transfer of $33.2 million of units of limited partnership in our operating partnership to these employees on November 2, 2004, the closing date of our initial public offering.

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Comparison of the Nine Months Ended September 30, 2005 to the Nine Months Ended September 30, 2004

	Nine Months Ended September 30,
	2005 (Company)									2004 (Predecessor)
	Student Housing		Military Housing		Corporate			Total		Student Housing		Military Housing		Corporate			Total
	(in thousands)
Revenue:
Rent and other property income	$	90,851	$	—	$	182		$	91,033	$	6,683	$	—	$	340		$	7,023
Expense reimbursements:
Related party	186		42,057		232			42,475		1,089		14,845		735			16,669
Third party	3,876		—		—			3,876		5,475		—		—			5,475
Management fees:
Related party	197		5,153		—			5,350		1,163		1,520		—			2,683
Third party	3,015		—		—			3,015		3,430		—		—			3,430
Other fee income-related party	664		14,067		31			14,762		—		4,174		—			4,174
Other income	109		69		70			248		58		70		365			493
Total revenue	98,898		61,346		515			160,759		17,898		20,609		1,440			39,947
Operating Expenses:
Property operating expenses	35,813		4,087		—			39,900		6,683		3,168		—			9,851
Reimbursed expenses	4,062		42,057		232			46,351		6,564		14,845		735			22,144
Real estate taxes	8,003		—		—			8,003		490		—		—			490
Administrative expenses	—		—		8,657			8,657		—		—		4,488			4,488
Profits interest expense	—		—		—			—		—		—		33,180			33,180
Depreciation and amortization	22,154		—		409			22,563		1,537		18		633			2,188
Interest	20,489		—		739			21,228		1,627		—		253			1,880
Total operating expenses	90,521		46,144		10,037			146,702		16,901		18,031		39,289			74,221
Income (loss) before minority interest and income taxes	8,377		15,202		(9,522		)	14,057		997		2,578		(37,849		)	(34,274		)
Minority interest	4,184		7,593		(4,756		)	7,021		—		—		—			—
Income (loss) before income taxes	4,193		7,609		(4,766		)	7,036		997		2,578		(37,849		)	(34,274		)
Income taxes	100		1,814		—			1,914		—		—		—			—
Net income (loss)	$	4,093	$	5,795	$	(4,766	)	$	5,122	$	997	$	2,578	$	(37,849	)	$	(34,274	)

Student Housing

Revenue. Of the 52 properties owned as of September 30, 2005, we acquired 30 of the student housing properties during 2004 and the remaining 22 properties during the nine months ended September 30, 2005. Rent from these 52 properties totaled $90.9 million for the nine months ended September 30, 2005.

Expense reimbursements from related parties decreased to $0.2 million in 2005 from $1.1 million in 2004, primarily due to our acquisition of two student housing properties from related parties in March 2005, which we managed prior to purchase.  In addition, we ceased managing one student housing property owned by a related party in March 2005 because it was sold to a third party.

Expense reimbursements from third parties decreased to $3.9 million in 2005 from $5.5 million in 2004, primarily due to our ceasing to provide services to five student housing properties in 2005 owned by third parties upon the sale of the properties.  We expect expense reimbursements, which relate to properties we manage but do not own, to become less significant as a percentage of overall revenue as rental revenue earned from the properties that we do own continues to increase.

Management fee income from related parties decreased to $0.2 million in 2005 from $1.2 million in 2004. The decrease in management fee income was primarily due to our acquisition of two student housing properties from related parties in March 2005 that we managed prior to purchase.  In addition, in March 2005 we ceased providing management services relating to an additional student housing property owned by a related party upon the sale of the property.

Management fee income from third parties decreased to $3.0 million in 2005 from $3.4 million in 2004, primarily due to our ceasing to manage five student housing properties owned by third parties upon the sale of the properties which was partially offset by an increase of $0.8 million related to our recognition of a management fee in 2005 that had not been previously recognized because it was deemed to be uncollectible.  For the remainder of 2005, we expect management fees to contribute less significantly as a percentage of overall revenue given the expected growth in rental revenue from the operations of properties we own.

Other fee income from related parties totaled $0.6 million in 2005 as a result of fees earned from providing development and management services to our joint venture with an institutional investor to finance the development and construction of two student

30

housing properties.  We expect these fees to decrease to approximately $0.3 million in the fourth quarter because of expected decrease in the amount of development and management services to be provided in the fourth quarter.

Expenses.  Property operating expenses increased to $35.8 million in 2005 from $6.7 million in 2004, primarily due to expenses attributable to the 52 properties acquired from July 2004 through September 2005.  We expect expenses to increase significantly in the future as we acquire additional properties.

Reimbursed expenses decreased to $4.1 million in 2005 from $6.6 million in 2004, primarily due to our acquisition of the two student housing properties from related parties in March 2005 that we managed prior to our purchase.  In addition, during the nine months ended September 30, 2005, we ceased providing management services relating to five student housing properties owned by third parties and a student housing property owned by a related party upon the sale of the properties.

Real estate taxes increased to $8.0 million in 2005 from $0.5 million in 2004 due to the acquisition of 52 properties from July 2004 through September 2005. We expect real estate taxes to increase significantly in the future as we acquire additional properties.

Depreciation and amortization increased to $22.2 million in 2005 from $1.5 million in 2004 as a result of acquiring 52 properties for an aggregate acquisition cost of $1,078.0 million from July 2004 through September 2005. The $22.2 million in 2005 is comprised of $15.2 million of depreciation and $7.0 million of lease intangible amortization. We expect depreciation and amortization to increase significantly in the future as we acquire additional properties.

Interest expense increased to $20.5 million in 2005 from $1.6 million in 2004 as a result of incurring debt, including placement of new mortgage debt and the assumption of existing mortgage debt, and borrowings under our line of credit, in connection with the acquisition of 52 properties from July 2004 through September 2005. During the nine months ended September 30, 2005, we placed $202.0 million of new mortgage debt, assumed $83.3 million of existing mortgage debt, and borrowed $244.0 million and repaid $107.0 million under our line of credit.  We expect interest expense to increase in the future as we incur additional debt to fund acquisitions and as interest rates rise.

Income taxes amounted to $0.1 million in 2005 as a result of taxable income in our taxable REIT subsidiary. There were no taxable REIT subsidiaries during the comparable period in 2004.

Military Housing

Revenue. Expense reimbursements totaled $42.0 million in 2005 compared to $14.8 million in 2004. Of the 2005 amount, $7.9 million related to the Fort Stewart and Hunter Army Airfield project and $7.3 million related to the Fort Carson project, both of which commenced operations in the fourth quarter of 2003; $0.4 million related to the Fort Hamilton project, which commenced operations in the second quarter of 2004; $1.3 million related to the Walter Reed Army Medical Center and Fort Detrick project, which commenced operations in the third quarter of 2004; $3.2 million related to the Fort Eustis/Fort Story project; and $18.5 million related to the Navy Northeast project, both of which commenced operations in the fourth quarter of 2004; and $3.4 million related to the Fort Bliss/White Sands Missile Range project, which commenced operations in the third quarter of 2005. Of the 2004 amount, $2.0 million related to the Fort Stewart and Hunter Army Airfield project, $10.5 million related to the Fort Carson project, $0.7 million related to the Fort Hamilton project, $0.6 million related to the Walter Reed Army Medical Center and Fort Detrick project and $1.0 million related to reimbursement of costs incurred in the development of the CDMP for the Fort Hamilton Project, Walter Reed Army Medical Center/Fort Detrick project and the Fort Eustis/Fort Story project.

Management fees from related parties totaled $5.2 million in 2005 compared to $1.5 million in 2004.  Of the 2005 amount, $0.7 million related to the Fort Stewart and Hunter Army Airfield project and $1.1 million related to the Fort Carson project, both of which commenced operations in the fourth quarter of 2003; $0.2 million related to the Fort Hamilton project, which commenced operations in the second quarter of 2004; $0.2 million related to the Walter Reed Army Medical Center and Fort Detrick project which commenced operations in the third quarter of 2004; $0.4 million related to the Fort Eustis/Fort Story project and $2.4 million related to the Navy Northeast project, both of which commenced operations in the fourth quarter of 2004; and $0.2 million related to the Fort Bliss/White Sands Missile Range project, which commenced operations in the third quarter of 2005.  Of the 2004 amount, $0.7 million related to the Fort Stewart and Hunter Army Airfield project, $0.7 million related to the Fort Carson project and $0.1 million related to the Fort Hamilton project and the Walter Reed Army Medical Center and Fort Detrick project.

Other fee income totaled $14.1 million in 2005 compared to $4.2 million in 2004. Of the 2005 amount, $9.7 million related to development and construction/renovation fees earned from related parties, $2.5 million related to business development fees, and $1.9 million related to preferred returns on the military housing investments. Of the $9.7 million of development and construction/renovation fees, $3.1 million related to the Fort Stewart and Hunter Army Airfield project, which commenced operations in the fourth quarter of 2003; $0.7 million related to the Fort Hamilton project, which commenced operations in June 2004; $0.9 million related to the Walter Reed Army Medical Center and Fort Detrick project which commenced operations in July 2004; $0.5 million related to the Fort Eustis/Fort Story project and $3.4 million related to the Navy Northeast project, both of which commenced operations in the fourth quarter of 2004; and $1.1 million related to the Fort Bliss/White Sands Missile Range project, which commenced operations in the third quarter of 2005.  Of the $1.9 million of preferred returns in 2005, $0.6 million related to the Navy Northeast investment and $1.3 million related to the Fort Carson investment. The 2004 amount consisted of $3.2 million of development and construction/renovation fees and $1.0 million of business development fees. Of the development and construction/renovation fees, $1.5 million related to the Fort Stewart and Hunter Army Airfield project, $0.5 million related to the Fort Carson project, $0.5 million related to the Fort Hamilton project and $0.7 million related to the Walter Reed Army Medical Center and

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Fort Detrick project.

Expenses.  Property operating expenses include costs related to operating the military housing segment of our business. These costs increased to $4.1 million in 2005 from $3.2 million in 2004 primarily due to costs associated with operating the Fort Eustis/Fort Story project and the Navy Northeast project, both of which commenced operations in the fourth quarter of 2004; and the Fort Bliss/White Sands Missile Range project, which commenced operations in the third quarter of 2005.

Reimbursed expenses increased to $42.0 million in 2005 from $14.8 million in 2004 primarily due to payroll and renovation expenses related to the seven military housing projects in operation as of September 30, 2005; closing costs and transition expenses for the Fort Hamilton, Walter Reed, Fort Detrick, Fort Eustis/Fort Story, Navy Northeast and Fort Bliss/White Sands projects; and expenses relating to the Fort Carson project’s management contracts.

Corporate

Rental revenue and expense reimbursements, which were recognized with respect to the portions of our corporate headquarters leased to entities affiliated with Gary M. Holloway, Sr., and payroll and related expenses reimbursed by entities affiliated with Mr. Holloway for the provision of common services, decreased to $0.4 million in 2005 from $1.1 million in 2004 primarily as a result of reimbursed expenses in 2004 related to our initial public offering.

Administrative expenses, primarily relating to management of our corporate office, accounting, legal, human resources and information technology, and corporate aircraft, increased to $8.7 million in 2005 from $4.4 million in 2004 primarily due to increased staffing and additional costs incurred in connection with becoming a public company and growth in our operating segments.

Depreciation, relating primarily to our corporate headquarters, decreased to $0.4 million in 2005 from $0.6 million in 2004 primarily due to the sale and transfer of an interest in a corporate aircraft in February 2005.

Interest expense increased to $0.7 million in 2005 from $0.3 million in 2004 primarily due to an increase in the interest rate on our corporate headquarters loan and the corporate aircraft loan.

Compensation expense was recorded in the nine-month period ended September 30, 2004, relating to profits interests awarded by Gary M. Holloway to certain employees of The GMH Predecessor Entities and other entities affiliated with Gary M. Holloway in recognition of past services. These employees were eligible to participate in the net proceeds or value received by Gary M. Holloway upon the sale or disposition of certain student housing properties and the military housing business in excess of Mr. Holloway’s equity investments in such assets.  These employees rendered all services and satisfied all conditions necessary to earn the right to benefit from these profits interests as of the date that such profits interests were awarded.  In accordance with Financial Accounting Standards Statement No.5, Accounting for Contingencies, compensation expense relating to the award of these profits interests is required to be recognized by The GMH Predecessor Entities when the sale or disposition of the assets resulting in proceeds received by Gary M. Holloway in an amount in excess of his equity investment in such assets becomes probable.  This amount became probable during the third quarter of 2004 when, in connection with the contribution of the ownership interests in GMH Military Housing LLC, College Park Management Inc. and other assets by Mr. Holloway to our operating partnership in anticipation of the initial public offering of the Company, the remaining profits interests awards were amended to fix the value of such awards at $33.2 million to be paid to these employees unconditionally.  Accordingly, this amount was recognized in the third quarter of 2004 and Mr. Holloway’s obligations regarding the profits interests were satisfied upon the transfer of $33.2 million of units of limited partnership in our operating partnership to these employees on November 2, 2004, the closing date of our initial public offering.

Liquidity and Capital Resources

Short-term liquidity requirements consist primarily of funds necessary to pay operating expenses and other costs. These expenses and costs may include (i) recurring maintenance and capital expenditures to maintain and lease our properties, (ii) interest expense and scheduled principal payments on outstanding indebtedness, (iii) real estate taxes and insurance, (iv) corporate salaries, employee benefits and other corporate overhead and administrative expenses and (v) future distributions to shareholders and partners of our Operating Partnership.

Our existing working capital and cash provided by operations, together with amounts available to us under our $150.0 million revolving credit facility are expected to be sufficient to meet our short-term liquidity requirements.   Availability under the credit facility as of September 30, 2005 was limited to a borrowing base amount equal to the sum of 60% of the value of an unencumbered asset pool as of the end of the previous quarter (which in no event may contain fewer than five student housing properties) and 50% of the annualized value of our cash flow from our management, development and construction/renovation fees in connection with our military housing projects and from management of our student housing properties in the previous quarter.  As of September 30, 2005, we had $137.0 million in outstanding borrowings under our credit facility, and an additional $13.0 million was available for draw under the facility. Subsequent to the end of the third quarter, and upon completion of our recent follow-on offering in early October 2005, we used $122.0 million in net proceeds from the offering to repay outstanding borrowings under the facility.

The credit facility was obtained by our Operating Partnership in November 2004, and the Trust serves as guarantor for the credit facility. Prior to an amendment to our credit facility that was effective as of August 9, 2005, advances under the credit facility bore interest, at the election of the borrower, at a Eurodollar rate based on LIBOR or a base rate based on the prime rate announced by

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Bank of America, N.A., as the administrative agent of the facility, plus an “Applicable Rate,” ranging from 1.50% to 2.00% for Eurodollar rate loans or 0.625% to 1.375% for base rate loans. The Applicable Rate is determined by the ratio of all liabilities to our total asset value, as defined in the credit facility. The credit facility also requires that we maintain certain corporate level financial covenants.

Effective as of August 9, 2005, we executed a Second Amendment and Waiver to Credit Agreement (“Amendment”), pursuant to which, among other things, the interest rates applicable to borrowings were modified to 1.625% to 2.375% for Eurodollar rate loans and 0.75% to 1.75% for prime rate loans. The credit facility also requires that we maintain certain corporate level financial covenants. Under the Amendment, the calculation of the borrowing base was revised to include cash flow from the military housing construction and development fees and to increase the total cash flow attributable to annualized fees from the management, construction and development of the military housing projects and student housing properties from 35% to 50%.  In addition, the Amendment provided a formal waiver from the lenders with respect to the Company’s noncompliance with the leverage ratio requirement under the facility as of June 30, 2005, and modified the calculation of the leverage ratio and increased the maximum leverage ratio from 60% to 65% through December 31, 2005.  At the end of the first quarter of 2006, the maximum leverage ratio will revert to 60%.

We elected to be treated as a REIT for federal income tax purposes in connection with the filing of our tax return relating to the fiscal year ended December 31, 2004. As a REIT, we are required to distribute at least 90% of our REIT taxable income to our shareholders on an annual basis. Therefore, except as discussed below, as a general matter, a substantial portion of cash generated by our operations will be used to fund distributions to shareholders and holders of limited partnership interests in our Operating Partnership, and will not be available to satisfy our liquidity needs.

Future dividends and distributions will be declared at the discretion of our board of trustees and will depend on our actual cash flow, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and other such factors as our board of trustees deems relevant. We expect that during the remainder of 2005, our cash flow from operations will be insufficient to fund our anticipated dividend distributions. Therefore, we expect to rely on amounts available under our credit facility or through other third party debt financing in order to fund these distributions and other capital needs.  In addition, our board of trustees may choose to pay a lower distribution in the event we are unable to obtain such financing. Any indebtedness we incur will increase our leverage and decrease our ability to borrow money for other needs, such as for the acquisition or development of additional student housing properties or investments relating to additional military housing projects.

As of September 30, 2005, 45 of our student housing properties, our corporate headquarters, and other assets were encumbered by notes payable aggregating $629.2 million and secured by first liens on the individual assets with an aggregate cost basis of approximately $914.5 million before accumulated depreciation.  Our notes payable have a weighted-average interest rate of 4.98% and mature at various dates between November 2005 and June 2024 and require monthly payments of principal and interest or monthly payments of interest only. The table below sets forth, for the five succeeding years and thereafter, the aggregate annual principal payments of our notes payable and credit facility (in thousands):

2005	$	7,043
2006	5,188
2007	224,960
2008	4,708
2009	34,076
2010	65,954
2011 and thereafter	424,242
	$	766,171

With regard to our military housing projects, we made a $10.6 million equity contribution in November 2004 relating to our Navy Northeast project and have contractually committed to contribute an aggregate of $2.0 million in 2006 to our Fort Hamilton project, $5.9 million in 2007 to our Walter Reed Army Medical Center/Fort Detrick project, $3.6 million in 2010 for our Fort Eustis/Fort Story project, $8.0 million in 2011 for our Fort Stewart and Hunter Army Airfield project, and $6.3 million in 2011 for our Fort Bliss/White Sands project. These equity contributions help to fund the development, construction and renovation of housing units at these bases during their respective initial development periods.

Typically, we are reimbursed for certain payroll expenses relating to the student housing properties we manage for third parties, for certain costs we incur after we are awarded a military housing project until we enter into agreements for the project and for transition costs we incur shortly before initiation of our management of a military housing project. However, we are required to fund these costs prior to the time we receive the reimbursements. Typically, Army and Navy projects require approximately $1.0 million to $7.0 million in costs associated with transition and exclusive negotiations, depending on the size of the project. The expenditures typically begin 12 months prior to closing of the award of the military housing project. Accordingly, these timing differences add to our short-term liquidity needs.

If cash flows from any of our military housing projects are insufficient to meet the coverage ratios or benchmarks entitling us to receive fee payments, any unpaid fees will accumulate and be subsequently paid from operations or upon dissolution of the projects to the extent that funds are available and the applicable thresholds are met. If these thresholds are not met, we will not have access to certain of the fees we have earned. The unavailability of these funds would materially impact our ability to meet our short-term and long-term liquidity needs. We will be required to make equity contributions at the beginning of the initial development period for

33

typical Navy transactions and at the end of the initial development period for typical Army transactions. If cash flow is insufficient, any unpaid equity returns will accumulate as specified in the applicable project agreement and subsequently be paid from operations or upon dissolution of the projects to the extent the funds are available. Based on our current expectations regarding the terms of the debt funding for our military projects, we expect that the projects will generate sufficient cash flows to fund the reinvestment account and pay anticipated equity returns.

With regard to our currently owned student housing properties, we do not have any short-term capital commitments; however, we will require funds in connection with our anticipated acquisitions of additional student housing properties.  As of October 31, 2005, we had agreements to acquire three student housing properties and one land parcel for development, and non-binding letters of intent to acquire six student housing properties and one land parcel for development.  We will be continuing our due diligence process with respect to these transactions during the remainder of 2005, as well as continuing to review potential transactions covering additional student housing properties that are located in the Company’s targeted markets and that meet management’s underwriting criteria for creating long-term growth potential.  The timing of any of these acquisitions will be dependent upon various factors, including the ability to complete satisfactory due diligence, obtain appropriate financing on the properties and the availability of capital. We intend to fund the equity portion of the purchase price for these additional student housing properties by using funds from our credit facility or from available cash from operations. In addition, we may leverage our existing student housing properties in order to have cash available to fund the purchase price of additional student housing properties.

Depending upon the size of the Company’s student housing acquisition pipeline and the timing of closings on our properties under contract and non-binding letter of intent, the amount of cash required to fund planned student housing acquisitions during the next twelve months may exceed the maximum capacity available under our existing credit facility. We also may pursue additional financing as opportunities arise.  Future financings may include a range of different sizes or types of financing, including the sale of additional debt or equity securities.  While we believe we will be able to obtain such funds, these funds may not be available on favorable terms or at all. Our ability to obtain additional financing depends on several factors, including future market conditions, our success or lack of success in penetrating our markets, our future creditworthiness, and restrictions contained in agreements with our investors or lenders, including the restrictions contained in the agreement governing our revolving credit facility.  These financings could increase our level of indebtedness or result in dilution to our equity holders.

Long-term liquidity requirements with respect to our student housing and military housing segments consist primarily of amounts necessary to fund scheduled debt maturities, renovations and other non-recurring capital expenditures that need to be made periodically at our properties, and the costs associated with acquisitions of student housing properties and awards or acquisitions of military housing projects that we pursue. Historically, we have satisfied our long-term liquidity requirements through various sources of capital, including existing working capital, cash provided by operations, long-term mortgage indebtedness, and owner contributions.  We now expect our long-term liquidity requirements to be satisfied primarily through cash generated by operations that is not used to fund distributions and the additional external financing sources discussed above.

Inflation

As a majority of the Company’s student housing leases are 12 months or less, rates on in-place leases generally approximate market rental rates.  The Company believes that inflationary increases in expenses will be significantly offset by rent increases upon renewal.  A majority of the Company’s military housing management fees, construction/renovation fees and business development fees are based on a percentage of revenue or expenses generated by the Company or the military housing projects.  The Company believes that inflationary increases in expenses will be significantly offset by increases in revenue.

Item 3.Quantitative and Qualitative Disclosure About Market Risk

Given current market conditions, our strategy favors fixed-rate, secured debt over variable-rate debt to minimize our exposure to increases in interest rates. As of September 30, 2005, 72% of the outstanding principal amount of our notes payable secured by properties we owned as of such date had fixed interest rates with a weighted-average rate of 4.86%. The remaining 28% of outstanding principal amount of our notes payable and line of credit, as of September 30, 2005, had variable interest rates primarily equal to LIBOR plus 1.75% to 2.25%.

Based on our variable rate debt balance as of September 30, 2005, if interest rates were to increase by 1.0%, our interest expense would increase by approximately $2.1 million on an annual basis.

As of September 30, 2005, we had $137.0 million in funds drawn from our credit facility, bearing a weighted-average interest rate of 5.90%.  In October 2005, we repaid $122.0 million of such outstanding balance on our credit facility using proceeds from our public offering of common shares that was completed on October 4, 2005.

Item 4.Controls and Procedures

(a)          Evaluation of Disclosure Controls and Procedures.  Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of

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1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive and financial officers, or persons performing similar functions, as appropriate to allow timely discussions regarding required disclosure. We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

(b)          Change in Internal Control over Financial Reporting.  There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings
None.
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3.	Defaults Upon Senior Securities
None.
Item 4.	Submission of Matters to a Vote of Security Holders
None.
Item 5.	Other Information

Entry Into a Material Definitive Agreement

On November 11, 2005, the Company executed an amendment to its Full Service Lease, dated as of November 2, 2004, between 353 Associates, L.P. (the “Landlord”) and GMH Capital Partners Commercial Realty Services, LP, GMH Capital Partners Asset Services, LP, GMH Philadelphia Barrage, LLC, GMH Construction Company, Inc. and GMH Associates, Inc (collectively, the “Tenants”), which covers the leasing of a portion of the Company’s corporate headquarters to the Tenants (see Note 1 to the financial statements included in this report).  353 Associates, L.P. is a wholly-owned subsidiary of the Operating Partnership, and each of the tenants is an entity wholly-owned by Gary M. Holloway, Sr.  Pursuant to the amendment, GMH Capital Partners Commercial Realty Services, LP will manage the provision of cleaning services for the entire corporate headquarters building in exchange for a monthly credit of $3,023.26 against monthly installments of rent of $16,004.16. In addition, under the terms of the amendment, GMH Capital Partners Commercial Realty Services, LP will manage the build-out of a portion of the first floor of the building for additional office space and will receive a construction oversight fee equal to $15,000 in consideration for the provision of such construction oversight services.  This construction oversight fee is to be paid upon substantial completion of the build-out in the form of a credit against monthly installments of rent. A copy of the amendment to the Full Service Lease is attached as Exhibit 10.4 to this Quarterly Report on Form 10-Q for the period ended September 30, 2005.  The form of amendment was approved by the Audit Committee of the Company’s Board of Trustees, in accordance with the Company’s Code of Business Conduct and Ethics.

Item 6. Exhibits

Exhibit	Description of Document
10.1	Aircraft Lease Agreement, effective as of August 11, 2005, by and among Corporate Flight Services, LLC, College Park Management, LLC, GMH Military Housing Management, LLC and GMH Communities, LP (filed herewith).
10.2	Second Amendment and Waiver to Credit Agreement, dated August 10, 2005, by and among GMH Communities, LP, GMH Communities Trust (“Trust”), each subsidiary of the Trust that becomes a borrower, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and the following lenders: Eurohypo AG, New York Branch, JPMorgan Chase Bank, Deutsche Bank Trust Company Americas, Merrill Lynch Bank USA, Morgan Stanley Bank, and Bank Midwest. (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005, as filed with the SEC on August 12, 2005).
10.3	Full Service Lease, dated November 2, 2004, by and among 353 Associates; GMH Capital Partners Commercial Realty Services, LP; GMH Capital Partners Asset Services, LP; GMH Philadelphia Barrage, LLC; GMH Construction Company, Inc. and GMH Associates, Inc. (filed herewith).
10.4	First Amendment to Lease, effective as of November 1, 2005, by and among 353 Associates, L.P., GMH Capital Partners Commercial Realty Services, LP, GMH Capital Partners Asset Services, LP, GMH Philadelphia Barrage, LLC, GMH Construction Company, Inc. and GMH Associates, Inc. (filed herewith).
31.1	Certifications of Chief Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as

35

	amended.(furnished herewith)
31.2	Certifications of Chief Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. (furnished herewith)
32.1	Certifications of Chief Executive Officer Required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)
32.2	Certifications of Chief Financial Officer Required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended. (This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)

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SIGNATURES

Pursuant to the requirements 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.

	GMH COMMUNITIES TRUST
Date:  November 14, 2005	/s/ Gary M. Holloway, Sr.
	Gary M. Holloway, Sr.
	President and Chief Executive Officer
	/s/ Bradley W. Harris
	Bradley W. Harris
	Senior Vice President
	and Chief Financial Officer

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EX-10.1

Exhibit 10.1

Aircraft Lease Agreement

This Aircraft Lease Agreement (the “Lease”), dated as of August 11, 2005, by and among Corporate Flight Services, LLC, a Delaware limited liability company (“CFS”) and College Park Management, LLC, a Delaware limited liability company, GMH Military Housing Management LLC, a Delaware limited liability company, and GMH Communities, LP, a Delaware limited partnership (collectively, the “Lessees,” and individually, each a “Lessee”), each of which, intending to be legally bound hereby and to bind each of their successors and assigns, agree as follows.

1.Lease.  CFS hereby leases to the Lessees that certain Dassault-Breguet Mystere Falcon  900 Serial #3, Registration Number 991RF (the “Aircraft”).

2.Term.  (a) Except as otherwise provided herein, this Lease shall have an initial term of twelve months (the “Initial Term”), and shall automatically renew for successive one-year terms (each, a “Renewal Term”) unless either CFS or the Lessees provide notice of termination to the other at least sixty (60) days prior to the end of the Initial Term or a Renewal Term.  The Initial Term and any Renewal Term hereunder being hereinafter referred to as the “Term”). This Lease shall automatically terminate on the date that CFS transfers title to the Aircraft to an unaffiliated third party.

(b) “Flight Period” means each hour and fraction thereof that the Aircraft is made available for a Lessee’s use following such Lessee’s request to CFS.  Nothing herein shall require that a Lessee request to use, or use, the Aircraft for any minimum period of time during the term of this Lease.

3.Rent and Related Flight Charges.   (a) Each Lessee shall pay CFS rent for its use of the Aircraft (“Rent”) in an amount equal to $2,850 (“Aircraft Hourly Fixed Rent Rate”) per hour and fraction thereof occurring during each Flight Period, and other expenses related to the operation of the Aircraft during its use by each Lessee.

(b) CFS may, from time to time, propose to change the Aircraft Hourly Fixed Rent Rate by written notice provided to the Lessees (the “Rent Change Notice”) at least thirty (30) days prior to the proposed effective date of the Rent change. The Lessees shall have the right to terminate this Lease by providing written notice to CFS no later than fifteen (15) days after receipt of the Rent Change Notice from CFS.

(c)  Rent for each Flight Period shall be payable by a Lessee to CFS in cash on or before the 30^th business day following the Lessee’s receipt of CFS’ Rent statement for such Flight Period.

4.Aircraft Condition.  CFS represents and warrants to the Lessees that, as of the date of this Lease: (a) the Aircraft has been inspected and maintained in accordance with all pertinent requirements of the Federal Aviation Regulations (“FAR”), (b) all applicable airworthiness directives and manufacturer’s service bulletins have been complied with, and (c) the Aircraft is in airworthy condition.

5.Custody of Aircraft.  During each Flight Period, subject to the terms and conditions hereof, a Lessee shall have custody of the Aircraft and may determine the destinations of the Aircraft and flight departure times.

6.Control of Aircraft.  During all Flight Periods, CFS shall have command and operational control over the Aircraft, all flight crews, and all servicing and loading of the Aircraft.  For the purpose of this Lease, operational control includes, without limitation, exclusive control over: (a) all flight crews; (b) determinations whether any particular flight may be safely commenced or operated; (c) assignment of flight crew to particular flights; (d) initiation and termination of all flights; (e) directions to flight crews to conduct flights; and (f) dispatch or release of flights.

7.Flight Crew Qualifications.  CFS shall use a fully-qualified flight crew, consisting of at least a pilot in command and second in command, for all flights of the Aircraft during a Flight Period.  Each such flight crew member shall (a) be appropriately licensed and rated by the Federal Aviation Administration (“FAA”) to operate the Aircraft, (b) be current and qualified to operate an aircraft pursuant to requisite provisions of the FAR, and (c) have at least the minimum qualifications and total pilot hours required by the applicable insurance policies carried by CFS for the Aircraft.

8.Use Consistent with Insurance.  Each Lessee agrees to use the Aircraft only for flights that are consistent with the applicable insurance coverage for the Aircraft.

9.Passengers, Baggage and Cargo.  There may be carried on the Aircraft on all flights, under this Lease, passengers, baggage and cargo as a Lessee in its reasonable discretion shall determine; provided, however, that the number of passengers shall in no event exceed the number of seats legally available in the Aircraft and the total load, including fuel and oil in such quantities as the pilot in command shall determine to be required, shall not exceed the legally permissible maximum load for the Aircraft.

10.Maintenance.  CFS shall provide proper maintenance of the Aircraft by performing, or causing to be performed, all required inspections, repairs, modifications, maintenance, preventive maintenance, fueling, internal cleaning, external cleaning, hangaring and

overhaul work completed as CFS deems necessary and as required by the FAR, pertinent FAA directives or other guidance, and by the applicable manufacturers’ maintenance and inspection program.  CFS shall maintain all logbooks and records pertaining to the Aircraft during the term of the Lease in accordance with the applicable FAR.  The parties agree that no period of required maintenance, preventive maintenance, inspection or overhaul shall be delayed or postponed because of a Lessee’s scheduling of the Aircraft for Flight Periods.

11.Fines, Penalties and Forfeitures.  Each Lessee shall be solely responsible for any fines, penalties or forfeitures (except for those fines, penalties or forfeitures levied directly against the flight crew) relating to operation of the Aircraft under this Lease due to a violation by it, its employees, agents or contractors of any federal, state, municipal, or other law or regulation relating to aircraft safety or aircraft noise.

12.Destruction of Aircraft.  In the event that the Aircraft is destroyed, lost or damaged beyond repair, whether due to casualty, mechanical failure, or otherwise, this Lease shall automatically terminate as of the date of such destruction, loss or damage, and neither party shall have any further obligations hereunder; provided, however, that such termination shall in no way effect, impair or limit (a) any liability or obligation of one party to the other which had occurred prior to such destruction, loss or damage, or (b) any liability of the Lessees to CFS and/or CFS to the Lessees as a result of negligence or willful misconduct resulting in such destruction, loss or damage.

13.Damage to Aircraft.  In the event the Aircraft is partially destroyed or damaged, CFS shall have the option, in its sole discretion, to either (a) repair the Aircraft in order that it shall be placed in as least as good condition as it was prior to such partial destruction or damage, or (b) terminate the Lease.  Within fifteen (15) days after the date of such partial destruction or damage, CFS shall give written notice to the Lessees specifying whether CFS has elected to fully repair the Aircraft or to terminate this Lease, which termination shall be effective immediately upon such written notice from CFS to the Lessees setting forth CFS’ election to so terminate this Lease.

14.Representations and Warranties.  CFS and the Lessees represent and warrant to the other that: (a) each is duly qualified and in good standing in its state of formation; (b) this Lease is duly executed and is in conformance with its respective charter documents; (c) the officer executing this Lease on its behalf has the requisite power and authority to execute the same; (d) this Lease is duly authorized by all necessary limited liability company, or such other requisite, action; (e) this Lease is a valid and binding obligation and is enforceable against the party in accordance with its terms; and (f) it is qualified to do business in each jurisdiction in which such qualification is necessary.

15.Claims Against the Aircraft.  Each Lessee agrees that, throughout the Term , it shall not cause or permit, through any of its own acts or failures to act, any liens, claims or encumbrances to attach to the Aircraft.

16.Carriage of Contraband.  Each Lessee agrees that, throughout the Term, it shall not cause or permit the carriage of contraband, prohibited hazardous material or illegal controlled substances aboard the Aircraft during any Flight Period.

17.Termination for Cause.  If the Lessees shall fail to timely, fully and diligently comply with any term or provision of this Lease, CFS shall have the right, at its option, to terminate this Lease, which termination shall be effective immediately upon written notice from CFS to the Lessees setting forth CFS’ election to so terminate this Lease.

18.Assignment.  This Lease is not and shall not be assigned by either party without the prior written consent of the other party.  This Lease shall inure to the benefit of and be binding upon the parties hereto and, subject to the restriction contained in the preceding sentence, their respective successors, assigns, heirs, distributees and executors.

19.Further Assurances.  The parties agree to and shall, from time to time, do and perform such other and further acts, and execute and deliver any and all such other and further instruments as may be required by law or reasonably requested by the other party to establish, maintain and protect the respective rights and remedies of the other as provided in the Lease and to carry out the intent and purpose of this Lease.

20.Governing Law.  This Lease shall be interpreted in accordance with, and performance shall be governed by, the internal laws of the State of Delaware, regardless of the conflicts of laws principles thereof.

21.Entire Lease.  This Lease supersedes any and all other leases, whether oral or in writing expressed or implied, between the parties hereto with respect to the Aircraft and contains all of the covenants and leases between the parties with respect to the subject matter hereof.  Each party to this Lease acknowledges that no representation, inducement, promises or Leases of any nature have been made by any party or any person acting on behalf of any party which are not embodied herein and that no lease, statement or promise concerning the subject matter of this Lease which is not contained in the lease shall be valid or binding.

22.Notices.  Any notices, requests, claims, demand and other communications required or permitted to be given hereunder shall be given in writing and shall be delivered (a) in person, (b) by certified mail, postage prepaid, return receipt requested, (c) by a commercial overnight courier that guarantees next day delivery and provides to the sender a delivery receipt or (d) by legible facsimile (followed by hard copy delivered in accordance with preceding subsections (a)-(c)). Any notice shall be effective only upon receipt (or refusal by the intended recipient to accept delivery). Such notices shall be addressed as follows:

CFS:	Corporate Flight Services, LLC
	10 Campus Boulevard
	Newtown Square, PA 19073
	Attention: Gary M. Holloway, Sr.
	Fax: 610-355-8480
GMH Military	GMH Military Housing, LLC
Housing	10 Campus Boulevard
Management	Newtown Square, PA 19073
LLC:	Attention: Joseph M. Macchione
	Fax: 610-355-8480
College Park	College Park Management, LLC
Management,	10 Campus Boulevard
LLC:	Newtown Square, PA 19073
	Attention: Joseph M. Macchione
	Fax: 610-355-8480
GMH	GMH Communities, LP
Communities,	10 Campus Boulevard
LP:	Newtown Square, PA 19073
	Attention: Joseph M. Macchione
	Fax: 610-355-8480

or to such other address as either party may from time to time specify in writing to the other party.

23.Amendment of Lease.  This Lease cannot be and shall not be modified, altered or amended expect as specifically provided herein or by a written amendment to this Lease executed by each of the parties hereto.

24.Severability.  The provisions of this Lease shall be deemed independent and severable and the invalidity, partial invalidity or unenforceability of any one provision or portion of this Lease shall not affect the validity or enforceability of any other provision of this Lease.  Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall as to such jurisdiction be ineffective to the extent of such prohibition or unenforceability, and any prohibition of unenforceability in any particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

25.Headings.  The headings of the paragraph contained in this Lease are inserted for convenience only and shall not constitute a part of this Lease.

26.Counterparts.  This Lease may be executed in two or more counterparts, each of which shall be binding as of the date first written above, and all of which shall constitute one and the same instrument.  Each such copy shall be deemed an original, and it shall not be necessary in making proof of this Lease to produce or account for more than one such counterpart.

[Signatures appear on following page(s)]

IN WITNESS WHEREOF, the parties hereto have caused this Lease to be duly executed as of the date first written above.

CORPORATE FLIGHT SERVICES, LLC, by its sole member
By:	/s/ Gary M. Holloway, Sr.
Gary M. Holloway, Sr.
GMH MILITARY HOUSING MANAGEMENT LLC
By:	/s/ Joseph M. Macchione
Name: Joseph M. Macchione
Title: Vice President
COLLEGE PARK MANAGEMENT, LLC
By:	/s/ Joseph M. Macchione
Name: Joseph M. Macchione
Title: Vice President and Secretary
GMH COMMUNITIES, LP,
by its sole general partner
GMH Communities GP Trust
By:	/s/ Gary M. Holloway, Sr.
Name: Gary M. Holloway, Sr.
Title: Managing Trustee

EX-10.3

Exhibit 10.3

PENNSYLVANIA

FULL SERVICE LEASE

353 ASSOCIATES

Landlord

and

GMH CAPITAL PARTNERS COMMERCIAL REALTY SERVICES, LP

GMH CAPITAL PARTNERS ASSET SERVICES, LP

GMH PHILADELPHIA BARRAGE, LLC

GMH CONSTRUCTION COMPANY, INC.

GMH ASSOCIATES, INC.

Tenant

10 Campus Boulevard

Newtown Square, PA 19073

TABLE OF CONTENTS

1.	SUMMARY OF DEFINED TERMS
2.	PREMISES
3.	TERM
4.	CONSTRUCTION BY LANDLORD
5.	FIXED RENT; SECURITY DEPOSIT
6.	INTENTIONALLY OMITTED
7.	ELECTRICITY, TELEPHONE & INTERNET CHARGES
8.	SIGNS; USE OF PREMISES AND COMMON AREAS
9.	ENVIRONMENTAL MATTERS
10.	TENANT’S ALTERATIONS
11.	CONSTRUCTION LIENS
12.	ASSIGNMENT AND SUBLETTING
13.	LANDLORD’S RIGHT OF ENTRY
14.	REPAIRS AND MAINTENANCE
15.	INSURANCE; SUBROGATION RIGHTS
16.	INDEMNIFICATION
17.	QUIET ENJOYMENT
18.	FIRE DAMAGE
19.	SUBORDINATION; RIGHTS OF MORTGAGEE
20.	CONDEMNATION
21.	ESTOPPEL CERTIFICATE
22.	DEFAULT
23.	LANDLORD’S LIEN
24.	LANDLORD’S REPRESENTATIONS AND WARRANTIES

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25.	SURRENDER
26.	RULES AND REGULATIONS
27.	GOVERNMENTAL REGULATIONS
28.	NOTICES
29.	BROKERS
30.	CHANGE OF BUILDING/PROJECT NAME
31.	LANDLORD’S LIABILITY
32.	AUTHORITY
33.	NO OFFER
34.	RENEWAL
35.	INTENTIONALLY OMITTED
36.	TENANT FINANCIAL INFORMATION
37.	MISCELLANEOUS PROVISIONS
38.	WAIVER OF TRIAL BY JURY
39.	CONSENT TO JURISDICTION

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LEASE

THIS LEASE (“Lease”) is entered into as of the 2nd day of November, 2004, between 353 ASSOCIATES, a Pennsylvania limited partnership (“Landlord”), and GMH CAPITAL PARTNERS COMMERCIAL REALTY SERVICES, LP, a Delaware limited partnership, GMH CAPITAL PARTNERS ASSET SERVICES, LP, a Delaware limited partnership, GMH PHILADELPHIA BARRAGE, LLC, a Delaware limited liability company, GMH CONSTRUCTION COMPANY, INC., a Florida corporation, and GMH ASSOCIATES, INC., a Pennsylvania corporation (collectively referred to herein as “Tenant”).

WITNESSETH

In consideration of the mutual covenants herein set forth, and intending to be legally bound, the parties hereto covenant and agree as follows:

1.             SUMMARY OF DEFINED TERMS.

The following defined terms, as used in this Lease, shall have the meanings and shall be construed as set forth below:

(a)           “Building”:  The Building located at 10 Campus Boulevard, Newtown Square, Pennsylvania.

(b)           “Project”:  The Building, the land and all other improvements located at 10 Campus Boulevard, Newtown Square, Pennsylvania.

(c)           “Premises”:  A portion of the Building which the parties stipulate and agree is a 9,697 rentable square foot portion of the first floor of the Building.

(d)           “Term”:  From the Commencement Date for a period of 60 months, ending on the last calendar day of the month.

(e)           “Fixed Rent”:

LEASE YEAR	PER R.S.F.	MONTHLY INSTALLMENTS	ANNUAL FIXED RENT
Months 1-60	$25.00	$20,202.08	$242,425.00

(f)            “Security Deposit”:  $0.

(g)           Intentionally Omitted.

(h)           “Rentable Area”: Premises   9,697 sq. ft.

(i)            “Permitted Uses”:  Tenant’s use of the Premises shall be limited to general office use and storage incidental thereto.  Tenant’s rights to use the Premises shall be subject to all applicable laws and governmental rules and regulations and to all reasonable requirements of the insurers of the Building.

(j)            “Tenant’s Broker”:  None

(k)           “Notice Address/Contact”

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Tenant:	GMH CAPITAL PARTNERS COMMERCIAL REALTY SERVICES, LP GMH CAPITAL PARTNERS ASSET SERVICES, LP GMH PHILADELPHIA BARRAGE, LLC GMH CONSTRUCTION COMPANY, INC. GMH ASSOCIATES, INC. 10 Campus Boulevard Newtown Square, PA 19073 Attn: Joseph M. Macchione Fax No.: 610-355-8480 E-Mail: jmacchione@gmh-inc.com
Landlord:	353 ASSOCIATES c/o GMH Communities, LP 10 Campus Boulevard Newtown Square, PA 19073 Attn: Joseph M. Macchione Fax No.: 610-355-8480 E-Mail: jmacchione@gmh-inc.com
with a copy to:	Morgan Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103 Attn:  Richard J. Sabat Fax No.: 877-432-9652 E-Mail: rsabat@morganlewis.com

(l)            “Tenant’s North American Industry Classification Number”: 531210

(m)          “Additional Rent”: All sums of money or charges required to be paid by Tenant under this Lease other than Fixed Rent, whether or not such sums or charges are designated as “Additional Rent”.

(n)           “Rent”: All Annual Fixed Rent, monthly installments of Annual Fixed Rent, Fixed Rent and Additional Rent payable by Tenant to Landlord under this Lease.

2.             PREMISES.

                Landlord does hereby lease, demise and let unto Tenant and Tenant does hereby hire and lease from Landlord the Premises for the Term, upon the provisions, conditions and limitations set forth herein.

3.             TERM.

                The Term of this Lease shall commence (the “Commencement Date”) on November 2, 2004.  The Term shall expire on November 1, 2009.

4.             CONSTRUCTION BY LANDLORD.  Landlord shall not perform any work to the Premises.  Tenant shall accept the Premises in as-is condition.

5.             FIXED RENT; SECURITY DEPOSIT.

(a)   Tenant shall pay to Landlord without notice or demand, and without set-off, the annual Fixed Rent payable in the monthly installments of Fixed Rent as set forth in Article 1(e), in advance on the first day of each calendar month during the Term by check sent to Landlord at the address provided for in Section 1(k) of this Lease.  Notwithstanding the immediately preceding sentence, the first full month’s installment and the Security Deposit shall

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be paid upon the execution of this Lease by Tenant by two separate checks.

(b)   In the event any Fixed Rent or Additional Rent, charge, fee or other amount due from Tenant under the terms of this Lease are not paid to Landlord when due, Tenant shall also pay as Additional Rent a service and handling charge equal to ten (10%) percent of the total payment then due.  The aforesaid late fee shall begin to accrue on the initial date of a payment due date, irrespective of any grace period granted hereunder.  This provision shall not prevent Landlord from exercising any other remedy herein provided or otherwise available at law or in equity in the event of any default by Tenant.

(c)   Tenant shall be required to pay a Security Deposit of $0 under this Lease.

6.             INTENTIONALLY OMITTED.

7.             ELECTRICITY, TELEPHONE AND INTERNET CHARGES.  Charges for normal electricity usage, phone, internet and cable services for the Premises is included in the Fixed Rent.  Landlord shall not be liable for any interruption or delay in electric or any other utility service for any reason unless caused by the gross negligence or willful misconduct of Landlord or its agents. Landlord shall have the right to change the electric and other utility providers to the Project or Building at any time.  In the event Tenant uses more electricity than the average office tenant occupying similar space, as determined in Landlord’s sole, reasonable judgment, Landlord shall have the right to bill Tenant for such additional costs as Additional Rent as Landlord may determine in Landlord’s sole and reasonable judgment.

8.             SIGNS; USE OF PREMISES AND COMMON AREAS.

(a)   Landlord shall provide Tenant with standard identification signage on all Building directories.  No other signs shall be placed, erected or maintained by Tenant at any place upon the Premises, Building or Project.

(b)   Tenant may use and occupy the Premises only for the express and limited purposes stated in Article 1(i) above; and the Premises shall not be used or occupied, in whole or in part, for any other purpose without the prior written consent of Landlord; provided that Tenant’s right to so use and occupy the Premises shall remain expressly subject to the provisions of “Governmental Regulations”, Article 28 herein.  No machinery or equipment shall be permitted that shall cause vibration, noise or disturbance beyond the Premises. Tenant, without Landlord’s consent or direction, shall not “vacate” the Premises at any time during the Term, nor permit the Premises to remain unoccupied.  “Vacate” shall be defined as Tenant’s ceasing to use the Premises for its Permitted Use or the removal of substantially all of its furniture and equipment and personal property from the Premises.

(c)   Tenant shall not overload any floor or part thereof in the Premises or the Building, including any public corridors or elevators therein, bringing in, placing, storing, installing or removing any large or heavy articles, and Landlord may prohibit, or may direct and control the location and size of, safes and all other heavy articles,  and may require, at Tenant’s sole cost and expense, supplementary supports of such material and dimensions as Landlord may deem necessary to properly distribute the weight.

(d)   Tenant shall not install in or for the Premises, without Landlord’s prior written approval, any equipment which requires more electric current than Landlord is required to provide under this Lease, and Tenant shall ascertain from Landlord the maximum amount of load or demand for or use of electrical current which can safely be permitted in and for the Premises, taking into account the capacity of electric wiring in the Building and the Premises and the needs of Building common areas (interior and exterior) and the requirements of other tenants of the Building, Tenant and shall not in any event connect a greater load than such safe capacity.

(e)   Tenant shall not commit or suffer any waste upon the Premises, Building or Project or any nuisance, or do any other act or thing which may disturb the quiet enjoyment of any other tenant in the Building or Project.

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(f)    Tenant shall have the right, non-exclusive and in common with others, to use the exterior paved driveways and walkways of the Building for vehicular and pedestrian access to the Building.  Tenant shall also have the right, in common with other tenants of the Building and Landlord, to use the designated parking areas of the Project for the parking of automobiles of Tenant and its employees and business visitors, incident to Tenant’s permitted use of the Premises; provided that Landlord shall have the right to restrict or limit Tenant’s utilization of the parking areas in the event the same become overburdened and in such case to equitably allocate on proportionate basis or assign parking spaces among Tenant and the other tenants of the Building.

9.             ENVIRONMENTAL MATTERS.

(a)   Hazardous Substances.

(i)            Tenant shall not, except as provided in subparagraph (ii) below, bring or otherwise cause to be brought or permit any of its agents, employees, contractors or invitees to bring in, on or about any part of the Premises, Building or Project, any hazardous substance or hazardous waste in violation of law, as such terms are or may be defined in (x) the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq., as the same may from time to time be amended, and the regulations promulgated pursuant thereto (“CERCLA”); the United States Department of Transportation Hazardous Materials Table (49 CFR 172.102); by the Environmental Protection Agency as hazardous substances (40 CFR Part 302); the Clean Air Act; and the Clean Water Act, and all amendments, modifications or supplements thereto; and/or (y) any other rule, regulation, ordinance, statute or requirements of any governmental or administrative agency regarding the environment (collectively, (x) and (y) shall be referred to as an  “Applicable Environmental Law”).

(ii)           Tenant may bring to and use at the Premises hazardous substances incidental to its normal business operations under the NAI Code referenced in article 1(m) above in the quantities reasonably required for Tenant’s normal business consistent with its occupancy pursuant to the Prior Leases and in accordance with Applicable Environmental Laws.  Tenant shall store and handle such substances in strict accordance with Applicable Environmental Laws.  From time to time promptly following a request to Landlord, Tenant shall provide Landlord with documents identifying the hazardous substances stored or used by Tenant on the Premises and describing the chemical properties of such substances and such other information reasonably requested by Landlord or Tenant.  Prior to the expiration or sooner termination of this Lease, Tenant shall remove all hazardous substances from the Premises and shall provide Landlord with an inspection report from an independent environmental engineer certifying that the Premises and the land surrounding the Premises are free of contamination from hazardous substances and hazardous wastes.  The provisions of this paragraph shall be personal to Tenant and, in the event Tenant ceases to occupy the Premises, Landlord’s approval to store and use hazardous substances shall automatically terminate.

(iii)          Tenant shall defend, indemnify and hold harmless Landlord and their respective affiliates, employees and agents from and against any and all third-party claims, actions, damages, liability and expense (including all attorney’s, consultant’s and expert’s fees, expenses and liabilities incurred in defense of any such claim or any action or proceeding brought thereon) arising from Tenant’s storage and use of hazardous substances on the Premises including, without limitation, any and all costs incurred by Landlord because of any investigation of the Project or any cleanup, removal or restoration of the Project to remove or remediate hazardous  or hazardous wastes deposited by Tenant.  Without limitation of the foregoing, if Tenant, its officers, employees, agents, contractors, licensees or invitees cause contamination of the Premises by any hazardous substances, Tenant shall promptly at its sole expense, take any and all necessary actions to return the Premises to the condition existing prior to such contamination, or in the alternative take such other remedial steps as may be required by law or recommended by Landlord’s environmental consultant.

(b)   NAI Numbers.

(i)            Tenant represents and warrants that Tenant’s NAI number as designated in the North American Industry Classification System Manual prepared by the Office of Management and Budget, and as

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set forth in Article 1(l) hereof, is correct.  Tenant represents that the specific activities intended to be carried on in the Premises are in accordance with Article 1(i).

(ii)           Except as provided in Article 9(a)(ii), Tenant shall not engage in operations at the Premises which involve the generation, manufacture, refining, transportation, treatment, storage, handling or disposal of “hazardous substances” or “hazardous waste” as such terms are defined under any Applicable Environmental Law.  Tenant further covenants that it will not cause or permit to exist any “release” or “discharge” (as such term is defined under Applicable Environmental Laws) on or about the Premises.

(iii)          Tenant shall, at its expense, comply with all requirements of Applicable Environmental Laws pertaining thereto.

(iv)          In addition, upon written notice of Landlord, Tenant shall cooperate with Landlord in obtaining Applicable Environmental Laws approval of any transfer of the Buildings.  Specifically in that regard, Tenant agrees that it shall (1) execute and deliver all affidavits, reports, responses to questions, applications or other filings required by Landlord and related to Tenant’s activities at the Premises, (2) allow inspections and testing of the Premises during normal business hours, and (3) as respects the Premises, perform any requirement reasonably required by Landlord necessary for the receipt of approvals under Applicable Environmental Laws, provided the foregoing shall be at no out-of-pocket cost or expense to Tenant except for clean-up and remediation costs arising from Tenant’s violation of this Article 9.

(c)   Additional Terms.

(i)            In the event of Tenant’s failure to comply in full with this Article, Landlord may, after written notice to Tenant and Tenant’s failure to cure within thirty (30) days of its receipt of such notice, at Landlord’s option, perform any and all of Tenant’s obligations as aforesaid and all costs and expenses incurred by Landlord in the exercise of this right all be deemed to be Additional Rent payable on demand and with interest at the Default Rate.

(ii)           The parties acknowledge and agree that Tenant shall not be held responsible for any environmental issue at the Premises unless such issue was caused by an action or omission of Tenant or its agents, employees, consultants or invitees.

(d)   Survival.        This Article 9 shall survive the expiration or sooner termination of this Lease.

10.           TENANT’S ALTERATIONS.

                                Tenant will not cut or drill into or secure any fixture, apparatus or equipment or make alterations, improvements or physical additions (collectively, “Alterations”) of any kind to any part of the Premises without first obtaining the written consent of Landlord, such consent not to be unreasonably withheld.  Alterations shall, at Landlord’s option, be done by Landlord at Tenant’s sole cost and expense.  Landlord’s consent shall not be required for (i) the installation of any office equipment including internal partitions which do not require disturbance of any structural elements or systems within the Building or (ii) minor work, including decorations, which does not require disturbance of any structural elements or systems within the Building and which costs in the aggregate less than $5,000.  If no approval is required or if Landlord approves Tenant’s Alterations and agrees to permit Tenant’s contractors to do the work, Tenant, prior to the commencement of labor or supply of any materials, must furnish to Landlord (i) a duplicate or original policy or certificates of insurance evidencing (a) general public liability insurance for personal injury and property damage in the minimum amount of $3,000,000.00 combined single limit, (b) statutory workman’s compensation insurance, and (c) employer’s liability insurance from each contractor to be employed (all such policies shall be non-cancelable without thirty (30) days prior written notice to Landlord and shall be in amounts and with companies satisfactory to Landlord); (ii) construction documents prepared and sealed by a registered Pennsylvania architect if such alteration causes the aggregate of all Alterations to be in excess of $10,000; (iii) all applicable building permits required by law; and (iv) an executed, effective Waiver of Mechanics

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Liens from such contractors and all sub-contractors in states allowing for such waivers or the cost of such alteration must be bonded by Tenant.  Any approval by Landlord permitting Tenant to do any or cause any work to be done in or about the Premises shall be and hereby is conditioned upon Tenant’s work being performed by workmen and mechanics working in harmony and not interfering with labor employed by Landlord, Landlord’s mechanics or their contractors or by any other tenant or their contractors.  If at any time any of the workmen or mechanics performing any of Tenant’s work shall be unable to work in harmony or shall interfere with any labor employed by Landlord, other tenants or their respective mechanics and contractors, then the permission granted by Landlord to Tenant permitting Tenant to do or cause any work to be done in or about the Premises, may be withdrawn by Landlord upon forty-eight (48) hours written notice to Tenant.

All Alterations (whether temporary or permanent in character) made in or upon the Premises, either by Landlord or Tenant, shall be Landlord’s property upon installation and shall remain on the Premises without compensation to Tenant unless Landlord provides written notice to Tenant to remove same at the expiration of the Lease, in which event Tenant shall promptly remove such Alterations and restore the Premises to good order and condition. At Lease termination, all furniture, movable trade fixtures and equipment (including telephone, security and communication equipment system wiring and cabling) shall, at Landlord’s option, be removed by Tenant and shall be accomplished in a good and workmanlike manner so as not to damage the Premises or Building and in such manner so as not to disturb other tenants in the Building.  All such installations, removals and restoration shall be accomplished in a good and workmanlike manner so as not to damage the Premises or Building and in such manner so as not to disturb other tenants in the Building.  If Tenant fails to remove any items required to be removed pursuant to this Article, Landlord may do so and the reasonable costs and expenses thereof shall be deemed Additional Rent hereunder and shall be reimbursed by Tenant to Landlord within fifteen (15) business days of Tenant’s receipt of an invoice therefor from Landlord.

11.           CONSTRUCTION LIENS.

(a)   Tenant will not suffer or permit any contractor’s, subcontractor’s or supplier’s lien (a “Construction Lien”) to be filed against the Premises or any part thereof by reason of work, labor services or materials supplied or claimed to have been supplied to Tenant; and if any Construction Lien shall at any time be filed against the Premises or any part thereof, Tenant, within ten (10) days after notice of the filing thereof, shall cause it to be discharged of record by payment, deposit, bond, order of a court of competent jurisdiction or otherwise. If Tenant shall fail to cause such Construction Lien to be discharged within the period aforesaid, then in addition to any other right or remedy, Landlord may, but shall not be obligated to, discharge it either by paying the amount claimed to be due or by procuring the discharge of such lien by deposit or by bonding proceedings. Any amount so paid by Landlord, plus all of Landlord’s costs and expenses associated therewith (including, without limitation, reasonable legal fees), shall constitute Additional Rent payable by Tenant under this Lease and shall be paid by Tenant to Landlord on demand with interest from the date of advance by Landlord at the Default Rate.

(b)   Nothing in this Lease, or in any consent to the making of alterations or improvements shall be deemed or construed in any way as constituting authorization by Landlord for the making of any alterations or additions by Tenant within the meaning of 49 P.S. Sections 1101-1902, as amended, or under the Contractor and Subcontractor Payment Act or any amendment thereof, or constituting a request by Landlord, express or implied, to any contractor, subcontractor or supplier for the performance of any labor or the furnishing of any materials for the use or benefit of Landlord.

12.           ASSIGNMENT AND SUBLETTING.

(a)           Subject to the remaining subsections of Article 12, except as expressly permitted pursuant to this section, Tenant shall not, without the prior written consent of Landlord, such consent not to be unreasonably withheld, assign, transfer or hypothecate this Lease or any interest herein or sublet the Premises or any part thereof.  Any of the foregoing acts without such consent shall be void and shall, at the option of Landlord, terminate this Lease.  Subject to subparagraph 12(i) below, this Lease shall not, nor shall any interest herein, be assignable as to the interest of Tenant by operation of law or by merger, consolidation or asset sale, without the written consent of

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Landlord.

(b)           If at any time or from time to time during the term of this Lease Tenant desires to assign this Lease or sublet all or any part of the Premises, Tenant shall give notice to Landlord of such desire, including the name, address and contact party for the proposed assignee or subtenant, a description of such party’s business history, the effective date of the proposed assignment or sublease (including the proposed occupancy date by the proposed assignee or sublessee), and in the instance of a proposed sublease, the square footage to be subleased, a floor plan professionally drawn to scale depicting the proposed sublease area,  and a statement of the duration of the proposed sublease (which shall in any and all events expire by its terms prior to the scheduled expiration of this Lease, and immediately upon the sooner termination hereof).   Landlord may, at its option, and in its sole and absolute discretion, exercisable by notice given to Tenant within sixty (60) days next following Landlord’s receipt of Tenant’s notice (which notice from Tenant shall, as a condition of its effectiveness, include all of the above-enumerated information), elect to recapture the Premises if Tenant is proposing to sublet or assign the Premises or such portion as is proposed by Tenant to be sublet (and in each case, the designated and non-designated parking spaces included in this demise, or a pro-rata portion thereof in the instance of the recapture of less than all of the Premises), and terminate this Lease with respect to the space being recaptured.

(c)           If Landlord elects to recapture the Premises or a portion thereof as aforesaid, then from and after the effective date thereof as approved by Landlord, after Tenant shall have fully performed such obligations as are enumerated herein to be performed by Tenant in connection with such recapture, and except as to obligations and liabilities accrued and unperformed (and any other obligations expressly stated in this Lease to survive the expiration or sooner termination of this Lease), Tenant shall be released of and from all lease obligations thereafter otherwise accruing with respect to the Premises (or such lesser portion as shall have been recaptured by Landlord).  The Premises, or such portion thereof as Landlord shall have elected to recapture, shall be delivered by Tenant to Landlord free and clear of all furniture, furnishings, personal property and removable fixtures, with Tenant repairing and restoring any and all damage to the Premises resulting from the installation, handling or removal thereof, and otherwise in the same condition as Tenant is, by the terms of this Lease, required to redeliver the Premises to Landlord upon the expiration or sooner termination of this Lease.  Upon the completion of any recapture and termination as provided herein, Tenant’s Fixed Rent and other monetary obligations hereunder shall be adjusted pro-rated based upon the reduced rentable square footage then comprising the Premises.

(d)           If Landlord provides written notification to Tenant electing not to recapture the Premises (or so much thereof as Tenant had proposed to sublease), then Tenant may proceed to market the designated space and may complete such transaction and execute an assignment of this Lease or a sublease agreement (in each case in form acceptable to Landlord) within a period of five (5) months next following Landlord’s notice to Tenant that it declines to recapture such space, provided that Tenant shall have first obtained in any such case the prior written consent of Landlord to such transaction, which consent shall not be unreasonably withheld.  If, however, Tenant shall not have assigned this Lease or sublet the Premises with Landlord’s prior written consent as aforesaid within five (5) months next following Landlord’s notice to Tenant that Landlord declines to recapture the Premises (or such portion thereof as Tenant initially sought to sublease), then in such event, Tenant shall again be required to request Landlord’s consent to the proposed transaction, whereupon Landlord’s right to recapture the Premises (or such portion as Tenant shall desire to sublease) shall be renewed upon the same terms and as otherwise provided in subsection (b) above.

For purposes of this Section 12(d), and without limiting the basis upon which Landlord may withhold its consent to any proposed assignment or sublease, the parties agree that it shall not be unreasonable for Landlord to withhold its consent to such assignment or sublease if: (i) the proposed assignee or sublessee shall have a net worth which is not acceptable to Landlord in Landlord’s reasonable discretion; (ii) the proposed assignee or sublessee shall have no reliable credit history or an unfavorable credit history, or other reasonable evidence exists that the proposed assignee or sublessee will experience  difficulty in satisfying its financial or other obligations under this Lease;  (iii) the proposed assignee of sublessee, in Landlord’s reasonable opinion, is not reputable and of good character; (iv) the portion of the Premises requested to be subleased renders the balance of the Premises unleasable as a separate area; (v) Tenant is proposing a sublease at a rental or subrental rate which is less than the then fair

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market rental rate for the portion of the Premises being subleased or assigned, or Tenant is proposing to assign or sublease to an existing tenant of the Building or another property owned by Landlord or by its partners, or to another prospect with whom Landlord or its partners, or their affiliates are then negotiating; (vi) the proposed assignee or sublessee will cause Landlord’s existing parking facilities to be reasonably inadequate, or in violation of code requirements, or require Landlord to increase the parking area or the number of parking spaces to meet code requirements, or the nature of such party’s business shall reasonably require more than four (4) parking spaces per 1,000 rentable square feet of floor space, or (vii) the nature of such party’s proposed business operation would or might reasonably permit or require the use of the Premises in a manner inconsistent with the “Permitted Use” specified herein, would or might reasonably otherwise be in conflict with express provisions of this Lease,  would or might reasonably violate the terms of  any other lease for the Building, or would, in Landlord’s reasonable judgement, otherwise be incompatible with other tenancies in the Building.

(e)           Any sums or other economic consideration received by Tenant as a result of any subletting, assignment or license (except rental or other payments received which are attributable to the amortization of the cost of leasehold improvements made to the sublet or assigned portion of the premises by Tenant for subtenant or assignee, and other reasonable expenses incident to the subletting or assignment, including standard leasing commissions) whether denominated rentals under the sublease or otherwise, which exceed, in the aggregate, the total sums which Tenant is obligated to pay Landlord under this Lease (prorated to reflect obligations allocable to that portion of the premises subject to such sublease or assignment) shall be divided evenly between Landlord and Tenant, with Landlord’s portion being payable to Landlord as Additional Rental under this Lease without affecting or reducing any other obligation of Tenant hereunder.

(f)            Regardless of Landlord’s consent, no subletting or assignment shall release Tenant of Tenant’s obligation or alter the primary liability of Tenant to pay the Rent and to perform all other obligations to be performed by Tenant hereunder.  The acceptance of rental by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof.  Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting.  In the event of default by any assignee of Tenant or any successor of Tenant in the performance of any of the terms hereof, Landlord may proceed directly against Tenant without the necessity of exhausting remedies against such assignee or successor.

(g)           In the event that (i) the Premises or any part thereof are sublet and Tenant is in default under this Lease, or (ii) this Lease is assigned by Tenant, then, Landlord may collect Rent from the assignee or subtenant and apply the net amount collected to the rent herein reserved; but no such collection shall be deemed a waiver of the provisions of this Article 12 with respect to assignment and subletting, or the acceptance of such assignee or subtenant as Tenant hereunder, or a release of Tenant from further performance of the covenants herein contained.

(h)           In connection with each proposed assignment or subletting of the Premises by Tenant, Tenant shall pay to Landlord (i) an administrative fee of $250 per request (including requests for non-disturbance agreements and Landlord’s or its lender’s waivers) in order to defer Landlord’s administrative expenses arising from such request, plus (ii) Landlord’s reasonable attorneys’ fees.

(i)            Tenant may, after notice to, but without the consent of Landlord, assign this Lease to an affiliate (i.e., a corporation 50% or more of whose capital stock is owned by the same stockholders owning 50% or more of Tenant’s capital stock), parent or subsidiary corporation of Tenant or to a corporation to which it sells or assigns all of substantially all of its assets or stock or with which it may be consolidated or merged (“Affiliate”), provided such purchasing, consolidated, merged, affiliated or subsidiary corporation shall, in writing, assume and agree to perform all of the obligations of Tenant under this Lease, shall have a net worth at least equal to $10,000,000, and it shall deliver such assumption with a copy of such assignment to Landlord within ten (10) days thereafter, and provided further that Tenant shall not be released or discharged from any liability under this Lease by reason of such assignment.

(j)            Anything in this Article 12 to the contrary notwithstanding, no assignment or sublease

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shall be permitted under this Lease if Tenant is in default at the time of such assignment or has previously defaulted (irrespective of the fact that Tenant cured such default) more than twice in connection with any of its monetary obligations under this Lease and such monetary defaults aggregate in excess of $20,000.

13.           LANDLORD’S RIGHT OF ENTRY.

                Landlord and persons authorized by Landlord may enter the Premises at all reasonable times upon reasonable advance notice (except in the case of an emergency in which case no prior notice is necessary) for the purpose of inspections, repairs, alterations to adjoining space, appraisals, or other reasonable purposes; including enforcement of Landlord’s rights under this Lease.  Landlord shall not be liable for inconvenience to or disturbance of Tenant by reason of any such entry; provided, however, that in the case of repairs or work, such shall be done, so far as practicable, so as to not unreasonably interfere with Tenant’s use of the Premises.  Provided, however, that such efforts shall not require Landlord to use overtime labor unless Tenant shall pay for the increased costs to be incurred by Landlord for such overtime labor.  Landlord also shall have the right to enter the Premises at all reasonable times after giving prior oral notice to Tenant, to exhibit the Premises to any prospective purchaser and/or mortgagee.   Landlord also shall have the right to enter the Premises at all reasonable times after giving prior oral notice to Tenant, to exhibit the Premises to any prospective tenants.

14.           REPAIRS AND MAINTENANCE.

(a)           Except as specifically otherwise provided in subparagraphs (b) and (c) of this Article, Tenant, at its sole cost and expense and throughout the Term of this Lease, shall keep and maintain the Premises in good order and condition (reasonable wear and tear excepted), free of accumulation of dirt and rubbish.  Landlord shall, upon written notice from Tenant, promptly make all repairs to the Premises (except for any Alterations made by Tenant to the Base Building Specifications) necessary to keep and maintain such good order and condition and shall charge Tenant by invoice for the cost of such repairs at Landlord’s standard rates (such rate to be competitive with the market rate for such services).  Such charges shall be considered Additional Rent and shall be payable by Tenant within thirty (30) days of delivery of an invoice.  When used in this Article 14, the term “repairs” shall include replacements and renewals when necessary.

(b)           Landlord, throughout the Term of this Lease and at Landlord’s sole cost and expenses, shall make all necessary repairs to the footings and foundations and the structural steel columns and girders forming a part of the Premises.

(c)           Landlord shall maintain all HVAC systems, plumbing and electric systems serving the Building and the Premises.

(d)           Landlord, throughout the Term of this Lease, shall make all necessary repairs to the Building outside of the Premises and the common areas, including the roof, walls, exterior portions of the Premises and the Building, utility lines, equipment and other utility facilities in the Building, which serve more than one tenant of the Building, and to any driveways, sidewalks, curbs, loading, parking and landscaped areas, and other exterior improvements for the Building; provided, however, that Landlord shall have no responsibility to make any repairs unless and until Landlord receives written notice of the need for such repair or Landlord has actual knowledge of the need to make such repair.

(e)           Landlord shall keep and maintain all common areas appurtenant to the Building and any sidewalks, parking areas, curbs and access ways adjoining the Property in a clean and orderly condition, free of accumulation of dirt, rubbish, snow and ice, and shall keep and maintain all landscaped areas in a neat and orderly condition.

(f)            Notwithstanding anything herein to the contrary, repairs to the Premises, Building or Project and its appurtenant common areas made necessary by a negligent or willful act or omission of Tenant or any employee, agent, contractor, or invitee of Tenant shall be made at the sole cost and expense of Tenant, except to the

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extent of insurance proceeds received by Landlord.

(g)           Landlord shall provide Tenant with janitorial services for the Premises Monday through Friday of each week in accordance with guidelines as may be set forth by Landlord from time to time.

15.           INSURANCE; SUBROGATION RIGHTS.

(a)           Tenant shall obtain and keep in force at all times during the term hereof, at its own expense, commercial general liability insurance including contractual liability and personal injury liability and all similar coverage, with combined single limits of $1,000,000.00 on account of bodily injury to or death of one or more persons as the result of any one accident or disaster and on account of damage to property, or in such other amounts as Landlord may from time to time require.  Tenant shall also require its movers to procure and deliver to Landlord a certificate of insurance naming Landlord as an additional insured.

(b)           All liability insurance required hereunder shall not be subject to cancellation without at least thirty (30) days prior notice to all insureds, and shall name Landlord and Tenant as insureds, as their interests may appear, and, if requested by Landlord, shall also name as an additional insured any mortgagee or holder of any mortgage which may be or become a lien upon any part of the Premises.  Prior to the commencement of the Term, Tenant shall provide Landlord with certificates which evidence that the coverages required have been obtained for the policy periods.  Tenant shall also furnish to Landlord throughout the term hereof replacement certificates at least thirty (30) days prior to the expiration dates of the then current policy or policies.  All the insurance required under this Lease shall be issued by insurance companies authorized to do business in the Commonwealth of Pennsylvania with a financial rating of at least an A-X as rated in the most recent edition of Best’s Insurance Reports and in business for the past five years.  The limit of any such insurance shall not limit the liability of Tenant hereunder.  If Tenant fails to procure and maintain such insurance, Landlord may, but shall not be required to, procure and maintain the same, at Tenant’s expense to be reimbursed by Tenant as Additional Rent within ten (10) days of written demand.  Any deductible under such insurance policy or self-insured retention under such insurance policy in excess of Twenty Five Thousand ($25,000) must be approved by Landlord in writing prior to issuance of such policy.  Tenant shall not self-insure without Landlord’s prior written consent.   The policy limits set forth herein shall be subject to periodic review, and Landlord reserves the right to require that Tenant increase the liability coverage limits if, in the reasonable opinion of Landlord, the coverage becomes inadequate or is less than commonly maintained by tenants of similar buildings in the area making similar uses.

(c)           Landlord shall obtain and maintain the following insurance during the Term of this Lease:  (i) replacement cost insurance including “special form” property insurance on the Building and on the Project, and (ii) commercial general liability insurance (including bodily injury and property damage) covering Landlord’s operations at the Project in amounts reasonably required by the Landlord’s lender or Landlord.

(d)           Each party hereto, and anyone claiming through or under them by way of subrogation, waives and releases any cause of action it might have against the other party and their respective employees, officers, members, partners, trustees and agents, on account of any loss or damage that is insured against under any insurance policy required to be obtained hereunder (to the extent that such loss or damage is recoverable under such insurance policy) that covers the Project, Building or Premises, Landlord’s or Tenant’s fixtures, personal property, leasehold improvements or business and which names Landlord or Tenant, as the case may be, as a party insured.  Each party hereto agrees that it will cause its insurance carrier to endorse all applicable policies waiving the carrier’s right of recovery under subrogation or otherwise against the other party.  During any period while such waiver of right of recovery is in effect, each party shall look solely to the proceeds of such policies for compensation for loss, to the extent such proceeds are paid under such policies.

16.           INDEMNIFICATION.

Tenant shall defend, indemnify and hold harmless Landlord and their respective affiliates, employees and agents from and against any and all third-party claims, actions, damages, liability and expense (including all

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reasonable attorney’s fees, expenses and liabilities incurred in defense of any such claim or any action or proceeding brought thereon) arising from (i) Tenant’s improper use of the Premises, (ii) the improper conduct of Tenant’s business, (iii) any activity, work or things done, permitted or suffered by Tenant or its agents, licensees or invitees in or about the Premises or elsewhere contrary to the requirements of the Lease, (iv) any breach or default in the performance of any obligation of Tenant’s part to be performed under the terms of this Lease, and (v) any negligence or willful act of Tenant or any of Tenant’s agents, contractors, employees or invitees.  Without limiting the generality of the foregoing, the obligations of Tenant shall include any case in which Landlord shall be made a party to any litigation arising out of Tenant’s use or occupancy of the Premises and commenced by or against Tenant, its agents, subtenants, licensees, concessionaires, contractors, customers or employees, then Tenant shall defend, indemnify and hold harmless Landlord and shall pay all costs, expenses and reasonable attorney’s fees incurred or paid by Landlord in connection with such litigation, after notice to Tenant and Tenant’s refusal to defend such litigation, and upon notice from Landlord shall defend the same at Tenant’s expense by counsel satisfactory to Landlord.

17.           QUIET ENJOYMENT.

Provided Tenant has performed all of the terms and conditions of this Lease, including the payment of Fixed Rent and Additional Rent, to be performed by Tenant, Tenant shall peaceably and quietly hold and enjoy the Premises for the Term, without hindrance from Landlord, or anyone claiming by through or under Landlord under and subject to the terms and conditions of this Lease and of any mortgages now or hereafter affecting all of or any portion of the Premises.

18.           FIRE DAMAGE.

(a)   Except as provided below, in case of damage to the Premises by fire or other insured casualty, Landlord shall repair the damage.  Such repair work shall be commenced promptly following notice of the damage and completed with due diligence, taking into account the time required for Landlord to effect a settlement with and procure insurance proceeds from the insurer, except for delays due to governmental regulation, scarcity of or inability to obtain labor or materials, intervening acts of God or other causes beyond Landlord’s reasonable control.

(b)   Notwithstanding the foregoing, if (i) the damage is of a nature or extent that, in Landlord’s reasonable judgment (to be communicated to Tenant within sixty (60) days from the date of the casualty), the repair and restoration work would require more than two hundred ten (210) consecutive days to complete after the casualty (assuming normal work crews not engaged in overtime), or (ii) if more than thirty (30%) percent of the total area of the Building is extensively damaged, or (iii) the casualty occurs in the last Lease Year of the Term and Tenant has not exercised a renewal right, either party shall have the right to terminate this Lease and all the unaccrued obligations of the parties hereto, by sending written notice of such termination to the other within ten (10) days of Tenant’s receipt of the notice from Landlord described above.  Such notice is to specify a termination date no less than fifteen (15) days after its transmission.

(c)   If the insurance proceeds received by Landlord as dictated by the terms and conditions of any financing then existing on the Building, (excluding any rent insurance proceeds) would not be sufficient to pay for repairing the damage or are required to be applied on account of any mortgage which encumbers any part of the Premises or Building, or if the nature of loss is not covered by Landlord’s fire insurance coverage, Landlord may elect either to (i) repair the damage as above provided notwithstanding such fact or (ii) terminate this Lease by giving Tenant notice of Landlord’s election as aforesaid.

(d)   In the event Landlord has not completed restoration of the Premises within two hundred ten (210) days from the date of casualty (subject to delay due to weather conditions, shortages of labor or materials or other reasons beyond Landlord’s control, Tenant may terminate this Lease by written notice to Landlord within thirty (30) business days following the expiration of such 210 day period (as extended for reasons beyond Landlord’s control as provided above) unless, within thirty (30) business days following receipt of such notice, Landlord has substantially completed such restoration and delivered the Premises to Tenant for occupancy.  Notwithstanding the foregoing, in the event Tenant is responsible for the aforesaid casualty, Tenant shall not have the right to terminate

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this Lease if Landlord is willing to rebuild and restore the Premises.

(e)   In the event of damage or destruction to the Premises or any part thereof, Tenant’s obligation to pay Fixed Rent and Additional Rent shall be equitably adjusted or abated.

19.           SUBORDINATION; RIGHTS OF MORTGAGEE.

(a)           This Lease shall be subject and subordinate at all times to the lien of any mortgages now or hereafter placed upon the Premises, Building and/or Project and land of which they are a part without the necessity of any further instrument or act on the part of Tenant to effectuate such subordination.  Tenant further agrees to execute and deliver upon demand such further instrument or instruments evidencing such subordination of this Lease to the lien of any such mortgage and such further instrument or instruments of attornment as shall be desired by any mortgagee or proposed mortgagee or by any other person.  Notwithstanding the foregoing, any mortgagee may at any time subordinate its mortgage to this Lease, without Tenant’s consent, by notice in writing to Tenant, and thereupon this Lease shall be deemed prior to such mortgage without regard to their respective dates of execution and delivery and in that event such mortgagee shall have the same rights with respect to this Lease as though it had been executed prior to the execution and delivery of the mortgage.  Upon written request of Tenant, Landlord shall use its reasonable efforts to deliver a subordination, attornment and nondisturbance agreement (“Nondisturbance Agreement”) from Landlord’s Mortgagee, on each such mortgagee’s standard form, which shall provide, inter alia, that the leasehold estate granted to Tenant under this Lease will not be terminated or disturbed by reason of the foreclosure of the mortgage held by Landlord’s Mortgagee, so long as Tenant shall not be in default under this Lease and shall pay all sums due under this Lease without offsets or defenses thereto and shall fully perform and comply with all of the terms, covenants and conditions of this Lease on the part of Tenant to be performed and/or complied with, and in the event a mortgagee or its respective successor or assigns shall enter into and lawfully become possessed of the Premises covered by this Lease and shall succeed to the rights of Landlord hereunder, Tenant will attorn to the successor as its landlord under this Lease and, upon the request of such successor landlord, Tenant will execute and deliver an attornment agreement in favor of the successor landlord.

(b)           In the event Landlord shall be or is alleged to be in default of any of its obligations owing to Tenant under this Lease, Tenant agrees to give to the holder of any mortgage (collectively the “Mortgagee”) now or hereafter placed upon the Premises, Building and/or Project, notice by overnight mail of any such default which Tenant shall have served upon Landlord, provided that prior thereto Tenant has been notified in writing (by way of Notice of Assignment of Rents and/or Leases or otherwise in writing to Tenant) of the name and addresses of any such Mortgagee.  Tenant shall not be entitled to exercise any right or remedy as there may be because of any default by Landlord without having given such notice to the Mortgagee, if required to do so; and Tenant further agrees that if Landlord shall fail to cure such default the Mortgagee shall have thirty (30) additional days (measured from the later of the date on which the default should have been cured by Landlord or the Mortgagee’s receipt of such notice from Tenant), within which to cure such default, provided that if such default be such that the same could not be cured within such period and Mortgagee is diligently pursuing the remedies necessary to effectuate the cure (including but not limited to foreclosure proceedings if necessary to effectuate the cure); then Tenant shall not exercise any right or remedy as there may be arising because of Landlord’s default, including but not limited to, termination of this Lease as may be expressly provided for herein or available to Tenant as a matter of law, if the Mortgagee either has cured the default within such time periods, or as the case may be, has initiated the cure of same within such period and is diligently pursuing the cure of same as aforesaid.

20.           CONDEMNATION.

(a)           If more than twenty (20%) percent of the floor area of the Premises is taken or condemned for a public or quasi-public use (a sale in lieu of condemnation to be deemed a taking or condemnation for purposes of this Lease), this Lease shall, at either party’s option, terminate as of the date title to the condemned real estate vests in the condemnor, and the Fixed Rent and Additional Rent herein reserved shall be apportioned and paid in full by Tenant to Landlord to that date and all rent prepaid for period beyond that date shall forthwith be repaid by Landlord to Tenant and neither party shall thereafter have any liability hereunder.

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(b)           If less than twenty (20%) percent of the floor area of the Premises is taken or if neither Landlord nor Tenant have elected to terminate this Lease pursuant to the preceding sentence, Landlord shall do such work as may be reasonably necessary to restore the portion of the Premises not taken to tenantable condition for Tenant’s uses, but shall not be required to expend more than the net award Landlord reasonably expects to be available for restoration of the Premises.  If Landlord determines that the damages available for restoration of the Building and/or Project will not be sufficient to pay the cost of restoration, or if the condemnation damage award is required to be applied on account of any mortgage which encumbers any part of the Premises, Building and/or Project, Landlord may terminate this Lease by giving Tenant thirty (30) days prior notice specifying the termination date.

(c)           If this Lease is not terminated after any such taking or condemnation, the Fixed Rent and the Additional Rent shall be equitably reduced in proportion to the area of the Premises which has been taken for the balance of the Term.

(d)           If a part or all of the Premises shall be taken or condemned, all compensation awarded upon such condemnation or taking shall go to Landlord and Tenant shall have no claim thereto other than Tenant’s damages associated with moving, storage and relocation; and Tenant hereby expressly waives, relinquishes and releases to Landlord any claim for damages or other compensation to which Tenant might otherwise be entitled because of any such taking or limitation of the leasehold estate hereby created, and irrevocably assigns and transfers to Landlord any right to compensation of all or a part of the Premises or the leasehold estate.

21.           ESTOPPEL CERTIFICATE.

(a)   Each party agrees at any time and from time to time, within ten (10) days after the other party’s written request, to execute, acknowledge and deliver to the other party a written instrument in recordable form certifying all information reasonably requested, including but not limited to, the following: that this Lease is unmodified and in full force and effect (or if there have been modifications, that it is in full force and effect as modified and stating the modifications), the Commencement Date, the expiration date of this Lease, the square footage of the Premises, the rental rates applicable to the Premises, the dates to which Rent, Additional Rent, and other charges have been paid in advance, if any, and stating whether or not to the best knowledge of the party signing such certificate, the requesting party is in default in the performance of any covenant, agreement or condition contained in this Lease and, if so, specifying each such default of which the signer may have knowledge.  It is intended that any such certification and statement delivered pursuant to this Article may be relied upon by any prospective purchaser of the Project or any mortgagee thereof or any assignee of Landlord’s interest in this Lease or of any mortgage upon the fee of the Premises or any part thereof.

22.           DEFAULT.

If:

(a)           Tenant fails to pay any installment of Fixed Rent or any amount of Additional Rent when due; provided, however, Landlord shall provide written notice of the failure to pay such Rent and Tenant shall have a three (3) business day grace period from its receipt of such Landlord’s notice (facsimile receipt being deemed to be notice hereunder) within which to pay such Rent without creating a default hereunder.  The late fee set forth in Article 5 hereof shall be due on the first day after such payment is due irrespective of the foregoing notice and grace period.   No additional notice shall be required thereafter and Landlord shall be entitled to immediately exercise its remedies hereunder if payment is not received during the grace period,

(b)           Tenant “vacates” the Premises (other than in the case of a permitted subletting or assignment) or permits the same to be unoccupied

(c)           Tenant fails to bond over a construction or mechanics lien within the time period set forth

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in Article 11,

(d)           Tenant fails to observe or perform any of Tenant’s other non-monetary agreements or obligations herein contained within thirty (30) days after written notice specifying the default, or the expiration of such additional time period as is reasonably necessary to cure such default not to exceed sixty (60) days after written notice specifying the default, provided Tenant immediately commences and thereafter proceeds with all due diligence and in good faith to cure such default,

(e)           Tenant makes any assignment for the benefit of creditors,

(f)            a petition is filed or any proceeding is commenced against Tenant or by Tenant under any federal or state bankruptcy or insolvency law and such petition or proceeding is not dismissed within thirty (30) days,

(g)           a receiver or other official is appointed for Tenant or for a substantial part of Tenant’s assets or for Tenant’s interests in this Lease,

(h)           any attachment or execution against a substantial part of Tenant’s assets or of Tenant’s interests in this Lease remains unstayed or undismissed for a period of more than ten (10) days, or

(i)            a substantial part of Tenant’s assets or of Tenant’s interest in this Lease is taken by legal process in any action against Tenant,

then, in any such event, an Event of Default shall be deemed to exist and Tenant shall be in default hereunder.

                                If an Event of Default shall occur, the following provisions shall apply and Landlord shall have, in addition to all other rights and remedies available at law or in equity, the rights and remedies set forth therein, which rights and remedies may be exercised upon or at any time following the occurrence of an Event of Default unless, prior to such exercise, Landlord shall agree in writing with Tenant that the Event(s) of Default has been cured by Tenant in all respects.

(a)           Acceleration of Rent.  By notice to Tenant, Landlord shall have the right to accelerate all Fixed Rent and all expense installments due hereunder and otherwise payable in installments over the remainder of the Term, and, at Landlord’s option, any other Additional Rent to the extent that such Additional Rent can be determined and calculated to a fixed sum; and the amount of accelerated rent to the termination date, without further notice or demand for payment, shall be due and payable by Tenant within five (5) days after Landlord has so notified Tenant, such amount collected from Tenant shall be discounted to present value using an interest rate of six percent (6%) per annum.  Additional Rent which has not been included, in whole or in part, in accelerated rent, shall be due and payable by Tenant during the remainder of the Term, in the amounts and at the times otherwise provided for in this Lease.

Notwithstanding the foregoing or the application of any rule of law based on election of remedies or otherwise, if Tenant fails to pay the accelerated rent in full when due, Landlord thereafter shall have the right by notice to Tenant, (i) to terminate Tenant’s further right to possession of the Premises and (ii) to terminate this Lease under subparagraph (b) below; and if Tenant shall have paid part but not all of the accelerated rent, the portion thereof attributable to the period equivalent to the part of the Term remaining after Landlord’s termination of possession or termination of this Lease shall be applied by Landlord against Tenant’s obligations owing to Landlord, as determined by the applicable provisions of subparagraphs (c) and (d) below.

(b)           Termination of Lease.  By notice to Tenant, Landlord shall have the right to terminate this Lease as of a date specified in the notice of termination and in such case, Tenant’s rights, including any based on any option to renew, to the possession and use of the Premises shall end absolutely as of the termination date; and this Lease shall also terminate in all respects except for the provisions hereof regarding Landlord’s damages and Tenant’s liabilities arising prior to, out of and following the Event of Default and the ensuing termination.

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                                Following such termination and the notice of same provided above (as well as upon any other termination of this Lease by expiration of the Term or otherwise) Landlord immediately shall have the right to recover possession of the Premises; and to that end, Landlord may enter the Premises and take possession, without the necessity of giving Tenant any notice to quit or any other further notice, with or without legal process or proceedings, and in so doing Landlord may remove Tenant’s property (including any improvements or additions to the Premises which Tenant made, unless made with Landlord’s consent which expressly permitted Tenant to not remove the same upon expiration of the Term), as well as the property of others as may be in the Premises, and make disposition thereof in such manner as Landlord may deem to be commercially reasonable and necessary under the circumstances.

(c)   Tenant’s Continuing Obligations/Landlord’s  Reletting Rights.

(i)            Unless and until Landlord shall have terminated this Lease under subparagraph (b) above, Tenant shall remain fully liable and responsible to perform all of the covenants and to observe all the conditions of this Lease throughout the remainder of the Term to the early termination date; and, in addition, Tenant shall pay to Landlord, upon demand and as Additional Rent, the total sum of all costs, losses, damages and expenses, including reasonable attorneys’ fees, as Landlord incurs, directly or indirectly, because of any Event of Default having occurred.

(ii)           If Landlord either terminates Tenant’s right to possession without terminating this Lease or terminates this Lease and Tenant’s leasehold estate as above provided, then, subject to the provisions below, Landlord shall have the unrestricted right to relet the Premises or any part(s) thereof to such tenant(s) on such provisions and for such period(s) as Landlord may deem appropriate. Landlord agrees, however, to use reasonable efforts to mitigate its damages, provided that Landlord shall not be liable to Tenant for its inability to mitigate damages if it shall endeavor to relet the Premises in like manner as it offers other comparable vacant space or property available for leasing to others in the Project of which the Building is a part.  If Landlord relets the Premises after such a default, the costs recovered from Tenant shall be reallocated to take into consideration any additional rent which Landlord receives from the new tenant which is in excess to that which was owed by Tenant.

(iii)          Notwithstanding anything in this Lease to the contrary, in the event of a default under this Lease (including the filing of bankruptcy by or against Tenant), all personal property of Tenant at the Building, shall become Landlord’s property, shall constitute security of Tenant’s obligations under this Lease and shall not be removed by Tenant from the Building.

(d)           Landlord’s Damages.

(i)            The damages which Landlord shall be entitled to recover from Tenant shall be the sum of:

(A)       all Fixed Rent and Additional Rent accrued and unpaid as of the termination date; and

(B)       (i)  all costs and expenses incurred by Landlord in recovering possession of the Premises, including removal and storage of Tenant’s property, (ii) the costs and expenses of restoring the Premises to the condition in which the same were to have been surrendered by Tenant as of the expiration of the Term, and (iii) the costs of reletting commissions; and

(C)       all Fixed Rent and Additional Rent (to the extent that the amount(s) of Additional Rent has been then determined) otherwise payable by Tenant over the remainder of the Term as reduced to present value.

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Less deducting from the total determined under subparagraphs (A), (B) and (C) all Rent and all other Additional Rent to the extent determinable as aforesaid, (to the extent that like charges would have been payable by Tenant) which Landlord receives from other tenant(s) by reason of the leasing of the Premises or part during or attributable to any period falling within the otherwise remainder of the Term.

(ii)           The damage sums payable by Tenant under the preceding provisions of this paragraph (d) shall be payable on demand from time to time as the amounts are determined; and if from Landlord’s subsequent receipt of rent as aforesaid from reletting, there be any excess payment(s) by Tenant by reason of the crediting of such rent thereafter received, the excess payment(s) shall be refunded by Landlord to Tenant, without interest.

(iii)          Landlord may enforce and protect the rights of Landlord hereunder by a suit or suits in equity or at law for the specific performance of any covenant or agreement contained herein, and for the enforcement of any other appropriate legal or equitable remedy, including, without limitation, injunctive relief, and for recovery of consequential damages and all moneys due or to become due from Tenant under any of the provisions of this Lease.

(e)           Landlord’s Right to Cure.  Without limiting the generality of the foregoing, if Tenant shall be in default in the performance of any of its obligations hereunder, Landlord, without being required to give Tenant any notice or opportunity to cure, may (but shall not be obligated to do so), in addition to any other rights it may have in law or in equity, cure such default on behalf of Tenant, and Tenant shall reimburse Landlord upon demand for any sums paid or costs incurred by Landlord in curing such default, including reasonable attorneys’ fees and other legal expenses, together with interest at 10% per annum Rate from the dates of Landlord’s incurring of costs or expenses.

Tenant further waives the right to any notices to quit as may be specified in the Landlord and Tenant Act of Pennsylvania, Act of April 6, 1951, as amended, or any similar or successor provision of law, and agrees that five (5) days notice shall be sufficient in any case where a longer period may be statutorily specified.

(f)    Additional Remedies.  In addition to, and not in lieu of any of the foregoing rights granted to Landlord:

(i)            TENANT HEREBY EMPOWERS ANY PROTHONOTARY, CLERK OF COURT OR ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR TENANT IN ANY AND ALL ACTIONS WHICH MAY BE BROUGHT FOR ANY RENT, OR ANY CHARGES HEREBY RESERVED OR DESIGNATED AS RENT OR ANY OTHER SUM PAYABLE BY TENANT TO LANDLORD UNDER OR BY REASON OF THIS LEASE (INCLUDING, WITHOUT LIMITATION, ANY SUM PAYABLE UNDER SUBPARAGRAPHS (a) THROUGH (e) OF THIS ARTICLE 22, AND TO SIGN FOR TENANT AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN ACTION OR ACTIONS FOR THE RECOVERY OF SAID RENT, CHARGES AND OTHER SUMS, AND IN SAID SUIT OR IN SAID ACTION OR ACTIONS TO CONFESS JUDGMENT AGAINST TENANT FOR ALL OR ANY PART OF THE RENT SPECIFIED IN THIS LEASE AND THEN UNPAID INCLUDING, AT LANDLORD’S OPTION, THE RENT FOR THE ENTIRE UNEXPIRED BALANCE OF THE TERM OF THIS LEASE, AND ALL OR ANY PART OF ANY OTHER OF SAID CHARGES OR SUMS, AND FOR INTEREST AND COSTS TOGETHER WITH REASONABLE ATTORNEY’S FEES OF 5%.  SUCH AUTHORITY SHALL NOT BE EXHAUSTED BY ONE EXERCISE THEREOF, BUT JUDGMENT MAY BE CONFESSED AS AFORESAID FROM TIME TO TIME AS OFTEN AS ANY OF SAID RENT OR SUCH OTHER SUMS, CHARGES, PAYMENTS, COSTS AND EXPENSES SHALL FALL DUE OR BE IN ARREARS, AND SUCH POWERS MAY BE EXERCISED AS WELL AFTER THE EXPIRATION OF THE TERM OR DURING ANY EXTENSION OR RENEWAL OF THIS LEASE.

(ii)           WHEN THIS LEASE OR TENANT’S RIGHT OF POSSESSION SHALL BE TERMINATED BY COVENANT OR CONDITION BROKEN, OR FOR ANY OTHER REASON, EITHER

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DURING THE TERM OF THIS LEASE OR ANY RENEWAL OR EXTENSION THEREOF, AND ALSO WHEN AND AS SOON AS THE TERM HEREBY CREATED OR ANY EXTENSION THEREOF SHALL HAVE EXPIRED, IT SHALL BE LAWFUL FOR ANY ATTORNEY AS ATTORNEY FOR TENANT TO FILE AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN ACTION TO CONFESS JUDGMENT IN EJECTMENT AGAINST TENANT AND ALL PERSONS CLAIMING UNDER TENANT, WHEREUPON, IF LANDLORD SO DESIRES, A WRIT OF EXECUTION OR OF POSSESSION MAY ISSUE FORTHWITH, WITHOUT ANY PRIOR WRIT OF PROCEEDINGS, WHATSOEVER, AND PROVIDED THAT IF FOR ANY REASON AFTER SUCH ACTION SHALL HAVE BEEN COMMENCED THE SAME SHALL BE DETERMINED AND THE POSSESSION OF THE PREMISES HEREBY DEMISED REMAIN IN OR BE RESTORED TO TENANT, LANDLORD SHALL HAVE THE RIGHT UPON ANY SUBSEQUENT DEFAULT OR DEFAULTS, OR UPON THE TERMINATION OF THIS LEASE AS HEREINBEFORE SET FORTH, TO BRING ONE OR MORE ACTION OR ACTIONS AS HEREINBEFORE SET FORTH TO RECOVER POSSESSION OF THE SAID PREMISES.

                                In any action to confess judgment in ejectment or for rent in arrears, Landlord shall first cause to be filed in such action an affidavit made by it or someone acting for it setting forth the facts necessary to authorize the entry of judgment, of which facts such affidavit shall be conclusive evidence, and if a true copy of this Lease (and of the truth of the copy such affidavit shall be sufficient evidence) be filed in such action, it shall not be necessary to file the original as a warrant of attorney, any rule of Court, custom or practice to the contrary notwithstanding.

                                 (INITIAL).  TENANT WAIVER.  TENANT SPECIFICALLY ACKNOWLEDGES THAT TENANT HAS VOLUNTARILY, KNOWINGLY AND INTELLIGENTLY WAIVED CERTAIN DUE PROCESS RIGHTS TO A PREJUDGMENT HEARING BY AGREEING TO THE TERMS OF THE FOREGOING PARAGRAPHS REGARDING CONFESSION OF JUDGMENT.  TENANT FURTHER SPECIFICALLY AGREES THAT IN THE EVENT OF DEFAULT, LANDLORD MAY PURSUE MULTIPLE REMEDIES INCLUDING OBTAINING POSSESSION PURSUANT TO A JUDGMENT BY CONFESSION AND ALSO OBTAINING A MONEY JUDGEMENT FOR PAST DUE AND ACCELERATED AMOUNTS AND EXECUTING UPON SUCH JUDGMENT.  IN SUCH EVENT AND SUBJECT TO THE TERMS SET FORTH HEREIN, LANDLORD SHALL PROVIDE FULL CREDIT TO TENANT FOR ANY MONTHLY CONSIDERATION WHICH LANDLORD RECEIVES FOR THE LEASED PREMISES IN MITIGATION OF ANY OBLIGATION OF TENANT TO LANDLORD FOR THAT MONEY.  FURTHERMORE, TENANT SPECIFICALLY WAIVES ANY CLAIM AGAINST LANDLORD AND LANDLORD’S COUNSEL FOR VIOLATION OF TENANT’S CONSTITUTIONAL RIGHTS IN THE EVENT THAT JUDGMENT IS CONFESSED PURSUANT TO THIS LEASE.

(g)           Interest on Damage Amounts.  Any sums payable by Tenant hereunder, which are not paid after the same shall be due, shall bear interest from that day until paid at the rate of four (4%) percent over the then Prime Rate as published daily under the heading “Money Rates” in The Wall Street Journal, unless such rate be usurious as applied to Tenant, in which case the highest permitted legal rate shall apply (the “Default Rate”).

(h)           Landlord’s Statutory Rights.  Landlord shall have all rights and remedies now or hereafter existing at law or in equity with respect to the enforcement of Tenant’s obligations hereunder and the recovery of the Premises.  No right or remedy herein conferred upon or reserved to Landlord shall be exclusive of any other right or remedy, but shall be cumulative and in addition to all other rights and remedies given hereunder or now or hereafter existing at law.  Landlord shall be entitled to injunctive relief in case of the violation, or attempted or threatened violation, of any covenant, agreement, condition or provision of this Lease, or to a decree compelling performance of any covenant, agreement, condition or provision of this Lease.

(i)            Remedies Not Limited.  Nothing herein contained shall limit or prejudice the right of Landlord to exercise any or all rights and remedies available to Landlord by reason of default or to prove for and obtain in proceedings under any bankruptcy or insolvency laws, an amount equal to the maximum allowed by any law in effect at the time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount be greater, equal to, or less than the amount of the loss or damage referred to above.

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(j)            No Waiver by Landlord.  No delay or forbearance by Landlord in exercising any right or remedy hereunder, or Landlord’s undertaking or performing any act or matter which is not expressly required to be undertaken by Landlord shall be construed, respectively, to be a waiver of Landlord’s rights or to represent any agreement by Landlord to undertake or perform such act or matter thereafter.  Waiver by Landlord of any breach by Tenant of any covenant or condition herein contained (which waiver shall be effective only if so expressed in writing by Landlord) or failure by Landlord to exercise any right or remedy in respect of any such breach shall not constitute a waiver or relinquishment for the future of Landlord’s right to have any such covenant or condition duly performed or observed by Tenant, or of Landlord’s rights arising because of any subsequent breach of any such covenant or condition nor bar any right or remedy of Landlord in respect of such breach or any subsequent breach.  Landlord’s receipt and acceptance of any payment from Tenant which is tendered not in conformity with the provisions of this Lease or following an Event of Default (regardless of any endorsement or notation on any check or any statement in any letter accompanying any payment) shall not operate as an accord and satisfaction or a waiver of the right of Landlord to recover any payments then owing by Tenant which are not paid in full, or act as a bar to the termination of this Lease and the recovery of the Premises because of Tenant’s previous default.

23.           LANDLORD’S LIEN.

In addition to any applicable common law or statutory lien, none of which are to be deemed waived by Landlord, Landlord shall have, at all times, and Tenant hereby grants to Landlord, a valid lien and security interest to secure payment of all rentals and other sums of money becoming due hereunder from Tenant, and to secure payment of any damages or loss which Landlord may suffer by reason of the breach by Tenant of any covenant, agreement or condition contained herein, upon all goods, wares, equipment, fixtures, furniture, improvements and other personal property of Tenant which may hereafter be situated on the Premises, and all proceeds therefrom, and such property shall not be removed therefrom without the consent of Landlord until all arrearage in Rent as well as any and all other sums of money then due to Landlord hereunder shall first have been paid and discharged and all the covenants, agreements and conditions hereof have been fully complied with and performed by Tenant.  Landlord covenants and agrees to subordinate the lien granted hereunder to any commercial lender which Tenant grants a security interest.  Upon the occurrence of an Event of Default by Tenant, but subject to Tenant’s lender rights, if any, after the expiration of all stated notice and cure periods, Landlord may, in addition to any other remedies provided herein, peaceably enter upon the Premises and take possession of any and all goods, wares, equipment, fixtures, furniture, improvements and other personal property of Tenant situated on the Premises, without liability for trespass or conversion, and sell the same at public or private sale, with or without having such property at the sale, after giving Tenant reasonable notice of time and place of any public sale or of the time after which any private sale is to be made, at which sale Landlord or its assigns may purchase unless otherwise prohibited by law.  Unless otherwise provided by law, and without intending to exclude any other manner of giving Tenant reasonable notice, the requirement of reasonable notice shall be met if such notice is given in the manner prescribed in Article 28 of this Lease at least five (5) days before the time of sale.  The proceeds from any such disposition, less all expenses connected with the taking of possession, holding and selling of the property (including reasonable attorney’s fees and other expenses), shall be applied as a credit against the indebtedness secured by the security interest granted in this Article 23.  Any surplus shall be paid to Tenant or as otherwise required by law; and Tenant shall pay any deficiencies forthwith.  Upon request by Landlord, Tenant agrees to execute and deliver to Landlord a financing statement in form sufficient to perfect the security interest of Landlord in the aforementioned property and proceeds thereof under the provisions of the Uniform Commercial Code in force in the Commonwealth of Pennsylvania.  Notwithstanding the foregoing, the parties acknowledge and agree that Tenant’s lender may have superior rights to the property noted herein.  After notice by Landlord in accordance with Article 28 hereof, Tenant shall use its best efforts to obtain, within forty-five (45) days of such notice, a waiver of all such rights from its lender in this regard, and, failing to obtain such waiver, that Tenant shall use its best efforts to obtain from such lender, the right to grant a subordinated lien to Landlord in such goods, second only to the lien of such lender.

24.           LANDLORD’S REPRESENTATIONS AND WARRANTIES.

                                Landlord represents and warrants to Tenant that:  (a) Landlord is the owner of the Building and the

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Project; (b) Landlord has the authority to enter into this Lease and (c) the person executing this Lease is duly authorized to execute and deliver this Lease on behalf of Landlord.

25.           SURRENDER.

                Tenant shall, at the expiration of the Term, promptly quit and surrender the Premises in good order and condition and in conformity with the applicable provisions of this Lease, excepting only reasonable wear and tear and damage by fire or other insured casualty.  Tenant shall have no right to hold over beyond the expiration of the Term and in the event Tenant shall fail to deliver possession of the Premises as herein provided, such occupancy shall not be construed to effect or constitute other than a tenancy at sufferance.  During any period of occupancy  beyond the expiration of the Term the amount of rent owed to Landlord by Tenant shall automatically become two hundred percent (200%) the sum of the Rent as those sums are at that time calculated under the provisions of the Lease.  If Tenant fails to surrender the space within thirty (30) days of the termination date, Landlord may elect to automatically extend the Term for an additional month or additional year, at Landlord’s option, with a Rent of two hundred percent (200%) the sum of the Rent as those sums are at that time calculated under the provisions of the Lease.  The acceptance of rent by Landlord or the failure or delay of Landlord in notifying or evicting Tenant following the expiration or sooner termination of the Term shall not create any tenancy rights in Tenant and any such payments by Tenant may be applied by Landlord against its costs and expenses, including attorney’s fees, incurred by Landlord as a result of such holdover.

26.           RULES AND REGULATIONS.

                                Tenant agrees that at all times during the terms of this Lease (as same may be extended) it, its employees, agents, invitees and licenses shall comply with all rules and regulations as Landlord may from time to time promulgate provided they do not increase the financial burdens of Tenant or unreasonably restrict Tenant’s rights under this Lease.  Tenant’s right to dispute the reasonableness of any changes in or additions to the Rules and Regulations shall be deemed waived unless asserted to Landlord within ten (10) business days after Landlord shall have given Tenant written notice of any such adoption or change.  In case of any conflict or inconsistency between the provisions of this Lease and any Rules and Regulations, the provisions of this Lease shall control.  Landlord shall have no duty or obligation to enforce any Rule and Regulation, or any term, covenant or condition of any other lease, against any other tenant, and Landlord’s failure or refusal to enforce any Rule or Regulation or any term, covenant of condition of any other lease against any other tenant shall be without liability of Landlord to Tenant.  However, if Landlord does enforce Rules or Regulations, Landlord shall endeavor to enforce same equally in a non-discriminatory manner.

27.           GOVERNMENTAL REGULATIONS.

(a)   Tenant shall, in the use and occupancy of the Premises and the conduct of Tenant’s business or profession therein, at all times comply with all applicable laws, ordinances, orders, notices, rules and regulations of the federal, state and municipal governments, or any of their departments and the regulations of the insurers of the Premises, Building and/or Project.

(b)   Without limiting the generality of the foregoing, Tenant shall (i) obtain, at Tenant’s expense, before engaging in Tenant’s business or profession within the Premises, all necessary licenses and permits including (but not limited to) state and local business licenses or permits, and (ii) remain in compliance with and keep in full force and effect at all times all licenses, consents and permits necessary for the lawful conduct of Tenant’s business or profession at the Premises.  Tenant shall pay all personal property taxes, income taxes and other taxes, assessments, duties, impositions and similar charges which are or may be assessed, levied or imposed upon Tenant and which, if not paid, could be liened against the Premises or against Tenant’s property therein or against Tenant’s leasehold estate.

(c)   Landlord shall be responsible for compliance with Title III of the Americans with Disabilities Act of l990, 42 U.S.C. ‘12181 et seq. and its regulations, (collectively, the “ADA”) (i) as to the design and

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construction of exterior common areas (e.g. sidewalks and parking areas) and (ii) with respect to the initial design and construction of the Premises.  Except as set forth above in the initial sentence hereto, Tenant shall be responsible for compliance with the ADA in all other respects concerning the use and occupancy of the Premises, which compliance shall include, without limitation (i) provision for full and equal enjoyment of the goods, services, facilities, privileges, advantages or accommodations of the Premises as contemplated by and to the extent required by the ADA, (ii) compliance relating to requirements under the ADA or amendments thereto arising after the date of this Lease and (iii) compliance relating to the design, layout, renovation, redecorating, refurbishment, alteration, or improvement to the Premises made or requested by Tenant at any time following the Commencement Date.

28.           NOTICES.

(a)   Wherever in this Lease it shall be required or permitted that notice or demand be given or served by either party to this Lease to or on the other party, such notice or demand shall be deemed to have been duly given or served if in writing and either: (i) personally served; (ii) delivered by pre-paid nationally recognized overnight courier service (e.g. Federal Express) with evidence of receipt required for delivery; (iii) forwarded by Registered or Certified mail, return receipt requested, postage prepaid; (iv) facsimile with a copy mailed by first class United States mail or (v) e-mailed with evidence of receipt and delivery of a copy of the notice by first class mail; in all such cases addressed to the parties at the addresses set forth in Article 1(k) hereof.  Each such notice shall be deemed to have been given to or served upon the party to which addressed on the date the same is delivered or delivery is refused.  Either party hereto may change its address to which said notice shall be delivered or mailed by giving written notice of such change to the other party hereto, as herein provided.

29.           BROKERS.

                Landlord and Tenant each represents and warrants to the other that such party has had no dealings, negotiations or consultations with respect to the Premises or this transaction with any broker or finder; and that otherwise no broker or finder called the Premises to Tenant’s attention for lease or took any part in any dealings, negotiations or consultations with respect to the Premises or this Lease.  Each party agrees to indemnify and hold the other harmless from and against all liability, cost and expense, including attorney’s fees and court costs, arising out of any misrepresentation or breach of warranty under this Article.

30.           CHANGE OF BUILDING/PROJECT NAME.

                                Landlord reserves the right at any time and from time to time to change the name by which the Building and/or Project is designated.

31.           LANDLORD’S LIABILITY.

                                Landlord’s obligations hereunder shall be binding upon Landlord only for the period of time that Landlord is in ownership of the Building; and, upon termination of that ownership, Tenant, except as to any obligations which are then due and owing, shall look solely to Landlord’s successor in interest in the Building for the satisfaction of each and every obligation of Landlord hereunder.  Landlord shall have no personal liability under any of the terms, conditions or covenants of this Lease and Tenant shall look solely to the equity of Landlord in the Building of which the Premises form a part for the satisfaction of any claim, remedy or cause of action accruing to Tenant as a result of the breach of any section of this Lease by Landlord.  In addition to the foregoing, no recourse shall be had for an obligation of Landlord hereunder, or for any claim based thereon or otherwise in respect thereof, against any past, present or future trustee, member, partner, shareholder, officer, director, partner, agent or employee of Landlord, whether by virtue of any statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such other liability being expressly waived and released by Tenant with respect to the above-named individuals and entities.

32.           AUTHORITY.

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                                Tenant represents and warrants that (a) Tenant is duly organized, validly existing and legally authorized to do business in the Commonwealth of Pennsylvania, and (b) the persons executing this Lease are duly authorized to execute and deliver this Lease on behalf of Tenant.

33.           NO OFFER.

                                The submission of the Lease by Landlord to Tenant for examination does not constitute a reservation of or option for the Premises or of any other space within the Building or in other buildings owned or managed by Landlord or its affiliates.  This Lease shall become effective as a Lease only upon the execution and legal delivery thereof by both parties hereto.

34.           RENEWAL.

                                Provided Tenant is neither in default at the time of exercise nor has Tenant ever been in default (irrespective of the fact that Tenant cured such default) of any monetary obligations under this Lease more than twice during the Term and such monetary default aggregates in excess of $60,000, and Tenant is fully occupying the Premises and the Lease is in full force and effect, Tenant shall have the right to renew this Lease for one (1) term of five (5) years each beyond the end of the initial Term (each, a “Renewal Term”).  Tenant shall furnish written notice of intent to renew one (1) year prior to the expiration of the applicable Term, failing which, such renewal right shall be deemed waived; time being of the essence.   The terms and conditions of this Lease during each Renewal Term shall remain unchanged except that the annual Fixed Rent for each Renewal Term shall be the greater of (i) the Fixed Rent for the term expiring, and (ii) Fair Market Rent (as such term is hereinafter defined), with in any event, annual increases.  All factors regarding Additional Rent shall remain unchanged, and no Tenant allowance shall be included in the absence of further agreement by the parties.  Anything herein contained to the contrary notwithstanding, Tenant shall have no right to renew the term hereof other than or beyond the one (1) consecutive five (5) year term hereinabove described.  It shall be a condition of each such Renewal Term that Landlord and Tenant shall have executed, not less than six (6) months prior to the expiration of the then expiring term hereof, an appropriate amendment to this Lease, in form and content satisfactory to each of them, memorializing the extension of the term hereof for the next ensuing Renewal Term.

For purposes of this Lease, “Fair Market Rent” shall mean the base rent, for comparable space, net of all free or reduced rent periods, work letters, cash allowances, fit-out periods and other tenant inducement concessions however denominated except as hereinafter provided.  In determining the Fair Market Rent, Landlord, Tenant and any appraiser shall take into account applicable measurement and the loss factors, applicable lengths of lease term, differences in size of the space demised, the location of the Building and comparable buildings, amenities in the Building and comparable buildings, the ages of the Building and comparable buildings, differences in base years or stop amounts for operating expenses and tax escalations and other factors normally taken into account in determining Fair Market Rent.  The Fair Market Rent shall reflect the level of improvement made or to be made by Landlord to the space under this Lease.  If Landlord and Tenant cannot agree on the Fair Market Rent, the Fair Market Rent shall be established by the following procedure: (1) Tenant and Landlord shall agree on a single MAI certified appraiser who shall have a minimum of ten (10) years experience in real estate leasing in the market in which the Premises is located, (2) Landlord and Tenant shall each notify the other (but not the appraiser), of its determination of such Fair Market Rent and the reasons therefor, (3) during the next seven (7) days both Landlord and Tenant shall prepare a written critique of the other’s determination and shall deliver it to the other party, (4) on the tenth (10th) day following delivery of the critiques to each other, Landlord’s and Tenant’s determinations and critiques (as originally submitted to the other party, with no modifications whatsoever) shall be submitted to the appraiser, who shall decide whether Landlord’s or Tenant’s determination of Fair Market Rent is more correct.  The determinations so chosen shall be the Fair Market Rent.  The appraiser shall not be empowered to choose any number other than the Landlord’s or Tenant’s.  The fees of the appraiser shall be paid by the non-prevailing party.

35.           INTENTIONALLY OMITTED.

36.           TENANT FINANCIAL INFORMATION.

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                                Any time and from time to time during the Term (but not more than once during any twelve month period unless a default has occurred under this Lease or Landlord has a reasonable basis to suspect that Tenant has suffered a material adverse change in its financial position) upon not less than thirty (30) days prior written request from Landlord, Tenant shall deliver to Landlord: (i) a current, accurate, complete and detailed balance sheet of Tenant (dated no more than thirty (30) days prior to such delivery), a profit and loss statement, a cash flow summary and all relevant accounting footnotes, all prepared in accordance with generally accepted accounting principles consistently applied and certified by the Chief Financial Officer of Tenant to be a fair and true presentation of Tenant’s current financial position; and (ii) a current, accurate, complete and detailed financial statements of Tenant audited by an independent certified public accountant for the last applicable calendar year.  Tenant agrees that its failure to strictly comply with this Article 38 shall constitute a material Default by Tenant under this Lease.  Landlord shall keep all information provided hereunder strictly confidential.

37.           MISCELLANEOUS PROVISIONS.

(a)           Successors.  The respective rights and obligations provided in this Lease shall bind and inure to the benefit of the parties hereto, their successors and assigns; provided, however, that no rights shall inure to the benefit of any successors or assigns of Tenant unless Landlord’s written consent for the transfer to such successor and/or assignee has first been obtained as provided in Article 12 hereof.

(b)           Governing Law.  This Lease shall be construed, governed and enforced in accordance with the laws of the Commonwealth of Pennsylvania, without regard to principles relating to conflicts of law.

(c)           Severability.  If any provisions of this Lease shall be held to be invalid, void or unenforceable, the remaining provisions hereof shall in no way be affected or impaired and such remaining provisions shall remain in full force and effect.

(d)           Captions.  Marginal captions, titles or exhibits and riders and the table of contents in this Lease are for convenience and reference only, and are in no way to be construed as defining, limiting or modifying the scope or intent of the various provisions of this Lease.

(e)           Gender.  As used in this Lease, the word “person” shall mean and include, where appropriate, an individual, corporation, partnership or other entity; the plural shall be substituted for the singular, and the singular for the plural, where appropriate; and the words of any gender shall mean to include any other gender.

(f)            Entire Agreement.  This Lease, including the Exhibits and any Riders hereto (which are hereby incorporated by this reference, except that in the event of any conflict between the printed portions of this Lease and any Exhibits or Riders, the term of such Exhibits or Riders shall control), supersedes any prior discussions, proposals, negotiations and discussions between the parties and the Lease contains all the agreements, conditions, understandings, representations and warranties made between the parties hereto with respect to the subject matter hereof, and may not be modified orally or in any manner other than by an agreement in writing signed by both parties hereto or their respective successors in interest.  Without in any way limiting the generality of the foregoing, this Lease can only be extended pursuant to the terms hereof, and in Tenant’s case, with the terms hereof, with the due exercise of an option (if any) contained herein pursuant to a written agreement signed by both Landlord and Tenant specifically extending the term.  No negotiations, correspondence by Landlord or offers to extend the term shall be deemed an extension of the termination date for any period whatsoever.

(g)           Counterparts.  This Lease may be executed in any number of counterparts, each of which when taken together shall be deemed to be one and the same instrument.

(h)           Telefax Signatures.  The parties acknowledge and agree that notwithstanding any law or presumption to the contrary a telefaxed signature of either party whether upon this Lease or any related document

24

shall be deemed valid and binding and admissible by either party against the other as if same were an original ink signature.

(i)            Calculation of Time.  In computing any period of time prescribed or allowed by any provision of this Lease, the day of the act, event or default from which the designated period of time begins to run shall not be included.  The last day of the period so computed shall be included, unless it is a Saturday, Sunday or a legal holiday, in which event the period runs until the end of the next day which is not a Saturday, Sunday, or legal holiday.  Unless otherwise provided herein, all Notices and other periods expire as of 5:00 p.m. (local time in Newtown Square, Pennsylvania) on the last day of the Notice or other period.

(j)            No Merger.  There shall be no merger of this Lease or of the leasehold estate hereby created with the fee estate in the Premises or any part thereof by reason of the fact that the same person, firm, corporation, or other legal entity may acquire or hold, directly or indirectly, this Lease of the leasehold estate and the fee estate in the Premises or any interest in such fee estate, without the prior written consent of Landlord’s mortgagee.

(k)           Time of the Essence.  TIME IS OF THE ESSENCE IN ALL PROVISIONS OF THIS LEASE, INCLUDING ALL NOTICE PROVISIONS TO BE PERFORMED BY OR ON BEHALF OF TENANT.

(l)            Recordation of Lease.  Tenant shall not record this Lease without the written consent of

Landlord.

(m)          Accord and Satisfaction.  No payment by Tenant or receipt by Landlord of a lesser amount than any payment of Fixed Rent or Additional Rent herein stipulated shall be deemed to be other than on account of the earliest stipulated Fixed Rent or Additional Rent due and payable hereunder, nor shall any endorsement or statement or any check or any letter accompanying any check or payment as Rent be deemed an accord and satisfaction.  Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such Rent or pursue any other right or remedy provided for in this Lease, at law or in equity.

(n)           No Partnership.  Landlord does not, in any way or for any purpose, become a partner of Tenant in the conduct of its business, or otherwise, or joint venturer or a member of a joint enterprise with Tenant.  This Lease establishes a relationship solely of that of a landlord and tenant.

(o)           Guaranty.  In order to induce Landlord to execute this Lease, Tenant agrees that Landlord may, at its option, at the time of the execution of this Lease or at any time during the Term, require a guaranty of the obligations of the Tenant hereunder by a person, firm, corporation, or other entity other than Tenant but with a business interest in Tenant, acceptable to Landlord, which guaranty shall be in a form satisfactory to Landlord.

(p)           No Presumption Against Drafter.  Landlord and Tenant understand, agree, and acknowledge that:  (i) this Lease has been freely negotiated by both parties; and (ii) that, in the event of any controversy, dispute, or contest over the meaning, interpretation, validity, or enforceability of this Lease, or any of its terms or conditions, there shall be no inference, presumption, or conclusion drawn whatsoever against either party by virtue of that party having drafted this Lease or any portion thereof.

(q)           Force Majeure.     If by reason of strikes or other labor disputes, fire or other casualty (or reasonable delays in adjustment of insurance), accidents, orders or regulations of any Federal, State, County or Municipal authority, or any other cause beyond Landlord’s reasonable control, Landlord is unable to furnish or is delayed in furnishing any utility or service required to be furnished by Landlord under the provisions of this Lease or is unable to perform or make or is delayed in performing or making any installations, decorations, repairs, alterations, additions or improvements, or is unable to fulfill or is delayed in fulfilling any of Landlord’s other obligations under this Lease, no such inability or delay shall constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of Rent, except as provided in section 18(e) hereof, or

25

relieve Tenant from any of its other obligations under this Lease, or impose any liability upon Landlord or its agents, by reason of inconvenience or annoyance to Tenant, or injury to or interruption of Tenant’s business, or otherwise.

38.           WAIVER OF TRIAL BY JURY.

                                LANDLORD AND TENANT WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS LEASE.  THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY TENANT AND TENANT ACKNOWLEDGES THAT NEITHER LANDLORD NOR ANY PERSON ACTING ON BEHALF OF LANDLORD HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT.  TENANT FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS LEASE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.  TENANT FURTHER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION AND AS EVIDENCE OF SAME HAS EXECUTED THIS LEASE.

39.           CONSENT TO JURISDICTION.

                                Tenant hereby consents to the exclusive jurisdiction of the state courts located in Montgomery, Delaware and Philadelphia County and to the federal courts located in the Eastern District of Pennsylvania.

IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and year first above written.

LANDLORD:	TENANT:
353 ASSOCIATES	GMH CAPITAL PARTNERS COMMERCIAL REALTYSERVICES, LP
By:  GH 353 Associates, Inc., its general partner	By:  GH CP Commercial Realty Services, LLC, its general partner
By:  /s/ Joseph M. Macchione	By:  /s/ Bruce Robinson
Name:  Joseph M. Macchione	Name: Bruce Robinson
Title:   Vice President	Title:   Vice President
	GMH CAPITAL PARTNERS ASSETSERVICES, LP
	By:  GH CP Asset Services, LLC, its general partner
	By:  /s/ Bruce Robinson
	Name: Bruce Robinson
	Title:   Vice President

26

GMH PHILADELPHIA BARRAGE, LLC

By:  /s/ Gary M. Holloway

Name: Gary M. Holloway

Title:   Sole Member

GMH CONSTRUCTION COMPANY, INC.

By:  /s/ Bruce Robinson

Name: Bruce Robinson

Title:   Vice President

GMH ASSOCIATES, INC.

By:  /s/ Bruce Robinson

Name: Bruce Robinson

Title:   Vice President

27

EX-10.4

Exhibit 10.4

FIRST AMENDMENT TO LEASE

                THIS FIRST AMENDMENT TO LEASE (this “Amendment”) is made as of the 1st day of November, 2005 (the “Effective Date”), by and between 353 ASSOCIATES, a Pennsylvania limited partnership (“Landlord”) and GMH CAPITAL PARTNERS COMMERCIAL REALTY SERVICES, LP, a Delaware limited partnership, GMH CAPITAL PARTNERS ASSET SERVICES, LP, a Delaware limited partnership, GMH PHILADELPHIA BARRAGE, LLC, a Delaware limited liability company, GMH CONSTRUCTION COMPANY, INC., a Florida corporation, and GMH ASSOCIATES, INC., a Pennsylvania corporation (collectively referred to herein as “Tenant”).

BACKGROUND

                A.            Landlord and Tenant entered into a certain Lease dated as of November 2, 2004 (the “Lease”), pursuant to which Landlord leased a portion of the first floor of that certain building located at 10 Campus Boulevard, Newtown Square, Pennsylvania (as more particularly described in the Lease, the “Premises”).  Capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Lease.

                B.            Landlord and Tenant desire to amend the Lease to, among other things, (i) reduce the size of the Premises and, accordingly, adjust the Fixed Rent, (ii) provide that Tenant shall be responsible for cleaning the Building in exchange for a credit against Fixed Rent, (iii) provide that Tenant shall be responsible for oversight of the build-out of a portion of the first floor of the Building in exchange for a one-time credit against Fixed Rent, and (iv) otherwise modify and amend the Lease as set forth in this Amendment.

                NOW, THEREFORE, in consideration of the mutual covenants and conditions herein set forth and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1.             Cleaning Services Schedule.  Schedule 14(h) attached to this Amendment is hereby incorporated into the Lease.

2.             Construction Oversight Services Schedule.  Schedule 40 attached to this Amendment is hereby incorporated into the Lease.

3.             Premises.  Article 1(c) of the Lease is hereby deleted in its entirety and replaced with the following:

                “(c)         “Premises”: A portion of the Building which the parties stipulate and agree is a 7,682 rentable square foot portion of the first floor of the Building, the location of which shall be confirmed by the parties pursuant to a site sketch to be delivered to Tenant by Landlord upon finalization of architectural drawings and specifications.”

1

4.             Fixed Rent.  Article 1(e) of the Lease is hereby deleted in its entirety and replaced with the following:

                “(e)         “Fixed Rent”:

LEASE YEAR	PER R.S.F.	MONTHLY INSTALLMENT	ANNUAL FIXED RENT
Months 1-60	$25.00	$16,004.16	$192,050.00

5.             Rentable Area. Article 1(h) of the Lease is hereby deleted in its entirety and replaced with the following:

                “(h)         “Rentable Area”:  Premises 7,682 sq. ft.”

6.             Fixed Rent.  The following Section (d) is hereby inserted at the end of Article 5 of the Lease:

                “(d)         The monthly installments of Fixed Rent as set forth in Article 1(e) of this Lease shall be reduced by the Cleaning Services Fee (as hereinafter defined) and the Construction Oversight Fee (as hereinafter defined).  To the extent that the rent credits received by Tenant for the Cleaning Services Fee and the Construction Oversight Fee exceed the Fixed Rent for the month that the build-out of the first floor of the Building is substantially completed (the “Substantial Completion Month”), such amount shall be carried forward and applied against the monthly installment of Fixed Rent for the month following the Substantial Completion Month.”

7.             Repairs and Maintenance.  The following Section (h) is hereby inserted at the end of Article 14 of the Lease:

                “(h)         Tenant shall provide cleaning services for the Building Monday through Friday of each week in accordance with the scope of services attached hereto as Schedule 14(h) (the “Cleaning Services”).  As provided in Section 5(d) of the Lease, Tenant shall receive a monthly credit against monthly installments of Fixed Rent in the amount of $3,023.26 per month (the “Cleaning Services Fee”) in consideration of the Cleaning Services.”

8.             Construction Oversight.  The following Article 40 is hereby inserted into the Lease:

                “40.         CONSTRUCTION OVERSIGHT.

                In connection with Landlord’s build-out of a portion of the first floor of the Building, Tenant shall provide the construction oversight services listed on Schedule 40 of this Lease (the “Construction Oversight Services”).  As provided in Section 5(d) of the Lease, Tenant shall receive a fee equal to Fifteen Thousand Dollars ($15,000) (the “Construction Oversight Fee”) in consideration of the Construction Oversight Services. 

2

The Construction Oversight Fee shall be paid upon substantial completion of the build-out in the form of a credit against monthly installments of Fixed Rent.”

9.             Ratification of Lease.  Except as specifically modified by this Amendment, all of the provisions of the Lease are hereby ratified and confirmed to be in full force and effect, and shall remain in full force and effect.

10.           Binding Effect.  This Amendment shall be binding upon, and shall inure to the benefit of Landlord and Tenant and their respective heirs, executors, personal representatives, administrators, successors and permitted assigns.  This Amendment represents the complete understandings between the parties hereto as to the subject matter hereof, and supersedes all prior negotiations, representations, warranties, promises, statements or amendments, either oral or written, among the parties hereto as to the subject matter hereof.  This Amendment may only be amended by a written instrument executed by both Landlord and Tenant.

11.           Inconsistency. In the event of any inconsistency between the Lease and this Amendment, the provisions of this Amendment shall control, and all other provisions of the Lease shall remain in full force and effect.

12.           Governing Law.  This Amendment shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania.

[Remainder of page intentionally left blank; signature pages follows.]

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of the date and year first above written.

LANDLORD:
353 ASSOCIATES
By:  GH 353 Associates, Inc., its general partner
By:		/s/ Joseph M. Macchione
Name: Joseph M. Macchione
Title: Vice President
Date: November 11, 2005
TENANT:
GMH CAPITAL PARTNERS COMMERCIAL REALTY SERVICES, LP
By:			GH CP Commercial Realty Services, LLC, its general partner
By:		/s/ Gary M. Holloway, Sr.
Name: Gary M. Holloway, Sr.
Title: President
Date: November 11, 2005
GMH CAPITAL PARTNERS ASSET SERVICES, LP
By:  GH CP Asset Services, LLC, its general partner
By:		/s/ Gary M. Holloway, Sr.
Name: Gary M. Holloway, Sr.
Title: President
Date: November 11, 2005
GMH PHILADELPHIA BARRAGE, LLC
By:	/s/ Gary M. Holloway, Sr.
Name: Gary M. Holloway, Sr.
Title: President
Date: November 11, 2005

4

GMH CONSTRUCTION COMPANY, INC.
By:	/s/ Gary M. Holloway, Sr.
Name: Gary M. Holloway, Sr.
Title: President
Date: November 11, 2005
GMH ASSOCIATES, INC.
By:	/s/ Gary M. Holloway, Sr.
Name: Gary M. Holloway, Sr.
Title: President
Date: November 11, 2005

5

Schedule 14(g)

CLEANING SERVICES

GMH CORPORATE OFFICE

NEWTOWN SQUARE, PA

Cleaning Specifications

A.Entrance Lobby

Daily

i)All stone ceramic tile, marble, terrazzo, and other flooring to be dust mopped or swept.

ii)Wet mop to remove spillage and other damaging dirt or grit on hard surface floors with attention to areas under walk off mats.

iii)Sweep and/or vacuum entrance mats and spot clean.

iv)All carpeting and rugs to be vacuumed and spots to be removed.

v)Hand dust or wipe clean all furniture.

vi)All walls, doors, window sills, ledges, elevator doors, (up to and including 65” high partitions) to be removed of smudges, fingerprints and splash marks.

vii)Thoroughly wash, clean all entrance door glass inside and out. Clean all entrance frames and ledges.

viii)Wipe clean all chrome, aluminum, brass and other metal work.

ix)Dust and/or wash clean all directory board display glass.

x)Sweep all aprons.

xi)Empty exterior ashtrays and police for debris.

Weekly

i)Complete all high and low dusting including picture frames,

baseboards, moldings, door frames and position network/framework in

level condition.

                Monthly

i)Vacuum all upholstery furniture and place correctly in an organized

               manner.

ii)Dust wipe clean all diffusers and ceiling ventilators.

iii)Dust clean all horizontal mini-blinds.

iv)Detail vacuum all carpeted areas including corners and edges under desks.

v)Maintain marble surfaces as per manufacturers specifications.

B.General Office Areas

Daily

i)Hand dust all furniture, fixtures, filing cabinets and other dust gathering pbjects, Desks to be dusted provided that are in acceptable condition.

ii)Spot clean walls, doors, window sills, ledges and wall areas.

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iii)Dust all tops of open space office partitions.

iv)Empty and clean all waste receptacles (recyclable and non-recyclable) replacing liners when necessary. Trash can liners to be neatly arranged. Remove waste to be designated central location for disposal.

v)All carpeting and rugs in traffic areas to be vacuumed and spots removed.

vi)All vinyl and similar type flooring to be dust mopped. Spot mop to remove spillage

vii)Interior partition glass to be spot cleaned.

Weekly

i)Dust clean all vertical surfaces such as walls, partitions, doors and any other surfaces not reached in nightly cleaning.

ii)All VCT and similar type flooring to be wet mopped.

iii)Wash all cleared desk tops and polish.

Monthly

i)Complete all high and low dusting including picture frames, baseboards, moldings, door frames and position artwork/frames in level condition.

ii)Vacuum all upholstered furniture and place correctly in an organized manner.

iii)Dust clean all diffusers and ceiling ventilators.

iv)Dust clean all horizontal mini-blinds.

v)Detail; vacuum all carpeted areas including corners, and edges under desks.

vi)Spray buff all VCT flooring.

Quarterly

i)Strip and recoat or top coat all VCT flooring.

C.Conference Rooms & Executive Offices

        Daily

i)Hand dust and wipe clean all furniture and place correctly in an organized manner.

ii)Spot clean all walls, doors, window sills, ledges and wall areas in accessible condition.

iii)All carpeting and rugs to be vacuumed and spots removed.

iv)Interior partition glass to be spot cleaned.

v)Empty and clean waste receptacles replacing plastic liners when necessary, Trash can liners to be neatly arranged.

Weekly

i)Dust all vertical surfaces such as walls, partitions, doors and other surfaces not reached in nightly cleaning.

Monthly

i)Complete all high and low dusting including picture frames, baseboards, moldings, door frames and position artwork/frames in level condition.

ii)Vacuum all upholstered furniture and place correctly in an organized manner.

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iii)Dust clean all diffusers and ceiling ventilators.

iv)Dust clean all horizontal mini blinds.

D.Common Areas

Daily

i)All VCT and similar types of flooring to be swept using approved dust down preparation. Spot mop to remove spillage.

ii)Maintain common area floors and walls in clean condition.

iii)All carpeting and rugs to be thoroughly vacuumed and spots to be removed.

iv)Dust and sanitize public telephones (where applicable).

Quarterly

i)Clean carpet in GMH common areas.

E. Cafeteria/Kitchen area/Coffee Areas

                Daily

i)Damp wipe tables and chairs.

ii)Dry and wet mop all floors in front of service areas (where applicable).

iii)Clean microwave ovens inside and outside (where applicable).

iv)Vacuum and spot clean all carpeted areas (where applicable).

v)Empty and clean all waste receptacles (recyclable and non-recyclables), replacing liners when necessary. Trash can liners to be neatly arranged.

vi)All glassware in kitchen area shall be put in dishwasher.

Monthly

i)Complete all high and low dusting including picture frames, baseboards, moldings, door frames and position artwork/frames in level condition.

ii)Vacuum all upholstered furniture and place correctly in an organized manner.

iii)Dust clean all horizontal miniblinds.

iv)Detail; vacuum all carpeted areas including corners, and edges under desks.

v)Spray buff all VCT flooring.

Quarterly

i) Strip and recoat or top scrub and top coat all VCT flooring.

F. Restrooms

                Daily

i)Sweep and wet mop floors with an approved germicidal element.

ii)Polish all mirrors, bright work and enameled surfaces.

iii)Wash and disinfect all basins, bowls, and urinals inside and out. Toilet seats to be cleaned on both sides.

iv)Hand dust and clean partitions, tops of ledges, all towel, paper and sanitary napkin dispensers and receptacles.

v)Clean air ventilating louvers whenever soil is visible.

vi)Refill all toilet tissue, soap, sanitary napkins and towel dispensers. Cleaning service to supply.

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vii)Empty and clean thoroughly all waste receptacles removing plastic liners when necessary.

Weekly

i)Wash all restroom stall partitions and walls adjacent to fixtures.

Quarterly

i)Machine scrub restroom floors.

G. Elevators

                Daily

i)Carpeting to be vacuumed and spots removed.

ii)Thoroughly clean interior of elevator cabs. Use crevice tool for corner vacuuming.

iii)Dust and wipe elevator doors.

iv)Remove gum and foreign matter.

H. Stairwells

                Daily

i)Police for debris.

ii)Spot mop stairs and landing or vacuum and remove stains if carpeted.

Weekly

i)Thoroughly weep stairs and landings (where applicable).

ii)Thoroughly wet mop stairs and landings (where applicable).

iii)All handrails to be dusted.

iv)Thoroughly vacuum stairs and landings (where applicable).

I. Drinking Fountains/Water Coolers

        Daily

i)Thoroughly wash, clean and sanitize all drinking fountains and water coolers. Polish chrome and stainless steel.

9

Schedule 40

CONSTRUCTION OVERSIGHT SERVICES

•Budget Management

-Qualify ability to complete based on Landlord’s requirement

-Formulate and install control system

-Continued monitoring during design phase

•Contract Management

-Contracts as management tools

-Procurement due diligence

-Define construction requirements

-Refine contract language

-Refine terms and conditions

•Change Order Administration

-Past experience develops effective systems

-Proper interpretation and documentation

-Avoidance techniques

•Project Management

-Complete operational aspects of project delivery

-Successful interaction of participants

-Coordination of team efforts

•Schedule Management

-Program schedule

-Meet scheduling objectives

-Chart progress/performance

•Project Controls/Audits

-Analyze processes

-Review documentation

10

EX-31.1

Exhibit 31.1

GMH COMMUNITIES TRUST

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

CERTIFICATIONS

I, Gary M. Holloway, Sr., certify that:

1.I have reviewed this quarterly report on Form 10-Q of GMH Communities Trust;

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;

bEvaluated 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; and

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: November 14, 2005	/s/ Gary M. Holloway, Sr.
	Gary M. Holloway, Sr.
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

GMH COMMUNITIES TRUST

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

CERTIFICATIONS

I, Bradley W. Harris, certify that:

1.I have reviewed this quarterly report on Form 10-Q of GMH Communities Trust;

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; and

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: November 14, 2005	/s/ Bradley W. Harris
	Bradley W. Harris
	Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

GMH COMMUNITIES TRUST

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

I, Gary M. Holloway, Sr., President and Chief Executive Officer of GMH Communities Trust, a Maryland real estate investment trust (the “Company”), hereby certify that, to my knowledge:

(1)           The Company’s periodic report on Form 10-Q for the period ended September 30, 2005 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2)           The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

*        *        *

/s/ Gary M. Holloway, Sr.

Gary M. Holloway, Sr.

President and Chief Executive Officer

Date: November 14, 2005

EX-32.2

Exhibit 32.2

GMH COMMUNITIES TRUST

CERTIFICATIONS REQUIRED BY

RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

I, Bradley W. Harris, Senior Vice President and Chief Financial Officer of GMH Communities Trust, a Maryland real estate investment trust (the “Company”), hereby certify that, to my knowledge:

(1)           The Company’s periodic report on Form 10-Q for the period ended September 30, 2005 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(2)           The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

*        *        *

/s/ Bradley W. Harris

Bradley W. Harris

Senior Vice President

and Chief Financial Officer

Date: November 14, 2005