~~PART I.~~

~~FINANCIAL INFORMATION~~

~~ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~CHAMBERS STREET PROPERTIES~~Gramercy Property Trust

Condensed Consolidated Balance Sheets

~~as of March 31, 2015~~(Amounts in thousands, except share and ~~December 31, 2014~~per share data)


PART I.	FINANCIAL INFORMATION


ITEM I.	FINANCIAL STATEMENTS

~~(In Thousands, Except Share Data)~~

March 31, December 31,
2015 2014
(unaudited)
ASSETS
Investments in Real Estate:
Land $ 630,783
$ 630,840
Land Available for Expansion 24,992
23,368
Buildings and Improvements 1,685,019
1,674,955
2,340,794
2,329,163
Less: Accumulated Depreciation and Amortization (257,510 ) (239,973 )
Net Investments in Real Estate 2,083,284
2,089,190
Investments in Unconsolidated Entities 394,738
423,693
Cash and Cash Equivalents 44,658
40,139
Restricted Cash 15,186
14,718
Tenant and Other Receivables, Net 11,676
11,216
Deferred Rent 41,071
39,429
Deferred Leasing Costs and Intangible Assets, Net 208,614
220,490
Deferred Financing Costs, Net 8,555
9,321
Prepaid Expenses and Other Assets 19,385
21,612
Total Assets $ 2,827,167
$ 2,869,808
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Secured Notes Payable, Net $ 581,706
$ 610,608
Unsecured Term Loan Facilities 570,000
570,000
Unsecured Revolving Credit Facility 235,044
200,044
Accounts Payable, Accrued Expenses and Other Liabilities 74,786
76,421
Intangible Liabilities, Net 25,067
26,248
Prepaid Rent and Security Deposits 16,939
15,569
Distributions Payable 10,075
9,951
Total Liabilities 1,513,617
1,508,841
COMMITMENTS AND CONTINGENCIES (NOTE 13)

SHAREHOLDERS' EQUITY
Common Shares of Beneficial Interest, $0.01 par value, 990,000,000 shares authorized; 236,861,496 and 236,920,675 issued and outstanding as of March 31, 2015 and December 31, 2014, respectively 2,366
2,364
Additional Paid-in-Capital 2,073,109
2,071,526
Accumulated Deficit (713,877 ) (689,654 )
Accumulated Other Comprehensive Loss (48,048 ) (23,269 )
Total Shareholders' Equity 1,313,550
1,360,967
Total Liabilities and Shareholders' Equity $ 2,827,167
$ 2,869,808



	March 31, 2016			December 31, 2015
Assets:
Real estate investments, at cost:
Land	$	683,110		$	702,557
Building and improvements	3,279,424			3,313,747
Less: accumulated depreciation	(114,389		)	(84,627		)
Total real estate investments, net	3,848,145			3,931,677
Cash and cash equivalents	67,124			128,031
Restricted cash	166,552			17,354
Investment in unconsolidated equity investments	527,269			580,000
Servicing advances receivable	—			1,382
Retained CDO bonds	8,786			7,471
Assets held for sale, net	10,548			420,485
Tenant and other receivables, net	43,209			34,234
Acquired lease assets, net of accumulated amortization of $84,671 and $54,323	631,048			682,174
Deferred costs, net of accumulated amortization of $1,558 and $892	17,152			13,950
Goodwill	3,477			3,568
Other assets	24,999			14,192
Total assets	$	5,348,309		$	5,834,518
Liabilities and Equity:
Liabilities:
Senior unsecured revolving credit facility	$	122,760		$	296,724
Exchangeable senior notes, net	107,205			106,581
Mortgage notes payable, net	491,360			530,222
Senior unsecured notes, net	148,935			99,124
Senior unsecured term loans, net	1,225,000			1,225,000
Total long-term debt, net	2,095,260			2,257,651
Accounts payable and accrued expenses	29,667			59,808
Dividends payable	46,790			8,980
Accrued interest payable	5,860			4,546
Deferred revenue	36,041			36,031
Below market lease liabilities, net of accumulated amortization of $21,240 and $17,083	238,115			242,456
Liabilities related to assets held for sale	376			291,364
Derivative instruments, at fair value	27,461			3,442
Other liabilities	9,060			8,271
Total liabilities	2,488,630			2,912,549
Commitments and contingencies
Noncontrolling interest in operating partnership	11,334			10,892
Equity:
Common shares, par value $0.01, 421,500,741 and 420,523,153 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively.	4,215			4,205
Series A cumulative redeemable preferred shares, par value $0.01, liquidation preference $87,500, 3,500,000 shares authorized, issued and outstanding at March 31, 2016.	84,394			84,394
Additional paid-in-capital	3,880,925			3,879,932
Accumulated other comprehensive loss	(20,527		)	(5,751		)
Accumulated deficit	(1,100,285		)	(1,051,454		)
Total shareholders' equity	2,848,722			2,911,326
Noncontrolling interest in other partnerships	(377		)	(249		)
Total equity	2,848,345			2,911,077
Total liabilities and equity	$	5,348,309		$	5,834,518

~~See accompanying notes to consolidated financial statements.~~

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

Gramercy Property Trust

Condensed Consolidated Statements of Operations

~~For the Three Months Ended March 31, 2015 and 2014 (unaudited)~~

(~~In Thousands, Except Share~~Amounts in thousands, except share and per ~~Share Data)~~share data)



	Three Months Ended March 31,
	2016			2015
Revenues
Rental revenue	$	92,095		$	31,190
Third-party management fees	5,046			8,186
Operating expense reimbursements	22,582			8,138
Investment income	443			238
Other income	379			183
Total revenues	120,545			47,935
Operating Expenses
Property operating expenses	24,169			8,383
Property management expenses	4,521			5,166
Depreciation and amortization	58,248			18,698
General and administrative expenses	7,722			4,773
Acquisition and merger-related expenses	410			3,506
Total operating expenses	95,070			40,526
Operating Income	25,475			7,409
Other Expense:
Interest expense	(21,953		)	(6,270		)
Equity in net loss of unconsolidated equity investments	(2,755		)	(1		)
Loss on extinguishment of debt	(5,757		)	—
Income (loss) from continuing operations before provision for taxes	(4,990		)	1,138
Provision for taxes	(703		)	(1,114		)
Income (loss) from continuing operations	(5,693		)	24
Income (loss) from discontinued operations	2,710			(62		)
Gain on extinguishment of debt	1,930			—
Income (loss) from discontinued operations	4,640			(62		)
Net loss	(1,053		)	(38		)
Net loss attributable to noncontrolling interest	120			42
Net income (loss) attributable to Gramercy Property Trust	(933		)	4
Preferred share dividends	(1,559		)	(1,559		)
Net loss available to common shareholders	$	(2,492	)	$	(1,555	)
Basic earnings per share:
Net loss from continuing operations, after preferred dividends	$	(0.02	)	$	(0.01	)
Net income from discontinued operations	0.01			—
Net loss available to common shareholders	$	(0.01	)	$	(0.01	)
Diluted earnings per share:
Net loss from continuing operations, after preferred dividends	$	(0.02	)	$	(0.01	)
Net income from discontinued operations	0.01			—
Net loss available to common shareholders	$	(0.01	)	$	(0.01	)
Basic weighted average common shares outstanding	420,181,216			149,115,357
Diluted weighted average common shares and common share equivalents outstanding	420,181,216			149,115,357

Three Months Ended
March 31,
2015 2014
REVENUES
Rental $ 54,346
$ 51,876
Tenant Reimbursements 16,439
15,220
Other Property Income 198
1,069
Total Revenues 70,983
68,165
EXPENSES
Property Operating 9,781
9,553
Real Estate Taxes 10,782
9,801
General and Administrative 9,873
6,864
Acquisition-Related —
290
Depreciation and Amortization 27,920
27,238
Total Expenses 58,356
53,746
Income Before Other (Expenses) Income 12,627
14,419
OTHER EXPENSES AND INCOME
Interest and Other Income 80
167
Interest Expense (13,059 ) (14,061 )
Interest Expense and Net Change in Fair Value of Non-Qualifying Derivative Financial Instruments 17
26
Total Other (Expenses) (12,962 ) (13,868 )
(Loss) Income Before Provision for Income Taxes and Equity in Income of Unconsolidated Entities (335 ) 551
Provision For Income Taxes (176 ) (58 )
Equity in Income of Unconsolidated Entities 6,505
2,826
NET INCOME 5,994
3,319
Basic and Diluted Net Income per Share $ 0.03
$ 0.01
Weighted Average Common Shares Outstanding - Basic 236,940,134
236,583,752
Weighted Average Common Shares Outstanding - Diluted 236,963,354
236,583,752
Dividends Declared per Common Share $ 0.128
$ 0.126

~~See accompanying notes to consolidated financial statements.~~

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

Gramercy Property Trust

Condensed Consolidated Statements of Comprehensive Income (Loss)

~~For the Three Months Ended March 31, 2015~~(Amounts in thousands)



	Three Months Ended March 31,
	2016			2015
Net loss	$	(1,053	)	$	(38	)
Other comprehensive income (loss):
Unrealized gain on debt securities and derivative instruments:
Unrealized gain on available for sale debt securities	934			5,750
Unrealized loss on derivative instruments	(22,189		)	(2,132		)
Foreign currency translation adjustments	6,119			(218		)
Reclassification of unrealized loss of terminated derivative instruments into earnings	360			—
Other comprehensive income (loss)	(14,776		)	3,400
Comprehensive income (loss)	(15,829		)	3,362
Net loss attributable to noncontrolling interest	120			42
Other comprehensive (income) loss attributable to noncontrolling interest	48			(38		)
Comprehensive income (loss) attributable to Gramercy Property Trust	$	(15,661	)	$	3,366

Gramercy Property Trust

Condensed Consolidated Statements of Shareholders’ Equity (Deficit) and ~~2014 (unaudited)~~Noncontrolling Interests

(~~In Thousands)~~Amounts in thousands, except share data)

Three Months Ended
March 31,
2015 2014
NET INCOME $ 5,994
$ 3,319
Foreign Currency Translation (Loss) Gain (18,736 ) 823
Swap Fair Value Adjustments (6,043 ) (2,761 )
COMPREHENSIVE (LOSS) INCOME (18,785 ) 1,381

~~See accompanying notes to consolidated financial statements.~~



	Common Shares			Preferred Shares		Additional Paid-In-Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings / (Accumulated Deficit)			Total Gramercy Property Trust			Noncontrolling interest
	Shares	Par Value		Preferred Shares		Additional Paid-In-Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings / (Accumulated Deficit)			Total Gramercy Property Trust			Noncontrolling interest			Total
Balance at December 31, 2015	420,523,153	$	4,205	$	84,394	$	3,879,932		$	(5,751	)	$	(1,051,454	)	$	2,911,326		$	(249	)	$	2,911,077
Net loss	—	—		—		—			—			(933		)	(933		)	(112		)	(1,045		)
Change in net unrealized loss on derivative instruments	—	—		—		—			(22,189		)	—			(22,189		)	—			(22,189		)
Change in net unrealized gain on debt securities	—	—		—		—			934			—			934			—			934
Reclassification of unrealized gain of terminated derivative instruments into earnings	—	—		—		—			360			—			360			—			360
Share based compensation - fair value	860,103	9		—		1,510			—			—			1,519			—			1,519
Proceeds from share options exercised	47,844	—				167									167						167
Conversion of Legacy OP Units to common shares	69,641	1		—		523			—			—			524			—			524
Reallocation of noncontrolling interest in the operating partnership	—	—		—		(1,207		)	—			—			(1,207		)	—			(1,207		)
Foreign currency translation adjustment	—	—		—		—			6,119			—			6,119			(16		)	6,103
Dividends on preferred shares	—	—		—		—			—			(1,559		)	(1,559		)	—			(1,559		)
Dividends on common shares	—	—		—		—			—			(46,339		)	(46,339		)	—			(46,339		)
Balance at March 31, 2016	421,500,741	$	4,215	$	84,394	$	3,880,925		$	(20,527	)	$	(1,100,285	)	$	2,848,722		$	(377	)	$	2,848,345

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

Gramercy Property Trust

Condensed Consolidated Statements of Cash Flows

~~For the Three Months Ended March 31, 2015 and 2014 (unaudited)~~(Amounts in thousands)

~~(In Thousands)~~

Three Months Ended
March 31,
2015 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 5,994
$ 3,319
Adjustments to Reconcile Net Income to Net Cash Flows Provided by Operating Activities:
Equity in Income of Unconsolidated Entities (6,505 ) (2,826 )
Distributions from Unconsolidated Entities 10,225
10,076
Gain on Interest Rate Swaps (17 ) (26 )
Prepaid Tenant Improvement Amortization (365 ) —
Lease Inducement Amortization 252
—
Depreciation and Amortization 27,920
27,238
Amortization of Non-Cash Interest Expense (380 ) (104 )
Amortization of Above and Below Market Leases 975
1,482
Share-Based Compensation 4,038
1,012
Straight-Line Rent Adjustment (1,668 ) (1,291 )
Changes in Operating Assets and Liabilities:
Tenant and Other Receivables (465 ) (1,297 )
Prepaid Expenses and Other Assets 102
337
Accounts Payable, Accrued Expenses and Other Liabilities (3,874 ) (6,185 )
Net Cash Flows Provided by Operating Activities 36,232
31,735
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Real Property (1,715 ) (27,450 )
Distributions from Unconsolidated Entities 7,407
10,186
Restricted Cash (468 ) 3,021
Lease Commissions (322 ) (1,396 )
Improvements to Investments in Real Estate (10,446 ) (398 )
Net Cash Flows Used in Investing Activities (5,544 ) (16,037 )
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase and Cancellation of Vested Shares (3,240 ) (247 )
Payment of Distributions (30,093 ) (29,797 )
Borrowings on Unsecured Revolving Credit Facility 35,000
10,000
Principal Payments on Unsecured Revolving Credit Facility —
(10,000 )
Principal Payments on Secured Notes Payable (27,757 ) (23,991 )
Payment of Financing Costs —
(62 )
Net Cash Flows Used in Financing Activities (26,090 ) (54,097 )
EFFECT OF FOREIGN CURRENCY TRANSLATION (79 ) (43 )
Net Increase (Decrease) in Cash and Cash Equivalents 4,519
(38,442 )
Cash and Cash Equivalents, Beginning of the Period 40,139
83,007
Cash and Cash Equivalents, End of the Period $ 44,658
$ 44,565
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Period for Interest $ 13,694
$ 14,298
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Distributions Declared and Payable $ 10,075
$ 9,954
Accounts Payable and Accrued Expenses—Construction In Progress $ 3,715
$ 58
Deferred Revenue Due to Cash Trap Provision $ 377
$ —
Reserve for Cash Held by Lenders $ 839
$ —

~~See accompanying notes to consolidated financial statements.~~

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~Consolidated Statements of Equity~~

~~For the Three Months Ended March 31, 2015 and 2014 (unaudited)~~

~~(In Thousands, Except Share Data)~~

Common Shares
Additional
Paid-in-
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Loss

Total
Shareholders’
Equity
Shares Amount
Balance at January 1, 2015 236,920,675
$ 2,364
$ 2,071,526
$ (689,654 ) $ (23,269 ) $ 1,360,967
Net Income —
—
—
5,994
—
5,994
Other Comprehensive Loss —
—
—
—
(24,779 ) (24,779 )
Share-Based Compensation 350,000
6
3,328
—
—
3,334
Repurchase and Cancellation of Vested Shares (409,179 ) (4 ) (3,236 ) —
—
(3,240 )
Non-Cash Amortization of Share-Based Compensation —
—
1,491
—
—
1,491
Distributions Declared ($0.128 per share) —
—
—
(30,217 ) —
(30,217 )
Balance at March 31, 2015 236,861,496
$ 2,366
$ 2,073,109
$ (713,877 ) $ (48,048 ) $ 1,313,550



	Three Months Ended March 31,
	2016			2015
Operating Activities:
Net loss	$	(1,053	)	$	(38	)
Adjustments to net cash provided by operating activities:
Depreciation and amortization	58,248			18,698
Amortization of acquired leases to rental revenue and expense	(163		)	(3,947		)
Amortization of deferred costs	2,675			601
Amortization of discounts and other fees	(1,109		)	(222		)
Amortization of lease inducement costs	86			44
Straight-line rent adjustment	(6,761		)	(2,172		)
Distributions received from unconsolidated equity investments	9,961			103
Equity in net loss of unconsolidated equity investments	2,755			1
Loss on extinguishment of debt	3,827			—
Amortization of share-based compensation	1,150			733
Changes in operating assets and liabilities:
Restricted cash	5,598			(451		)
Payment of capitalized leasing costs	(3,973		)	(143		)
Tenant and other receivables	(2,151		)	(6,124		)
Accrued interest	(8		)	(10		)
Other assets	(10,519		)	7,686
Accounts payable, accrued expenses and other liabilities	(33,738		)	(147		)
Deferred revenue	(3,077		)	3,841
Net cash provided by operating activities	21,748			18,443
Investing Activities:
Capital expenditures	(6,416		)	(1,196		)
Distributions received from unconsolidated equity investments	47,408			—
Proceeds from sale of real estate	416,094			—
Restricted cash held in escrow for 1031 exchange	(145,500		)	—
Contributions to unconsolidated equity investments	(4,790		)	(602		)
Acquisition of real estate	(52,874		)	(423,147		)
Restricted cash for tenant improvements	198			(5,631		)
Proceeds from repayments of servicing advances receivable	1,390			—
Net cash provided by (used in) investing activities	255,510			(430,576		)
Financing Activities:
Proceeds from unsecured term loans and revolving credit facility	—			235,000
Proceeds from unsecured credit facility	75,000			—
Proceeds from senior unsecured notes	50,000			—
Repayment of unsecured term loans and revolving credit facility	(250,000		)	—
Proceeds from mortgage notes payables	9,550			—
Repayment of mortgage notes payable	(198,189		)	(971		)
Offering costs	—			(331		)
Proceeds from sale of common stock	—			16,173
Payment of deferred financing costs	(551		)	(3,248		)
Payment of debt extinguishment costs	(13,803		)
Preferred shares dividends paid	(1,559		)	(1,559		)
Common shares dividends paid	(8,736		)	(9,354		)
Proceeds from exercise of stock options and employee purchase under the employee share purchase plan	167			14
Contributions from noncontrolling interests in other entities	—			169
Distribution to noncontrolling interest holders	(29		)	(117		)
Change in restricted cash from financing activities	(12		)	(12		)
Net cash provided by (used in) financing activities	(338,162		)	235,764
Net decrease in cash and cash equivalents	(60,904		)	(176,369		)
Decrease in cash and cash equivalents related to foreign currency translation	(3		)	15
Cash and cash equivalents at beginning of period	128,031			200,069
Cash and cash equivalents at end of period	$	67,124		$	23,715

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

Common Shares
Additional
Paid-in-
Capital

Accumulated
Deficit

Accumulated
Other
Comprehensive
Income (Loss)

Total
Shareholders’
Equity
Shares Amount
Balance at January 1, 2014 236,463,981
$ 2,359
$ 2,067,008
$ (589,313 ) $ 4,596
$ 1,484,650
Net Income —
—
—
3,319
—
3,319
Other Comprehensive Loss —
—
—
—
(1,938 ) (1,938 )
Share-Based Compensation 578,425
1
1,011
—
—
1,012
Repurchase and Cancellation of Vested Shares (31,959 ) —
(247 ) —
—
(247 )
Distributions Declared ($0.126 per share) —
—
—
(29,820 ) —
(29,820 )
Balance at March 31, 2014 237,010,447
$ 2,360
$ 2,067,772
$ (615,814 ) $ 2,658
$ 1,456,976

~~See accompanying notes to consolidated financial statements.~~

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

1. ~~Organization~~Business and ~~Nature of Business~~Organization

~~Chambers Street Properties (NYSE: CSG) is~~Gramercy Property Trust, or the Company or Gramercy, a ~~self-administered~~Maryland real estate investment trust, ~~("REIT") that focuses on~~or REIT, is a leading global investor and asset manager of commercial real estate. Gramercy specializes in acquiring ~~owning~~ and managing single-tenant, net leased industrial, office, and ~~office~~specialty properties. The Company focuses on income producing properties leased to ~~creditworthy tenants. We were formed~~high quality tenants in major markets in the United States and Europe.

Gramercy earns revenues primarily through three sources: (i) rental revenues on properties that it owns in the United States, (ii) asset management revenues on properties owned by third parties in the United States and Europe and (iii) pro-rata rental revenues on its unconsolidated equity investments in the United States, Europe, and Asia.

On December 17, 2015, Chambers Street Properties, or Chambers, a Maryland REIT, completed a merger, or the Merger, with Gramercy Property Trust Inc., or Legacy Gramercy, a Maryland corporation, pursuant to which Legacy Gramercy stockholders received 3.1898 common shares of beneficial interest of Chambers for each share of common stock of Legacy Gramercy held. Following the Merger, Chambers changed its name to “Gramercy Property Trust” and began trading on the New York Stock Exchange, or NYSE, using the “GPT” stock symbol.

In the Merger, Chambers was the legal acquirer and Legacy Gramercy was the accounting acquirer for financial reporting purposes. Thus, the financial information set forth herein subsequent to the close of the Merger on December 17, 2015 reflects results of the combined company, and financial information prior to the close of the Merger reflects Legacy Gramercy results. For this reason, period to period comparisons may not be meaningful. Refer to Note 4 for additional information on the Merger.

Unless the context requires otherwise, all references to “Company,” “Gramercy,” “we,” “our,” and “us” mean Legacy Gramercy and one or more of the Company’s subsidiaries for the period prior to the Merger closing and Gramercy Property Trust and one or more of the Company’s subsidiaries for periods following the Merger closing.

As of March 31, 2016, the Company owns, either directly or in an unconsolidated equity investment, a portfolio of 316 industrial, office, and specialty properties with 98.7% occupancy. Tenants include Bank of America, N.A., Healthy Way of Life II, LLC (d.b.a Life Time Fitness), Amazon.com, Inc., JPMorgan Chase Bank, N.A. Nuance Communications, Inc. and others. As of March 31, 2016, the Company’s asset management business, which operates under the ~~laws~~name Gramercy Asset Management, manages for third-parties approximately $900,000 of commercial real estate assets, including approximately $459,000 of assets in Europe.

During the ~~state~~three months ended March 31, 2016, the Company acquired three properties aggregating 621,646 square feet in two separate transactions for a total purchase price of ~~Maryland on~~approximately $52,750.

During the three months ended March ~~30, 2004, and have~~31, 2016, the Company sold nine properties aggregating 2,095,194 square feet for total gross proceeds of approximately $531,500.

As of March 31, 2016, the Company’s wholly-owned portfolio of net leased properties is summarized as follows:



Property Type	Number of Properties	Rentable Square Feet	Occupancy
Industrial	154	34,384,245	98.4	%
Office	113	9,865,700	98.8	%
Specialty retail	9	1,187,258	100.0	%
Total	276	45,437,203	98.5	%

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

The Company has elected to be taxed as a REIT under ~~sections~~the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code or IRC, and generally will not be subject to U.S. federal income taxes to the extent it distributes its taxable income, if any, to its shareholders. The Company has in the past established, and may in the future establish taxable REIT subsidiaries, or TRSs, to effect various taxable transactions. Those TRSs would incur U.S. federal, state and local taxes on the taxable income from their activities.

The Company’s operating partnership, GPT Operating Partnership LP, or the Operating Partnership, indirectly owns (i) all of the Company’s consolidated real estate investments, (ii) the Company’s interests in unconsolidated investments and (iii) the entities, primarily a TRS, that conduct the Company’s third-party asset management operations. The Company is the sole general partner and 100% owner of the Operating Partnership. The Operating Partnership is the 100% owner of all of its direct and indirect subsidiaries, except that, as of March 31, 2016, third-party holders of limited partnership interests in Legacy Gramercy’s operating partnership, the entity that owns substantially all of Legacy Gramercy’s assets and investments, owned approximately 0.32% of the beneficial interest of the Company. These interests are referred to as the noncontrolling interests in Legacy Gramercy’s operating partnership. See Note 12 for more information on the Company’s noncontrolling interests.

2. Significant Accounting Policies

Basis of Quarterly Presentation

The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, it does not include all of the information and footnotes required by GAAP for complete financial statements. In management’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. The 2016 operating results for the period presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The Condensed Consolidated Balance Sheet at December 31, 2015 has been derived from the audited Consolidated Financial Statements at that date.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation. During the first quarter of 2016, the Company adopted ASU 2015-03, Simplifying the Presentation of Debt Issuances Costs, which requires the Company to reclassify debt financing costs, which were previously accounted for on the deferred costs line within the asset section, and present them in the balance sheet as a direct deduction from the carrying amount of the corresponding debt liability, with the exception of deferred financing costs associated with the credit facility which remain in deferred costs in the asset section on the Condensed Consolidated Balance Sheets. Deferred financing costs totaling $6,389 have been reclassified in the December 31, 2015 Condensed Consolidated Balance Sheet from the deferred costs line and netted against the corresponding debt liability. See “Recently Issued Accounting Pronouncements” below for further discussion of the new accounting guidance for deferred financing costs.

Principles of Consolidation

The Condensed Consolidated Financial Statements include the Company’s accounts and those of the Company’s subsidiaries which are wholly-owned or controlled by the Company, or entities which are variable interest entities, or VIEs, in which the Company is the primary beneficiary. The primary beneficiary is the party that absorbs a majority of the VIE’s anticipated losses and/or a majority of the expected returns. The Company has evaluated its investments for potential classification as variable interests by evaluating the sufficiency of each entity’s equity investment at risk to absorb losses.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

Entities which the Company does not control and are considered VIEs, but where the Company is not the primary beneficiary, are accounted for under the equity method. All significant intercompany balances and transactions have been eliminated. The equity interests of other limited partners in the Company’s operating partnerships are reflected as noncontrolling interests.

Real Estate Investments

The Company records acquired real estate investments as business combinations when the real estate is occupied, at least in part, at acquisition. Costs directly related to the acquisition of such investments are expensed as incurred. The Company allocates the purchase price of real estate to land, building, improvements and intangibles, such as the value of above- and below-market leases, and origination costs associated with the in-place leases at the acquisition date. The values of the above- and below-market leases are amortized and recorded as either an increase, in the case of below-market leases, or a decrease, in the case of above-market leases, to rental revenue over the remaining term of the associated lease. The values associated with in-place leases are amortized to depreciation and amortization expense over the remaining term of the associated lease.

The Company assesses the fair value of the leases at acquisition based upon estimated cash flow projections that utilize appropriate discount rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property. Additionally, for transactions that are business combinations, the Company evaluates the existence of goodwill or a gain from a bargain purchase at the time of acquisition.

Acquired real estate investments involving sale-leasebacks that have newly-originated leases are recorded as asset acquisitions and accordingly, transaction costs incurred in connection with the acquisition are capitalized. Acquired real estate investments which are under construction are considered build-to-suit transactions and other acquired real estate investments that do not meet the definition of a business combination are recorded at cost. In build-to-suit transactions, the Company engages a developer to construct a property or provides funds to a tenant to develop a property. The Company capitalizes the funds provided to the developer/tenant and real estate taxes, if applicable, during the construction period.

Certain improvements are capitalized when they are determined to increase the useful life of the building. Depreciation is computed using the straight-line method over the shorter of the estimated useful life at acquisition of the capitalized item or 40 years for buildings, five to ten years for building equipment and fixtures, and the lesser of the useful life or the remaining lease term for tenant improvements and leasehold interests. Maintenance and repair expenditures are charged to expense as incurred.

In leasing space, the Company may provide funding to the lessee through a tenant allowance. If the Company is considered the owner of the leasehold improvements constructed using a tenant allowance, the Company capitalizes the amount of the allowance and depreciates it over the shorter of the useful life of the leasehold improvements or the lease term. If the tenant allowance represents a payment for a purpose other than funding leasehold improvements, or if the Company is not considered the owner of the improvements for accounting purposes, the allowance is considered to be a lease incentive and is recognized over the lease term as a reduction of rental revenue.

The Company also reviews the recoverability of the property’s carrying value when circumstances indicate a possible impairment of the value of a property, expected to result from the property’s use and eventual disposition. If management determines impairment exists due to the inability to recover the carrying value of a property, an impairment loss is recorded in the Condensed Consolidated Statements of Operations to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used and for assets held for sale, an impairment loss is recorded to the extent that the carrying value exceeds the fair value less estimated cost of disposal. The estimated fair value of the asset becomes its new cost basis and if the asset is to be held and used, the new cost basis will be depreciated or amortized over its remaining useful life.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

Intangible Assets and Liabilities

The Company follows the acquisition method of accounting for business combinations. The Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respective fair values. Tangible assets include land, buildings and improvements on an as-if vacant basis and identifiable intangible assets include amounts allocated to acquired leases for above- and below-market lease rates, the value of in-place leases, and above-market and below-market ground rent intangibles.

The above- and below-market lease values are amortized as a reduction of and increase to rental revenue, respectively, over the remaining non-cancelable terms of the respective leases. The value of in-place leases is amortized to depreciation and amortization expense over the remaining non-cancelable term of the respective leases. To the extent acquired leases contain fixed rate renewal options that are below-market and determined to be material, the Company amortizes such below-market lease value into rental revenue over the renewal period. If a tenant terminates its lease prior to its contractual expiration and no future rental payments will be received, any unamortized balance of the market lease intangibles will be written off to rental revenue and any unamortized balance of the in-place lease intangibles will be written off to depreciation and amortization expense. The above- and below-market ground rent intangible values are amortized as a reduction of and increase to rent expense, respectively, over the remaining non-cancelable terms of the respective leases. If the Company terminates its lease prior to its contractual expiration and no future rent payments will be paid, any unamortized balance of the ground rent intangibles will be written off to rent expense.

Intangible assets and liabilities consist of the following:



	March 31, 2016		December 31, 2015
Intangible assets:
In-place leases, net of accumulated amortization of $75,613 and $49,125	$	550,230	$	644,540
Above-market leases, net of accumulated amortization of $8,879 and $5,051	75,614		94,202
Below-market ground rent, net of accumulated amortization of $179 and $147	5,204		5,236
Amounts related to assets held for sale, net of accumulated amortization of $0	—		(61,804		)
Total intangible assets	$	631,048	$	682,174
Intangible liabilities:
Below-market leases, net of accumulated amortization of $21,068 and $16,934	$	234,617	$	255,452
Above-market ground rent, net of accumulated amortization of $172 and $149	3,498		3,522
Amounts related to liabilities of assets held for sale, net of accumulated amortization of $0	—		(16,518		)
Total intangible liabilities	$	238,115	$	242,456

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

The following table provides the weighted-average amortization period as of March 31, 2016 for intangible assets and liabilities and the projected amortization expense for the next five years.



	Weighted-Average Amortization Period	April 1 to December 31, 2016			2017			2018			2019			2020
In-place leases	9.5	$	75,472		$	86,996		$	74,517		$	61,701		$	49,432
Total to be included in depreciation and amortization expense		$	75,472		$	86,996		$	74,517		$	61,701		$	49,432
Above-market lease assets	7.5	$	11,295		$	13,173		$	11,553		$	9,987		$	7,557
Below-market lease liabilities	20.3	(12,380		)	(13,071		)	(12,768		)	(12,517		)	(12,250		)
Total to be included in rental revenue		$	(1,085	)	$	102		$	(1,215	)	$	(2,530	)	$	(4,693	)

Below-market ground rent	42.1	$	95		$	127		$	127		$	127		$	127
Above-market ground rent	37.3	(70		)	(94		)	(94		)	(94		)	(94		)
Total to be included in property operating expense		$	25		$	33		$	33		$	33		$	33

The Company recorded $27,560 and $7,997 of amortization of in-place lease intangible assets as part of depreciation and amortization for the three months ended March 31, 2016 and 2015, respectively. The Company recorded $181 and $3,945 of amortization of market lease intangible assets and liabilities as an increase (decrease) to rental revenue for the three months ended March 31, 2016 and 2015, respectively. The Company recorded $9 and $39 of amortization of ground rent intangible assets and liabilities as a reduction to other property operating expense for the three months ended March 31, 2016 and 2015, respectively.

Goodwill

Goodwill represents the fair value of the collaboration expected to be achieved upon consummation of a business combination and is measured as the excess of consideration transferred over the net assets acquired at acquisition date. The Company initially recognized goodwill of $3,887 related to the acquisition of Gramercy Europe Asset Management, however during the second quarter of 2015, as a result of finalization of the purchase price allocation for the acquisition, the Company decreased the amount allocated to goodwill by $85 and thus the final purchase price allocation to goodwill as a result of the acquisition was $3,802. The adjustment to goodwill for the finalized purchase price was primarily related to a reduction in the contract intangible value as well as an increase in the accrued income recorded for incentive fees. The carrying value of goodwill is adjusted each reporting period for the effect of foreign currency translation adjustments. The carrying value of goodwill at March 31, 2016 and December 31, 2015 was $3,477 and $3,568, respectively. The Company’s goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company takes a qualitative approach to consider whether an impairment of goodwill exists prior to quantitatively determining the fair value of the reporting unit in step one of the impairment test. The Company did not record any impairment on its goodwill during the three months ended March 31, 2016 or 2015.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

Unconsolidated Equity Investments

The Company accounts for substantially all of its unconsolidated equity investments under the equity method of accounting since it exercises significant influence, but does not unilaterally control the entities, and is not considered to be the primary beneficiary. In unconsolidated equity investments, the rights of the other investors are protective and participating. Unless the Company is determined to be the primary beneficiary, these rights preclude it from consolidating the investments. The investments are recorded initially at cost as unconsolidated equity investments, as applicable, and subsequently are adjusted for equity interest in net income (loss) and cash contributions and distributions. The amount of the investments on the Condensed Consolidated Balance Sheets is evaluated for impairment at each reporting period. None of the unconsolidated equity investment debt is recourse to the Company. Transactions with unconsolidated equity method entities are eliminated to the extent of the Company’s ownership in each such entity. Accordingly, the Company’s share of net income (loss) of these equity method entities is included in consolidated net income (loss).

The Company’s 5.07% investment in CBRE Strategic Partners Asia, the Company’s unconsolidated equity investment described more in Note 5, is presented in the Condensed Consolidated Financial Statements at fair value. CBRE Strategic Partners Asia is an investment company that accounts for its investments at fair value with changes in the fair value of the investments recorded in the statement of operations. See the “Fair Value Measurements” section of Note 2 as well as Note 9, “Fair Value Measurements,” for further discussion of the fair value accounting methodology used for CBRE Strategic Partners Asia.

Carrying values of the Company’s unconsolidated equity investments were $527,269 and $580,000 at March 31, 2016 and December 31, 2015, respectively.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.

Restricted Cash

The Company had restricted cash of $166,552 and $17,354 at March 31, 2016 and December 31, 2015, respectively, which primarily consists of proceeds from property sales held by qualified intermediaries to be used for tax-deferred, like-kind exchanges under IRC Section 1031, as well as reserves for certain capital improvements, leasing, interest and real estate tax and insurance payments as required by certain mortgage loan obligations.

Variable Interest Entities

During the first quarter of 2016, the Company adopted ASU 2015-02, Amendments to the Consolidation Analysis, which modified the analysis it must perform to determine whether it should consolidate certain types of legal entities. The Company’s operating partnerships, including both the GPT Operating Partnership, or the Operating Partnership, and Gramercy Operating Partnership, which is Legacy Gramercy’s operating partnership, are VIEs under the revised guidance and the Company is the primary beneficiary of each of them, because it holds majority ownership and exercises control over every aspect of the partnerships’ operations. Because the operating partnerships were already consolidated in the Company’s balance sheets, the revised guidance has no impact on the consolidated financial statements of the Company. The assets and liabilities of the Company and its operating partnerships are substantially the same, as the Company does not have any significant assets other than its investments in the operating partnerships. All of the Company's debt is also an obligation of the operating partnerships. There were no other legal entities qualifying under the scope of the revised guidance that were consolidated as a result of the adoption. In addition, there were no voting interest entities under prior existing guidance determined to be VIEs under the revised guidance.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

The Company had four consolidated VIEs as of March 31, 2016 and two consolidated VIEs as of December 31, 2015. The Company had four unconsolidated VIEs as of March 31, 2016 and December 31, 2015. The following is a summary of the Company’s involvement with VIEs as of March 31, 2016:



	Company carrying value-assets		Company carrying value-liabilities		Face value of assets held by the VIEs		Face value of liabilities issued by the VIEs
Assets
Consolidated VIEs
Operating partnerships	$	5,348,309	$	2,488,630	$	5,348,309	$	2,488,630
Proportion Foods	$	8,329	$	550	$	8,329	$	8,820
Gramercy Europe Asset Management (European Fund Manager)	$	276	$	1,029	$	276	$	1,029
Unconsolidated VIEs
Gramercy Europe Asset Management (European Fund Carry Co.)	$	—	$	—	$	11	$	28
Retained CDO Bonds	$	8,786	$	—	$	1,202,885	$	1,197,539

The following is a summary of the Company’s involvement with VIEs as of December 31, 2015:



	Company carrying value-assets		Company carrying value-liabilities		Face value of assets held by the VIEs		Face value of liabilities issued by the VIEs
Assets
Consolidated VIEs
Proportion Foods	$	7,949	$	16	$	7,949	$	8,183
Gramercy Europe Asset Management (European Fund Manager)	$	334	$	832	$	334	$	832
Unconsolidated VIEs
Gramercy Europe Asset Management (European Fund Carry Co.)	$	—	$	—	$	11	$	16
Retained CDO Bonds	$	7,471	$	—	$	1,382,373	$	1,282,583

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

Consolidated VIEs

Proportion Foods

In December 2015, the Company entered into a non-recourse financing arrangement with Big Proportion Austin LLC, or BIG, for a build-to-suit industrial property in Round Rock, Texas, or Proportion Foods. Concurrently, the Company entered into a forward purchase agreement with BIG, pursuant to which the Company will acquire the property, which is 100% leased to Proportion Foods, upon substantial completion of the facility’s development. The Company has determined that Proportion Foods is a VIE, as the equity holders of the entity do not have controlling financial interests and the obligation to absorb losses. The Company controls the activities that most significantly affect the economic outcome of Proportion Foods through its financing arrangement to fund the property’s development and its forward purchase agreement with BIG. As such, the Company has concluded that it is the entity’s primary beneficiary and has consolidated the VIE. The Company has a note receivable from BIG related to the financing arrangement, which is a note payable for BIG and thus eliminates upon consolidation of the VIE.

The construction of the facility on the property is expected to be complete in December 2016 and the Company has committed $24,950 in financing for the construction. BIG is responsible for funding in excess of the $24,950 mortgage note. As of March 31, 2016, the Company has funded $8,270 for the property.

Gramercy Europe Asset Management (European Fund Manager)

In connection with the Company’s December 2014 investment in the Gramercy European Property Fund, the Company acquired equity interests in the entity, hereinafter European Fund Manager, which provides investment and asset management services to Gramercy European Property Fund. The Company has determined that European Fund Manager is a VIE, as the equity holders of that entity do not have controlling financial interests and the obligation to absorb losses. As Gramercy Europe Asset Management, through an investment advisory agreement with the VIE, controls the activities that most significantly affect the economic outcome of European Fund Manager, the Company has concluded that it is the entity’s primary beneficiary and has consolidated the VIE.

European Fund Manager is expected to generate net cash inflows for the Company in the form of management fees in the future, however, if the VIE’s cash inflows are not sufficient to cover its obligations, the Company may provide financial support for the VIE.

Unconsolidated VIEs

Gramercy Europe Asset Management (European Fund Carry Co.)

In connection with the Company’s December 2014 investment in the Gramercy European Property Fund, the Company acquired equity interests in the entity, hereinafter European Fund Carry Co., entitled to receive certain preferential distributions, if any, made from time-to-time by Gramercy European Property Fund. The Company has determined that European Fund Carry Co. is a VIE, as the equity holders of that entity do not have controlling financial interests and the obligation to absorb losses. Decisions that most significantly affect the economic performance of European Fund Carry Co. are decided by a majority vote of that VIE’s shareholders. As such, the Company does not have a controlling financial interest in the VIE and has accounted for it as an equity investment.

As of March 31, 2016 and December 31, 2015, European Fund Carry Co. had net assets of $(17) and $(5).

Investment in Retained CDO Bonds

The Retained CDO Bonds are non-investment grade subordinate bonds, preferred shares and ordinary shares of three collateralized debt obligations, or CDOs, which the Company recognized subsequent to the disposal of its Gramercy Finance segment, or Gramercy Finance, and exit from the commercial real estate finance business in March 2013. The Company is not obligated to provide any financial support to these CDOs. The Company’s maximum exposure to loss is limited to its interest in the Retained CDO Bonds and the Company does not control the activities that most significantly impact the VIE’s economic performance.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

Assets Held for Sale and Discontinued Operations

As of March 31, 2016 and December 31, 2015, the Company had one and six assets classified as held for sale, respectively, which represent legacy Chambers properties that qualified as held for sale as of the closing date of the Merger and are included within discontinued operations, in accordance with ASC 360, as these assets acquired in the Merger do not align with the Company’s investment strategy and therefore will be sold. Real estate investments to be disposed of are reported at the lower of carrying amount or estimated fair value, less costs to sell. Once an asset is classified as held for sale, depreciation and amortization expense is no longer recorded. Refer to Note 3 for further information on the Company’s assets held for sale and discontinued operations.

Tenant and Other Receivables

Tenant and other receivables are derived from management fees, rental revenue and tenant reimbursements.

Management fees, including incentive management fees, are recognized as earned in accordance with the terms of the management agreements. The management agreements may contain provisions for fees related to dispositions, administration of the assets including fees related to accounting, valuation and legal services, and management of capital improvements or projects on the underlying assets.

Rental revenue is recorded on a straight-line basis over the initial term of the lease. Since many leases provide for rental increases at specified intervals, straight-line basis accounting requires the Company to record a receivable, and include in revenues, unbilled rent receivables that will only be received if the tenant makes all rent payments required through the expiration of the initial term of the lease. Tenant and other receivables also include receivables related to tenant reimbursements for common area maintenance expenses and certain other recoverable expenses that are recognized as revenue in the period in which the related expenses are incurred.

Tenant and other receivables are recorded net of the allowances for doubtful accounts, which as of March 31, 2016 and December 31, 2015 were $261 and $204, respectively. The Company continually reviews receivables related to rent, tenant reimbursements, and management fees, including incentive fees, and determines collectability by taking into consideration the tenant or asset management clients’ payment history, the financial condition of the tenant or asset management client, business conditions in the industry in which the tenant or asset management client operates and economic conditions in the area in which the property or asset management client is located. In the event that the collectability of a receivable is in doubt, the Company increases the allowance for doubtful accounts or records a direct write-off of the receivable.

Deferred Costs

Deferred costs consist of deferred financing costs, deferred acquisition costs, and deferred leasing costs. Deferred costs are presented net of accumulated amortization.

The Company’s deferred financing costs are comprised of costs associated with the Company’s unsecured credit facilities and include commitment fees, issuance costs, and legal and other third-party costs associated with obtaining the related financing. Deferred financing costs are amortized on a straight-line or effective interest basis over the contractual terms of the respective agreements and the amortization is reflected as interest expense. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financing transactions that do not close are expensed in the period in which it is determined that the financing will not close. During the first quarter of 2016, the Company adopted accounting guidance related to the presentation of deferred financing costs on the balance sheet and reclassified amounts from the deferred costs line pertaining to debt arrangements other than its unsecured credit facilities, that were within the asset section, to instead be netted against the corresponding debt liability for all periods presented. See “Recently Issued Accounting Pronouncements” below for further discussion of the new accounting guidance for deferred financing costs.

The Company’s deferred acquisition costs consist primarily of lease inducement fees paid to secure acquisitions and are amortized on a straight-line basis over the related lease term as a reduction from rental revenue.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

The Company’s deferred leasing costs include direct costs, such as lease commissions, incurred to initiate and renew operating leases and are amortized on a straight-line basis over the related lease term as a reduction from rental revenue.

Fair Value Measurements

At March 31, 2016 and December 31, 2015, the Company measured its Retained CDO Bonds, derivative instruments, and CBRE Strategic Partners Asia on a recurring basis and measured its real estate investments classified as held for sale at Merger closing on a non-recurring basis. ASC 820-10, “Fair Value Measurements and Disclosures,” among other things, establishes a hierarchical disclosure framework associated with the level of pricing observability utilized in measuring financial instruments and other assets and liabilities at fair value. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, fair values are not necessarily indicative of the amounts the Company could realize on disposition of these assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, or an exit price. The level of pricing observability generally correlates to the degree of judgment utilized in measuring the fair value of financial instruments and other assets and liabilities. The investment manager of CBRE Strategic Partners Asia applies valuation techniques for the Company’s investment carried at fair value based upon the application of the income approach, the direct market comparison approach, the replacement cost approach or third-party appraisals to the underlying assets held in the unconsolidated entity in determining the net asset value attributable to the Company’s ownership interest therein. The three broad levels defined are as follows:

Level I – This level is comprised of financial instruments and other assets and liabilities that have quoted prices that are available in liquid markets for identical assets or liabilities.

Level II – This level is comprised of financial instruments and other assets and liabilities for which quoted prices are available but which are traded less frequently and instruments that are measured at fair value using management’s judgment, where the inputs into the determination of fair value can be directly observed.

Level III – This level is comprised of financial instruments and other assets and liabilities that have little to no pricing observability as of the reported date. These financial instruments do not have active markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment and assumptions.

For a further discussion regarding fair value measurements see Note 9, “Fair Value Measurements.”

Revenue Recognition

Real Estate Investments

Rental revenue from leases on real estate investments is recognized on a straight-line basis over the term of the lease, regardless of when payments are contractually due. The excess of rental revenue recognized over the amounts contractually due according to the underlying leases are included in deferred revenue on the Condensed Consolidated Balance Sheets. For leases on properties that are under construction at the time of acquisition, the Company begins recognition of rental revenue upon completion of construction of the leased asset and delivery of the leased asset to the tenant.

The Company’s lease agreements with tenants also generally contain provisions that require tenants to reimburse the Company for real estate taxes, insurance costs, common area maintenance costs, and other property-related expenses. Under lease arrangements in which the Company is the primary obligor for these expenses, such amounts are recognized as both revenues and operating expenses for the Company. Under lease arrangements in which the tenant pays these expenses directly, such amounts are not included in revenues or expenses. These reimbursement amounts are recognized in the period in which the related expenses are incurred.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

The Company recognizes sales of real estate properties only upon closing. Payments received from purchasers prior to closing are recorded as deposits. Profit on real estate sold is recognized using the full accrual method upon closing when the collectability of the sale price is reasonably assured and the Company is not obligated to perform significant activities after the sale. Profit may be deferred in whole or part until the sale meets the requirements of profit recognition on sale of real estate.

Asset Management Business

The Company’s asset and property management agreements may contain provisions for fees related to dispositions, administration of the assets including fees related to accounting, valuation and legal services, and management of capital improvements or projects on the underlying assets. The Company recognizes revenue for fees pursuant to its management agreements in the period in which they are earned. Management fees received prior to the date earned are included in deferred revenue on the Condensed Consolidated Balance Sheets.

Certain of the Company’s asset management contracts include provisions that may allow it to earn additional fees, generally described as incentive fees or profit participation interests, based on the achievement of a targeted valuation of the managed assets or the achievement of a certain internal rate of return on the managed assets. The Company recognizes incentive fees on its asset management contracts based upon the amount that would be due pursuant to the contract, if the contract were terminated at the reporting date. If the contract may be terminated at will, revenue will only be recognized for the amount that would be due pursuant to that termination. If the incentive fee is a fixed amount, only a proportionate share of revenue is recognized at the reporting date, with the remaining fees recognized on a straight-line basis over the measurement period. The values of incentive management fees are periodically evaluated by management. For the three months ended March 31, 2016, and 2015, the Company recognized incentive fees of $973 and $3,035, respectively.

Investment and Other Income

Investment income consists primarily of income accretion on the Company’s Retained CDO Bonds, which are measured at fair value on a quarterly basis using a discounted cash flow model. Other income primarily consists of interest income on servicing advances and realized foreign currency exchange gain (loss).

Share-Based Compensation Plans

The Company has share-based compensation plans, described more fully in Note 11. The Company accounts for share-based awards using the fair value recognition provisions. Awards of shares or restricted shares are expensed as compensation over the benefit period and may require inputs that are highly subjective and require significant management judgment and analysis to develop. The Company assumes a forfeiture rate which impacts the amount of aggregate compensation cost recognized. In accordance with the provisions of the Company’s share-based compensation plans, the Company accepts the return of shares of the Company’s common shares, at the current quoted market price to satisfy minimum statutory tax-withholding requirements related to shares that vested during the period. The Company also grants awards pursuant to its share-based compensation plans in the form of LTIP units, which are a class of limited partnership interests in the Company’s operating partnerships.

Foreign Currency

Gramercy Europe Asset Management operates an asset and property management business in the United Kingdom. The Company owns one property located in the United Kingdom and has unconsolidated equity investments in Europe and Asia. The Company also has euro-denominated borrowings outstanding under the multi-currency portion of its revolving credit facility. Refer to Note 5 for more information on the Company’s foreign unconsolidated equity investments.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

Translation

The Company has interests in the European Union and United Kingdom for which the functional currency is the euro and the British pound sterling, respectively. The Company performs the translation from the euro or the British pound sterling to the U.S. dollar for assets and liabilities using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted-average exchange rate during the period. The Company reports the gains and losses resulting from such translation as a component of other comprehensive income (loss). As of March 31, 2016 and 2015, the Company recorded net translation gains (losses) of $6,119 and $(218), respectively. These translation gains and losses are reclassified to earnings when the Company has substantially exited from all investments in the related currency.

Transaction Gains or Losses

A transaction gain or loss realized upon settlement of a foreign currency transaction will be included in earnings for the period in which the transaction is settled. Foreign currency intercompany transactions that are scheduled for settlement are included in the determination of net income.

Intercompany foreign currency transactions of a long-term nature that do not have a planned or foreseeable future settlement date, in which the entities to the transactions are consolidated or accounted for by the equity method in the Company’s financial statements, are not included in net income but are reported as a component of other comprehensive income (loss).

Net realized gains (losses) are recognized on foreign currency transactions in connection with the transfer of cash from or to foreign operations of subsidiaries or equity investments to the parent company. For the three months ended March 31, 2016 and 2015, the Company recognized net realized foreign currency transaction gains (losses) of $105 and $(6), respectively, on such transactions.

Derivative and Non-Derivative Hedging Instruments

In the normal course of business, the Company is exposed to the effect of interest rate changes and foreign exchange rate changes. The Company limits these risks by following established risk management policies and procedures including the use of derivatives and non-derivative net investment hedges. The Company uses a variety of derivative instruments that are considered “plain vanilla” derivatives to manage, or hedge, interest rate risk. The Company enters into hedging and derivative instruments that will be maximally effective in reducing the interest rate risk and foreign currency exchange rate risk exposure that they are designated to hedge. This effectiveness is essential for qualifying for hedge accounting. Instruments that meet these hedging criteria are formally designated as hedges at the inception of the derivative contract. The Company’s derivative and non-derivative hedging instruments typically include interest rate swaps, caps, collars and floors, as well as non-derivative net investment hedges. The Company expressly prohibits the use of unconventional derivative instruments and using derivative instruments for trading or speculative purposes. Further, the Company has a policy of only entering into contracts with major financial institutions based upon their credit ratings and other factors.

The Company recognizes all derivatives on the Condensed Consolidated Balance Sheets at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings. Derivative accounting may increase or decrease reported net income and shareholders’ equity prospectively, depending on future levels of the London Interbank Offered Rate, or LIBOR, swap spreads and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows, provided the contract is carried through to full term.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

The Company’s non-derivative hedging instrument, the foreign currency denominated tranche of the Company’s 2015 Revolving Credit Facility, is reported at carrying value on its Condensed Consolidated Balance Sheets. As the non-derivative net investment hedge is denominated in euros, the Company translates the carrying value in euros into its functional and reporting currency of U.S. dollars at the period-ending rate and reports this value in its financial statements, with the foreign currency translation adjustment associated with the hedged net investment reported in the cumulative translation adjustment within other comprehensive income (loss). Refer to Note 10 for more information on the Company’s derivative and non-derivative hedging instruments.

Other Assets

The Company makes payments for certain expenses such as insurance and property taxes in advance of the period in which it receives the benefit. These payments are classified as other assets and amortized over the respective period of benefit relating to the contractual arrangement. Other assets also includes deposits related to pending acquisitions and financing arrangements, as required by a seller or lender, respectively. Costs prepaid in connection with securing financing for a property are reclassified into deferred financing costs at the time the transaction is completed. Additionally, other assets includes costs of software purchased for internal use and as well as the value of contracts assumed by the Company pursuant to a business combination, such as asset or property management contracts.

Servicing Advances Receivable

The Company’s servicing advances receivable consisted of its accrual for the reimbursement of servicing advances, including expenses such as legal fees and professional fees incurred while the Company was the collateral manager of the CDOs, which were recognized as part of the disposal of Gramercy Finance in March 2013. For the three months ended March 31, 2016 and 2015, the Company received reimbursements from servicing advances of $1,390 and $0, respectively. As of March 31, 2016 and December 31, 2015, the servicing advances receivable was $0 and $1,382, respectively.

Retained CDO Bonds

The Retained CDO Bonds are non-investment grade subordinate bonds, preferred shares and ordinary shares of three CDOs, which the Company recognized at fair value and retained in March 2013 subsequent to the disposal of Gramercy Finance. Management estimated the timing and amount of cash flows expected to be collected and recognized an investment in the Retained CDO Bonds equal to the net present value of these discounted cash flows. There is no guarantee that the Company will realize any proceeds from this investment, or what the timing will be for the expected remaining life of the Retained CDO Bonds. The Company considers these investments to be not of high credit quality and does not expect a full recovery of interest and principal. Therefore, the Company has suspended interest income accruals on these investments. On a quarterly basis, the Company evaluates the Retained CDO Bonds to determine whether significant changes in estimated cash flows or unrealized losses on these investments, if any, reflect a decline in value which is other-than-temporary. If there is a decrease in estimated cash flows and the investment is in an unrealized loss position, the Company will record an other-than-temporary impairment, or OTTI, in the Condensed Consolidated Statements of Operations. To determine the component of the OTTI related to expected credit losses, the Company compares the amortized cost basis of the Retained CDO Bonds to the present value of the revised expected cash flows, discounted using the pre-impairment yield. Conversely, if the security is in an unrealized gain position and there is a decrease or significant increase in expected cash flows, the Company will prospectively adjust the yield using the effective yield method. Refer to Note 9 for further discussion regarding the fair value measurement of the Retained CDO Bonds. For the three months ended March 31, 2016 and 2015, the Company recognized no OTTI on its Retained CDO Bonds.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

A summary of the Company’s Retained CDO Bonds as of March 31, 2016 is as follows:



Description	Number of Securities	Face Value		Amortized Cost		Gross Unrealized Gain		Other-than-temporary impairment		Fair Value		Weighted Average Expected Life
Available for Sale, Non- investment Grade:
Retained CDO Bonds	9	$	376,972	$	6,842	$	1,944	$	—	$	8,786	2.5
Total	9	$	376,972	$	6,842	$	1,944	$	—	$	8,786	2.5

The following table summarizes the activity related to credit losses on the Retained CDO Bonds for the three month period ended March 31, 2016 and for the year ended December 31, 2015:



	2016			2015
Balance as of January 1, 2016 and January 1, 2015, respectively of credit losses on Retained CDO Bonds for which a portion of an OTTI was recognized in other comprehensive income	$	3,196		$	6,818
Additions to credit losses:	—			—
On Retained CDO Bonds for which an OTTI was not previously recognized	—			—
On Retained CDO Bonds for which an OTTI was previously recognized and a portion of an OTTI was recognized in other comprehensive income	—			—
On Retained CDO Bonds for which an OTTI was previously recognized without any portion of OTTI recognized in other comprehensive income	—			—
Reduction for credit losses:	—			—
On Retained CDO Bonds for which no OTTI was recognized in other comprehensive income at current measurement date	—			—
On Retained CDO Bonds sold during the period	—			—
On Retained CDO Bonds charged off during the period	—			—
For increases in cash flows expected to be collected that are recognized over the remaining life of the Retained CDO Bonds	(1,524		)	(3,622		)
Balance as of March 31, 2016 and December 31, 2015, respectively, of credit losses on Retained CDO Bonds for which a portion of an OTTI was recognized in other comprehensive income	$	1,672		$	3,196

Income Taxes

The Company elected to be taxed as a REIT, under Sections 856 through 860 of the Internal Revenue Code, ~~of 1986 (the "Internal Revenue Code")~~ beginning with ~~the~~its taxable ~~period~~year ended December 31, 2004.

We To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its ordinary taxable income, to shareholders. As a REIT, the Company generally will not be subject to U.S. federal income tax on taxable income that the Company distributes to its shareholders. If the Company fails to qualify as a REIT in any taxable year, it will then be subject to U.S. federal income taxes on taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for U.S. federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income and net cash available for distributions to shareholders. However, the Company believes that it will be organized and will operate in ~~an umbrella partnership~~such a manner as to qualify for treatment as a REIT ~~structure~~and the Company intends to operate in the foreseeable future in such a manner so that it will qualify as a REIT for U.S. federal income tax purposes. The Company is subject to certain state and local taxes. The Company’s TRSs are subject to federal, state and local taxes.

For the three months ended March 31, 2016 and 2015, the Company recorded $703 and $1,114 of income tax expense, respectively. Tax expense for each year is comprised of federal, state, local, and foreign taxes. Income taxes,

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

primarily related to the Company’s TRSs, are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which ~~our operating partnership, CSP Operating Partnership, LP ("CSP OP"), indirectly owns substantially~~those temporary differences are expected to be recovered or settled. A valuation allowance is provided if the Company believes it is more likely than not that all or a portion of ~~the properties acquired on our behalf. CSP OP was formed~~a deferred tax asset will not be realized. Any increase or decrease in Delaware on March 30, 2004, and we are the 100% owner and sole general partner. For each interest in our common shares of beneficial interest $0.01 par value (the "common shares"), that we issue, an equal interesta valuation allowance is included in the ~~limited partnership units of CSP OP~~tax provision when such a change occurs.

The Company’s policy for interest and penalties, if any, on material uncertain tax positions recognized in the financial statements is ~~issued~~ to ~~us in exchange for the cash proceeds from the issuance of the~~classify these as interest ~~in our common shares.~~expense and operating expense, respectively. As of March 31, 2016 and December 31, 2015, ~~we owned 100%~~the Company did not incur any material interest or penalties.

Earnings Per Share

The Company presents both basic and diluted earnings per share, or EPS. Basic EPS excludes dilution and is computed by dividing net income available to vested common shareholders by the weighted average number of vested common shares outstanding during the period. The Company has adopted the two-class computation method, and thus includes all participating securities in the computation of basic shares for the periods in which the Company has net income available to vested common shares outstanding. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares, as long as their inclusion would not be anti-dilutive. Refer to Note 11 for further discussion of the ~~limited partnership units~~computation of ~~CSP OP directly~~EPS.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash investments, debt investments and accounts receivable. The Company places its cash investments in excess of insured amounts with high quality financial institutions.

Concentrations of credit risk also arise when a number of the Company’s tenants or ~~indirectly through a wholly-owned taxable REIT subsidiary.~~

~~As of March 31, 2015, we owned, on a consolidated basis, 102 industrial (primarily warehouse/distribution) and office properties located~~asset management clients are engaged in 18 U.S. states (Arizona, California, Colorado, Florida, Illinois, Indiana, Kansas, Kentucky, Maryland, Massachusetts, Minnesota, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Texas and Virginia) and in the United Kingdom, encompassing approximately 25.3 million rentable square feet. Our consolidated properties were approximately 97.6% leased (based upon rentable square feet) as of March 31, 2015. As of March 31, 2015, 77 of our consolidated properties were net leasedsimilar business activities or are subject to ~~single tenants, which encompassed approximately 20.6 million rentable square feet.~~

~~We had ownership interests in four unconsolidated entities~~similar economic risks or conditions that as of March 31, 2015, owned interests in 28 properties. Excluding those properties owned through our investment in CB Richard Ellis Strategic Partners Asia II-A, L.P. ("CBRE Strategic Partners Asia"), we owned, on an unconsolidated basis, 25 industrial (primarily warehouse/distribution) and office properties located in seven U.S. states (Arizona, Florida, Illinois, Indiana, Ohio, Tennessee and Texas) and three countries in Europe (France, Germany and the United Kingdom), encompassing approximately 12.3 million rentable square feet. Our unconsolidated properties were approximately 99.9% leased (based upon rentable square feet) as of March 31, 2015. As of March 31, 2015, 20 of our unconsolidated properties were net leasedcould cause their inability to ~~single tenants, which encompassed approximately 11.5 million rentable square feet.~~

~~Unless the context otherwise requires or indicates, references~~meet contractual obligations to the ~~"Company," "we," "our"~~Company. The Company regularly monitors its portfolio to assess potential concentrations of credit risk. Management believes the current credit risk portfolio is reasonably well diversified. One asset management client, KBS, accounted for 86% and ~~"us" refer to the activities of and the assets and liabilities~~80% of the business and operations of Chambers Street Properties and its subsidiaries. References to unconsolidated properties include properties owned through unconsolidated joint ventures and do not include properties owned by CBRE Strategic Partners Asia. See Note 4 "Investments in Unconsolidated Entities."

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~2. Basis of Presentation and Summary of Significant Accounting Policies~~

~~Basis of Presentation and Principles of Consolidation~~

The accompanying consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles ("GAAP") and reflect the accounts of the Company, CSP OP and its consolidated subsidiaries. The Company consolidates its wholly-owned properties and joint ventures it controls through either 1) voting rights or similar rights or 2) by means other than voting rights if the Company is deemed to be the primary beneficiary of a variable interest entity. All intercompany accounts and transactions are eliminated in consolidation.

Certain information and footnotes required for annual financial statement presentation have been condensed or excluded pursuant to Securities and Exchange Commission (the "SEC") rules and regulations. Accordingly, our interim financial statements do not include all of the information and disclosures required under GAAP for complete financial statements. In the opinion ofCompany’s management ~~all adjustments of a normal recurring nature considered necessary in all material respects to present fairly our financial position, results of our operations and cash flows as of and~~fee income for the three months ended March 31, 2016 and 2015, ~~have been made. The results~~respectively. Gramercy Europe Asset Management accounted for 13% of ~~operations~~the Company’s management fee income, including European asset management fee income, for the three months ended March 31, ~~2015 are not necessarily indicative~~2016. One tenant, Bank of America, N.A., accounted for 11% and 37% of the ~~results of operations to be expected~~Company’s rental revenue for the ~~entire year. The consolidated financial statements~~three months ended March 31, 2016 and notes thereto should be read in conjunction with our current Annual Report on Form 10-K, which contains the latest available audited consolidated financial statements and notes thereto, which are as of and2015 respectively. Additionally, for the ~~year~~three months ended ~~December~~March 31, ~~2014.~~2016, there were three states, California, Florida, and Texas, that each accounted for 10% or more of the Company’s rental revenue.

Use of Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles, or GAAP, requires usmanagement to make estimates and assumptions that affect the amounts reported ~~amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of~~in the financial statements and ~~the reported amounts of revenues and expenses during the reporting period.~~accompanying notes. Actual results could differ from those estimates.

~~Segment Information~~

~~We currently operate our consolidated properties~~Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in two geographic areas, the United States and the United Kingdom. We view our consolidated property operations as two reportable segments, Industrial Properties and Office Properties, which participate in the acquisition, development, ownership, and operation of high quality real estate in their respective segments.thousands, except per share data)

~~Revenue Recognition and Valuation of Receivables~~

All leases are classified as operating leases and minimum rents are recognized on a straight-line basis over the terms of the leases. The excess of rents recognized over amounts contractually due pursuant to the underlying leases is recorded as deferred rent. In connection with various leases, we have received irrevocable stand-by letters of credit totaling $20.3 million as security for such leases at March 31, ~~2015 and December 31, 2014.~~2016

Reimbursements from tenants, consisting of amounts due from tenants for common area maintenance, real estate taxes, insurance and other recoverable costs, are recognized as revenue in the period the expenses are incurred. Tenant reimbursements are recognized and presented on a gross basis, when we are the primary obligor with respect to incurring expenses and with respect to having the credit risk.

Tenant receivables and deferred rent receivables are carried net of the allowances for uncollectible current tenant receivables and deferred rent. Management's determination of the adequacy of these allowances is based primarily upon evaluations of historical loss experience, individual receivables, current economic conditions, and other relevant factors. The allowances are increased or decreased through the provision for bad debts. The allowance for uncollectible rent receivable was $18,000 and $62,000 as of March 31, 2015 and December 31, 2014, respectively.

~~Translation of Non-U.S. Currency Amounts~~

The financial statements and transactions of our United Kingdom properties are recorded in their functional currency, namely the Great Britain Pound ("GBP") and are then translated into U.S. dollars ("USD").

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

Assets and liabilities of these properties are denominated in the functional currency and are then translated at exchange rates in effect at the balance sheet date. Revenues and expenses are translated at the average exchange rate for the reporting period. Translation adjustments are reported in "Accumulated Other Comprehensive Income (Loss)," a component of Shareholders' Equity.

The carrying value of our United Kingdom assets and liabilities fluctuate due to changes in the exchange rate between the USD and the GBP. The exchange rate of the USD to the GBP was $1.4819 and $1.5576 at March 31, 2015 and December 31, 2014, respectively. The profit and loss average exchange rate of the USD to the GBP was approximately $1.5357 and $1.6586 for the three months ended March 31, 2015 and 2014, respectively.

The carrying value of our assets and liabilities held within our joint venture in Europe (the "European JV") fluctuate due to changes in the exchange rate between the USD and the Euro ("EUR"). The exchange rate of the USD to the EUR was $1.0732 and $1.2099 at March 31, 2015 and December 31, 2014. The profit and loss average exchange rate of the USD to the EUR was approximately $1.1513 and $1.3679 for the three months ended March 31, 2015 and 2014, respectively.

~~Income Taxes~~

We elected to be taxed as a REIT under the Internal Revenue Code commencing with our taxable year ended December 31, 2004. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we generally distribute at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding net capital gain). It is our current intention to adhere to these requirements and maintain our REIT qualification. As a REIT, we generally will not be subject to corporate level U.S. federal income tax on net income we distribute currently to our shareholders. If we fail to qualify as a REIT in any taxable year, then we will be subject to U.S. federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. We believe that we have met all the REIT organizational and operational requirements for the three months ended March 31, 2015, and we were not subject to any U.S. federal income taxes, other than U.S. federal income taxes on income generated by our Taxable REIT Subsidiary. As such, we have not provided for income taxes other than as addressed below.

~~ASC 740-10~~ ~~Income Taxes~~ requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary difference, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

No deferred tax assets or liabilities were recorded as of March 31, 2015, other than as mentioned below related to the United Kingdom net operating losses. In addition, we believe that any current or deferred tax liability associated with our Taxable REIT Subsidiary would be ~~de minimus~~.

We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position, and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

~~We did not have any uncertain tax positions which would require us to record any unrecognized tax benefits or additional tax liabilities as of March 31, 2015.~~

Even if we qualify for taxation as a REIT, we may be subject to certain state, foreign, and local taxes on our income and property and to U.S. federal income and excise taxes on our undistributed taxable income, if any.

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

Included as a component of our tax provision, we have incurred income and other taxes (franchise, local and state government and international) related to our continuing operations in the amount of $176,000 and $58,000 during the three months ended March 31, 2015 and 2014, respectively.

The United Kingdom taxes real property operating results at a statutory rate of 20%. The properties we own (or hold interest in) in the United Kingdom have operated at a taxable loss to date and have generated a deferred tax asset of approximately $0.6 million consisting of these net operating loss carryforwards. We have provided for a full valuation allowance of $0.6 million as of March 31, 2015 on deferred tax assets because it is not likely that future operating profits in the United Kingdom would be sufficient to absorb the net operating losses.

~~The tax years from 2010 through 2014 remain open to examination by the taxing jurisdictions to which the Company is subject.~~

~~Fair Value of Financial Instruments and Investments~~

We generally determine or calculate the fair value of financial instruments using appropriate present value or other valuation techniques, such as discounted cash flow analyses, incorporating available market discount rate information for similar types of instruments and our estimates for non-performance and liquidity risk. These techniques are significantly affected by the assumptions used, including the discount rate, credit spreads, and estimates of future cash flow. The Investment Manager of CBRE Strategic Partners Asia applies valuation techniques for our investment carried at fair value based upon the application of the income approach, the direct market comparison approach, the replacement cost approach or third party appraisals to the underlying assets held in the unconsolidated entity in determining the net asset value attributable to our ownership interest therein. As of March 31, 2015, the financial assets and liabilities recorded at fair value in our consolidated financial statements are our derivative instruments and our investment in CBRE Strategic Partners Asia.

The remaining financial assets and liabilities which are only disclosed at fair value are comprised of all other notes payable, the unsecured line of credit and other debt instruments. We determined the fair value of our secured notes payable and other debt instruments by performing discounted cash flow analyses using an appropriate market discount rate. We calculate the market discount rate by obtaining period-end treasury rates for fixed-rate debt, or London Inter-Bank Offering Rate ("LIBOR") rates for variable-rate debt, for maturities that correspond to the maturities of our debt and then adding an appropriate credit spread derived from information obtained from third-party financial institutions. These credit spreads take into account factors such as our credit standing, the maturity of the debt, whether the debt is secured or unsecured, and the loan-to-value ratios of the debt.

~~The carrying amounts of our cash and cash equivalents, restricted cash, tenant and other receivables and accounts payable approximate fair value due to their short-term maturities.~~

~~Share-based Compensation~~

For share-based awards for which there is no pre-established performance period, we recognize compensation costs over the service vesting period, which represents the requisite service period, on a straight-line basis.

For share-based awards with service or market conditions, we record the cost of the awards based on the grant-date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. For share-based awards in which the performance period precedes the grant date, we recognize compensation costs straight-lined over the requisite service period, which includes both the performance and service vesting periods.

During the performance period for a share-based award program, we estimate the total compensation cost of the potential future awards. We then record compensation costs equal to the portion of the requisite service period that has elapsed through the end of the reporting period.

~~For share-based awards granted by the Company, CSP OP issues a number of common units equal to the number of common shares ultimately granted by us in respect of such awards.~~

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~New~~Recently Issued Accounting ~~Standards~~Pronouncements

In May 2014, the Financial Accounting Standards Board, or FASB, issued ASU 2014-09, Revenue from Contracts with Customers, which creates a new Topic ASC 606, Revenue from Contracts with Customers. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, the guidance requires increased disclosures related to revenue recognition. The update was originally effective for fiscal years, and ~~IASB issued their final standard on revenue from contracts~~interim periods within those years, beginning after December 15, 2016, with ~~customers. The standard, issued by~~early adoption not permitted. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers, which deferred the effective date so that it is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption only permitted as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company will appropriately adopt and apply the guidance retrospectively for its fiscal year ended December 31, 2018 and the interim periods within that year. The Company is currently evaluating the guidance to determine the impact it may have on its Condensed Consolidated Financial Statements.

In February 2015, the FASB issued ASU ~~2014-09, outlines a single comprehensive model for entities~~2015-02, Amendments to ~~use in accounting for revenue arising from contracts with customers and supersedes most~~the Consolidation Analysis, which amends the current ~~revenue recognition~~consolidation guidance, including introducing a separate consolidation analysis specific to limited partnerships and other similar entities. Under this analysis, limited partnerships and other similar entities will be considered a VIE unless the ~~guidance on real estate derecognition for most transactions. Entities have the option of using either a full retrospective~~limited partners hold substantive kick-out rights or ~~a modified approach to adopt the~~participating rights. The guidance ~~in ASU 2014-09. For public entities, the ASU~~ is effective for annual ~~reporting~~and interim periods ~~(including interim reporting periods within those periods)~~ beginning after December 15, ~~2016. Early application is not~~2015, with early adoption permitted. ~~We are assessing the impact of~~The Company adopted this guidance ~~on our consolidated financial statements and notes~~during the first quarter of 2016, which did not result in changes to ~~our consolidated financial statements.~~the Company’s conclusions regarding consolidation of applicable entities.

In ~~January~~April 2015, the FASB issued ASU ~~2015-01, Income Statement - Extraordinary and Unusual Items (Subtopic 225-20):~~2015-03, Simplifying ~~Income Statement~~the Presentation ~~by Eliminating~~of Debt Issuance Costs, which serves to simplify the ~~Concept~~presentation of ~~Extraordinary Items. The ASU is~~debt issuance costs in a part of the Simplification Initiative, to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to the users ofcompany’s financial statements. The amendments in the update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that liability. The update is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. In August 2015, the FASB issued ASU 2015-15, Interest – Imputation of Interest, which allows an entity to present the debt issuance costs from a line-of-credit arrangement as an asset. The Company adopted this guidance during the first quarter of 2016 and reclassified amounts in each period presented. The adoption of this guidance did not have a material impact on the Company’s Condensed Consolidated Financial Statements as the update relates only to changes in financial statement presentation. See the “Reclassification” section above for further details on the adoption of this guidance.

In April 2015, the FASB issued ASU 2015-05, Intangibles – Goodwill and Other – Internal-Use Software: Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. The update requires companies to account for the software license element of a cloud computing arrangement consistent with the acquisition of other software licenses and other licenses of intangible assets. The update is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. The Company adopted this guidance during the first quarter of 2016. The adoption of this guidance did not have a material impact on the Company’s Condensed Consolidated Financial Statements.

In February 2016, the FASB issued ASU 2016-02, Leases, which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The update will be effective beginning in the first quarter of 2019 and early adoption is permitted. The new standard ~~eliminates~~requires a modified retrospective transition approach for all leases existing at, or entered into after, the ~~requirements~~date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact of adopting the new leases standard on its Condensed Consolidated Financial Statements.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting. The update serves to simplify the accounting for ~~reporting entities to consider whether an underlying event~~share-based payment award transactions, including income tax consequences, classification of awards as either equity or ~~transaction is extraordinary but retains~~liabilities, and classification of awards on the ~~presentation and disclosure~~statement of cash flows. The guidance ~~for items that are unusual~~ in ~~nature and occur infrequently. The~~the ASU ~~applies to all entities and~~ is effective for fiscal years beginning after December 15, ~~2015, and~~2016, including interim periods ~~thereafter,~~within those fiscal years, with early adoption ~~permitted.~~permitted for any interim or annual period. The Company has not elected early adoption of ~~this~~the amendments in the updates and expects that the new guidance iswill not ~~anticipated to~~ have a material impact on ~~our consolidated financial statements or notes to our consolidated financial statements.~~its Condensed Consolidated Financial Statements.

~~In February~~

3. Dispositions, Assets Held for Sale, and Discontinued Operations

Real Estate Dispositions

During the three months ended March 31, 2016, the Company sold nine properties. During the three months ended March 31, 2015, the ~~FASB issued~~ ~~ASU 2015-02,~~Company did not sell any properties. The nine property sales in 2016 consisted of all office properties that comprised an aggregate 2,095,194 square feet and generated gross proceeds of $531,500. The Company did not recognize any gains or impairments on disposals during the three months ended March 31, 2016. Six of the property sales in 2016 were structured as like-kind exchanges within the meaning of Section 1031 of the IRC. As a result of the sales, the Company deposited $175,808 of the total sales proceeds into an IRC Section 1031 exchange escrow account with a qualified intermediary. The Company then used $30,301 of these funds as consideration for one property acquisition during the three months ended March 31, 2016. Five of the properties sold during the three months ended March 31, 2016, which were sold for gross proceeds of $386,000, represent properties assumed in the Merger that were designated as held for sale at the time of Merger closing, thus they are included in discontinued operations for all periods presented. Four of the properties sold during the three months ended March 31, 2016, which were sold for gross proceeds of $145,500, were also assumed in the Merger and were classified as held for sale at the time of disposition, however they are not included in discontinued operations as they did not meet the definition of discontinued operations.

Assets Held for Sale

The Company separately classifies properties held for sale in the Condensed Consolidated ~~(Topic 810): Amendments~~Balance Sheets and Condensed Consolidated Statements of Operations. The Company had one and six assets classified as held for sale as of March 31, 2016 and December 31, 2015, respectively. In the normal course of business the Company identifies non-strategic assets for sale. Changes in the market may compel the Company to decide to classify a property held for sale or classify a property that was designated as held for sale back to held for investment. During the three months ended March 31, 2016 and 2015, the Company did not reclassify any properties previously identified as held for sale to held for investment.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

The following table summarizes the assets held for sale and liabilities related to the ~~Consolidation Analysis~~. assets held for sale as of March 31, 2016 and December 31, 2015:



Assets held for sale	March 31, 2016		December 31, 2015
Real estate investments	$	10,522	$	348,582
Acquired lease assets	—		61,804
Other assets	26		10,099
Total assets	10,548		420,485
Liabilities related to assets held for sale
Mortgage notes payable, net	—		260,704
Below-market lease liabilities	—		16,518
Other liabilities	376		14,142
Total liabilities	376		291,364
Net assets held for sale	$	10,172	$	129,121

Discontinued Operations

The ~~ASU changes~~following operating results for Gramercy Finance, the ~~analysis~~assets previously sold and the assets that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. Key amendments under the new standard include the following: evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities; elimination of the presumption that a general partner should consolidate a limited partnership; consolidation analysis of reporting entities that are involved with variable interest entities (VIEs), particularly those that have fee arrangements and related party relationship; addition of scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements similar to those for registered money market funds. The ASU applies to all reporting entities that are required to evaluate whether they should consolidate certain legal entities and is effective for fiscal years beginning after December 15, 2015, and interim periods thereafter, with early adoption permitted. We are still assessing the impact of this guidance on our consolidated financial statements and notes to our consolidated financial statements.

~~In April 7, 2015, the FASB issued~~ ~~ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs~~. This ASU addresses balance sheet presentation requirements for debt issuance costs by requiring debt issuance costs to be presented as a deduction from the corresponding debt liability. This will make the presentation of debt issuance costs consistent with the presentation of debt discounts or premiums. The recognition and measurement guidance for debt issuance costs is not affected. The guidance is effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, it is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. Upon adoption, an entity must apply the new guidance retrospectively to all prior periods presentedwere assumed in the ~~financial statements. An entity is also required~~Merger and simultaneously designated as held for sale for the three months ended March 31, 2016 and 2015 are included in discontinued operations for all periods presented:



	Three Months Ended March 31,
	2016			2015
Operating Results:
Revenues	$	5,857		$	(100	)
Operating expenses	(2,180		)	210
General and administrative expense	(12		)	(172		)
Interest expense	(955		)	—
Gain on extinguishment of debt	1,930			—
Net income (loss) from discontinued operations	$	4,640		$	(62	)

Discontinued operations have not been segregated in the ~~year~~Condensed Consolidated Statements of ~~adoption (and in interim periods within that year)~~Cash Flows. The table below presents additional relevant information pertaining to ~~provide certain disclosures about the change in accounting principle, including the nature~~results of ~~and reason~~discontinued operations for the ~~change, the transition method, a description of the prior-period information that has been retrospectively adjusted~~three months ended March 31, 2016 and ~~the effect of the change on the financial statement line items (that is, debt issuance cost asset~~2015, including depreciation, amortization, capital expenditures, and ~~the debt liability). We are still assessing the impact of this guidance on our consolidated financial statements~~significant operating and ~~notes to our consolidated financial statements.~~investing noncash items:



	Three Months Ended March 31,
	2016			2015
Significant operating noncash items	$	(9,455	)	$	—
Increase in cash and cash equivalents related to foreign currency translation	275			—
Total	$	(9,180	)	$	—

~~3. Investment~~

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

4. Real Estate ~~Activity~~Investments

~~Wholly-Owned~~Property Acquisitions

During the three months ended March 31, ~~2015, we acquired an 11.8 acre undeveloped parcel in Phoenix, Arizona for approximately $1.7 million. The undeveloped parcel is situated immediately adjacent to our Goodyear Crossing II property.~~

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~4. Investments in Unconsolidated Entities~~

~~As of March 31, 2015 and December 31, 2014, we owned~~2016, the ~~following number of properties through unconsolidated entities:~~Company’s property acquisitions are summarized as follows:

Ownership % Number of Properties
March 31, December 31,
2015 2014
Duke JV 80.0% 13
14
European JV 80.0% 9
9
UK JV 80.0% 3
3
CBRE Strategic Partners Asia 5.07% 3
3
28
29



Property Type	Number of Properties	Square Feet	Purchase Price
Industrial	3	621,646	$	52,750
Total	3	621,646	$	52,750

~~Investments in unconsolidated entities at March~~During the year ended December 31, 2015, ~~and December 31, 2014 consist of~~ the ~~following (in thousands):~~Company’s property acquisitions are summarized as follows:

March 31, December 31,
2015 2014
Duke JV $ 230,861
$ 239,376
European JV 125,853
144,141
UK JV 31,223
33,189
Afton Ridge 117
117
CBRE Strategic Partners Asia 6,684
6,870
$ 394,738
$ 423,693



Property Type⁽¹⁾	Number of Properties	Square Feet	Purchase Price
Industrial⁽²⁾	95	23,972,916	$	1,561,828
Office⁽²⁾	53	8,496,686	1,864,235
Specialty retail	10	1,330,544	300,500
Total	158	33,800,146	$	3,726,563


(1)	Includes 104 properties acquired as part of the Merger, of which 60 were industrial properties that comprise 17,355,358 square feet and 44 were office properties that comprise 7,205,381 square feet.

(2)

The Company assumed mortgages on 17 of its property acquisitions in 2015. The unpaid principal value of the mortgages assumed at acquisition was $153,877. Additionally, the Company assumed 30 mortgages in connection with 29 properties acquired as part of the Merger in 2015. The unpaid principal value of the mortgages assumed with the Merger was $464,292, of which $254,291 was classified as held for sale upon closing of the Merger. Refer to Note 6 for more information on the Company’s debt obligations related to acquisitions.

The ~~following is a summary~~Company recorded revenues and net income for the three months ended March 31, 2016 of $652 and $464, respectively, related to its three real estate acquisitions during the ~~investments in unconsolidated entities~~period. The Company recorded revenues and net loss for the three months ended March 31, 2015 of $3,446 and $472, respectively, related to its 27 real estate acquisitions during the ~~year ended December 31, 2014 (in thousands):~~period.

Property Purchase Price Allocations

The Company is currently analyzing the fair value of the lease and real estate assets of ten of its property investments acquired in 2015, and accordingly, the purchase price allocations are preliminary and subject to change. The initial recording of the assets is summarized as follows:

March 31, December 31,
2015 2014
Investment Balance, January 1 $ 423,693
$ 514,802
Contributions —
7,625
Company's Equity in Net Income (including adjustments for basis differences) 6,505
28,823
Other Comprehensive Loss of Unconsolidated Entities (17,828 ) (22,342 )
Distributions (17,632 ) (105,215 )
Investment Balance, End of Period $ 394,738
$ 423,693

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~The following are the balance sheets of our investments in unconsolidated entities at March 31, 2015 (in thousands):~~

Duke JV European JV
Other ⁽²⁾
Total

Assets
Investments in Real Estate⁽¹⁾
$ 319,663
$ 241,518
$ 184,245
$ 745,426
Other Assets 32,886
42,108
10,379
85,373
Total Assets $ 352,549
$ 283,626
$ 194,624
$ 830,799
Liabilities and Equity
Secured Notes Payable, net $ 56,948
$ 119,897
$ —
$ 176,845
Other Liabilities 7,581
6,413
20,150
34,144
Total Liabilities 64,529
126,310
20,150
210,989
CSP Equity 230,861
125,853
38,024
394,738
Other Investors' Equity 57,159
31,463
136,450
225,072
Total Liabilities and Equity $ 352,549
$ 283,626
$ 194,624
$ 830,799

~~__________~~



		Preliminary Allocations recorded
Period of Acquisition	Number of Acquisitions	Real Estate Assets		Intangible Assets		Intangible Liabilities
Year Ended December 31, 2015⁽¹⁾	10	$	259,093	$	—	$	—

(1)

~~Includes REIT Basis Adjustments for costs incurred by~~Allocations exclude the ~~Company outside~~104 properties acquired as part of the ~~Duke/Hulfish, LLC joint venture (the "Duke JV") that~~Merger Portfolio, which are ~~directly capitalizable to its investment~~separately disclosed below in the section, “Merger with Chambers.” Additionally, allocations include real estate assets of $7,947 for Proportion Foods, a consolidated VIE. Refer to Note 2 for more information on Proportion Foods.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

During the three months ended March 31, 2016 and the year ended December 31, 2015, the Company finalized the purchase price allocations for five and 141 properties acquired in prior periods, respectively, for which the Company had recorded preliminary purchase price allocations at the time of acquisition. The aggregate changes from the preliminary purchase price allocations to the finalized purchase price allocations, in accordance with ASU 2015-16, which the Company adopted in the third quarter of 2015, are shown in the table below:



	Preliminary Allocations recorded							Finalized Allocations recorded
Period Finalized	Number of Acquisitions	Real Estate Assets		Intangible Assets		Intangible Liabilities		Real Estate Assets		Intangible Assets		Intangible Liabilities		Increase (Decrease) to Rental Revenue			(Increase) Decrease to Depreciation and Amortization Expense
Three Months Ended March 31, 2016	5	$	63,309	$	2,084	$	184	$	56,656	$	8,553	$	—	$	(18	)	$	13
Year Ended December 31, 2015⁽¹⁾	141	$	1,373,360	$	320,066	$	81,961	$	1,535,763	$	302,083	$	226,381	$	2,307		$	(205	)


(1)	Allocations for the year ended December 31, 2015 include the 67 properties acquired ~~including~~as part of the Bank of America Portfolio.

Pro Forma

The following table summarizes, on an unaudited pro forma basis, the Company’s combined results of operations for the three months ended March 31, 2016 and 2015 as though the acquisitions closed during the three months ended March 31, 2016 and 2015 were completed on January 1, 2015. The supplemental pro forma operating data is not necessarily indicative of what the actual results of operations would have been assuming the transaction had been completed as set forth above, nor do they purport to represent the Company’s results of operations for future periods. The table includes pro forma operating results for the assets acquired in the Merger.



	Three Months Ended March 31,
	2016			2015
Pro forma revenues	$	112,243		$	119,034
Pro forma net income available to common shareholders⁽¹⁾	$	(7,558	)	$	8,910
Pro forma income per common share-basic	$	(0.02	)	$	0.06
Pro forma income per common share-diluted	$	(0.02	)	$	0.06
Pro forma common shares-basic	420,181,216			149,937,452
Pro forma common share-diluted	420,181,216			155,132,478


(1)	Net income for each period has been adjusted for acquisition costs ~~paid~~related to ~~our former investment advisor prior to January 1, 2009.~~the property acquisitions during the period.

Merger with Chambers

As described in Note 1, on December 17, 2015, the Company completed a merger transaction in which Legacy Gramercy merged with and into a subsidiary of Chambers. In accordance with ASC 805, Business Combinations, the Merger was accounted for as a reverse acquisition, with Chambers as the legal acquirer and Legacy Gramercy as the accounting acquirer for financial reporting purposes. At Merger closing, each share of Legacy Gramercy common stock, par value $0.001 per share, that was issued and outstanding immediately prior to the effective time of the Merger, was canceled and converted into the right to receive 3.1898 common shares, par value $0.01 per share, of the Company.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

Because the Merger is accounted for as a reverse acquisition, consideration for the Merger is computed as if Legacy Gramercy had issued its equity interests to Chambers shareholders. Consideration for the Merger was $1,829,241, based on Legacy Gramercy’s closing stock price of $24.63 on December 17, 2015, the number of Chambers common shares outstanding at the close of the Merger, and the Merger Agreement exchange ratio of 3.1898 set forth in the Agreement and Plan of Merger, dated as of July 1, 2015, related to the Merger, or the Merger Agreement.

The Company is in the process of completing the allocation of the purchase price for the Merger, which the Company expects to finalize later this year. The following table summarizes the preliminary purchase price allocation, which represents the current best estimate of acquisition date fair values of the assets acquired and liabilities assumed:



Assets
Investments:
Land	$	261,514
Buildings and improvements	1,651,462
Net investments	1,912,976
Cash and cash equivalents	24,687
Restricted cash	8,990
Unconsolidated equity investments	556,232
Tenant and other receivables, net	10,885
Acquired lease assets	387,988
Deferred costs and other assets	5,002
Assets held for sale	$	418,115
Total assets	$	3,324,875
Liabilities
Mortgage notes payable	$	218,945
Revolving credit facilities and term loans	860,000
Below-market lease liabilities	40,593
Accounts payable, accrued expenses, and other liabilities	87,106
Liabilities related to assets held for sale	288,990
Total liabilities	$	1,495,634
Estimated fair value of net assets acquired	$	1,829,241

The final allocation of the purchase price will be based on the Company’s assessment of the fair value of the acquired assets and liabilities and may differ significantly from the estimated preliminary allocation. During the three months ended March 31, 2016, the Company recorded adjustments to the preliminary purchase price allocation for Chambers as a result of further evaluation of the fair value of the assets acquired and liabilities assumed. The adjustments recorded resulted in a decrease to the allocation to assets acquired by $328 and a decrease to the allocation to liabilities assumed by $328. The preliminary purchase price allocation adjustments also resulted in an increase in net income of $7 to record adjustments to depreciation and amortization expense related to the adjustments on the Condensed Consolidated Statements of Operations for the three months ended March 31, 2016.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

Acquisition of Gramercy Europe Asset Management

On December 19, 2014, the Company acquired ThreadGreen Europe Limited, a United Kingdom based property and asset management platform, which the Company subsequently renamed Gramercy Europe Limited, or Gramercy Europe Asset Management, for $3,755 and the issuance of 96,535 shares of the Company’s common stock, valued at $652 as of the date of closing. The Company accounted for the acquisition utilizing the acquisition method of accounting for business combinations. The Company initially recognized assets of $902, liabilities of $398, and goodwill of $3,887, as well as a $16 realized foreign currency transaction loss related to the acquisition and during the second quarter of 2015, the Company finalized the purchase price allocation, which resulted in an increase to the allocation to assets by $190, an increase to the allocation to liabilities by $105, a decrease to goodwill by $85, and a decrease to net income of $80 to record adjustments to amortization and incentive fees. The final allocation of the purchase price included assets of $1,092, liabilities of $503, and goodwill of $3,802. Goodwill represents the fair value of the collaboration expected to be achieved upon consummation of a business combination and is measured as the excess of consideration transferred over the net assets acquired at acquisition date. For more information on Gramercy Europe Asset Management, refer to Note 5.

5. Unconsolidated Equity Investments

The Company has investments in a variety of ventures. The Company will co-invest in entities that own multiple properties with various investors or with one partner. The Company may manage the ventures and collect asset and property management fees as well as incentive fees, otherwise known as profit participation, from its investment partners, or one of the other partners will manage the ventures for asset and property management fees as well as incentive fees. Depending on the structure of the venture, the Company’s voting interest may be different than its economic interest. As the Company does not control these ventures, the Company accounts for these investments under the equity method of accounting.

As a result of the Merger, the Company acquired an interest in four unconsolidated entities, the Duke Joint Venture, Goodman Europe Joint Venture, Goodman UK Joint Venture, and the CBRE Strategic Partners Asia, a real estate investment fund. The Company’s equity investment in the entities was fair valued on the Merger closing date, and the difference between the historical carrying value of the net assets and the fair value has been recorded as a basis difference. The basis difference will be amortized to equity in net income from joint ventures and equity investments over the remaining weighted-average useful life of the underlying assets of each entity.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

As of March 31, 2016 and December 31, 2015, the Company owned properties through unconsolidated equity investments and had investment interests in these unconsolidated entities as follows:



						As of March 31, 2016			As of December 31, 2015
Investment	Ownership %		Voting Interest %		Partner	Investment in Unconsolidated Equity Investment⁽¹⁾		Number of Properties	Investment in Unconsolidated Equity Investment⁽¹⁾		Number of Properties
Gramercy European Property Fund ⁽²⁾	19.8	%	19.8	%	Various	$	26,228	15	$	23,381	12
Philips Joint Venture	25.0	%	25.0	%	Various	—		1	—		1
Duke Joint Venture	80.0	%	50.0	%	Duke Realty	291,324		9	352,932		13
Goodman Europe Joint Venture	80.0	%	50.0	%	Goodman Group	163,884		9	158,863		9
Goodman UK Joint Venture	80.0	%	50.0	%	Goodman Group	38,096		3	36,698		3
CBRE Strategic Partners Asia	5.07	%	5.07	%	Various	5,126		2	5,508		2
Morristown Joint Venture	50.0	%	50.0	%	21 South Street	2,611		1	2,618		1
Total						$	527,269	40	$	580,000	41

(1)

The amounts presented include basis differences of $101,236, $38,651 and $6,140, net of accumulated amortization, for the Duke Joint Venture, Goodman Europe Joint Venture, and Goodman UK Joint Venture, respectively, as of March 31, 2016. The amounts presented include basis differences of $136,198, $37,371, and $6,578, net of accumulated amortization, for the Duke Joint Venture, Goodman Europe Joint Venture, and Goodman UK Joint Venture, respectively, as of December 31, 2015.


(2)	Includes European Fund Carry Co., which has a carrying value of $(7) and $0 for the ~~Goodman Princeton Holdings (Jersey) Limited joint venture (the "UK JV")~~Company’s 25% interest as of March 31, 2016 and ~~CBRE Strategic Partners Asia.~~December 31, 2015, respectively.

The following ~~are~~is a summary of the ~~balance sheets of our~~Company’s unconsolidated equity investments ~~in unconsolidated entities at December~~for the three months ended March 31, ~~2014 (in thousands):~~2016:

Duke JV European JV
Other⁽²⁾
Total

Assets
Investments in Real Estate⁽¹⁾
$ 323,236
$ 274,128
$ 186,360
$ 783,724
Real Estate Investments and Other Assets Held-for-Sale 17,230
—
—
17,230
Other Assets 32,474
49,435
11,553
93,462
Total Assets $ 372,940
$ 323,563
$ 197,913
$ 894,416
Liabilities and Equity
Liabilities Related to Real Estate Investments Held-for-Sale $ 11,048
$ —
$ —
$ 11,048
Secured Notes Payable, net 57,222
135,173
—
192,395
Other Liabilities 6,013
8,214
17,093
31,320
Total Liabilities 74,283
143,387
17,093
234,763
CSP Equity 239,376
144,141
40,176
423,693
Other Investors' Equity 59,281
36,035
140,644
235,960
Total Liabilities and Equity $ 372,940
$ 323,563
$ 197,913
$ 894,416



	Unconsolidated Equity Investments
Balance as of December 31, 2015	$	580,000
Contributions to unconsolidated equity investments	2,471
Equity in net loss of unconsolidated equity investments, including adjustments for basis differences	(2,755		)
Other comprehensive income of unconsolidated equity investments	7,576
Distributions from unconsolidated equity investments	(57,368		)
Purchase price allocation adjustments	(2,655		)
Balance as of March 31, 2016	$	527,269

~~__________~~Gramercy European Property Fund

In December 2014, the Company, along with several equity investment partners, formed Gramercy European Property Fund, a private real estate investment fund, which targets single-tenant industrial, office and specialty retail assets throughout Europe. The equity investors, including the Company, have collectively committed approximately $401,145 (€352,500) in equity capital comprised of an initial commitment of approximately $287,345 (€252,500), including $56,900 (€50,000) from the Company and $230,445 (€202,500) from its equity investment partners, plus an additional $113,800 (€100,000) from certain equity investment partners, not including the Company, after the first $287,345 (€252,500) has been invested. As of March 31, 2016 and December 31, 2015, the Company contributed $28,134 (€25,358) and $25,663 (€23,160) to the Gramercy European Property Fund, respectively. During the three months ended March 31, 2016 and the year ended December 31, 2015, the Gramercy European Property Fund acquired three and 12 properties, respectively, located in Germany, the Netherlands, Poland, and the United Kingdom.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

Philips Building

The Philips Joint Venture is a fee interest in 200 Franklin Square Drive, a 199,900 square foot building located in Somerset, New Jersey which is 100% net leased to Philips Holdings, USA Inc., a wholly-owned subsidiary of Royal Philips Electronics through December 2021, or the Philips Joint Venture. The property is financed by a $40,127 fixed rate mortgage note with maturity in September 2035. The loan had an anticipated repayment date in September 2015 and, as such, distributions from the property began paying down the loan in September 2015. During the three months ended March 31, 2016 and 2015 the Company received distributions of $0 and $103 from the joint venture, respectively.

Duke

The Duke Joint Venture invests in industrial and office properties located throughout the United States. The Company’s investment partner, Duke Realty, acts as the managing member of the Duke Joint Venture, is entitled to receive fees in connection with the services it provides to the Duke Joint Venture, including asset management, construction, development, leasing and property management services, and is entitled to a promoted interest in the Duke Joint Venture. The Company has joint approval rights with Duke over all major policy decisions. Pursuant to the Duke Amended and Restated Operating Agreement, the Company has the right to a call option to acquire Duke’s entire interest in the Duke Joint Venture, with the value of such interest based on the opinions of qualified appraisers and which the Company can exercise upon the occurrence and adoption by resolution of certain triggering events. Additionally, the Duke Joint Venture has certain rights to participate in the development of certain adjacent and nearby parcels of land currently owned by Duke. The Company received distributions of $53,807 from the Duke Joint Venture during the three months ended March 31, 2016.

Goodman Joint Ventures

The Goodman UK Joint Ventures invests in industrial properties in the United Kingdom and the Goodman Europe Joint Venture invests in industrial properties in France and Germany. The Goodman UK and Goodman Europe Joint Ventures pay certain fees to certain Goodman Group subsidiaries in connection with the services they provide to the Goodman UK and Goodman Europe Joint Ventures, including but not limited to investment advisory, development management and property management services. Goodman is entitled to a promoted interest in the Goodman UK and Goodman Europe Joint Ventures.

If a deadlock has arisen pertaining to a major decision regarding a specific property, either shareholder may exercise a buy-sell option in relation to the relevant property for the Goodman UK and Goodman Europe Joint Ventures. After the initial investment period, either shareholder wishing to exit the Goodman Europe and Goodman UK Joint Venture may exercise a buy-sell option with respect to its entire interest. During the three months ended March 31, 2016, the Company received distributions of $0 and $3,561 from the Goodman UK Joint Venture and the Goodman Europe Joint Venture, respectively.

CBRE Strategic Partners Asia

CBRE Strategic Partners Asia is a real estate investment fund with investments in China. CBRE Strategic Partners Asia had an eight-year original term, which began on January 31, 2008 and may be extended for up to two one-year periods with the approval of two-thirds of the limited partners. CBRE Strategic Partners Asia’s commitment period has ended; however, it may call capital to fund operations, obligations and liabilities. For the three months ended March 31, 2016, no capital has been committed or distributed. In March 2016, the limited partners approved a one-year extension of the fund’s life. CBRE Strategic Partners Asia is managed by CBRE Investors SP Asia II, LLC, an affiliate of CBRE Global Investors. CBRE Strategic Partners Asia is not obligated to redeem the interests of any of its investors, including of the Company, prior to 2017. Except in certain limited circumstances such as transfers to affiliates or successor trustees or state agencies, the Company will not be permitted to sell its interest in CBRE Strategic Partners Asia without the prior written consent of the general partner, which the general partner may withhold in its sole discretion.

Morristown

On October 8, 2015, the Company contributed 50% of its interest in an office property located in Morristown, New Jersey to a joint venture the Company formed with 21 South Street, a subsidiary of Hampshire Partners Fund VIII LP. The Company sold the remaining 50% equity interest of the property to 21 South Street for gross proceeds of $2,600. In connection with the sale, the Company, entered into a joint venture agreement for the property with 21 South Street, or the Morristown Joint Venture. In October 2015, the Morristown Joint Venture entered into a leasing and construction management agreement with Prism Construction Management, LLC to manage the construction of specific improvements at the property.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

The Condensed Consolidated Balance Sheets for the Company’s unconsolidated equity investments at March 31, 2016 are as follows:



	As of March 31, 2016
	Duke Joint Venture		Goodman UK Joint Venture		Goodman Europe Joint Venture		Gramercy European Property Fund		CBRE Strategic Partners Asia		Other⁽¹⁾		Total
Assets:
Real estate assets, net⁽²⁾	$	342,437	$	41,011	$	287,922	$	282,178	$	109,554	$	50,423	$	1,113,525
Other assets	25,138		6,122		40,106		58,861		9,337		3,390		142,954
Total assets	$	367,575	$	47,133	$	328,028	$	341,039	$	118,891	$	53,813	$	1,256,479
Liabilities and members’ equity:
Mortgages payable	$	12,992	$	—	$	127,137	$	170,431	$	—	$	40,127	$	350,687
Other liabilities	6,329		1,049		5,676		38,074		13,948		3,839		68,915
Total liabilities	19,321		1,049		132,813		208,505		13,948		43,966		419,602
Gramercy Property Trust equity	291,324		38,096		163,884		26,235		5,126		2,604		527,269
Other members’ equity	56,930		7,988		31,331		106,299		99,817		7,243		309,608
Liabilities and members’ equity	$	367,575	$	47,133	$	328,028	$	341,039	$	118,891	$	53,813	$	1,256,479


(1)	Includes REIT Basis Adjustments for costs incurred by the Company outside of the Duke JV that are directly capitalizable to its investment in real estate assets acquired, including acquisition costs paid to our former investment advisor prior to January 1, 2009.Philips Joint Venture, Morristown Joint Venture, and European Fund Carry Co.


(2)	Includes ~~UK JV, Afton Ridge,~~REIT basis adjustments that were recorded by the Company to adjust the unconsolidated equity investments to fair value upon closing of the Merger.

The Condensed Consolidated Balance Sheets for the Company’s unconsolidated equity investments at December 31, 2015 are as follows:



	As of December 31, 2015
	Duke Joint Venture		Goodman UK Joint Venture		Goodman Europe Joint Venture		Gramercy European Property Fund		CBRE Strategic Partners Asia		Other⁽¹⁾		Total
Assets:
Real estate assets, net⁽²⁾	$	443,313	$	42,584	$	276,925	$	236,312	$	109,554	$	50,698	$	1,159,386
Other assets	32,739		3,427		42,139		39,983		9,337		15,954		143,579
Total assets	$	476,052	$	46,011	$	319,064	$	276,295	$	118,891	$	66,652	$	1,302,965
Liabilities and members’ equity:
Mortgages payable	$	56,105	$	—	$	121,350	$	143,616	$	—	$	40,424	$	361,495
Other liabilities	6,035		1,783		8,622		14,581		13,948		16,540		61,509
Total liabilities	62,140		1,783		129,972		158,197		13,948		56,964		423,004
Gramercy Property Trust equity	352,932		36,698		158,863		23,385		5,508		2,614		580,000
Other members’ equity	60,980		7,530		30,229		94,713		99,435		7,074		299,961
Liabilities and members’ equity	$	476,052	$	46,011	$	319,064	$	276,295	$	118,891	$	66,652	$	1,302,965


(1)	Includes Philips Joint Venture, Morristown Joint Venture, and ~~CBRE Strategic Partners Asia.~~European Fund Carry Co.


(2)	Includes REIT basis adjustments that were recorded by the Company to adjust the unconsolidated equity investments to fair value upon closing of the Merger.

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~Gramercy Property Trust

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(Dollar amounts in thousands, except per share data)

March 31, 2016

Certain real estate assets in the Company’s unconsolidated equity investments are subject to mortgage loans. The following ~~are~~is a summary of the ~~statements~~secured financing arrangements within the Company’s unconsolidated equity investments as of ~~operations~~March 31, 2016:



					Outstanding Balance⁽²⁾
Property	Unconsolidated Equity Investment	Ownership %	Interest Rate⁽¹⁾	Maturity Date	March 31, 2016		December 31, 2015
Graben⁽³⁾	Goodman Europe Joint Venture	80.0%	2.39%	7/27/2017	$	35,392	$	33,781
Koblenz	Goodman Europe Joint Venture	80.0%	2.27%	12/12/2017	36,132		34,486
Durrholz	Gramercy European Property Fund	19.8%	1.20%	3/31/2020	13,451		12,937
Venray	Gramercy European Property Fund	19.8%	3.00%	12/2/2020	14,189		13,578
Bodenheim	Goodman Europe Joint Venture	80.0%	3.01%	11/25/2020	12,882		12,296
Bremen	Goodman Europe Joint Venture	80.0%	3.01%	11/25/2020	13,428		12,817
Lille	Goodman Europe Joint Venture	80.0%	3.13%	12/17/2020	29,304		27,970
Carlisle	Gramercy European Property Fund	19.8%	2.84%	2/19/2021	12,152		—
Lake Forest	Duke Joint Venture	80.0%	5.00%	8/1/2021	8,781		8,823
Tampa	Duke Joint Venture	80.0%	5.00%	9/1/2021	4,211		4,231
Rotterdam	Gramercy European Property Fund	19.8%	1.10%	12/30/2022	8,338		—
Uden	Gramercy European Property Fund	19.8%	1.10%	12/30/2022	9,745		9,331
Strykow	Gramercy European Property Fund	19.8%	1.10%	12/30/2022	20,954		20,063
Piaseczno	Gramercy European Property Fund	19.8%	1.10%	12/30/2022	8,900		8,522
Juchen	Gramercy European Property Fund	19.8%	1.10%	12/30/2022	20,627		19,750
Breda	Gramercy European Property Fund	19.8%	1.10%	12/30/2022	8,142		7,796
Berlin	Gramercy European Property Fund	19.8%	1.10%	12/30/2022	12,307		11,783
Potsdam	Gramercy European Property Fund	19.8%	1.10%	12/30/2022	9,514		9,109
Kerkade	Gramercy European Property Fund	19.8%	1.10%	12/30/2022	10,529		10,081
Zaandam	Gramercy European Property Fund	19.8%	1.10%	12/30/2022	12,744		12,203
Oud-Beijerland	Gramercy European Property Fund	19.8%	1.10%	12/30/2022	8,838		8,463
Philips	Philips Joint Venture	25.0%	6.90%	9/11/2035	40,127		40,424
Weston Pointe⁽⁴⁾	Duke Joint Venture	80.0%	N/A	N/A	—		43,051
Total					$	350,687	$	361,495


(1)	Represents the current interest rate as of March 31, 2016.


(2)	Mortgage loans amounts are presented at 100% of the amount in the unconsolidated equity investment.


(3)	Represents two properties under this mortgage loan.


(4)	Represents four properties under this mortgage loan, which were sold during the three months ended March 31, 2016.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

The Condensed Consolidated Statements of Operations for ~~our~~the unconsolidated equity investments ~~in unconsolidated entities~~ for the three months ended March 31, 2016 and 2015 ~~and March 31, 2014 (in thousands):~~or partial period for acquisitions or dispositions which closed during these periods, are as follows:

Three Months Ended
March 31, 2015 March 31, 2014
Duke JV European JV
Other ⁽¹⁾
Total Duke JV European JV
Other ⁽²⁾
Total
Total Revenue $ 12,631
$ 6,573
$ (2,334 ) $ 16,870
$ 14,660
$ 7,336
$ (399 ) $ 21,597
Operating Expenses 3,423
1,215
618
5,256
5,036
1,129
745
6,910
Net Operating Income 9,208
5,358
(2,952 ) 11,614
9,624
6,207
(1,144 ) 14,687
Depreciation and Amortization 5,214
2,601
484
8,299
7,516
2,929
523
10,968
Interest Expense 794
957
—
1,751
1,040
1,133
—
2,173
Gain on Sale of Real Estate 3,020
—
—
3,020
—
—
—
—
Loss on Extinguishment of Debt (73 ) —
—
(73 ) —
—
—
—
Net Income (Loss) 6,147
1,800
(3,436 ) 4,511
1,068
2,145
(1,667 ) 1,546
Company Share in Net Income 4,917
1,439
175
6,531
854
1,716
287
2,857
Adjustments for REIT basis (26 ) —
—
(26 ) (31 ) —
—
(31 )
CSP Equity in Net Income $ 4,891
$ 1,439
$ 175
$ 6,505
$ 823
$ 1,716
$ 287
$ 2,826

~~__________~~



	For the Three Months Ended March 31, 2016																		For the Three Months Ended March 31, 2015
	Duke Joint Venture			Goodman UK Joint Venture			Goodman Europe Joint Venture			Gramercy European Property Fund			Other⁽¹⁾			Total			Total⁽²⁾
Revenues	$	10,536		$	4,284		$	6,121		$	5,057		$	301		$	26,299		$	959
Operating expenses	2,991			287			862			502			712			5,354			541
Acquisition expenses	—			—			—			666			—			666			—
Interest expense	436			—			923			927			729			3,015			522
Depreciation and amortization	3,729			750			2,290			2,345			333			9,447			313
Total expenses	7,156			1,037			4,075			4,440			1,774			18,482			1,376
Net income (loss) from operations	3,380			3,247			2,046			617			(1,473		)	7,817			(417		)
Loss on derivatives	—			—			—			(3,814		)	—			(3,814		)	—
Loss on extinguishment of debt	(7,962		)	—			—			—			—			(7,962		)
Net gain on disposals	38,535			—			—			—			—			38,535			—
Provision for taxes	—			—			—			(315		)	—			(315		)	—
Net income (loss)	$	33,953		$	3,247		$	2,046		$	(3,512	)	$	(1,473	)	$	34,261		$	(417	)
Company’s share in net income (loss)	$	27,162		$	2,597		$	1,637		$	(695	)	$	(79	)	$	30,622		(1		)
Adjustments for REIT basis	(32,621		)	(270		)	(486		)	—			—			(33,377		)	—
Company’s equity in net income (loss) within continuing operations	$	(5,459	)	$	2,327		$	1,151		$	(695	)	$	(79	)	$	(2,755	)	$	(1	)


(1)	Includes ~~UK JV~~Philips Joint Venture, Morristown Joint Venture, European Fund Carry Co., and CBRE Strategic Partners Asia.


(2)	~~Includes UK JV, Afton Ridge,~~Represents the Gramercy European Property Fund and ~~CBRE Strategic Partners Asia.~~the Philips Joint Venture.

~~Investments in Unconsolidated Entities Activity~~

On January 23, 2015, the Duke JV sold one office property located in Raleigh, North Carolina for approximately $20.6 million, of which our pro rata share was approximately $16.4 million and our pro rata gain was approximately $2.4 million.

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~6. Debt Obligations

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~Secured Debt

~~(Unaudited)~~Mortgage Loans

~~5. Deferred Leasing Costs and Intangible Assets and Liabilities~~

~~The following table summarizes our deferred leasing costs and intangible~~Certain real estate assets including acquired above-market leases, acquired in-place leases and other intangible assets and intangible liabilities, including acquired below-market leases and acquired above-market ground lease obligations (in thousands):

March 31, December 31,
2015 2014
Deferred Leasing Costs and Intangible Assets, Net:
Deferred Leasing Costs $ 22,848
$ 22,481
Accumulated Amortization (4,961 ) (4,218 )
Deferred Leasing Costs, Net 17,887
18,263
Above-Market Leases 63,566
63,566
Accumulated Amortization (32,449 ) (30,311 )
Above-Market Leases, Net 31,117
33,255
In-Place Leases 300,124
300,124
Accumulated Amortization (141,740 ) (132,414 )
In-Place Leases, Net 158,384
167,710
Other Intangible Assets 1,425
1,425
Accumulated Amortization

(199 ) (163 )
Other Intangible Assets, Net 1,226
1,262
Total Deferred Leasing Costs and Intangible Assets, Net $ 208,614
$ 220,490

Intangible Liabilities, Net:
Below-Market Leases $ 51,653
$ 51,653
Accumulated Amortization (27,838 ) (26,675 )
Below-Market Leases, Net 23,815
24,978
Above-Market Ground Lease Obligation 1,501
1,501
Accumulated Amortization (249 ) (231 )
Above-Market Ground Lease Obligation, Net 1,252
1,270
Total Intangible Liabilities, Net $ 25,067
$ 26,248

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~The following table sets forth amortization related~~are subject to ~~intangible assets and liabilities for~~mortgage loans. During the three months ended March 31, 2016, the Company did not assume any mortgages in connection with real estate acquisitions, however the Company entered into one non-recourse mortgage for $9,550 related to a prior period real estate acquisition. During the year ended December 31, 2015, the Company assumed $618,169 of non-recourse mortgages in connection with 46 real estate acquisitions, including $464,292 of non-recourse mortgages relating to 29 properties acquired in connection with the Merger.

During the three months ended March 31, 2016, the Company paid off the debt on six properties encumbered by mortgage loans and ~~2014 (in thousands):~~transferred one property encumbered by a mortgage loan, and as a result, the Company recorded a net loss on the early extinguishment of debt of $(3,827), including a gain on extinguishment of debt of $1,930 within discontinued operations, related to unamortized deferred financing costs and mortgage premiums (discounts) that were immediately expensed upon termination as well as early termination fees incurred for the extinguishments. The Company did not pay off any mortgage loans during the three months ended March 31, 2015. The Company’s mortgage loans include a series of financial and other covenants that the Company has to comply with in order to borrow under them. The Company was in compliance with the covenants under the facilities as of March 31, 2016.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

Three Months Ended
March 31,
2015 2014
Deferred Leasing Costs⁽¹⁾
$ 749
$ 354
Above-Market Leases⁽²⁾
2,138
2,515
In-Place Leases⁽¹⁾
9,326
9,469
Other Intangible Assets⁽¹⁾
36
—
Below-Market Leases⁽²⁾
(1,163 ) (1,033 )
Above-Market Ground Lease Obligation⁽³⁾
(18 ) (18 )

~~__________~~


~~(1)~~	The amortization of deferred leasing costs, in-place leases and other intangible assets are recorded to depreciation and amortization expense in the consolidated statements of operations for the periods presented.


~~(2)~~	The amortization of above-market leases and below-market leases are recorded as reductions and additions to rental income, respectively, in the consolidated statements of operations for the periods presented.


~~(3)~~	~~The amortization of the above-market ground lease obligation is recorded as a decrease to property operating expense in the consolidated statements of operations for the periods presented.~~

The following is a ~~schedule~~summary of ~~future amortization of deferred leasing costs, intangible assets and liabilities~~the Company’s secured financing arrangements as of March 31, ~~2015 (in thousands):~~2016:

Intangible Assets Intangible Liabilities
Deferred Leasing Costs
Acquired
Above-Market
Leases

Acquired
In-Place
Leases
Other Intangible Assets
Acquired
Below-Market
Leases

Above-Market
Ground Lease
Obligations
Remaining 2015 $ 1,424
$ 6,327
$ 27,236
$ 108
$ 3,368
$ 53
2016 1,750
5,557
29,727
144
3,590
71
2017 1,604
4,466
25,254
144
3,098
71
2018 1,531
3,862
21,050
144
2,825
71
2019 1,332
3,300
17,284
144
2,604
71
Thereafter 10,246
7,605
37,833
542
8,330
915
$ 17,887
$ 31,117
$ 158,384
$ 1,226
$ 23,815
$ 1,252



Property	Interest Rate⁽¹⁾	Maturity Date	Outstanding Balance
Property	Interest Rate⁽¹⁾	Maturity Date	March 31, 2016		December 31, 2015
Wilson	5.33%	10/1/2016	$	8,545	$	8,603
Arrowood	5.57%	11/11/2016	13,025		13,025
Point West I - Swapped to Fixed	3.41%	12/6/2016	10,310		10,391
Buford	7.46%	7/1/2017	15,840		15,947
100 Tice Blvd	5.97%	9/15/2017	18,179		18,340
100 Tice Blvd	5.97%	9/15/2017	18,180		18,341
4701 Gold Spike Drive⁽³⁾	4.45%	3/1/2018	9,701		9,754
1985 International Way⁽³⁾	4.45%	3/1/2018	6,741		6,777
3660 Deerpark Boulevard⁽³⁾	4.45%	3/1/2018	6,968		7,006
Tolleson Commerce Park II⁽³⁾	4.45%	3/1/2018	4,190		4,213
20000 S. Diamond Lake Road⁽³⁾	4.45%	3/1/2018	6,103		6,136
Ames⁽⁷⁾	5.53%	5/1/2018	16,785		16,900
Atrium I - Swapped to Fixed	3.78%	5/31/2018	20,410		20,644
Greenwood	3.28%	6/15/2018	7,567		7,610
Mt. Comfort	3.28%	6/15/2018	6,116		6,150
Blue Grass	4.28%	1/1/2019	12,605		12,696
Easton III - Swapped to Fixed	3.95%	1/31/2019	6,048		6,094
Fairforest Bldg. 6	5.42%	6/1/2019	1,307		1,398
North Rhett I	5.65%	8/1/2019	1,363		1,486
Lawrence	4.00%	1/1/2020	21,219		21,371
Kings Mountain II	5.47%	1/1/2020	2,702		2,859
Irving	5.46%	7/1/2020	21,730		21,800
Parsippany	5.46%	7/1/2020	14,879		14,926
Plantation⁽⁶⁾	5.46%	7/1/2020	17,635		17,692
Commerce	5.46%	7/1/2020	8,108		8,134
Redondo Beach	5.46%	7/1/2020	9,324		9,354
El Segundo	5.46%	7/1/2020	15,406		15,455
Richfield	5.46%	7/1/2020	7,906		7,931
Richardson	5.46%	7/1/2020	3,243		3,254
Houston⁽⁵⁾	5.46%	7/1/2020	17,352		17,407
Aurora	5.46%	7/1/2020	2,068		2,074
Dixon	5.46%	7/1/2020	8,108		8,134
1 Rocket Road	6.60%	8/1/2020	18,000		18,108
North Rhett II	5.20%	10/1/2020	1,155		1,210
Mount Holly Bldg.	5.20%	10/1/2020	1,155		1,210
Orangeburg Park Bldg.	5.20%	10/1/2020	1,174		1,230
Kings Mountain I	5.27%	10/1/2020	1,001		1,049
Des Plaines	5.25%	10/31/2020	2,519		2,537
Waco - Swapped to Fixed	4.55%	12/19/2020	15,410		15,485
Ten Parkway North	4.75%	1/1/2021	11,060		11,145
Union Cross Bldg. II	5.53%	6/1/2021	4,803		4,998
Union Cross Bldg. I	5.50%	7/1/2021	1,583		1,647
Yuma	5.15%	12/6/2023	12,200		12,247
Allentown	5.07%	1/6/2024	23,352		23,443
Fairforest Bldg. 5	6.33%	2/1/2024	6,874		7,040

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~Gramercy Property Trust

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(Dollar amounts in thousands, except per share data)

March 31, 2016

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, ~~2015 and December 31, 2014 (amounts in thousands):~~2016

Notional Amount Fair Value Rate
Type of Instrument March 31, December 31, March 31, December 31, March 31, December 31, Index
Maturity
Date
2015 2014 2015 2014 2015 2014
Interest Rate Swap⁽¹⁾
$ 10,635
$ 10,716
$ (146 ) $ (135 ) 1.2 % 1.3 % LIBOR 12/6/2016
Interest Rate Swap⁽²⁾
200,000
200,000
(116 ) 1,467
0.8 % 0.8 % LIBOR 3/7/2018
Interest Rate Swap⁽¹⁾
21,346
21,580
(478 ) (354 ) 1.6 % 1.6 % LIBOR 5/31/2018
Interest Rate Swap 200,000
200,000
(3,497 ) (1,540 ) 1.5 % 1.5 % LIBOR 1/15/2019
Interest Rate Swap⁽¹⁾
6,234
6,280
(177 ) (127 ) 1.8 % 1.8 % LIBOR 1/31/2019
Interest Rate Swap⁽²⁾
50,000
50,000
(399 ) 266
1.4 % 1.4 % LIBOR 3/6/2020
Interest Rate Swap 120,000
120,000
(7,179 ) (5,543 ) 2.4 % 2.4 % LIBOR 1/31/2021

~~__________~~


~~(1)~~	We assumed this swap in connection with the purchase of the Duke Portfolio on March 1, 2013. This swap is considered a hedging instrument under ASC 815-20 as of March 31, 2015. The swap was not considered a hedging instrument under ASC 815-20 during the period from March 1, 2013 to March 31, 2013.


~~(2)~~	We entered into these swaps in connection with the origination of the TD Term Loan and WF Term Loan #1 in March 2013. These swaps are considered hedging instruments under ASC 815-20 as of March 31, 2015. These swaps were not considered hedging instruments under ASC 815-20 during the period from March 11, 2013 and March 12, 2013, respectively, to May 29, 2013.

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~We record all derivative instruments~~Assets and liabilities measured at fair value on a ~~gross~~recurring basis ~~in the consolidated balance sheets. Accordingly, there~~and on a non-recurring basis are ~~no offsetting amounts that net assets against liabilities. The asset and liability balances presented~~categorized in the table below ~~reflect~~based upon the ~~gross amounts~~lowest level of ~~derivatives recorded in~~significant input to the ~~consolidated balance sheets (in thousands):~~valuations.

Asset Derivatives Liability Derivatives
Fair Value Fair Value
March 31, December 31, March 31, December 31,
Type of Instrument Balance Sheet Location 2015 2014 Balance Sheet Location 2015 2014
Derivatives designated as hedging instruments
Interest Rate Swaps Prepaid Expenses and Other Assets $ —
$ 1,733
Accounts Payable, Accrued Expenses and Other Liabilities $ 11,992
$ 7,699



At March 31, 2016	Total		Level I		Level II		Level III
Financial Assets:
Retained CDO Bonds:
Non-investment grade, subordinate CDO bonds	$	8,786	$	—	$	—	$	8,786
Marketable securities:
Investment in CBRE Strategic Partners Asia	5,126		—		—		5,126
Real estate investments classified as held for sale at Merger closing	10,522		—		—		10,522
	$	24,434	$	—	$	—	$	24,434
Financial Liabilities:
Derivative instruments:
Interest rate swaps	$	27,461	$	—	$	—	$	27,461
	$	27,461	$	—	$	—	$	27,461



At December 31, 2015	Total		Level I		Level II		Level III
Financial Assets:
Retained CDO Bonds:
Non-investment grade, subordinate CDO bonds	$	7,471	$	—	$	—	$	7,471
Marketable securities:
Investment in CBRE Strategic Partners Asia	5,508		—		—		5,508
Real estate investments classified as held for sale at Merger closing	393,984		—		—		393,984
	$	406,963	$	—	$	—	$	406,963
Financial Liabilities:
Derivative instruments:
Interest rate swaps	$	3,442	$	—	$	—	$	3,442
	$	3,442	$	—	$	—	$	3,442

Derivative instruments: Interest rate swaps are valued with the assistance of a third-party derivative specialist, who uses a combination of observable market-based inputs, such as interest rate curves, and unobservable inputs which require significant judgment such as the credit valuation adjustments due to the risk of non-performance by both the Company and its counterparties. The ~~table below presents~~most significant unobservable input in the ~~effect~~fair valuation of ~~our~~ derivative instruments ~~on our consolidated statement~~is the credit valuation adjustment as it requires significant management judgment regarding changes in the credit risk of ~~operations and consolidated statement~~the Company or its counterparties, however the primary driver of ~~comprehensive income~~the fair value of the interest rate swaps is the forward interest rate curve. Fair values of the Company’s derivative instruments were valued using a Black-Scholes model. Fair value of the Company’s embedded exchange option was determined using a probabilistic valuation model with the assistance of third-party valuation specialists.

Total unrealized losses from derivatives for the three months ended March 31, 2016 and 2015 were $(22,189) and ~~2014 (in thousands):~~

Three Months Ended
March 31,
2015 2014
Derivatives Designated as Cash Flow Hedges:
Gain (Loss) Recognized in Other Comprehensive Income (OCI) (Effective Portion) $ (8,188 ) $ (5,089 )
Loss Reclassified from AOCI into Interest Expense (Effective Portion) (2,145 ) (2,328 )
Net Change in Fair Value of Derivative Financial Instruments (Ineffective Portion and Amount Excluded from Effectiveness Testing) 17
26

At March 31, 2015, the Company expects that the hedged forecasted transactions, for each of the outstanding qualifying cash flow hedging relationships, remains probable of occurring. During the next twelve months we anticipate reclassifying $7.5 million of amounts currently recorded$(2,132), respectively, in accumulated other comprehensive income (loss).

Gramercy Property Trust

Notes to ~~earnings.~~Condensed Consolidated Financial Statements

~~Concentration~~(Dollar amounts in thousands, except per share data)

March 31, 2016

Retained CDO Bonds: Retained CDO Bonds are valued on a recurring basis using an internally developed discounted cash flow model. Management estimates the timing and amount of ~~Credit Risk~~

~~Our credit risk relates primarily~~cash flows expected to be collected and applies a discount rate equal to the yield that the Company would expect to pay for similar securities with similar risks at the valuation date. Future expected cash ~~restricted cash,~~flows generated by management require significant assumptions and ~~interest rate swap agreements. Cash accounts at each U.S. institution are insured by~~judgment regarding the ~~Federal Deposit Insurance Corporation up to $250,000 through December 31, 2015.~~

~~We have not experienced any losses to date on our invested cash and restricted cash. The interest rate swap agreements create credit risk. Credit risk arises from~~expected resolution of the potential failure of counterparties to perform in accordance with the terms of their contracts. Our risk management policies define parameters of acceptable market risk and limit exposure to credit risk. Credit exposure resulting from derivative financial instruments is represented by their fair value amounts, increased by an estimate of potential adverse position exposure arising from changes over time in interest rates, maturities,underlying collateral, which includes loans and other ~~relevant factors. We do not anticipate nonperformance by any of our counterparties.~~

Our consolidated properties are located throughout the United States and in the United Kingdom. The ability of the tenants to honor the terms of their respective leases is dependent upon the economic, regulatory, and social factors affecting the communities in which the tenants operate. In addition, we do not have any tenant whose rents exceeds 10% of our total rental revenue.

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~8. Future Minimum Rents~~

~~The following is a schedule of future minimum rents to be received on non-cancelable operating leases from consolidated properties as of March 31, 2015 (in thousands):~~

Remaining 2015 $ 162,143
2016 197,435
2017 185,133
2018 168,162
2019 149,110
Thereafter 463,068
$ 1,325,051

~~9. Related Party Transactions~~

~~As required by the Transitional Services Agreement, we and the former investment advisor have agreed on a list of unacquired~~lending investments, real estate investments, ~~for which~~and collateralized mortgage backed securities. The resolution of the ~~former investment advisor has performed certain acquisition related consulting services prior~~underlying collateral requires further management assumptions regarding capitalization rates, lease-up periods, future occupancy rates, market rental rates, holding periods, capital improvements, net property operating income, timing of workouts and recoveries, loan loss severities and other factors. The models are most sensitive to the ~~termination of~~unobservable inputs such as the Transitional Service Agreement (a "Qualifying Property"). If any Qualifying Property is acquired by us within the nine months following the termination of the Transitional Services Agreement then we shall pay an acquisition consulting fee equal to 0.75% of (i) the contract purchase price of the real estate investments (including debt), or (ii) when we make an investment indirectly through another entity, such investment's pro rata share of the gross asset value of real estate investments held by that entity to the former investment advisor.

During the year ended December 31, 2014, we acquired one Qualifying Property and paid the former investment advisor $0.2 million in acquisition consulting fees. There are no further Qualifying Properties under the Transitional Services Agreement and we do not anticipate paying the former investment advisor any further acquisition consulting fees.

Additionally, until June 30, 2017, if we attempt to effect certain types of transactions, including, but not limited to, a merger, consolidation or sale of 10% of more of our business, assets or voting securities (excluding the sale of any securities pursuant to a registration statement filed pursuant to the Securities Act of 1933, as amended), we have agreed under our Transition to Self-Management Agreement, by and among CB Richard Ellis Realty Trust, CBRE Operating Partnership, L.P., CBRE Global Investors, LLC and CBRE Advisors LLC, dated April 27, 2012 (the “Transition to Self-Management Agreement”) to engage CBRE Global Investors, LLC, our former sponsor, or an affiliate of our former sponsor to provide financial advice and assistance in connection therewith provided that such entity continues to have the sufficient expertise and resources to provide such financial advice and assistance. The transactional financial advisory fee payable by the Company to CBRE Global Investors or its affiliate upon the closingtiming of a transaction will be equal to one-quarter of one percent (0.25%) of the consideration in the transaction, as defined in the Transition to Self-Management Agreement, plus the reimbursement of reasonable expenses.

~~10. Equity Incentive Plan and Performance Bonus Plan~~

~~Equity Incentive Plan~~

~~At our annual shareholders' meeting held on May 31, 2013, our shareholders approved the 2013 Equity Incentive Plan. Our key employees, directors, trustees, officers, advisors, consultants~~loan default or other personnel of ours and our subsidiaries or other persons expected to provide significant services to us or our subsidiaries would be eligible to be granted incentive share options, non-qualified share options, share appreciation rights, restricted shares, restricted share units, dividend equivalent rights and other equity-based awards as contemplated in the 2013 Equity Incentive Plan. As of March 31, 2015, there were 3,330,631 common shares available for grant under the 2013 Equity Incentive Plan.

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~2015 Awards~~

On January 9, 2015, our Board of Trustees' independent trustees, Messrs. Charles Black, Mark Brugger, James Francis, James Orphanides and Louis Salvatore, were awarded restricted shares units ("Trustee RSUs") under the Company's 2013 Equity Incentive Plan on the following terms: (i) (y) Mr. Black was awarded 20,000 Trustee RSUs, and (z) Messrs. Brugger, Francis, Orphanides and Salvatore each were awarded 5,000 Trustee RSUs; and (ii) each award is subject to a mandatory deferral program. Pursuant to the mandatory deferral program, each Trustee RSU entitles a holder to receive one common share upon the earlier of (i) the sixth month anniversary of the holder's separation of service from the Company, and (ii) a change in control of the Company. Each Trustee RSU also entitles a holder to receive an amount equal to the dividends paid on one common share. The fair value of the Trustee RSUs was valued by a third-party valuation firm taking into consideration the mandatory deferral program restrictions. Based on the valuation analysis, the fair value of each Trustee RSU was determined to be $7.13, which represents a discount of 12.5% from the grant date closing share price of $8.15. The expected remaining tenure is estimated to be two years.

On March 13, 2015, our employees were awarded an aggregate of 474,862 restricted share units under the Company's 2013 Equity Incentive Plan, of which 237,440 are subject to market and service vesting requirements ("Performance Share Units" or "PSUs") and 237,422 are subject to time-based vesting requirements ("Time-Based RSUs" or "RSUs").

The Time-Based RSUs are subject to vest in three equal annual installments from the date of grant contingent on the grantee's continued employment with the Company. The Company pays an amount into an escrow account for the benefit of the grantee, measured by the dividends and other distributions paid with respect to the number of shares underlying the Time-Based RSU, or a Dividend Equivalent, between the grant dateproperty sale and the ~~date such Time-Based RSU vests. The Dividend Equivalent is paid to the grantee on the relevant vesting dates~~severity of ~~the Time-Based RSU.~~

~~The PSUs are restricted share units that vest at the end~~loan losses. Significant increases (decreases) in any of a three-year performance period. Each employee is granted a target number of PSUs (the “PSU Target Award”). The actual number of common shares issued to each employee is subject to the achievement of certain levels of total shareholder return relative to the total shareholder return of a peer group of publicly-traded REITs includedthose inputs in the FTSE NAREIT All Equity Total Return Index, over a three-year performance period. There will be no payout of our common shares if our total shareholder return falls below the 30th percentile of the total shareholder returns of the peer group. The maximum number of common shares issued to an employee is equal to 150% of the PSU Target Award and is earned if our total shareholder return is equal to or greater than the 75th percentile of the total shareholder returns of the peer group. The number of PSUs can ultimately fluctuate from the 237,440 granted based upon the levels of achievement for shareholder returns. Compensation expense for the PSU's will be recorded on a straight-line basis over the three year period. The fair value of the Performance Share Unit award was determined using a Monte Carlo simulation performed by a third-party valuation firm. The following table summarizes the assumptions utilized in the Monte Carlo simulation pricing model:

Assumptions
Fair value per unit at March 13, 2015 $ 6.00
Expected share price volatility 22.0 %
Dividend yield 6.0 %
Risk-free interest rate 0.99 %
Remaining expected life 2.8 years

The computations of expected volatility are based on a blend of the historical volatility of our common shares and those of our peer group companies with similar operations over approximately five and a half years as that is expected to be most consistent with future volatility and equates to a time period twice as long as the approximate two and four-fifths year remaining performance period of the PSUs. Implied volatility data is based on the observed pricing of six month (180 day) publicly-traded options on each company's common stock. The risk-free interest rate corresponds to the length of the remaining Performance Cycle and is based on the prevailing zero-coupon U.S. Treasury yield as of March 13, 2015. The expected dividend yield is estimated by examining the Company's average dividend yield over the preceding five years,

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

isolation as well as ~~its current dividend yield as~~any change in the expected timing of ~~March 13, 2015. The expected life of the PSUs is equal~~those inputs would result in a significantly lower (higher) fair value measurement. Due to the ~~remaining 2.8 year vesting period as of March 13, 2015.~~

~~Retirement of Mr. Cuneo~~

On March 5, 2015, Mr. Cuneo stepped down as President and Chief Executive Officer of the Company and resigned from the Board of Trustees of the Company. Pursuant to his Memorandum of Retirement dated November 9, 2014, Mr. Cuneo remained employed by the Companyinherent uncertainty in a non-officer position through March 16, 2015. As part of his 2014 performance bonus, Mr. Cuneo received 75,000 Time-Based RSUs and 75,000 PSUs, which became fully vested upon his retirement. We recognized cash compensation of approximately $187,000 and non-cash compensation of approximately $3.3 million related to Mr. Cuneo’s retirement in 2015.

~~2014 Awards~~

On January 29, 2014, our Board's independent trustees, Messrs. Black, Brugger, Francis, Orphanides and Salvatore, were awarded equity grants under our 2013 Equity Incentive Plan on the following terms: (i) (x) Mr. Black's award was for 20,000 common shares, (y) Messrs. Orphanides and Salvatore each were awarded 5,000 common shares and (z) Messrs. Brugger and Francis each were awarded 1,550 common shares, for a total of 33,100 common shares awarded to trustees and (ii) each award vested in its entirety, upon issuance. We recorded compensation expense based upon the $7.87 price per share on January 29, 2014.

On February 26, 2014, the Company and Operating Partnership entered into an amendment to Martin A. Reid's employment agreement, effective as of January 1, 2013, increasing Mr. Reid's annual target Long Term Incentive Award to 90,000 restricted common shares of the Company.

On March 15, 2014, a total of 401,875 restricted common shares were granted to our named executive officers (Messrs. Cuneo, Kianka and Reid) based on each executive's achievement of performance objectives during 2013, as determined at the discretion of our Compensation Committee. Additionally, 25 of our employees were granted 143,450 restricted common shares, in the aggregate, on March 15, 2014. One-third of the restricted shares granted to our named executive officers and employees will vest on each of the first three anniversaries of grant if the grantee is employed by the Company on such anniversary. We recorded compensation expense based upon the $7.74 price per share on March 15, 2014. Compensation expense is recognized on a straight-line basis over the service vesting period of three years. We recognized share-based compensation expense of $171,000 and $66,000 during the three and three months ended March 31, 2015 and 2014 as a result of granting the awards to our named executive officers and our employees.

On July 31, 2014, the Compensation Committee of the Board of Trustees of the Company (the “Compensation Committee”) adopted and approved an incentive bonus plan, a form of restricted share award agreement, and a form of restricted share unit award agreement that may be used in connection with awards made pursuant to the 2013 Equity Incentive Plan from time to time to the Company’s trustees, executive officers and other employees.

The incentive bonus plan is intended to provide additional incentive for key employees of the Company to perform to the best of their abilities, to further the growth, development and financial success of the Company, and to enable us to attract and retain qualified and talented individuals. Restricted shares are awarded to grantees based on a time-based vesting formula. Restricted share units represent a contingent commitment of the Company to issue shares to a grantee based on certain performance-based goals determined by the Compensation Committee.

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~Summary of Time-Based Restricted Common Shares~~

~~A summary of our Time-Based Restricted Common Shares from January 1, 2015 through March 31, 2015 is presented below:~~

Nonvested Restricted Stock
Common Shares
Weighted-Average
Grant Date
Fair Value
per Share
Outstanding at January 1, 2015 800,699
$ 8.68
Granted⁽¹⁾
200,000
8.10
Vested⁽¹⁾⁽²⁾
(728,963 ) 8.50
Outstanding at March 31, 2015 271,736
$ 8.53

~~__________~~


~~(1)~~	~~Shares granted to Mr. Cuneo were fully vested upon his retirement.~~


~~(2)~~	Total shares vested include 331,485 common shares that were tendered in accordance with the terms of our 2013 Equity Incentive Plan to satisfy minimum state tax withholding requirements related to the restricted common shares that have vested. We accept the return of shares at the current quoted closing share price of the Company's common shares on the NYSE to satisfy tax obligations.

~~Summary of Time-Based Restricted Share Units~~

~~A summary of our Time-Based Restricted Share Units from January 1, 2015 through March 31, 2015 is presented below:~~

Nonvested RSUs
Amount
Weighted-Average Grant Date Fair Value Per Share
Vested RSUs Total RSUs
Outstanding at January 1, 2015 —
$ —
—
—
Granted 237,422
7.78
—
237,422
Vested
(75,000 ) 7.78
75,000
—
Settled⁽¹⁾
—
—
(75,000 ) (75,000 )
Outstanding at March 31, 2015 162,422
$ 7.78
—
162,422

~~__________~~

~~(1)~~

Represents vested RSUs that were settled in shares of the Company's common shares. Total shares settled include 38,806 shares that were tendered in accordance with the terms of our 2013 Equity Incentive Plan to satisfy minimum state tax withholding requirements related to the RSU settled. We accept the return of shares at the current quoted closing share price of the Company's common shares on the NYSE to satisfy tax obligations.

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~Summary of Performance Share Units~~

~~A summary of our Performance Share Units from January 1, 2015 through March 31, 2015 is presented below:~~

Nonvested PSUs
Amount Weighted-Average Grant Date Fair Value Per Share Vested PSUs Total PSUs
Outstanding at January 1, 2015 —
$ —
—
—
Granted 237,440
6.56
—
237,440
Vested
(75,000 ) 7.78
75,000
—
Settled⁽¹⁾
—
—
(75,000 ) (75,000 )
Outstanding at March 31, 2015 162,440
$ 6.00
—
162,440

~~__________~~

~~(1)~~

Represents vested PSUs that were settled in shares of the Company's common shares. Total shares settled include 38,888 shares that were tendered in accordance with the terms of our 2013 Equity Incentive Plan to satisfy minimum state tax withholding requirements related to the PSU settled. We accept the return of shares at the current quoted closing share price of the Company's common shares on the NYSE to satisfy tax obligations.

2015 2014
(in thousands, except share data)
Compensation Expense Recorded During the Three Months Ended March 31⁽¹⁾
$ 4,038
$ 1,012
Unamortized Compensation Costs $ 4,269
$ 8,263
Shares Available for the Future Awards⁽²⁾
3,330,631
4,019,075

~~__________~~


~~(1)~~	~~2015 compensation expense includes severance expense totaling $3.3 million.~~


~~(2)~~	~~Shares available for the future awards includes units under our 2013 Equity Incentive Plan.~~

~~11. Shareholders' Equity~~

~~Common Shares~~

Under our current declaration of trust, we have the authority to issue a total of 1,000,000,000 shares of beneficial interest. Of the total shares authorized, 990,000,000 shares are designated as common shares, with a par value of $0.01 per share, and 10,000,000 shares are designated as preferred shares, with a par value of $0.01 per share. As of March 31, 2015 and December 31, 2014, there were no preferred shares issued or outstanding.

~~At-The-Market Offering~~

On November 6, 2013, we and CSP OP entered into four separate Equity Distribution Agreements with certain sales agents, pursuant to which we may sell, from time to time, our common shares having an aggregate offering price of up to $250.0 million. Sales of our common shares may be made in ordinary brokers' transactions on the NYSE, in negotiated transactions or transactions that are deemed to be "at the market" ("ATM") offerings, including sales made to or through a market maker other than on an exchange, at prices related to the prevailing market prices or at negotiated prices. We may use these proceeds and proceeds from the sale of its debt securities to repay debt, including borrowings under our unsecured revolving credit facility, to make acquisitions of properties or portfolios of properties, or for general corporate purposes. As of March 31, 2015 there have been no sales of common shares under the ATM program.

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~Accumulated Other Comprehensive Income (Loss)~~

~~The following presents the changes in the balances of each component of accumulated other comprehensive income (loss) for the three months ended March 31, 2015 and 2014 (in thousands):~~

Foreign Currency
Translation Gain (Loss)

Swap Fair Value
Adjustment

Accumulated
Other Comprehensive
Income (Loss)
Balance at January 1, 2015 $ (17,513 ) $ (5,756 ) $ (23,269 )
Other Comprehensive Loss Before Reclassifications (18,736 ) (8,188 ) (26,924 )
Amounts Reclassified from Accumulated Other Comprehensive Income to Interest Expense —
2,145
2,145
Balance at March 31, 2015 $ (36,249 ) $ (11,799 ) $ (48,048 )

Foreign Currency
Translation Gain

Swap Fair Value
Adjustment

Accumulated
Other Comprehensive
Income (Loss)
Balance at January 1, 2014 $ 1,670
$ 2,926
$ 4,596
Other Comprehensive Income (Loss) Before Reclassifications 823
(5,089 ) (4,266 )
Amounts reclassified from Accumulated Other Comprehensive Income to Interest Expense —
2,328
2,328
Balance at March 31, 2014 $ 2,493
$ 165
$ 2,658

~~12. Fair Value of Financial Instruments and Investments~~

We apply the three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices for identical financial instruments in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as instruments that have little to no pricing observability as of the reported date. These financial instruments do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value, ~~require significant management judgment or estimation.~~the Company has designated its Retained CDO Bonds as Level III.

As of March 31, 2015 and December 31, 2014, we held certain items that were required to be measured at fair value on a recurring basis. These included cash equivalents, interest rate swap derivative contracts and our equity method investmentInvestment in CBRE Strategic Partners Asia. Cash equivalents consist of short-term, highly liquid, income-producing investments, all of which have original maturities of 90 days or less, including money market funds and U.S. Government obligations. Derivative instruments are related to our economic hedging activities with respect to interest rates.

Asia:The fair values of the interest rate swap derivative agreements are estimated with the assistance of a third-party valuation specialist using the market standard methodology of discounting the future expected cash payments and receipts on the pay and receive legs of the interest rate swap agreements that swap the estimated variable rate mortgage note payment stream for a fixed rate receive payment stream over the period of the loan. The variable interest rates used in the calculation of projected receipts on the interest rate swap agreements are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements (where appropriate). Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. However, as of March 31, 2015 and December 31, 2014, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

valuations in their entirety are classified in Level 2 of the fair value hierarchy. We have consistently applied these valuation techniques in all periods presented and believe we have obtained the most accurate information available for the types of derivative contracts we hold.

~~Our~~Company’s investment in CBRE Strategic Partners Asia is based on the Level 3III valuation inputs applied by the ~~Investment Manager~~investment manager of ~~this investment company~~CBRE Strategic Partners Asia, utilizing a mix of different approaches for valuing the underlying real estate related investments within the investment company. The approaches include the income approach, direct market comparison approach and the replacement cost approach for newer properties. For investments owned more than one year, except for investments under construction or incurring significant renovation, ~~it is~~ CBRE Strategic Partners ~~Asia’s policy to obtain~~Asia obtains a third-party appraisal. For investments in real estate under construction or incurring significant renovation, the valuation analysis is prepared by the ~~Investment Manager.~~investment manager of CBRE Strategic Partners Asia. The valuations are most sensitive to the unobservable inputs of discount rates, as well as capitalization rates an expected future cash flows, and significant increases (decreases) in these inputs would result in a significantly lower (higher) fair value measurement. On a quarterly basis, the Company obtains the financial results of CBRE Strategic Partners Asia and on an annual basis the Company receives audited financial statements.

~~Impairment~~Real estate investments classified as held for sale at Merger closing: Real estate investments classified as held for sale at the time of ~~Real Estate~~

~~During~~ the year ended December 31, 2014, we recognized an impairment charge of $27.6 million in continuing operations related to our 70 Hudson Street property. Accordingly, we reduced the carrying value of this property to the property’s currentMerger are reported at estimated fair value, less costs to sell. The fair value of ~~approximately $94.0 million. The~~real estate investments and their related lease intangibles is determined by an independent valuation firm using valuation techniques including the market approach, income approach, and cost approach. Key assumptions in the valuations, to which the fair value determinations are most sensitive, include discount and capitalization rates as well as expected future cash flows. Significant increases (decreases) in these inputs would result in a significantly lower (higher) fair value measurement. As the inputs are unobservable, the Company determined the inputs used to ~~calculate the~~value this liability falls within Level III for fair value ~~included projected cash flows~~reporting.

Fair Value on a Recurring Basis

Quantitative information regarding the valuation techniques and ~~risk-adjusted rate of return that we estimated would be used by a market participant in valuing~~ the ~~asset or by obtaining a~~ range of ~~third-party broker valuation estimates.~~

~~We utilized a discounted cash flow analysis~~significant unobservable Level III inputs used to ~~estimate the property's fair value. The unobservable inputs (Level 3) of our real estate that was recorded at~~determine fair value ~~as of December 31, 2014 included a discount rate of 12%, a terminal capitalization rate of 6.5%, a market rent growth rate range of 3% - 3.4% and an expense growth rate of 3%.~~

~~The following items are measured at fair value~~measurements on a recurring basis ~~and non-recurring basis at~~as of March 31, ~~2015 and December 31, 2014 (in thousands):~~2016 are:

As of March 31, 2015
Fair Value Measurements Using:

Quoted
Markets
Prices
(Level 1)

Significant
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total
Fair Value
Assets (Liabilities)
Cash and Cash Equivalents $ 1,574
$ —
$ —
$ 1,574
Interest Rate Swaps Designated as Cash Flow Hedges - Assets —
—
—
—
Interest Rate Swaps Designated as Cash Flow Hedges - Liabilities —
(11,992 ) —
(11,992 )
Investment in CBRE Strategic Partners Asia —
—
6,684
6,684

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

As of December 31, 2014
Fair Value Measurements Using:

Quoted
Markets
Prices
(Level 1)

Significant
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Total
Fair Value
Assets (Liabilities)
Cash and Cash Equivalents $ 1,573
$ —
$ —
$ 1,573
Interest Rate Swaps Designated as Cash Flow Hedges - Assets —
1,733
—
1,733
Interest Rate Swaps Designated as Cash Flow Hedges - Liabilities —
(7,699 ) —
(7,699 )
Investment in CBRE Strategic Partners Asia —
—
6,870
6,870
Fair Value of Real Estate at Impairment⁽¹⁾
—
—
94,000
94,000



	At March 31, 2016
Financial Asset or Liability	Fair Value		Valuation Technique	Unobservable Inputs	Range
Non-investment grade, subordinate CDO bonds	$	8,786	Discounted cash flows	Discount rate	22.50%
Interest rate swaps	$	27,461	Hypothetical derivative method	Credit borrowing spread	135 to 220 basis points
Investment in CBRE Strategic Partners Asia	$	5,126	Discounted cash flows	Discount rate	20.00%

~~__________~~


~~(1)~~	~~Represents a non-recurring fair value measurement.~~

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

The following roll forward table ~~presents our activity for our investment in CBRE Strategic Partners Asia~~reconciles the beginning and ending balances of financial assets measured at fair value on a recurring basis using ~~significant unobservable inputs (Level 3)~~Level III inputs:



	Retained CDO Bonds		Investment in CBRE Strategic Partners Asia			Total Financial Assets – Level III
Balance as of December 31, 2015	$	7,471	$	5,508		$	12,979
Amortization of discounts or premiums	381		—			381
Adjustments to fair value:
Unrealized gain in other comprehensive income from fair value adjustment	934		—			934
Total income on fair value adjustment	—		(68		)	(68		)
Purchase price allocation adjustments	—		(314		)	(314		)
Balance as of March 31, 2016	$	8,786	$	5,126		$	13,912

The following roll forward table reconciles the beginning and ending balances of financial liabilities measured at fair value on a recurring basis using Level III inputs:



	Derivative Instruments
Balance as of December 31, 2015	$	3,442
Adjustments to fair value:
Ineffective portion of change in derivative instruments	1,830
Unrealized loss on derivatives	22,189
Balance as of March 31, 2016	$	27,461

Fair Value on a Non-Recurring Basis

The Company measured its real estate investments classified as held for sale at the time of the Merger on a non-recurring basis as of March 31, 2016 and December 31, 2015. The Company had one and six assets in this classification as of March 31, 2016 and December 31, 2015, respectively, as the Company sold five of the assets during the first quarter of 2016. These assets were recorded at fair value, less costs to sell of $10,522 and $393,984 as of March 31, 2016 and December 31, 2015, respectively, and are included in discontinued operations. Refer to Note 3 for further information on these assets.

10. Derivative and Non-Derivative Hedging Instruments

In connection with the Merger, the Company assumed three interest rate swap derivative contracts related to mortgage loans on real estate assets and re-designated these interest rate swaps as cash flow hedges. Additionally, following the Merger, the Company terminated the interest rate swap on its unsecured $200,000 senior term loan and, in connection with its entry into the 2015 Revolving Credit Facility, entered into two new interest rate swap derivative contracts related to the 3-Year Term Loan and 7-Year Term Loan associated with its 2015 Revolving Credit Facility.

As of March 31, 2016, the Company’s derivative instruments consist of interest rate swaps, which are cash flow hedges. Changes in the effective portion of fair value of the derivatives are recognized in other comprehensive income (loss) until the hedged item expires or is recognized in earnings. Borrowings on the Company’s foreign currency denominated tranche of the 2015 Revolving Credit Facility and borrowings on the foreign currency

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

denominated tranche of the Company’s $200,000 million senior revolving credit facility that the Company terminated in December 2015, which are designated as non-derivative net investment hedges, are recognized at par value based on the exchange rate in effect on the date of the draw. Subsequent changes in the exchange rate of the Company’s non-derivative net investment hedge are recognized as part of the cumulative foreign currency translation adjustment within other comprehensive income (loss). The ineffective portion of the change in fair value of a derivative or non-derivative hedging instrument will be immediately recognized in earnings. Derivative accounting may increase or decrease reported net income and shareholders’ equity, depending on future levels of LIBOR interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows, provided the contract is carried through to full term. Refer to Note 2 and Note 9 for additional information on the Company’s derivative and non-derivative hedging instruments, including the fair value measurement of these instruments, as applicable.

The following table summarizes the notional and fair value of the Company’s derivative and hedging instruments at March 31, 2016. The fair value of the derivatives is presented in the Company’s balance sheet in Derivative instruments, at fair value and the carrying value of the non-derivative net investment hedge is included in the balance of the Company’s 2015 Revolving Credit Facility. The notional value is an indication of the extent of the Company’s involvement in this instrument at that time, but does not represent exposure to credit, interest rate or market risks:

Benchmark Rate

Notional Value

Strike Rate

Effective Date

Expiration Date

Fair Value

Assets of Non-VIEs:

Interest Rate Swap - Waco

1 mo. USD-LIBOR-BBA

15,410 USD

4.55%

12/19/2013

12/19/2020

953

Interest Rate Swap - Point West I

1 mo. USD-LIBOR-BBA

10,310 USD

1.41%

8/16/2011

12/6/2016

Interest Rate Swap - Atrium I

1 mo. USD-LIBOR-BBA

20,410 USD

1.78%

8/16/2011

5/31/2018

444

Interest Rate Swap - Easton III

1 mo. USD-LIBOR-BBA

6,048 USD

1.95%

8/16/2011

1/31/2019

188

Interest Rate Swap - 5-Year Term Loan

1 mo. USD-LIBOR-BBA

750,000 USD

1.60%

12/17/2015

12/17/2020

19,337

Interest Rate Swap - 7-Year Term Loan

1 mo. USD-LIBOR-BBA

175,000 USD

1.82%

12/17/2015

1/9/2023

6,477

Non-Derivative Net Investment Hedge

in Gramercy European Property Fund

EUR-USD exchange rate

20,000 Euros

N/A

9/28/2015

N/A

—

Total hedging instruments

27,461

Through its interest rate swaps, the Company is hedging exposure to variability in future interest payments on its debt facilities. At March 31, 2016, the interest rate swap derivative instruments were reported at their fair value as a net liability of $27,461. Swap loss of $1,830 was recognized as interest expense in the Condensed Consolidated Statements of Operations with respect to interest rate swap hedge ineffectiveness, or to amounts excluded from ineffectiveness, which relates to the off-market financing element associated with certain derivatives. No gain or loss was recognized with respect to hedge ineffectiveness or to amounts excluded from ineffectiveness for the three months ended March 31, 2015. During the three months ended March 31, 2016, the Company reclassified $315 from accumulated other comprehensive income into interest expense related to a derivative terminated in 2015. Over time, the realized and unrealized gains and losses held in accumulated other comprehensive income will be reclassified into earnings in the same periods in which the hedged interest payments affect earnings. During the next 12 months, the Company expects that $9,145 will be reclassified from other comprehensive income as an increase in interest expense for the Company’s interest rate swaps as of March 31, 2016. Additionally, the Company will recognize $3,468 in interest expense on a straight-line basis over the remaining original term of terminated swaps through June 2019, representing

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

amortization of the remaining accumulated other comprehensive income balance related to the swap, and of this amount 1,087 will be recognized in interest expense during the next 12 months.

Through its non-derivative net investment hedge, which was entered into in September 2015, the Company is hedging exposure to changes in the euro-U.S. dollar exchange rate of its net equity investment in the Gramercy European Property Fund, which has euros as its functional currency. At March 31, 2016, the non-derivative net investment hedge was reported at its carrying value as a net liability of $22,760, which is included in the balance of the senior unsecured revolving credit facility on the Condensed Consolidated Balance Sheets. During the three months ended March 31, 2016, the Company recorded a net loss of $(1,036) in other comprehensive income (loss) from the impact of exchange rates related to the non-derivative net investment hedge. No gain or loss was recognized with respect to non-derivative net investment hedge ineffectiveness, or to amounts excluded from ineffectiveness, in interest expense in the Condensed Consolidated Statement of Operations for the three months ended March 31, 2016. When the non-derivative net investment is sold or substantially liquidated, the balance of the translation adjustment accumulated in other comprehensive income will be reclassified into earnings.

11. Shareholders’ Equity (Deficit)

The equity structure in the condensed consolidated financial statements following the reverse merger reflects the equity structure of the Company. As a result, the Company’s common shares outstanding have been adjusted retroactively for all prior periods presented computed on the basis of the number of shares outstanding multiplied by the exchange ratio of 3.1898 established in the Merger Agreement. As of March 31, 2016 and 2015, the Company’s authorized capital shares consist of 1,000,000,000 shares of beneficial interest, $0.01 par value per share, of which the Company is authorized to issue up to 990,000,000 common shares of beneficial interest, par value $0.01 per share, or common shares, and 10,000,000 preferred shares of beneficial interest, par value of $0.01, or preferred shares. As of March 31, 2016, 421,500,741 common shares and 3,500,000 preferred shares were issued and outstanding, respectively. All share, share price, and per share data has been updated retroactively to reflect the Merger exchange ratio of 3.1898.

In February 2016, the Company’s board of trustees authorized and the Company declared a dividend of $0.11 per common share, which was paid on April 15, 2016 to common share and unitholders of record as of the close of business on March 31, 2016.

In February 2016, the Company’s board of trustees approved a share repurchase program authorizing the Company to repurchase up to $100,000 of the Company’s outstanding common shares. Purchases under the program will be made from time to time in the open market or in privately negotiated transactions. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The program may be suspended or discontinued at any time. For the three months ended March 31, 2016, the Company did not repurchase any shares.

In February 2015, Legacy Gramercy’s board of directors approved a 1-for-4 reverse stock split of its common stock and outstanding Class A limited partnership units of Legacy Gramercy's operating partnership, or Legacy OP Units. The reverse stock split was effective after the close of trading on March 20, 2015, and the Company’s common stock began trading on a reverse split-adjusted basis on the New York Stock Exchange on March 23, 2015.

Preferred Shares

Upon closing of the Merger on December 17, 2015, each of Legacy Gramercy’s 3,500,000 shares of 7.125% Series B Cumulative Redeemable Preferred Stock, or Series B Preferred Stock, was exchanged for one share of the Company’s 7.125% Series A Cumulative Redeemable Preferred Shares, or Series A Preferred Shares, which have the same preferences, rights and privileges as the Series B Preferred Stock. Holders of the Series A Preferred Shares are entitled to receive annual dividends of $1.78125 per share on a quarterly basis and dividends are cumulative, subject to certain provisions. On or after August 15, 2019, the Company can, at its option, redeem the Series A Preferred Shares at par for cash. At March 31, 2016, the Company has 3,500,000 of its Series A Preferred Shares outstanding with a mandatory liquidation preference of $25.00 per share.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

Equity Plan Activities

Following the Merger, the Company’s active equity incentive plan, from which share awards are issued, is the legacy Chambers equity incentive plan, or the 2013 Equity Incentive Plan. The 2013 Equity Incentive Plan allows for the following awards to be made: (i) stock options that qualify as incentive stock options under Section 422 of the Internal Revenue Code, (ii) stock options that do not qualify, (iii) stock appreciation rights, (iv) share awards, (v) phantom shares, and (vi) dividend equivalents and other equity awards. As of March 31, 2016, there were 2,820,792 shares available for grant under the 2013 Equity Incentive Plan. The Company’s 2004 Equity Incentive Plan, 2012 Inducement Plan, 2012 Outperformance Plan, and 2015 Equity Incentive Plan continued to exist following the Merger, however they became inactive and thus no new share awards will be issued out of any of those plans.

In connection with the adoption of the 2015 Equity Incentive Plan, seven senior officers were issued a total of 308,444 restricted shares in June 2015, 50% of which will vest on each of the fourth and fifth anniversaries of the grant date, subject to continued employment.

Effective at the closing of the Merger, the change in accelerated vesting control provisions of the 2012 Outperformance Plan were waived by all plan participants, and as a result the LTIP units will continue on, subject to the original service and performance conditions.

Through March 31, 2016, 2,908,116 restricted shares had been issued under the Company’s Equity Incentive Plans, of which 59% have vested. Except for certain performance based awards, the vested and unvested shares are currently entitled to receive distributions on common shares if declared by the Company. Holders of restricted shares are prohibited from selling such shares until they vest but are provided the ability to vote such shares beginning on the date of grant. Compensation expense of $483 and $245 was recorded for the three months ended March 31, 2016 and 2015, respectively, related to the issuance of restricted shares. Compensation expense of $6,879 will be recorded over the course of the next 42 months representing the remaining weighted average vesting period of equity awards issued under the Equity Incentive Plans as of March 31, 2016. As of March 31, 2016 and December 31, 2015, the Company had 779,928 and 684,199 weighted-average unvested restricted shares outstanding, respectively.

Compensation expense of $488 and $488 was recorded for the three months ended March 31, 2016 and 2015, respectively, for the 2012 Outperformance Plan. Compensation expense of $2,438 will be recorded over the course of the next 15 months, representing the remaining weighted average vesting period of the awards issued under the 2012 Outperformance Plan as of March 31, 2016.

Deferred Stock Compensation Plan for Directors

Under Legacy Gramercy’s Directors’ Deferral Program, which commenced April 2005 and was amended and restated effective January 1, 2015, the Company’s independent directors could elect to defer up to 100% of their annual retainer fee, chairman fees and meeting fees. Unless otherwise elected by a participant, fees deferred under the program were credited on a quarterly basis in the form of phantom shares using the closing price of the Company’s common stock for that quarter. Phantom shares were convertible into an equal number of shares of common stock upon such directors’ termination of service from the board of directors or a change in control by the Company. Participating directors who elected to receive fees in the form of phantom shares had the option to have their accounts credited for an equivalent amount of phantom shares stock units for any dividends declared based on the dividend rate for the quarter or have dividends paid in cash.

In connection with the closing of the Merger, on December 17, 2015 each outstanding phantom share granted under Legacy Gramercy’s Directors’ Deferral Program, was vested and, on the first business day of the month following the Merger closing, converted into the right to receive a number of the Company’s common shares, rounded to the nearest whole share, determined by multiplying the number of subject phantom shares by the Exchange Ratio of the Merger. As a result, the directors received an aggregate of $916 in cash and 410,713 in shares in January 2016. The portion paid out in cash was classified as a liability on the Consolidated Balance Sheets as of December 31, 2015. The Legacy Gramercy’s Directors’ Deferral Program terminated upon consummation of the Merger.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

Earnings per Share

The Company has adopted the two-class computation method, and thus includes all participating securities in the computation of basic shares for the periods in which the Company has net income available to vested common shares outstanding. A participating security is defined as an unvested share-based payment award containing non-forfeitable rights to dividends regardless of whether or not the awards ultimately vest or expire. Net losses are not allocated to participating securities unless the holder has a contractual obligation to share in the losses.

Earnings per share for the three months ended March 31, 2016 and 2015 are computed as follows:



	Three Months Ended March 31,
	2016			2015
Numerator – Income (loss):
Net income (loss) from continuing operations	$	(5,693	)	$	24
Net income (loss) from discontinued operations	4,640			(62		)
Net loss	(1,053		)	(38		)
Net loss attributable to noncontrolling interest	120			42
Nonforfeitable dividends allocated to unvested restricted shareholders	(199		)	(19		)
Preferred share dividends	(1,559		)	(1,559		)
Net loss available to vested common shares outstanding	$	(2,691	)	$	(1,574	)
Denominator – Weighted average shares ⁽¹⁾:
Weighted average basic shares outstanding	420,181,216			149,115,357
Effect of dilutive securities:
Unvested share based payment awards	—			—
Options	—			—
Phantom shares	—			—
Shares related to OP Units	—			—
Exchangeable Senior Notes	—			—
Diluted Shares	420,181,216			149,115,357


(1)	As a result of the Merger, each outstanding share of common stock of Legacy Gramercy was converted into 3.1898 of a newly issued common share of the Company. Therefore, the historical data related to quarterly earnings per common share for the periods ended before December 31, 2015 have been adjusted by the Merger exchange ratio of 3.1898.

Diluted income (loss) per share assumes the conversion of all common share equivalents into an equivalent number of common shares if the effect is not anti-dilutive. Options were computed using the treasury share method. The Company only includes the effect of the excess conversion premium on its Exchangeable Senior Notes in the calculation of diluted earnings per share, as the Company has the intent and ability to settle the debt component of the Exchangeable Senior Notes in cash and the excess conversion premium in shares. The weighted average price of the Company’s common shares for the three months ended March 31, 2016 was below the exchange price of $7.66 for the period. Therefore, there is no potential dilutive effect of the excess conversion premium and no effect was included in the calculation of diluted earnings per share for the three months ended March 31, 2016.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

The weighted average price of the Company’s common shares for the three months ended March 31, 2015 ~~and 2014, respectively (in thousands):~~

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Investment in
CBRE Strategic
Partners Asia
Balance at January 1, 2015 $ 6,870
Translation Adjustment in Other Comprehensive Income (186 )
Balance at March 31, 2015 $ 6,684

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Investment in
CBRE Strategic
Partners Asia
Balance at January 1, 2014 $ 9,676
Total Loss on Fair Value Adjustment (112 )
Balance at March 31, 2014 $ 9,564

~~Disclosure~~was above the exchange price of ~~Fair Value Financial Instruments~~

~~For disclosure purposes only,~~$7.76 for the ~~following table summarizes our notes payable and their estimated fair value at March 31, 2015 and December 31, 2014 (in thousands):~~

March 31, 2015 December 31, 2014
Financial Instrument
Carrying
Value

Fair
Value

Carrying
Value

Fair
Value
Secured Notes Payable⁽¹⁾
$ 581,706
$ 603,775
$ 610,608
$ 628,194
Unsecured Term Loan Facilities⁽¹⁾
$ 570,000
$ 584,654
$ 570,000
$ 577,196
Unsecured Revolving Credit Facility⁽¹⁾
$ 235,044
$ 235,044
$ 200,044
$ 200,044

~~__________~~


~~(1)~~	~~Items are measured using Level 2 inputs.~~

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

These financial instruments do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.

~~13. Commitments and Contingencies~~

~~Ground Leases - We own a property that is subject~~period, however due to a long-term noncancellable ground lease obligation that contractually expires on November 30, 2032. We have three ten-year renewal options that will allow us to extend the expiration of the ground lease through November 30, 2062. The minimum commitment under the ground lease as of March 31, 2015 and thereafter is as follows (in thousands):

Remaining 2015 $ 205
2016 273
2017 273
2018 276
2019 308
Thereafter 4,474
$ 5,809

Litigation—From time to time, we and our properties may be subject to legal proceedings, which arise in the ordinary course of our business. Currently, neither our Company nor any of our properties are subject to, or threatened with, any legal proceedings for which the outcome is reasonably likely to have a material adverse effect on our financial statements.

Environmental Matters—We are not aware of any material environmental liability or any unasserted claim or assessment with respect to a material environmental liability that we believe would require additional disclosure or the recording of a loss contingency.

~~14. Segment Disclosure~~

We view our consolidated property operations as two reportable segments: Industrial Properties and Office Properties. In addition, we had one non-reportable segment, which was Retail Properties. However, during the third quarter ended September 30, 2014 we sold our last remaining retail property, therefore, eliminating the non-reportable segment from future reportable presentations. Management internally evaluates the operating performance and financial results of our segments based on net operating income. We also have certain general and administrative level activities including legal, accounting, tax preparation and shareholder servicing costs that are not considered separate operating segments.

We evaluate the performance of our segments based on net operating income, defined as: rental income, tenant reimbursements and other property income less property and related expenses (operating and maintenance and real estate taxes) and excludes other non-property income and expenses, interest expense, depreciation and amortization, and corporate general and administrative expenses.

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

~~The following table compares~~ the net ~~operating income~~loss available to vested common shares outstanding, the excess conversion premium was excluded from the calculation of earnings per share for the three months ended March 31, 2015.

For the three months ended March 31, 2016, 16,336 share options, 2,883,465 unvested share based payment awards, and 1,374,302 common shares related to Legacy OP Units were computed using the treasury share method, which due to the net loss from continuing operations excluding amounts attributable to noncontrolling interest and adjusted for preferred dividends declared during the period were anti-dilutive. For the three months ended March 31, 2016, the Company excluded unvested restricted share awards of 779,928 from its weighted average basic shares outstanding due to the net loss from continuing operations excluding amounts attributable to noncontrolling interest and adjusted for preferred dividends declared during the period.

For the three months ended March 31, 2015, 50,058 share options, 2,039,175 unvested share based payment awards, 488,778 phantom share units, 1,701,391 Legacy OP Units, and ~~2014 (in thousands):~~1,737,718 Exchangeable Senior Notes were computed using the treasury share method, which due to the net loss from continuing operations excluding amounts attributable to noncontrolling interest and adjusted for preferred dividends declared during the period were anti-dilutive. For the three months ended March 31, 2015, the Company excluded unvested restricted share awards of 520,585 from its weighted average basic shares outstanding due to the net loss from continuing operations excluding amounts attributable to noncontrolling interest and adjusted for preferred dividends declared during the period.

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income (loss) as of March 31, 2016 and December 31, 2015 is comprised of the following:



	March 31, 2016			December 31, 2015
Net unrealized loss on derivative securities	$	(28,263	)	$	(6,074	)
Net unrealized gain on debt instruments	1,944			1,010
Foreign currency translation adjustments:
Gain (loss) on non-derivative net investment hedge⁽¹⁾	(1,022		)	14
Other foreign currency translation adjustments	6,499			(656		)
Reclassification of swap loss into interest expense	315			(45		)
Total accumulated other comprehensive loss	$	(20,527	)	$	(5,751	)

Three Months Ended
March 31,
2015 2014
Industrial Properties
Revenues:
Rental $ 18,386
$ 14,145
Tenant Reimbursements 4,948
3,721
Other Property Income 198
—
Total Revenues 23,532
17,866
Property and Related Expenses:
Property Operating 1,872
1,491
Real Estate Taxes 3,832
3,129
Total Property and Related Expenses 5,704
4,620
Net Operating Income $ 17,828
$ 13,246
Office Properties
Revenues:
Rental $ 35,960
$ 36,700
Tenant Reimbursements 11,491
11,476
Other Property Income —
1,069
Total Revenues 47,451
49,245
Property and Related Expenses:
Property Operating 7,909
8,002
Real Estate Taxes 6,950
6,672
Total Property and Related Expenses 14,859
14,674
Net Operating Income $ 32,592
$ 34,571
Non-Reportable Properties
Revenues:
Rental $ —
$ 1,031
Tenant Reimbursements —
23
Total Revenues —
1,054
Property and Related Expenses:
Property Operating —
60
Real Estate Taxes —
—
Total Property and Related Expenses —
60
Net Operating Income $ —
$ 994

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~

~~(Unaudited)~~

Three Months Ended
March 31,
2015 2014
Reconciliation to Consolidated Net Income
Total Segment Net Operating Income $ 50,420
$ 48,811
Expenses:
General and Administrative 9,873
6,864
Acquisition-Related —
290
Depreciation and Amortization 27,920
27,238
Total Expenses 37,793
34,392
Income Before Other (Expenses) Income 12,627
14,419
Other Expenses and Income
Interest and Other Income 80
167
Interest Expense (13,059 ) (14,061 )
Interest Expense and Net Change in Fair Value of Non-Qualifying Derivative Financial Instruments 17
26
(Loss) Income Before Provision for Income Taxes and Equity in Income of Unconsolidated Entities

(335 ) 551
Provision for Income Taxes (176 ) (58 )
Equity in Income of Unconsolidated Entities 6,505
2,826
Net Income $ 5,994
$ 3,319

March 31, December 31,
Assets 2015 2014
Industrial Properties $ 915,999
$ 916,038
Office Properties 1,491,098
1,504,285
Non-Segment Assets⁽¹⁾
420,070
449,485
Total Assets $ 2,827,167
$ 2,869,808

~~_________~~


(1)	~~Non-segment assets primarily include our investments~~The foreign currency translation adjustment associated with the Company’s non-derivative net investment hedge related to its equity investment in ~~unconsolidated entities.~~the Gramercy European Property Fund is included in other comprehensive income (loss).

12. Noncontrolling Interest

Noncontrolling interests represent the common units of limited partnership interest in Legacy Gramercy’s operating partnership, the entity that owns substantially all of Legacy Gramercy’s assets and investments, or Legacy OP Units, not held by the Company as well as third-party equity interests in the Company’s other consolidated subsidiaries. Legacy OP Units may be redeemed for one share of the Company’s common stock. The redemption rights are outside of the Company’s control, and thus the Legacy OP Units are classified as a component of temporary equity and are shown in the mezzanine equity section of the Company’s Condensed Consolidated Financial Statements. The Company is party by assumption to a registration rights agreement with the holders of the Legacy OP Units that requires the Company, subject to the terms and conditions and certain exceptions set forth therein, to file and maintain a registration statement relating to the issuance of shares of its common shares upon redemption of Legacy OP Units.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

Common Units of Limited Partnership Interest in the Operating Partnership

On July 31, 2014, the Company issued 944,601 Legacy OP Units in connection with the acquisition of three properties. Subsequent to the Merger, each Legacy OP Unit may be redeemed at the election of the holder for cash equal to the then fair market value of 3.1898 shares of the Company’s common stock, par value $0.01 per share, except that the Company may, at its election, acquire each Legacy OP Unit for 3.1898 shares of the Company’s common stock. The Legacy OP Unit holders do not have any obligation to provide additional contributions to the partnership, nor do they have any decision making powers or control over the business of Legacy Gramercy’s operating partnership. The Legacy OP Unit holders do not have voting rights; however, they are entitled to receive dividends.

As of March 31, 2016, the noncontrolling interest unit holders owned 420,486 Legacy OP Units, which can be redeemed for 1,341,268 shares, as each Legacy OP Unit is redeemable for 3.1898 shares of the Company’s common stock following the Merger. The outstanding Legacy OP Units as of March 31, 2016 represent an interest of approximately 0.32% in the Company. During the three months ended March 31, 2016 and the year ended December 31, 2015, 21,832 and 142,056 Legacy OP Units, respectively, were converted into shares of Legacy Gramercy’s common stock. At March 31, 2016, 1,341,268 shares of the Company’s common stock were reserved for issuance upon redemption of units of limited partnership interest of the Company’s Operating Partnership.

Legacy OP Units are recorded at the greater of cost basis or fair market value based on the closing share price of the Company’s common shares at the end of the reporting period. As of March 31, 2016, the value of the Legacy OP units was $11,334. The Company attributes a portion of its net income (loss) during each reporting period to noncontrolling interest based on the percentage ownership of Legacy OP Unit holders relative to the Company’s total outstanding common shares and Legacy OP Units. The Company recognizes changes in fair value in the Legacy OP Units through accumulated deficit, however decreases in fair value are recognized only to the extent that increases to the amount in temporary equity were previously recorded. The Company’s diluted earnings per share includes the effect of any potential shares outstanding from redemption of the Legacy OP Units.

Below is the rollforward of the activity relating to the noncontrolling interests in Legacy Gramercy’s operating partnership as of March 31, 2016:



	Noncontrolling Interest
Balance as of December 31, 2015	$	10,892
Issuance of noncontrolling interests in the Company’s operating partnerships	—
Redemption of noncontrolling interests in the Company’s operating partnerships	(523		)
Net loss attribution	(8		)
Fair value adjustments	1,207
Dividends	(234		)
Balance as of March 31, 2016	$	11,334

Interests in Other Operating Partnerships

In connection with the Company’s December 2014 investment in the Gramercy European Property Fund, the Company acquired a 50% equity interest in European Fund Manager, which provides investment and asset management services to Gramercy European Property Fund. European Fund Manager is a VIE of the Company and is consolidated into its Condensed Consolidated Financial Statements. Refer to Note 2 for further discussion of the VIE and consolidation considerations.

As of March 31, 2016 and December 31, 2015, the value of the Company’s interest in European Fund Manager was $(377) and $(249), respectively. The Company’s interest in European Fund Manager is presented in the equity section of the Company’s Condensed Consolidated Financial Statements.

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~Gramercy Property Trust

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~Notes to Condensed Consolidated Financial Statements

~~(Unaudited)~~(Dollar amounts in thousands, except per share data)

March 31, 2016

13. Commitments and Contingencies

~~15. Earnings per Share~~Funding Commitments

The Company is obligated to fund the development of Proportion Foods, a build-to-suit property in Round Rock, Texas, which is a consolidated VIE, and upon substantial completion of the development to acquire the property through a forward purchase contract. The Company’s remaining future commitment for the property at March 31, 2016 is approximately $20,838.

The Company has committed approximately $56,900 (€50,000) to the Gramercy European Property Fund, which was formed in December 2014. As of March 31, 2016 and December 31, 2015, the Company had contributed $28,134 (€25,358) and $25,663 (€23,160), respectively. See Note 5, “Unconsolidated Equity Investments,” for further information on the Gramercy European Property Fund. Foreign currency commitments have been converted into U.S. dollars based on (i) the foreign exchange rate at the closing date for completed transactions and (ii) the exchange rate that prevailed on December 31, 2015, in the case of unfunded commitments.

Legal Proceedings

The Company evaluates litigation contingencies based on information currently available, including the advice of counsel and the assessment of available insurance coverage. The Company will establish accruals for litigation and claims when a loss contingency is considered probable and the related amount is reasonably estimable. The Company will periodically review these contingencies which may be adjusted if circumstances change. The outcome of a litigation matter and the amount or range of potential losses at particular points may be difficult to ascertain. If a range of loss is estimated and an amount within such range appears to be a better estimate than any other amount within that range, then that amount is accrued.

Legacy Gramercy, its board of directors, Chambers and/or Merger Sub are named as defendants in two pending putative class action lawsuits brought by purported Legacy Gramercy stockholders challenging the Merger. Two suits that were separately filed in New York Supreme Court, New York County, captioned (i) Berliner v. Gramercy Property Trust, et al., Index No. 652424/2015 (filed July 9, 2015) and (ii) Gensler v. Baum, et al., Index No. 157432/2015 (filed July 22, 2015), have been consolidated into a single action under the caption In re Gramercy Property Trust Stockholder Litigation, Index No. 652424/2015 (the “New York Action”). In addition, four suits that were separately filed in Circuit Court for Baltimore City, Maryland, captioned (i) Jobin v. DuGan, et al., Case No. 24-C-15-003942 (filed July 27, 2015); (ii) Vojik v. Gramercy Property Trust, et al., Case No. 24-C-15-004412 (filed August 25, 2015); (iii) Hoffbauer et al. v. Chambers Street Properties, et al., 24-C-15-004904 (filed September 24, 2015) (originally filed as two separate suits in the Circuit Court for Baltimore County, Maryland, captioned Plemons v. Chambers Street Properties, et al., Case No. 03-C-15-007943 (filed July 24, 2015) and Hoffbauer et al. v. Chambers Street Properties, et al., Case No. 03-C-15-008639 (filed August 12, 2015), and refiled as a single action in the Circuit Court for Baltimore County on September 24, 2015); and (iv) Morris v. Gramercy Property Trust, et al., Case No. 24-C-15-004972 (filed September 28, 2015) have been consolidated into a single action under the caption Glenn W. Morris v. Gramercy Property Trust Inc. et al., Case No. 24-C-15-004972 (the “Maryland Action,” and together with the New York Action, the “Actions”). The complaints allege, among other things, that the directors of Legacy Gramercy breached their fiduciary duties to Legacy Gramercy stockholders by agreeing to sell the Company for inadequate consideration and agreeing to improper deal protection terms in the merger agreement, and that the preliminary joint proxy statement/prospectus filed with the SEC on Form S-4 on September 11, 2015 was materially incomplete and misleading. The complaints also allege that Chambers, Merger Sub and/or Legacy Gramercy aided and abetted these purported breaches of fiduciary duty. The amended complaint in the Morris consolidated action also asserts derivative claims on behalf of Legacy Gramercy for breach of fiduciary duty against the directors of Legacy Gramercy. Plaintiffs seek, among other things, an injunction barring the Merger, rescission of the Merger to the extent it is already implemented, declaratory relief, an award of damages and/or costs/attorney fees.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

On December 7, 2015, the parties to the Actions entered into a Memorandum of Understanding (the “MOU”), which provides for the settlement of the Actions. While the defendants in the Actions continue to vigorously deny all allegations of wrongdoing, fault, liability or damage to any of the plaintiffs or the class of stockholders of Legacy Gramercy, and believe that no supplemental disclosure is required under the applicable law, in order to (i) avoid the burden, inconvenience, expense and distraction of further litigation in connection with the Actions, (ii) finally put to rest and terminate all of the claims that were or could have been asserted against the defendants in the Actions and (iii) permit the Merger to proceed without risk of the courts in New York or Maryland ordering an injunction or damages in connection with the Actions, Chambers and Legacy Gramercy agreed, without admitting any liability or wrongdoing, pursuant to the terms of the MOU, to make certain supplemental disclosures related to the proposed Merger, which were set forth in Legacy Gramercy’s Current Report on Form 8-K filed with on December 7, 2015.

The MOU contemplates that the parties will enter into a stipulation of settlement. The stipulation of settlement will be subject to customary conditions, including, among other things, confirmatory discovery and court approval following ~~table reconciles~~notice to Legacy Gramercy stockholders. In the ~~numerator~~event that the parties enter into a stipulation of settlement, a hearing will be scheduled at which a court will consider the fairness, reasonableness and ~~denominator~~adequacy of the settlement. If the settlement is finally approved by the court, it will resolve and release all claims by stockholders of Legacy Gramercy challenging any aspect of the proposed Merger, the Merger Agreement and any disclosure made in ~~computing~~connection therewith, pursuant to terms that will be set forth in the ~~Company's basic~~notice sent to Legacy Gramercy stockholders prior to final approval of the settlement. In addition, in connection with the settlement, the parties contemplate that plaintiffs’ counsel will file a petition for an award of attorneys’ fees and ~~diluted per-share computations~~expenses to be paid by Gramercy or its successor. There can be no assurance that the court will approve the settlement. In the event that the settlement is not approved or that the conditions are not satisfied, the settlement may be terminated.

On October 1, 2015, a putative class action lawsuit was filed in the Superior Court of New Jersey, Law Division, Mercer County by a purported shareholder of Chambers. The action, captioned Elstein v. Chambers Street Properties et al., Docket No. L-002254-15 (the “New Jersey Action”), names as defendants Chambers, its board of trustees and Legacy Gramercy. The complaint alleges, among other things, that the trustees of Chambers breached their fiduciary duties to Chambers’ shareholders by agreeing to the Merger after a flawed sales process and by approving improper deal protection terms in the merger agreement, and that Legacy Gramercy aided and abetted these purported breaches of fiduciary duty. The complaint also alleges that the preliminary joint proxy statement/prospectus was materially misleading and incomplete. Plaintiffs seek, among other things, an injunction barring the Merger, rescission of the Merger to the extent it is already implemented, declaratory relief and an award of damages.

On December 3, 2015, the parties to the New Jersey Action entered into a Stipulation of Settlement providing for ~~net income~~the settlement of the New Jersey Action. While the defendants in the New Jersey Action continue to vigorously deny all allegations of wrongdoing, fault, liability or damage to any of the plaintiffs or the class of shareholders of Chambers, and believe that no supplemental disclosure is required under the applicable law, in order to (i) avoid the burden, inconvenience, expense and distraction of further litigation in connection with the New Jersey Action, (ii) finally put to rest and terminate all of the claims that were or could have been asserted against the defendants in the New Jersey Action and (iii) permit the Merger to proceed without risk of the Superior Court of New Jersey ordering an injunction or damages in connection with the New Jersey Action, Chambers and Legacy Gramercy agreed, without admitting any liability or wrongdoing, pursuant to the terms of the Stipulation of Settlement, to make certain supplemental disclosures related to the proposed Merger, all of which were set forth in Legacy Gramercy’s Current Report on Form 8-K filed with on December 7, 2015. The Stipulation of Settlement is subject to customary conditions, including court approval following notice to the Chambers shareholders. On April 4, 2016, the court granted preliminary approval of the settlement and scheduled a hearing to consider final approval for May 20, 2016. If the settlement is finally approved by the court, it will resolve and release all claims by shareholders of Chambers challenging any aspect of the proposed Merger, the Merger Agreement and any disclosure made in connection therewith, including in the Definitive Proxy Statement, pursuant to terms set forth in the notice sent to Chambers’ shareholders. There can be no assurance that the court will approve the settlement. In the event that the settlement is not approved or that the conditions are not satisfied, the settlement may be terminated.

The defendants believe the lawsuits are without merit.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

In December 2010, the Company sold its 45% joint venture interest in the leased fee of the 2 Herald Square property in New York, New York, for approximately $25,600 plus assumed mortgage debt of approximately $86,100, or the 2 Herald Sale Transaction. Subsequent to the closing of the transaction, the New York City Department of Finance, or the NYC DOF, and New York State Department of Taxation, or the NYS DOT, issued notices of determination assessing, in the case of the NYC DOF notice, approximately $2,924 of real property transfer tax, plus interest, and, in the case of the NYS DOT notice, approximately $446 of real property transfer tax, plus interest, collectively, the Transfer Tax Assessments, against the Company in connection with the 2 Herald Sale Transaction. The Company believes that NYC DOF and NYS DOT erred in issuing the Transfer Tax Assessments and intends to vigorously defend against same.

In September 2013, the Company filed a petition challenging the NYC DOF Transfer Tax Assessment with the New York City Tax Appeal Tribunal. In July 2014, the Company filed a similar petition challenging the NYS DOT Transfer Tax Assessment. Trial of the Company’s NYC DOF Transfer Tax Assessment appeal was completed in December 2014.

In April 2015, the New York City Tax Appeals Tribunal, or the NYC Tribunal, rendered an opinion denying the Company’s petition challenging the NYC DOF Transfer Tax Assessment and ruled that the Company is liable for the NYC DOF Transfer Tax Assessment. In July 2015, the Company appealed the adverse decision of the NYC Tribunal. A decision on the Company’s appeal is expected in late-2016.

No decision has yet been rendered in connection with the NYS DOT Transfer Tax Assessment, which the Company anticipates will be set for trial by late 2016.

In April 2015, to stop the accrual of additional interest while the Company’s appeals are pending, the Company paid the NYC DOF $4,025 in full satisfaction of the NYC DOF Transfer Tax Assessment and the NYS DOT $617 in full satisfaction of the NYS DOF Transfer Tax Assessment. There was $0 and $68 of additional interest recorded in discontinued operations for the matter for the three months ended March 31, 2016 and 2015, respectively.

In connection with the Company’s property acquisitions and ~~2014~~the Merger, the Company has determined that there is a risk it will have to pay future amounts to tenants related to continuing operating expense reimbursement audits. The Company has estimated a range of loss and determined that its best estimate of total loss is $8,000, including $1,000 related to the Merger, which has been accrued and recorded in other liabilities as ~~follows (in~~of March 31, 2016 and December 31, 2015. The Company has determined that there is a reasonable possibility that a loss may be incurred in excess of $8,000 and estimates this range to be $8,000 to $13,000.

In addition, the Company and/or one or more of its subsidiaries is party to various litigation matters that are considered routine litigation incidental to its business, none of which are considered material.

Office Leases

The Company has several office locations, which are each subject to operating lease agreements. These office locations include the Company’s corporate office at 521 Fifth Avenue, New York, New York, and the Company’s regional offices located in Horsham, Pennsylvania, Clayton, Missouri, and London, United Kingdom.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data):

March 31, 2016

Capital and Operating Ground Leases

Certain properties acquired are subject to ground leases, which are accounted for as operating and capital leases. The ground leases have varying ending dates, renewal options and rental rate escalations, with the latest leases extending to June 2053. Future minimum rental payments to be made by the Company under these noncancelable ground leases, excluding increases resulting from increases in the consumer price index, are as follows:

Three Months Ended
March 31,
2015 2014
Numerator:
Net Income $ 5,994
$ 3,319
Allocation to Participating Securities (Nonvested Restricted Shares and Vested RSUs) (40 ) (127 )
Numerator for Basic and Diluted Net Income $ 5,954
$ 3,192
Denominator:

Basic Weighted Average Shares Outstanding 236,940,134
236,583,752
Effect of Dilutive Securities - Non-Vested Time-Based RSUs 23,220
—
Diluted Weighted Average Shares Outstanding 236,963,354
236,583,752
Basic and Diluted Earnings Per Share:
Net Income per Share $ 0.03
$ 0.01



	Ground Leases - Operating		Ground Leases - Capital		Total
April 1 to December 31, 2016	$	1,374	$	—	$	1,374
2017	1,728		—		1,728
2018	1,728		—		1,728
2019	1,707		—		1,707
2020	1,732		—		1,732
Thereafter	47,991		329		48,320
Total minimum rent expense	$	56,260	$	329	$	56,589

The Company incurred rent expense on ground leases of $451 and $384 during the three months ended March 31, 2016 and 2015, respectively.

14. Income Taxes

The Company has elected to be taxed as a REIT, under Sections 856 through 860 of the Internal Revenue Code beginning with its taxable year ended December 31, 2004. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its ordinary taxable income to stockholders. As a REIT, the Company generally will not be subject to U.S. federal income tax on taxable income that it distributes to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will then be subject to U.S. federal income taxes on taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for U.S. federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income and net cash available for distributions to stockholders. However, the Company believes that it is organized and will operate in such a manner as to qualify for treatment as a REIT and the Company intends to operate in the foreseeable future in such a manner so that it will qualify as a REIT for U.S. federal income tax purposes. The Company may, however, be subject to certain state and local taxes. The Company’s TRSs are subject to federal, state and local taxes. The Company’s Asset and Property management business, Gramercy Asset Management, conducts its business through a wholly-owned TRS. In addition to the limitation on the Company’s use of its net operating losses under Section 382, since the Company uses separate subsidiary REITs and taxable REIT subsidiaries to conduct different aspects of its business, losses incurred by the individual subsidiary REITs and TRSs are only available to offset taxable income derived by each respective subsidiary REIT or TRS.

For the three months ended March 31, 2016 and 2015 the Company recorded $703 and $1,114 of income tax expense. Tax expense for the three months ended March 31, 2016 and 2015 in continuing operations is comprised of federal, state and local taxes primarily attributable to Gramercy Asset Management.

The Company’s policy for interest and penalties, if any, on material uncertain tax positions recognized in the financial statements is to classify these as interest expense and operating expense, respectively. As of March 31, 2016 and December 31, 2015, the Company did not incur any material interest or penalties.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

15. Segment Reporting

As of March 31, 2016, the Company has determined that it has two reportable operating segments: Asset Management and Investments/Corporate. The reportable segments are determined based upon the management approach, which looks to the Company’s internal organizational structure. The Company’s lines of business require different support infrastructures. All significant inter-segment balances and transactions have been eliminated.

The Asset Management segment includes substantially all of the Company’s activities related to asset and property management of commercial properties located throughout the United States and Europe. The Asset Management segment generates revenues from fee income related to the management agreements for properties owned by third parties throughout the United States and Europe.

The Investments/Corporate segment includes all of the Company’s activities related to the investment and ownership of commercial properties located throughout the United States and Europe. The Investments/Corporate segment generates revenues from rental revenues from properties owned by the Company, either directly or in unconsolidated equity investments.

The Company evaluates performance based on the following financial measures for each segment:



	Asset Management			Investments / Corporate			Total Company
Three Months Ended March 31, 2016
Total revenues	$	5,151		$	115,394		$	120,545
Equity in net loss from unconsolidated equity investments	—			(2,755		)	(2,755		)
Total operating and interest expense⁽¹⁾	(5,459		)	(118,024		)	(123,483		)
Net loss from continuing operations	$	(308	)	$	(5,385	)	$	(5,693	)



	Asset Management				Investments / Corporate			Total Company
Three Months Ended March 31, 2015
Total revenues	$	8,179			$	39,756		$	47,935
Equity in net loss from unconsolidated equity investments	—				(1		)	(1		)
Total operating and interest expense⁽¹⁾	(6,673		)		(41,237		)	(47,910		)
Net income (loss) from continuing operations	$	1,506		��	$	(1,482	)	$	24



	Asset Management		Investments / Corporate		Total Company
Total Assets:
March 31, 2016	$	11,216	$	5,337,093	$	5,348,309
December 31, 2015	$	5,882	$	5,828,636	$	5,834,518


(1)	Total operating and interest expense includes operating costs on commercial property assets for the Investments/Corporate segment and costs to perform required functions under the management agreement for the Asset Management segment. Depreciation and amortization of $58,248 and $18,698 and provision for taxes of $703 and $1,114 for the three months ended March 31, 2016 and 2015, respectively.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share data)

March 31, 2016

16. Supplemental Cash Flow Information

The following table represents supplemental cash flow disclosures for the three months ended March 31, 2016 and 2015:



	Three Months Ended March 31,
	2016			2015
Supplemental cash flow disclosures:
Interest paid	$	20,638		$	5,769
Income taxes paid	322			167
Proceeds from 1031 exchanges from sale of real estate	175,808			—
Use of funds from 1031 exchanges for acquisitions of real estate	(30,308		)	—
Non-cash activity:
Fair value adjustment to noncontrolling interest in the operating partnership	$	1,207		$	350
Debt assumed in acquisition of real estate	—			141,033
Debt transferred in disposition of real estate	(101,432		)	—
Redemption of units of noncontrolling interest in the operating partnership for common shares	(524		)	(2,631		)
Non-cash activities recognized in other comprehensive income:
Deferred losses and other non-cash activity related to derivatives	$	(22,189	)	$	(2,132	)
Change in net unrealized loss on securities available for sale	934			5,750
Non-cash effect of foreign currency translation adjustments	6,119			(218		)

17. Subsequent Events

~~On April 28, 2015, our Board~~Subsequent to March 31, 2016, the Company closed on the acquisition of ~~Trustees approved~~ a ~~monthly distribution~~portfolio of ~~$0.0425 per common share~~12 industrial properties which comprise an aggregate of 1,439,696 square feet and were acquired for ~~each~~an aggregate purchase price of approximately $115,159. The properties are 100% leased with lease terms ending between September 2021 and December 2032.

In May 2016, the ~~months of July, August and September of 2015. The July dividend will be paid on August 10, 2015~~Company’s partner in the Goodman Europe Joint Venture agreed to all shareholders of record on July 31, 2015, the August dividend will be paid on September 9, 2015 to all shareholders of record on August 31, 2015, and the September dividend will be paid on October 8, 2015 to all shareholders of record on September 30, 2015.

On April 28, 2015, our Board of Trustees appointed Hugh S. O’Beirne, in addition to his current position of General Counsel, as Executive Vice President, Chief Legal Officer, Chief Compliance Officer, Chief Risk Officer and Secretary.

~~On May 8, 2015, we entered into (i) amendments~~sell its 20% interest to the employment agreements with certain of our officers, including Martin A. Reid, our Interim President and Chief Executive Officer, and Chief Financial Officer, and Philip L. Kianka, our Chief Operating Officer, and (ii) an amended and restated severance agreement with Hugh S. O'Beirne, our Chief Legal Officer, General Counsel, Chief Compliance Officer, Chief Risk Officer and Secretary, which, in each case, amended the definition of "Change of Control" to provide that a Change in Control of our company would occur following any consolidation or merger of the company if the company's shareholders immediately prior to the consolidation or merger, would not, immediately thereafter, in substantially the same proportions, beneficially own shares representing 70% rather than 50%, of the combined voting power of the securities of the corporation issuing cash or securities in the consolidation or merger.

~~Table of Contents~~

~~ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~Explanatory Note~~

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements, the notes thereto, and the other financial data included elsewhere in this Form 10-Q.

~~Cautionary Note Regarding Forward-Looking Statements~~

This document contains various "forward-looking statements." You can identify forward-looking statements by the use of forward-looking terminology such as "believes," "expects," "may," "will," "would," "could," "should," "seeks," "approximately," "intends," "plans," "projects," "estimates" or "anticipates" or the negative of these words and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Statements regarding the following subjects may be impacted by a number of risks and uncertainties:

~~our business strategy;~~

~~our ability to obtain future financing arrangements;~~

~~estimates relating to our future distributions;~~

~~our understanding of our competition;~~

~~market trends;~~

~~projected capital expenditures;~~

~~the impact of technology on our assets, operations and business; and~~

~~the use of the proceeds of any offerings of securities.~~

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 are subject to risks and uncertainties and can change as a result of many possible events or factors, not allGramercy European Property Fund, both of which are ~~known~~related parties of the Company. The transaction is expected to ~~us. If~~close in the second quarter of 2016.


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollar amounts in thousands, except per share data)

Overview

Gramercy Property Trust, or the Company or Gramercy, a ~~change occurs,~~Maryland real estate investment trust, or REIT, is a leading global investor and asset manager of commercial real estate. We specialize in acquiring and managing single-tenant, net leased industrial, office, and specialty properties. We focus on income producing properties leased to high quality tenants in major markets in the United States and Europe.

We earn revenues primarily through three sources: (i) rental revenues on properties that we own in the United States, (ii) asset management revenues on properties owned by third parties in the United States and Europe and (iii) pro-rata rental revenues on our ~~business, financial condition, liquidity~~unconsolidated equity investments in the United States, Europe, and ~~results of operations may vary materially from those expressed in our forward-looking statements. You should carefully consider these risks before you make an investment decision~~Asia.

On December 17, 2015, Chambers Street Properties, or Chambers, a Maryland REIT, completed a merger, or the Merger, with ~~respect~~Gramercy Property Trust Inc., or Legacy Gramercy, a Maryland corporation, pursuant to ~~our~~which Legacy Gramercy shareholders received 3.1898 common shares of beneficial interest ~~$0.01 par value (the "common shares"), along with~~of Chambers for each share of common stock of Legacy Gramercy held. Following the ~~following factors that could cause actual results~~Merger, Chambers changed its name to ~~vary from our forward-looking statements:~~

~~general volatility of~~Gramercy Property Trust and began trading on the ~~securities markets in which we participate;~~

~~national, regional and local economic climates;~~

~~changes in supply and demand for industrial and office properties;~~

~~adverse changes in~~New York Stock Exchange, or NYSE, using the ~~real estate markets, including increasing vacancy, increasing competition and decreasing rental revenue;~~

~~availability and credit worthiness of prospective tenants;~~

~~our ability to maintain rental rates and maximize occupancy;~~

~~our ability to identify and secure acquisitions;~~

~~our ability to successfully manage growth and/or operate acquired properties;~~

~~our pace of acquisitions and/or dispositions of properties;~~

~~risks related to development projects (including construction delay, cost overruns or our inability to obtain necessary permits);~~

~~payment of distributions from sources other than cash flows and operating activities;~~

~~receiving and maintaining corporate debt ratings and changes in the general interest rate environment;~~

~~availability of capital (debt and equity);~~

~~our ability to refinance existing indebtedness or incur additional indebtedness;~~

~~Table of Contents~~

~~ability to comply with our debt covenants;~~

~~unanticipated increases in financing and other costs, including a rise in interest rates;~~

~~the actual outcome of the resolution of any conflict;~~

~~material adverse actions or omissions by any of our joint venture partners;~~

~~our ability to operate as a self-managed company;~~

~~availability of and ability to retain our~~“GPT” stock symbol. Legacy Gramercy’s executive ~~officers and other qualified personnel;~~

~~future terrorist attacks or epidemics in the United States or abroad;~~

~~the ability of CSP Operating Partnership, LP ("CSP OP") to qualify as a partnership for U.S. federal income tax purposes;~~

~~our ability to qualify as a real estate investment trust ("REIT") for U.S. federal income tax purposes;~~

~~foreign currency fluctuations;~~

~~changes to accounting principles and policies and guidelines applicable to REITs;~~

~~legislative or regulatory changes adversely affecting REITs and the real estate business;~~

~~environmental, regulatory and/or safety requirements; and~~

other factors discussed under Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2014 and those factors that may be contained in any filing we make with the Securities and Exchange Commission (the "SEC"), including Part II, Item 1A of Form 10-Qs.

Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of future events, new information or otherwise. For a further discussion of these and other factors that could impact our future results, performance or transactions, see Item1A. "Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2014, and Item 1A,"Risk Factors" in this Quarterly Report on Form 10-Q.

~~Overview~~

~~We are a self-administered REIT focused on acquiring, owning and managing net leased industrial and office properties leased to creditworthy tenants. Our experienced~~ management team manages the combined company.

In the Merger, Chambers was the legal acquirer and Legacy Gramercy was the “accounting acquirer” for financial reporting purposes. Thus, the financial information set forth herein subsequent to the close of the Merger on December 17, 2015 reflects results of the combined company, and financial information prior to the close of the Merger reflects Legacy Gramercy results. For this reason, period to period comparisons may not be meaningful.

During the three months ended March 31, 2016, we acquired three properties aggregating 621,646 square feet for a total purchase price of $52,750. During the three months ended March 31, 2016, we sold nine properties aggregating 2,095,194 square feet for total gross proceeds of $531,500.

As of March 31, 2016, our ~~day-to-day operations, with certain services provided by~~asset management business, which operates under the name Gramercy Asset Management, managed approximately $900,000 of commercial properties for third ~~parties. All~~parties, including approximately $459,000 of assets in Europe.

As of March 31, 2016, we owned interests (either directly or in an unconsolidated equity investment) in 316 properties containing an aggregate of approximately 62,128,511 rentable square feet.

As of March 31, 2016, our ~~real estate investments are held directly by, or indirectly through~~ wholly-owned ~~subsidiaries~~portfolio of ~~CSP OP of which we are the 100% owner and sole general partner.~~ net leased properties is summarized as follows:



Properties	Number of Properties	Rentable Square Feet	Occupancy
Industrial	154	34,384,245	98.4	%
Office	113	9,865,700	98.8	%
Specialty retail	9	1,187,258	100.0	%
Total	276	45,437,203	98.5	%

We have elected to be taxed as a REIT ~~for~~under the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, and generally will not be subject to U.S. federal income ~~tax purposes.~~taxes to the extent we distribute our taxable income, if any, to our shareholders. We have in the past established, and may in the future establish TRSs to effect various taxable transactions. Those TRSs would incur U.S. federal, state and local taxes on the taxable income from their activities.

We were formed as a Maryland REIT in ~~Maryland on~~ March ~~30,~~ 2004 and commenced operations in July 2004 following an initial private placement of our common shares. ~~Since the Company was established,~~In May 2013, we ~~have raised equity capital of approximately $2.5 billion in gross proceeds through two public offerings of~~listed our common shares on the NYSE under the symbol “CSG.” Following the Merger in December 2015, we changed our NYSE trading symbol to ~~finance~~“GPT.” We conduct all of our operations through GPT Operating Partnership LP, our Operating Partnership. We are the sole general partner of our Operating Partnership. Our Operating Partnership conducts our commercial real estate investment ~~activities.~~

~~As of March 31, 2015, we owned, on~~business through various wholly-owned entities and our realty management business through a consolidated basis, 102 industrial (primarily warehouse/distribution) and office properties located in 18 U.S. states (Arizona, California, Colorado, Florida, Illinois, Indiana, Kansas, Kentucky, Maryland, Massachusetts, Minnesota, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Texas and Virginia) and in the United Kingdom, encompassing approximately 25.3 million rentable square feet. Our consolidated properties were approximately 97.6% leased (based upon rentable square feet) as of March 31, 2015. As of March 31, 2015, 77 of our consolidated properties were net leased to single tenants, which encompassed approximately 20.6 million rentable square feet.

In addition, we owned, on an unconsolidated basis, 25 industrial (primarily warehouse/distribution) and office properties located in seven U.S. states (Arizona, Florida, Illinois, Indiana, Ohio, Tennessee and Texas) and in three European countries (France, Germany and the United Kingdom) encompassing approximately 12.3 million rentable square feet. Our unconsolidated properties were approximately 99.9% leased (based upon rentable square feet) as of March 31, 2015. As of March 31, 2015, 20 of our unconsolidated properties were net leased to single tenants, which encompassed approximately 11.5 million rentable square feet.wholly-owned TRS.

Unless the context requires otherwise, ~~requires or indicates,~~all references to “Company,” “Gramercy,” “we,” “our,” and “us” mean Legacy Gramercy and one or more of our subsidiaries for the ~~"Company," "we," "our" and "us" refer~~period prior to the ~~activities of~~Merger closing and ~~the assets~~Gramercy Property Trust and ~~liabilities of the business and operations of Chambers Street Properties and its subsidiaries. References to unconsolidated properties~~

~~Table of Contents~~

~~include properties owned through unconsolidated joint ventures and do not include properties owned by CB Richard Ellis Strategic Partners Asia II-A, L.P. ("CBRE Strategic Partners Asia").~~

~~Business Strategy~~

~~We focus on investing in industrial and office properties that are primarily net leased to investment grade~~one or ~~creditworthy tenants on long-term leases through acquisitions of existing properties or build-to-suit projects. We believe the credit quality of many~~more of our ~~tenants,~~subsidiaries for periods following the length of our leases, the relatively modest capital expense requirements of our industrial properties and our single-tenant focus help us to enhance shareholder value. We monitor the credit of our tenants to stay abreast of any material changes in credit quality. We monitor tenant credit by (1) reviewing the credit ratings of tenants (or their parent companies) that are rated by nationally recognized rating agencies, (2) reviewing financial statements that are publicly available or that are required to be delivered to us under the applicable lease, (3) monitoring news reports regarding our tenants and their underlying businesses and (4) monitoring the timeliness of rent collections. We also believe that our senior management team's extensive experience helps us to identify and consummate the acquisition and development of high-quality net leased properties. Our strategy has been to grow our portfolio with properties targeted to provide steady income, sustaining tenant relationships and enhancing the value of our existing properties, with a focus on the following:Merger closing.

~~Acquisitions.~~ We believe high-quality industrial and office properties, which are net leased to tenants with strong credit profiles, represent attractive investments. We target acquisitions in markets with above-average projected rental growth, strong tenant demand and significant barriers to new construction. During the three months ended~~March 31, 2015, we acquired an 11.8 acre undeveloped parcel adjacent to Goodyear Crossing II in Phoenix, Arizona for approximately $1.7 million.~~

~~Build-to-Suit Opportunities.~~ ~~We may consider build-to-suit opportunities that have attractive development yields and leased to tenants with strong credit profiles on a long-term basis.~~

~~Maximize Cash Flow Through Internal Growth.~~ We target investments with fixed rent escalations over long term leases that provide stable, increasing cash flow. We have typically structured our property acquisitions to achieve a positive spread between our cost of capital and the yields achieved on our investments. A majority of our existing leases typically have embedded rental rate growth as they provide for periodic increases in rent.

~~Capital Recycling.~~ ~~We consider selectively disposing of properties that are no longer consistent with our investment strategy or whose returns appear to have been maximized. During the three months ended~~March 31, 2015, consistent with our investment strategy to focus on single-tenant industrial and office properties, we sold an office property located in North Carolina and held in the Duke JV for approximately $20.6 million, of which our pro rata share was approximately $16.4 million and our pro rata gain was approximately $2.4 million.

~~Actively Manage a Strong and Flexible Capital Structure.~~ We expect to maintain a prudent capital structure with access to multiple sources of equity and debt financing. We continue to stagger our debt maturities and utilize a balance of secured and unsecured borrowings. We continue to have a mix of fixed and floating-rate debt and intend to maintain modest total leverage. As a means to reduce our exposure to foreign currency fluctuations, we endeavor to retain debt in the local currency of our international properties.

~~During the three months endedMarch 31, 2015, we completed the following activities in order to maintain a prudent capital structure:~~

~~On February 2, 2015, we paid off the note payable secured by One Wayside Road in the amount of approximately $23.8 million prior to their maturity dates of August 1, 2015.~~

~~Factors that May Influence the Results of Operations~~

Economic conditions, leasing activity and real estate capital availability all continue to improve. Industrial leasing activity has strengthened over the past few years with the improvement in economic drivers such as employment, industrial production, international trading volumes and consumer confidence. Office leasing activity is also improving with recovering employment, beginning in the tech and energy sectors, and now broadening across other sectors including business and financial services, and healthcare. Whereas industrial and office leasing activity in the immediately preceding years was substantially weighted toward large corporate tenants, starting in 2013, activity trended towards normalization in the market for smaller tenants.

In concert with this leasing activity, market rent trends remain positive in most major markets. Driven by market rent growth and investor demand, construction and development activity has begun to increase, including both single-tenant build-to-suit and speculative projects. Beginning in 2013, we observed speculative construction activity expanding to a wider selection of markets, although development still remains below long-term averages.

~~Table of Contents~~

Debt and equity capital for commercial real estate investment is broadly available. While there has been increased competition to acquire properties, we are seeing transactions in many markets that are consistent with our strategy, particularly in the eastern part of the United States. Rents have generally continued to grow and vacancies are trending downward. We are also seeing more attractive transactions that have shorter duration lease terms. E-commerce sales growth has been strong and continues to be a large driver of demand for warehouse/distribution space.

~~Leasing Activity~~

Our ability to maintain high occupancy rates is a principal driver of maintaining and increasing rental revenue. Our leasing activity for the three months ended March 31, 2015 is presented in the table below ($ in thousands):

Prior Lease ⁽¹⁾
New Lease ⁽¹⁾

Square Feet
Annualized Base Rent⁽²⁾

Annualized Base Rent⁽²⁾

Tenant
Improve-
ments
& Leasing
Commis-
sions⁽⁴⁾

Average Lease Term (in years)⁽⁵⁾
Cash
GAAP⁽³⁾
Cash
GAAP⁽³⁾

Industrial Properties
Consolidated
Renewals 128,356
$ 428
$ 428
$ 428
$ 440
$ 113
3.21
New Tenants - Previously Leased Space⁽⁶⁾
68,800
216
216
216
222
70
3.25
New Tenants - Not Previously Leased Space⁽⁷⁾
9,100
—
—
29
29
9
3.25
Total Consolidated 206,256
644
644
673
691
192
3.22
Consolidated & Unconsolidated
Renewals 128,356
428
428
428
440
113
3.21
New Tenants - Previously Leased Space⁽⁶⁾
68,800
216
216
216
222
70
3.25
New Tenants - Not Previously Leased Space⁽⁷⁾
9,100
—
—
29
29
9
3.25
Total Consolidated & Unconsolidated 206,256
644
644
673
691
192
3.22
Office Properties
Consolidated
Renewals 11,061
161
155
182
181
118
3.94
New Tenants - Previously Leased Space 30,777
626
626
626
626
—
2.00
Total Consolidated 41,838
787
781
808
807
118
2.44
Unconsolidated
New Tenants - Not Previously Leased Space⁽⁷⁾
3,603
—
—
66
72
130
7.00
Total Unconsolidated 3,603
—
—
66
72
130
7.00
Consolidated & Unconsolidated
Renewals 11,061
161
155
182
181
118
3.94
New Tenants - Previously Leased Space⁽⁶⁾
30,777
626
626
626
626
—
2.00
New Tenants - Not Previously Leased Space⁽⁷⁾
3,603
—
—
66
72
130
7.00
Total Consolidated & Unconsolidated 45,441
787
781
874
879
248
2.78
Total Properties
Consolidated
Renewals 139,417
589
583
610
621
231
3.43
New Tenants - Previously Leased Space⁽⁶⁾
99,577
842
842
842
848
70
2.32
New Tenants - Not Previously Leased Space⁽⁷⁾
9,100
—
—
29
29
9
3.25
Total Consolidated 248,094
1,431
1,425
1,481
1,498
310
2.79
Unconsolidated
New Tenants - Not Previously Leased Space⁽⁷⁾
3,603
—
—
66
72
130
7.00
Total Unconsolidated 3,603
—
—
66
72
130
7.00
Consolidated & Unconsolidated
Renewals 139,417
589
583
610
621
231
3.43
New Tenants - Previously Leased Space⁽⁶⁾
99,577
842
842
842
848
70
2.32
New Tenants - Not Previously Leased Space⁽⁷⁾
12,703
—
—
95
101
139
5.87
Total Consolidated & Unconsolidated 251,697
$ 1,431
$ 1,425
$ 1,547
$ 1,570
$ 440
2.97

~~Table of Contents~~

~~__________~~


~~(1)~~	~~Prior lease amounts represent rents in place at the time of expiration or termination. New lease amounts represent rents in place at the time of lease commencement.~~ ~~For certain leases, prior lease amounts are adjusted for comparability to new lease amounts (i.e. if a prior lease is gross and the new lease is net, the prior amounts are adjusted accordingly).~~

~~(2)~~

Cash Annualized Base Rent for each lease equals (i) 12 times the monthly cash base rent due as of March 31, 2015, or (ii) for any lease still in an initial free or reduced rent period as of March 31, 2015, 12 times the monthly cash base rent due upon expiration of the initial free or reduced rent period. ~~U.S. Generally Accepted Accounting Principles ("GAAP")~~ ~~Annualized Base Rent includes the effect of straight-line rent. Cash and GAAP annualized base rent amounts for unconsolidated properties are included at pro rata share.~~


~~(3)~~	~~GAAP amounts for prior leases include above/below market rents if applicable.~~


~~(4)~~	~~Includes tenant improvement costs and lease commissions incurred to execute the lease and not necessarily paid in the current quarter.~~


~~(5)~~	~~Weighted average initial lease term (in years) weighted by annualized cash base rent.~~


~~(6)~~	~~Represents leases signed to new tenants for space that was previously leased since the later of (i) twelve months ago or (ii) the date we acquired the property.~~


~~(7)~~	~~Represents leases signed to new tenants for space that was not previously leased since the later of (i) twelve months ago or (ii) the date we acquired the property.~~

The following table sets forth percentage leased and average annual net effective rent information regarding our total portfolio of consolidated properties and unconsolidated properties as of March 31, 2015 and 2014. Percentage leased information is presented at 100% and average annual net effective rent information is presented at our pro-rata share for our unconsolidated properties (in thousands, except percentage data):

Total Square Feet % of Total Square Feet % Leased
Average Annual
Net Effective Rent⁽¹⁾
2015 2014 2015 2014 2015 2014 2015 2014
Consolidated Properties:
Office 7,284
7,559
28.8 % 32.7 % 98.9 % 97.2 % $ 149,775
$ 148,848
Industrial 18,041
15,380
71.2 % 66.6 % 97.1 % 92.7 % 74,016
58,560
Other —
144
— % 0.7 % —%
100.0 % —
4,225
Total 25,325
23,083
100.0 % 100.0 % 97.6 % 94.2 % $ 223,791
$ 211,633

Unconsolidated Properties:
Office 667
1,201
5.4 % 9.5 % 98.9 % 95.0 % $ 11,265
$ 17,968
Industrial 11,627
11,501
94.6 % 90.5 % 100.0 % 100.0 % 44,432
54,698
Total 12,294
12,702
100.0 % 100.0 % 99.9 % 99.5 % $ 55,697
$ 72,666

Consolidated and Unconsolidated Properties:
Office 7,951
8,760
21.1 % 24.5 % 98.9 % 96.9 % $ 161,040
$ 166,816
Industrial 29,668
26,881
78.9 % 75.1 % 98.2 % 95.8 % 118,448
113,258
Other —
144
— % 0.4 % —%
100.0 % —
4,225
Total 37,619
35,785
100.0 % 100.0 % 98.4 % 96.1 % $ 279,488
$ 284,299

~~__________~~


~~(1)~~	Average Annual Net Effective Rent is calculated as the total average annual cash base rental payments, adjusted for free rent periods. There is no effect given to other landlord concessions and excludes payments received from tenants for reimbursement of real estate taxes and operating expenses.

~~Table of Contents~~

~~Tenant Lease Expirations~~

Our ability to maintain occupancy rates, and net effective rents, primarily depends upon our continuing ability to re-lease expiring space. We have limited near term lease expirations with an average remaining lease term of 6.33 years as of March 31, 2015. In addition, approximately 89.1% of our base rent is scheduled to expire after 2016. The following table sets forth a schedule of expiring leases for our consolidated and unconsolidated properties as of March 31, 2015 (Expiring Net Rentable Square Feet and Expiring Base Rent in thousands):

Consolidated Properties
Unconsolidated
Properties⁽¹⁾

Consolidated &
Unconsolidated
Properties⁽¹⁾

Expiring
Net Rentable
Square Feet

Expiring
Base Rent

Expiring
Net Rentable
Square Feet

Expiring
Base Rent

Number Of
Expiring
Leases

Expiring
Net Rentable
Square Feet

Expiring
Base Rent

Percentage
of Expiring
Base Rent
Remaining 2015 897
$ 4,986
21
$ 367
19
918
$ 5,353
1.9 %
2016 1,778
23,629
547
2,277
29
2,325
25,906
9.0 %
2017 1,727
15,751
873
3,940
23
2,600
19,691
6.8 %
2018 2,024
20,879
2,088
9,904
30
4,112
30,782
10.7 %
2019 3,843
26,554
2,815
11,026
27
6,658
37,580
13.0 %
2020 2,173
19,665
104
2,144
18
2,277
21,809
7.6 %
2021 4,747
38,114
2,167
8,714
21
6,914
46,829
16.3 %
2022 663
7,908
1,364
6,334
7
2,027
14,242
4.9 %
2023 3,353
30,431
1,188
5,251
19
4,541
35,682
12.4 %
2024 705
19,859
12
264
5
717
20,123
7.0 %
Thereafter 2,807
25,247
1,107
4,930
18
3,914
30,177
10.4 %
Total 24,717
$ 233,023
12,286
$ 55,151
216
37,003
$ 288,174
100.0 %
Weighted Average Remaining Term (Years) ⁽²⁾:

Triple Net Single-Tenant Properties⁽³⁾
6.49
6.10
6.40

Multi-Tenant Properties 7.09
5.13
6.82

Other Single-Tenant Properties 4.02
4.75
4.10

Total Weighted Average Remaining Term (Years)⁽²⁾
6.42
5.92
6.33

~~__________~~


~~(1)~~	~~Expiring Net Rentable Square Feet for Unconsolidated Properties is at 100%. Expiring Base Rent for Unconsolidated Properties is at our pro rata share of effective ownership.~~


~~(2)~~	~~Weighted Average Remaining Term is the average remaining term weighted by Expiring Base Rent.~~


~~(3)~~	~~Triple Net Single-Tenant Properties include certain properties that have minimal secondary tenant(s).~~

The leases scheduled to expire during the remainder of 2015 and in 2016 represent approximately 3.2 million rentable square feet or 10.9% of our total expiring base rent. We believe that, on average, the current market rental rates are approximately 10% below the expiring cash rental rates and approximately 2% above the expiring GAAP rental rates for leases scheduled to expire during the remainder of 2015 and in 2016, although individual properties within any particular market presently may be leased either above, below, or at the current quoted market rates within that market, and the average rental rates for individual markets may be above, below, or at the average cash rental rate of our overall portfolio. Our ability to re-lease available space depends upon both general market conditions and the market conditions in the specific regions in which individual properties are located.

~~Table of Contents~~

Property Portfolio ~~Size~~

Our portfolio size at the end of each quarter since commencement of our initial public offering (October 24, 2006) through March 31, 2015 is as follows (Net Rentable Square Feet and Approximate Total Acquisition Cost in thousands):

Consolidated Properties
Unconsolidated Properties⁽¹⁾

Consolidated &
Unconsolidated
Properties⁽¹⁾
Cumulative
Property
Portfolio as of:
Properties
Net Rentable
Square Feet

Approximate
Total
Acquisition
Cost
Properties
Net Rentable
Square Feet

Approximate
Total
Acquisition
Cost
Properties
Net Rentable
Square Feet

Approximate
Total
Acquisition
Cost
12/31/2006 9
878
$ 86,644
—
—
$ —
9
878
$ 86,644
3/31/2007 9
878
86,644
—
—
—
9
878
86,644
6/30/2007 10
928
110,491
—
—
—
10
928
110,491
9/30/2007 42
5,439
348,456
—
—
—
42
5,439
348,456
12/31/2007 44
5,576
353,594
—
—
—
44
5,576
353,594
3/31/2008 47
6,257
426,856
—
—
—
47
6,257
426,856
6/30/2008 47
6,257
426,856
1
605
35,636
48
6,862
462,492
9/30/2008 49
6,483
486,777
6
3,307
193,773
55
9,790
680,550
12/31/2008 52
6,771
582,682
8
5,649
273,205
60
12,420
855,887
3/31/2009 52
6,771
582,717
8
5,649
273,130
60
12,420
855,847
6/30/2009 53
7,106
598,103
11
5,976
305,308
64
13,082
903,411
9/30/2009 57
7,805
719,822
11
5,976
305,202
68
13,781
1,025,024
12/31/2009 60
8,630
791,314
13
6,904
356,158
73
15,534
1,147,472
3/31/2010 58
8,407
748,835
18
7,392
418,818
76
15,799
1,167,653
6/30/2010 62
9,086
916,210
22
8,633
471,615
84
17,719
1,387,825
9/30/2010 63
9,295
983,810
22
8,633
471,615
85
17,928
1,455,425
12/31/2010 73
12,800
1,308,560
30
9,901
629,268
103
22,701
1,937,828
3/31/2011 73
12,800
1,308,560
43
11,950
903,508
116
24,750
2,212,068
6/30/2011 75
14,614
1,657,966
43
12,356
917,566
118
26,970
2,575,532
9/30/2011 74
13,906
1,689,048
43
12,355
918,771
117
26,261
2,607,819
12/31/2011 77
14,434
1,747,299
45
13,851
997,506
122
28,285
2,744,805
3/31/2012 78
15,784
1,824,403
46
13,997
1,007,753
124
29,781
2,832,156
6/30/2012 78
15,784
1,842,359
46
13,997
1,007,753
124
29,781
2,850,112
9/30/2012 78
16,831
1,920,218
46
13,997
1,008,246
124
30,828
2,928,464
12/31/2012 82
18,995
2,070,272
47
15,067
1,071,267
129
34,062
3,141,539
3/31/2013 99
22,314
2,572,995
30
11,748
713,722
129
34,062
3,286,717
6/30/2013 99
22,405
2,573,034
30
11,748
713,722
129
34,153
3,286,756
9/30/2013 101
22,791
2,630,692
30
11,748
713,722
131
34,539
3,344,414
12/31/2013 99
22,460
2,595,194
30
12,807
740,525
129
35,267
3,335,719
3/31/2014 100
23,082
2,625,394
29
12,702
728,205
129
35,785
3,353,599
6/30/2014 100
23,083
2,625,394
29
12,829
734,556
129
35,912
3,359,950
9/30/2014 100
23,453
2,618,304
29
12,829
734,556
129
36,282
3,352,860
12/31/2014 102
25,325
2,668,298
26
12,416
694,432
128
37,741
3,362,730
3/31/2015 102
25,325
2,669,973
25
12,294
676,432
127
37,619
3,346,405

~~__________~~


~~(1)~~	~~Net Rentable Square Feet for unconsolidated properties is at 100%. Approximate Total Acquisition Cost for unconsolidated properties is at our pro rata share of effective ownership.~~

~~Table of Contents~~

~~Critical Accounting Policies~~

~~Refer to our Annual Report on Form 10-K for the year ended December 31, 2014 for a discussion of our critical accounting policies. There have been no changes to these policies~~Property acquisitions during the three months ended March 31, ~~2015.~~

~~Significant Tenants~~2016 are summarized in the table below:

~~The following table details our largest tenants as~~



Property Type	Number of Properties	Square Feet	Purchase Price
Industrial	3	621,646	$	52,750
Total	3	621,646	$	52,750

Asset and Property Management

In addition to net leased investing, we also operate a commercial real estate management business for third parties. As of March 31, ~~2015 ($~~2016, this business, which operates under the name Gramercy Asset Management, manages approximately $900,000 of commercial properties. We manage properties for companies including KBS Real Estate Investment Trust, Inc., or KBS, and the Gramercy European Property Fund.

We have an integrated asset management platform within Gramercy Asset Management to consolidate responsibility for, and control over, leasing, lease administration, property management, operations, construction management, tenant relationship management and property accounting. To the extent that we provide asset management services for third-party property owners, we provide such services in ~~thousands):~~consultation with and at the direction of such owners.

Credit Rating⁽¹⁾

Consolidated &
Unconsolidated
Properties⁽²⁾

% of
Cash
An-nual-
ized
Base
Rent

Major Tenants⁽³⁾
Primary Industry S&P Moody's Net
Rentable
Square
Feet
Annualized
Base Rent

Cash
GAAP⁽⁴⁾

1 Amazon.com Internet Retail AA- Baa1 6,540,667
$ 26,022
$ 25,161
9.8 %
2 Raytheon Company Defense and Aerospace A A3 666,290
10,582
11,248
4.0 %
3 Lord Abbett & Co. Financial Services — — 272,127
10,069
10,370
3.8 %
4 U.S. General Services Administration Government AA+ Aa1 418,682
9,958
10,174
3.7 %
5 JP Morgan Chase Financial Services A A3 396,179
6,212
6,626
2.3 %
6 Endo Health Solutions Inc. Pharmaceutical and Healthcare Related — — 299,809
5,846
6,338
2.2 %
7 Nuance Communications, Inc. Software BB- Ba3 200,605
5,842
5,842
2.2 %
8 Comcast of California Telecommunications A- A3 219,631
5,205
5,042
2.0 %
9 Eisai, Inc. Pharmaceutical and Healthcare Related — — 208,911
5,189
5,217
2.0 %
10 PPD Development LP Pharmaceutical and Healthcare Related B B3 251,475
4,991
4,643
1.9 %
11 Charles Komar & Sons, Inc. Apparel Retail — — 159,341
4,933
4,093
1.9 %
12 The Coleman Company, Inc. Consumer Products BB Ba3 1,107,000
4,760
4,569
1.8 %
13 Deloitte LLP Professional Services — — 175,000
4,740
4,660
1.8 %
14
Barclay's Capital⁽⁵⁾
Financial Services A A2 409,272
4,582
2,221
1.7 %
15 Barr Laboratories, LLC Pharmaceutical and Healthcare Related A- A3 142,500
4,489
4,426
1.7 %
16 Clorox International Co Consumer Products BBB+ Baa1 1,350,000
4,484
4,429
1.7 %
17 Unilever Consumer Products A+ A1 1,594,760
4,250
4,058
1.6 %
18 Nationwide Mutual Insurance Co Insurance A+ A1 315,102
3,808
3,761
1.4 %
19 Humana Pharmaceutical and Healthcare Related BBB+ Baa3 226,822
3,788
3,731
1.4 %
20 Carl Zeiss Meditec Pharmaceutical and Healthcare Related — — 201,620
3,770
3,395
1.4 %
21 ConAgra Foods Packaged Foods, LLC Food Service and Retail BBB- Baa2 741,860
3,423
3,269
1.3 %
22 Whirlpool Corporation Consumer Products BBB Baa2 1,020,000
3,385
3,429
1.3 %
23 Kimberly-Clark Global Sales, Inc. Consumer Products A A2 744,080
3,348
3,279
1.3 %
24 Space Exploration Technologies Corp Defense and Aerospace — — 514,753
3,348
3,913
1.3 %
25 SBM Atlantia, Inc. Petroleum and Mining — — 171,091
3,293
2,659
1.2 %
26 Prime Distribution Services Logistics Distribution — — 1,200,420
3,256
3,038
1.2 %
27 NCS Pearson, Inc. Education BBB+ Baa1 167,218
3,201
2,794
1.2 %
28 Bob's Discount Furniture Home Furnishings/Home Improvement — — 672,000
3,098
3,154
1.2 %
29 Noxell Corporation Consumer Products — — 800,797
3,088
3,274
1.2 %
30 Kellogg Sale Company Consumer Products BBB+ Baa2 1,142,400
3,033
2,854
1.1 %
31 Royal Caribbean Cruises Ltd Travel/Leisure BB Ba1 128,540
2,893
2,462
1.1 %
32 Time Warner Cable Inc. Telecommunications BBB Baa2 134,000
2,814
2,655
1.1 %
33 REMEC Defense and Space Defense and Aerospace — — 132,685
2,736
2,753
1.0 %
34 Syngenta Seeds Inc Agriculture A+ A2 116,338
2,728
2,575
1.0 %
35 American Home Mortgage Financial Services — — 182,700
2,713
2,676
1.0 %
36 Dr Pepper / Seven Up, Inc. Food Service and Retail BBB+ Baa1 601,500
2,611
2,696
1.0 %
37 Citicorp North America, Inc. Financial Services A Baa2 175,695
2,574
2,551
1.0 %
38 Mercy Health Partners of SW Ohio Pharmaceutical and Healthcare Related — A1 124,671
2,566
2,099
1.0 %
39 Disney Vacation Development Travel/Leisure A A2 100,924
2,533
2,121
1.0 %
40 Verizon Wireless Telecommunications BBB+ Baa1 180,147
2,519
2,408
0.9 %
Other (approx 146) tenants 12,795,956
73,348
70,584
27.6 %
37,003,568
$ 266,028
$ 257,247
100.0 %

~~__________~~


~~(1)~~	~~Credit rating is for our tenant, its guarantor or its parent company.~~


~~(2)~~	~~Includes unconsolidated properties held through our~~ ~~Duke/Hulfish, LLC joint venture (the "Duke JV")~~, ~~our joint venture in Europe (the "European JV")~~ ~~and~~ ~~Goodman Princeton Holdings (Jersey) Limited joint venture (the "UK JV"). Net Rentable Square Feet is at 100% and annualized base rent is at our pro rata share of effective ownership.~~


~~(3)~~	~~In certain cases in which our tenant is a wholly-owned subsidiary of its parent company, the parent company is listed as our tenant.~~


~~(4)~~	~~Includes amortization of straight line rent, above-market leases and lease inducement. Excludes operating expense reimbursements.~~


~~(5)~~	In accordance with the provisions of the loan secured by our 70 Hudson Street property, beginning in February 2015, the property's cash flow in excess of interest and operating expenses is being reserved by the lender. As a result, we are only able to recognize a portion of this tenant's annualized base rental revenue. The rents in this table are presented at the adjusted amounts.

~~Table of Contents~~

~~Off-Balance Sheet Arrangements~~

~~As of~~Market Capitalization

At March 31, 2015, we had four Investments in Unconsolidated Entities: (i) a 5.07% ownership interest in CBRE Strategic Partners Asia; (ii) an 80% ownership interest in the Duke JV; (iii) an 80% ownership interest in the UK JV; and (iv) an 80% ownership interest in the European JV. Our investments are discussed in Note 4 to the accompanying2016, our consolidated ~~financial statements "Investments in Unconsolidated Entities."~~

~~Inflation~~

~~The real estate~~ market has not been affected significantly by inflation in the past several years due to the relatively low inflation rate. We expect to include provisions in the majority of our tenant leases designed to protect us from the impact of inflation. We expect these provisions will include reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements, or in some cases, annual reimbursement of operating expenses above a certain allowance. Due to the generally long-term nature of these leases, annual rent increases may not be sufficient to cover inflation and rent may be below market.

~~Non-GAAP Supplemental Financial Measures: FFO, Core FFO and AFFO~~

Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry analysts and investors consider presentations of operating results for REITs that use historical cost accounting to be insufficient. Consequently, the National Association of Real Estate Investment Trusts ("NAREIT") created Funds from Operations ("FFO") as a supplemental measure of REIT operating performance.

~~Table of Contents~~

FFO is a non-GAAP measure that is commonly used in the real estate industry. The most directly comparable GAAP measure to FFO is net income. FFO, as we define it, is presented as a supplemental financial measure. Management believes that FFO is a useful supplemental measure of REIT performance. FFO does not present, nor do we intend for it to present, a complete picture of our financial condition and/or operating performance. We believe that net income, as computed under GAAP, appropriately remains the primary measure of our performance and that FFO, when considered in conjunction with net income, improves the investing public's understanding of the operating results of REITs and makes comparisons of REIT operating results more meaningful.

We compute FFO in accordance with standards established by NAREIT. Modifications to the NAREIT calculation of FFO are common among REITs, as companies seek to provide financial measures that meaningfully reflect their business and provide greater transparency to the investing public as to how the management team considers their results of operations. As a result, our FFO may not be comparable to FFO as reported by other REITs that do not compute FFO in accordance with the NAREIT definition, or that interpret the NAREIT definition differently than we do. The revised NAREIT White Paper on FFO defines FFO as net income or loss computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, impairment charges and gains and losses from sales of depreciable operating property, plus real estate related depreciation and amortization (excluding amortization of deferred financing costs and depreciation of non-real estate assets), and after adjustment for unconsolidated partnerships and joint ventures.

Management believes that NAREIT's definition of FFO reflects the fact that real estate, as an asset class, generally appreciates over time, and that depreciation charges required by GAAP do not always reflect the underlying economic conditions. Likewise, the exclusion from NAREIT's definition of FFO of impairment charges and gains and losses from the sales of previously depreciated operating real estate assets allows investors and analysts to readily identify the operating results of the long-term assets that form the core of a REIT's activity and assists in comparing those operating results between periods. Thus, FFO provides a performance measure that, when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates and operating costs. Management also believes that FFO provides useful information to the investment community about our financial performance when compared to other REITs, since FFO is generally recognized as the industry standard for reporting the operations of REITs.

However, changes in the accounting and reporting rules under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that have been put into effect since the establishment of NAREIT's definition of FFO have prompted an increase in the non-cash and non-operating items included in FFO. We calculate Core FFO as FFO exclusive of the net effects of acquisition costs, interest rate swap gains/losses, transition and listing costs, and unrealized gain/loss in investments in unconsolidated entities. Core FFO is a useful measure to management's decision-making process. As discussed below, period to period fluctuations in the excluded items can be driven by short-term factors that are not particularly relevant to our long-term investment decisions, long-term capital structures or long-term tax planning and tax structuring decisions.

~~We believe that Core FFO appropriately presents our results of operations~~capitalization was $5,744,441 based on a ~~comparative basis. The items that we exclude from net income are subject to significant fluctuations from period to period that cause both positive~~common share price of $8.45 per share and ~~negative effects on our results~~the closing price of ~~operations, often in inconsistent and unpredictable directions.~~

- Acquisition-related expenses: Acquisition-related expenses are primarily the result of the volume of our acquisitions completed during each period, and therefore we believe such acquisition costs are not reflective of our operating results during each period.

- Loss on early extinguishment of debt: Losses on early extinguishment of debt incurred in the current year are primarily a result of secured mortgage loan repayments typically associated with the sales of the underlying properties.

- Net change in fair value of non-qualifying derivative financial instruments and unrealized gains or losses on our investment in unconsolidated entities: Unrealized gains or losses that we have recognized during a given period are based primarily upon changes in the estimated fair market value of certain of our investments due to changes in market conditions and do not necessarily reflect the operating performance of these properties during the corresponding period.

~~- Other non-recurring expenses: Other non-recurring expenses such as severance-related costs and costs related to the process of listing~~ our common shares on the New York Stock Exchange on March 31, 2016. Market capitalization includes consolidated debt and common and preferred shares.

Indebtedness

Mortgage Loans

Certain of our real estate assets are subject to mortgage loans. During the three months ended March 31, 2016, we did not assume any mortgages in connection with real estate acquisitions, however we entered into one non-recourse mortgage for $9,550. During the year ended December 31, 2015, we assumed $618,169 of non-recourse mortgages in connection with 29 real estate acquisitions.

During the three months ended March 31, 2016, we paid off the debt on six properties encumbered by mortgage loans and transferred one property encumbered by a mortgage loan, and as a result, we recorded a net loss on the early extinguishment of debt of $(3,827), including a gain on extinguishment of debt of $1,930 within discontinued operations, related to unamortized deferred financing costs and mortgage premiums (discounts) that were immediately expensed upon termination as well as early termination fees. We did not pay off any mortgage loans during the three months ended March 31, 2015. Our mortgage loans include a series of financial and other covenants that we have to comply with in order to borrow under them. We were in compliance with the covenants under the facilities as of March 31, 2016.

2015 Credit Facility and Term Loans

At the close of the Merger on December 17, 2015, both Legacy Gramercy and Chambers terminated the Legacy Gramercy unsecured credit facilities and entered into an agreement, or the Credit Agreement, for a new $850,000 senior unsecured revolving credit facility and $1,050,000 term loan facility with JPMorgan Chase Securities LLC and Merrill Lynch, Pierce, Fenner and Smith Incorporated. The $850,000 senior unsecured revolving credit facility, or the 2015 Revolving Credit Facility, consists of a $750,000 U.S. dollar revolving credit facility and a $100,000 multicurrency revolving credit facility. The term loan facility, or the 2015 Term Loan, consists of a $300,000 term loan facility that matures in January 2019 with one 12-month extension, or the 3-Year Term Loan, and a $750,000 term loan facility that matures in January 2021, or the 5-Year Term Loan. The 2015 Revolving Credit Facility matures in January 2020, but may be extended for two additional six month periods upon the payment of applicable fees and satisfaction of certain customary conditions. Net proceeds from the 2015 Revolving Credit Facility were used to repay Legacy Gramercy’s unsecured credit facilities consisting of a $200,000 senior term loan and a $200,000 senior revolving credit facility, as well as for general corporate purposes. Borrowings under the multicurrency loan denominated in euros are designated as a non-derivative net investment hedge to mitigate the risk from fluctuations in foreign currency exchange rates. Refer to Note 10 of the accompanying financial statements for further information on the hedge. At the close of the Merger on December 17, 2015, we also entered into a new $175,000 seven-year unsecured term loan with Capital One, N.A., or the 7-Year Term Loan, which matures in January 2023.

These unsecured borrowing facilities include a series of financial and other covenants that we have to comply with in order to borrow under the facilities. We were in compliance with the covenants under the facilities as of March 31, 2016. As of March 31, 2016, there were borrowings of $122,760 outstanding under the 2015 Revolving Credit Facility, including $22,760 (€20,000) on the multicurrency tranche, borrowings of $1,050,000 outstanding under the 2015 Term Loan, and borrowings of $175,000 outstanding under the 7-Year Term Loan.

Senior Unsecured Notes

On December 17, 2015, we issued and sold $100,000 aggregate principal amount of senior unsecured notes, or the Senior Unsecured Notes, and on January 12, 2016 we issued and sold an additional $50,000 aggregate principal amount of the Senior Unsecured Notes in private placements. The Senior Unsecured Notes are guaranteed by us and bear interest at a rate of 4.97% per annum, with interest payable in arrears on June 17 and December 17 of each year, commencing June 17, 2016, until the maturity date of December 17, 2024.

Exchangeable Senior Notes

On March 18, 2014, we issued $115,000 of 3.75% Exchangeable Senior Notes. The Exchangeable Senior Notes are senior unsecured obligations of the Legacy Gramercy operating partnership and are guaranteed by us on a senior unsecured basis. The Exchangeable Senior Notes mature on March 15, 2019, unless redeemed, repurchased or exchanged in accordance with their terms prior to such date and will be exchangeable, under certain circumstances, for cash, for common shares or for a combination of cash and common shares, at the Legacy Gramercy operating partnership’s election. The Exchangeable Senior Notes will also be exchangeable prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date, at any time beginning on December 15, 2018, and also upon the occurrence of certain events. On or after March 20, 2017, in certain circumstances, the Legacy Gramercy operating partnership may redeem all or part of the Exchangeable Senior Notes for cash at a price equal to 100% of the principal amount of the Exchangeable Senior Notes to be redeemed, plus accrued and unpaid interest up to, but excluding, the redemption date.

As of March 31, 2016, the Exchangeable Senior Notes have a current exchange rate of 40.9434 units of Merger consideration, or Units of Merger Consideration, where one Unit of Merger Consideration represents 3.1898 of our common shares, or approximately 130.6013 of our common shares for each $1.0 principal amount of the Exchangeable Senior Notes. The fair value of the Exchangeable Senior Notes was determined at issuance to be $106,689. The discount is being amortized to interest expense over the expected life of the Exchangeable Senior Notes. As of March 31, 2016 and December 31, 2015, the Exchangeable Senior Notes were recorded as a liability at carrying value of $107,205 and $106,581, respectively, net of unamortized discount and deferred financing costs of $7,795 and $8,419, respectively. The fair value of the embedded exchange option of the Exchangeable Senior Notes was recorded in additional paid-in-capital within shareholders’ equity of $11,726 as of March 31, 2016 and December 31, 2015.

Derivative and Non-Derivative Hedging Instruments

In connection with the Merger, we assumed three interest rate swap derivative contracts related to mortgage loans on real estate assets and re-designated these interest rate swaps as cash flow hedges. Additionally, following the Merger, we terminated the interest rate swap on our unsecured $200,000 senior term loan and, in connection with our entry into the 2015 Revolving Credit Facility, we entered into two new interest rate swap derivative contracts related to the 3-Year Term Loan and 7-Year Term Loan associated with our 2015 Revolving Credit Facility.

As of March 31, 2016, our derivative instruments consist of interest rate swaps, which are cash flow hedges. Changes in the effective portion of fair value of the derivatives are recognized in other comprehensive income (loss) until the hedged item expires or is recognized in earnings. Borrowings on our foreign currency denominated tranche of the 2015 Revolving Credit Facility and borrowings on the foreign currency denominated tranche of our $200,000 million senior revolving credit facility that we terminated in December 2015, which are designated as non-derivative net investment hedges, are recognized at par value based on the exchange rate in effect on the date of the draw. Subsequent changes in the exchange rate of our non-derivative net investment hedge are recognized as part of the cumulative foreign currency translation adjustment within other comprehensive income (loss). The ineffective portion of the change in fair value of a derivative or non-derivative hedging instrument will be immediately recognized in earnings. Derivative accounting may increase or decrease reported net income and shareholders’ equity, depending on future levels of LIBOR interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows, provided the contract is carried through to full term. Refer to Note 2 and Note 9 for additional information on our derivative and non-derivative hedging instruments, including the fair value measurement of these instruments, as applicable.

The following table summarizes the notional and fair value of our derivative and hedging instruments at March 31, 2016. The fair value of the derivatives is presented in our balance sheet in derivative instruments, at fair value and the carrying value of the non-derivative net investment hedge is included in the balance of our 2015 Revolving Credit Facility. The notional value is an indication of the extent of our involvement in this instrument at that time, but does not represent exposure to credit, interest rate or market risks:

Benchmark Rate

Notional Value

Strike Rate

Effective Date

Expiration Date

Fair Value

Assets of Non-VIEs:

Interest Rate Swap - Waco

1 mo. USD-LIBOR-BBA

15,410 USD

4.55%

12/19/2013

12/19/2020

953

Interest Rate Swap - Point West I

1 mo. USD-LIBOR-BBA

10,310 USD

1.41%

8/16/2011

12/6/2016

Interest Rate Swap - Atrium I

1 mo. USD-LIBOR-BBA

20,410 USD

1.78%

8/16/2011

5/31/2018

444

Interest Rate Swap - Easton III

1 mo. USD-LIBOR-BBA

6,048 USD

1.95%

8/16/2011

1/31/2019

188

Interest Rate Swap - 5-Year Term Loan

1 mo. USD-LIBOR-BBA

750,000 USD

1.60%

12/17/2015

12/17/2020

19,337

Interest Rate Swap - 7-Year Term Loan

1 mo. USD-LIBOR-BBA

175,000 USD

1.82%

12/17/2015

1/9/2023

6,477

Non-Derivative Net Investment Hedge in Gramercy European Property Fund

EUR-USD exchange rate

20,000 Euros

N/A

9/28/15

N/A

—

Total hedging instruments

27,461

Through our interest rate swaps, we are hedging exposure to variability in future interest payments on our debt facilities. At March 31, 2016, the interest rate swap derivative instruments were reported at their fair value as a net liability of $27,461. Swap loss of $1,830 was recognized as interest expense in the Condensed Consolidated Statements of Operations with respect to interest rate swap hedge ineffectiveness, or to amounts excluded from ineffectiveness, which relates to the off-market financing element associated with certain derivatives. No gain or loss was recognized with respect to hedge ineffectiveness or to amounts excluded from ineffectiveness for the three months ended March 31, 2015. During the three months ended March 31, 2016, we reclassified $315 from accumulated other comprehensive income into interest expense related to a derivative terminated in 2015. Over time, the realized and unrealized gains and losses held in accumulated other comprehensive income will be reclassified into earnings in the same periods in which the hedged interest payments affect earnings. During the next 12 months, we expect that $9,145 will be reclassified

from other comprehensive income as an increase in interest expense for our interest rate swaps as of March 31, 2016. Additionally, we will recognize $3,468 in interest expense on a straight-line basis over the remaining original term of terminated swaps through June 2019, representing amortization of the remaining accumulated other comprehensive income balance related to the swap, and of this amount, $1,087 will be recognized in interest expense during the next 12 months.

Through our non-derivative net investment hedge, which was entered into in September 2015, we are hedging exposure to changes in the euro-U.S. dollar exchange rate of our net equity investment in the Gramercy European Property Fund, which has euros as its functional currency. At March 31, 2016, the non-derivative net investment hedge was reported at our carrying value as a net liability of $22,760, which is included in the balance of the senior unsecured revolving credit facility on the Condensed Consolidated Balance Sheets. During the three months ended March 31, 2016, we recorded a net loss of $(1,036) in other comprehensive income (loss) from the impact of exchange rates related to the non-derivative net investment hedge. No gain or loss was recognized with respect to non-derivative net investment hedge ineffectiveness, or to amounts excluded from ineffectiveness, in interest expense in the Condensed Consolidated Statement of Operations for the three months ended March 31, 2016. When the non-derivative net investment is sold or substantially liquidated, the balance of the translation adjustment accumulated in other comprehensive income will be reclassified into earnings.

Contractual Obligations

We are obligated to fund capital expenditures related to our real estate investments, which primarily consist of expenditures to maintain assets, tenant improvement allowances and other construction or expansion obligations under tenant leases, and leasing commissions. As of March 31, 2016, we had commitments relating to tenant improvement allowances and funding obligations under leases totaling approximately $16,000 that are expected to be funded over the next five years. Additionally, we are obligated to fund the development of Proportion Foods, a build-to-suit property in Round Rock, Texas, which is a consolidated VIE, and upon substantial completion of the development to acquire the property through a forward purchase contract. Our remaining future commitment for the property at March 31, 2016 is approximately $20,838.

We have committed approximately $56,900 (€50,000) to the Gramercy European Property Fund, which was formed in December 2014. The Gramercy European Property Fund has a total initial capital commitment of approximately $287,345 (€252,500) from us and our ~~modified “Dutch Auction” tender offer~~investment partners, comprised of $56,900 (€50,000) from us, $230,445 (€202,500) from our investment partners, and an additional $113,800 (€100,000) from certain investment partners, not including us, after the first $287,345 (€252,500) has been invested. See Note 5, “Unconsolidated Equity Investments,” in the Condensed Consolidated Financial Statements for further information on the Gramercy European Property Fund. Foreign currency commitments have been converted into U.S. dollars based on (i) the foreign exchange rate at the closing date for completed transactions and (ii) the exchange rate that prevailed on March 31, 2016, in the case of unfunded commitments.

Combined aggregate principal maturities and future minimum payments of our unsecured debt obligations, non-recourse mortgages, Senior Unsecured Notes, Exchangeable Senior Notes, and ground leases, in addition to associated interest payments, as of March 31, 2016 are as follows:



	Unsecured Credit Facility		Term Loans		Mortgage Notes Payable		Senior Unsecured Notes		Exchangeable Senior Notes		Ground Leases		Interest Payments		Total
April 1 through December 31, 2016	$	—	$	—	$	43,429	$	—	$	—	$	1,374	$	47,739	$	92,542
2017	—		—		65,215		—		—		1,728		62,306		129,249
2018	—		—		92,589		—		—		1,728		60,263		154,580
2019	—		300,000		28,836		—		115,000		1,707		51,631		497,174
2020	122,760		—		174,103		—		—		1,732		44,519		343,114
Thereafter	—		925,000		76,050		150,000		—		48,320		58,373		1,257,743
Above market interest	—		—		—		—		—		—		2,278		2,278
Total	$	122,760	$	1,225,000	$	480,222	$	150,000	$	115,000	$	56,589	$	327,109	$	2,476,680

We have several office locations, which are each subject to operating lease agreements. These office locations include our corporate office at 521 Fifth Avenue, 30th Floor, New York, New York, and our regional offices located in Horsham, Pennsylvania, Clayton, Missouri, London, United Kingdom.

Leasing Agreements

Future minimum rental revenue under non-cancelable leases, excluding reimbursements for operating expenses, as of March 31, 2016 are as follows:



	Operating Leases
April 1 to December 31, 2016	$	253,796
2017	331,621
2018	315,992
2019	293,720
2020	260,728
Thereafter	1,421,528
Total minimum lease rental income	$	2,877,385

Future straight-line rent adjustments under non-cancelable leases as of March 31, 2016 are as follows:



	Straight-line Rent Adjustments
April 1 to December 31, 2016	$	15,830
2017	15,292
2018	12,140
2019	5,460
2020	676
Thereafter	(73,452		)
Total straight-line rent adjustments	$	(24,054	)

Off-Balance-Sheet Arrangements

We have off-balance-sheet investments, including joint ventures and equity investments. These investments all have varying ownership structures. Substantially all of our joint venture and equity investment arrangements are accounted for under the equity method of accounting as we have the ability to exercise significant influence, but not ~~reflective~~control over the operating and financial decisions of these joint venture and equity investment arrangements. Our off-balance-sheet arrangements and financial results are discussed in detail in Note 5 in the accompanying financial statements.

Dividends

To maintain our qualification as a REIT, we must pay annual dividends to our shareholders of at least 90% of our REIT taxable income, determined before taking into consideration the dividends paid deduction and net capital gains. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, which would only be paid out of available cash, we must first meet both our operating requirements and scheduled debt service on our mortgages and loans payable.



Quarter Ended	Common dividends per share ⁽¹⁾		Preferred dividends per share
March 31, 2015	$	0.063	$	0.445
June 30, 2015	$	0.069	$	0.445
September 30, 2015	$	0.069	$	0.445
December 31, 2015	$	0.078	$	0.445
March 31, 2016	$	0.110	$	0.445


(1)	Common dividends declared for a quarter are accrued for during the quarter and then paid to common shareholders of record as of the end of the quarter during the month following the quarter-end.

Transactions with Trustee Related Entities and Related Parties

Our CEO, Gordon F. DuGan, is on the board of directors of the Gramercy European Property Fund and has committed approximately $1,423 (€1,250) in capital to the Gramercy European Property Fund. The two Managing Directors of Gramercy Europe Asset Management have collectively committed approximately $1,423 (€1,250) in capital to the Gramercy European Property Fund. Foreign currency commitments have been converted into U.S. dollars based on (i) the foreign exchange rate at the closing date for completed transactions and (ii) the exchange rate that prevailed on March 31, 2016, in the case of unfunded commitments.

One of the properties acquired in December 2015 as part of the Merger is partially leased to Duke Realty, our partner in the Duke Joint Venture, a joint venture that investments in industrial and office properties located throughout the United States and in which we have an 80% interest and Duke Realty has a 20% interest. Duke Realty acts as the managing member of the Duke Joint Venture and provides asset management, construction, development, leasing and property management services, for which it is entitled to receive fees as well as a promoted interest. Duke Realty leases 30,777 square feet of one of our office properties located in Minnesota which has an aggregate 324,296 rentable square feet. The lease expires in May 2016 and Duke Realty paid us $176 under the lease for the three months ended March 31, 2016.

Three of the properties we acquired in January 2015 for an aggregate purchase price of approximately $19,750, which comprised an aggregate 450,000 square feet and are located in Milwaukee, Wisconsin, were acquired from affiliates of KTR Capital Partners, a private industrial real estate investment company, for which one of our trustees served as Chief Executive Officer and Chairman of the Board.

Non-GAAP Financial Measures

We use the following non-GAAP financial measures that we believe are useful to investors as a key supplemental measure of our operating ~~results during each period.~~performance: funds from operations attributable to common shareholders and unitholders, or FFO, core funds from operations attributable to common shareholders and unitholders, or Core FFO, and adjusted funds from operations attributable to common shareholders and unitholders, or AFFO. We present FFO because we consider it an important supplemental measure of our operating performance and believe that it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITs. We also use FFO as one of several criteria to determine performance-based incentive compensation for members of our senior management, which may be payable in cash or equity awards. The revised White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as net income (loss) (determined in accordance with GAAP), excluding impairment write-downs of investments in depreciable real estate and investments in in-substance real estate investments, gains or losses from debt restructurings and sales of depreciable operating properties, plus real estate-related depreciation and amortization

(excluding amortization of deferred financing costs), less distributions to noncontrolling interests and gains/losses from discontinued operations and after adjustments for unconsolidated partnerships and joint ventures.

Core FFO and AFFO are presented excluding property acquisition costs, loss on extinguishment of debt, other-than-temporary impairments on retained bonds, and other one-time charges. Our AFFO also excludes non-cash share-based compensation expense, amortization of above- and below-market leases, amortization of deferred financing costs, amortization of lease inducement costs, non-real estate depreciation and amortization, amortization of free rent received at property acquisition, straight-line rent, and these AFFO adjustments as they pertain to unconsolidated equity investments. We believe that Core FFO isand AFFO are useful ~~to investors~~supplemental measures regarding our operating performances as they provide a ~~supplemental measure of operating performance. We believe that adjusting FFO to exclude acquisition costs provides investors a view of the performance~~more meaningful and consistent comparison of our portfolio over time, including if we cease to acquire properties on a frequent and regular basis and allows for a comparison of the performance of our portfolio with other REITs that are not currently engaging in acquisitions. We also believe that Core FFO may provide investors with a useful indication of our future performance, and of the sustainability

~~Table of Contents~~

of our current distribution policy. However, because Core FFO excludes acquisition costs, which are important components in an analysis of our historical performance, such supplemental measure should not be construed as a historical performance measure and may not be as useful a measure for estimating the value of our common shares.

We calculate AFFO as Core FFO exclusive of the net effects of (i) amortization associated with deferred financings costs; (ii) amortization of above- and below-market lease intangibles; (iii) amortization of premium on notes payable; (iv) amortization of deferred revenue related to tenant improvements, (v) deferred income taxes; (vi) share-based and other non-cash compensation expense; (vii) deferred straight-line rental revenue; and (viii) recurring capital expenditures.operating performance.

FFO, Core FFO and AFFO ~~measure~~do not represent cash generated from operating activities ~~not~~ in accordance with GAAP and should not be considered as ~~alternatives~~an alternative to ~~(i)~~ net income (determined in accordance with GAAP), as ~~indications~~an indication of our financial performance, or ~~(ii)~~ to cash flow from operating activities ~~(determined in accordance with GAAP)~~ as ~~measures~~a measure of our liquidity, nor ~~are they~~is it entirely indicative of funds available to fund our cash needs, including our ability to make cash distributions. ~~We believe that to further understand our performance, each~~Our calculation of FFO ~~Core FFO and AFFO, should~~may be ~~compared with our reported net income and considered in addition to cash flows in accordance with GAAP, as presented in our Consolidated Financial Statements.~~

~~Not all REITs calculate FFO, Core FFO and AFFO (or an equivalent measure), in~~different from the ~~same manner~~calculation used by other companies and, therefore, ~~comparisons with other REITs~~comparability may ~~not~~ be ~~meaningful.~~limited.



~~Maryland~~	56-2466617
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer of Identification No.)

521 5^th Avenue, 30^th Floor, New York, NY 10175 (Address of principal executive offices – zip code)		(212) 297-1000 (Registrant’s telephone number, including area code)



Large accelerated filer x	Accelerated filer o¨	Non-accelerated filer o¨		Smaller reporting company o¨
			(doDo not check if a smaller reporting company)



		~~Page~~
				Page
PART I.		FINANCIAL INFORMATION
~~Item~~ITEM 1.	~~Consolidated Financial Statements (unaudited)~~	FINANCIAL STATEMENTS	1
		Condensed Consolidated Balance Sheets as of March 31, ~~2015~~2016 and December 31, ~~2014~~	2015 (unaudited)	1
		Condensed Consolidated Statements of Operations for the ~~Three Months Ended~~three months ended March 31, 2016 and 2015 ~~and 2014~~	(unaudited)	2
		Condensed Consolidated Statements of Comprehensive Income (Loss) for the ~~Three Months Ended~~three months ended March 31, 2016 and 2015 ~~and 2014~~	(unaudited)	3
		Condensed Consolidated Statement of Equity for the three months ended March 31, 2016 (unaudited)	4
		Condensed Consolidated Statements of Cash Flows for the ~~Three Months Ended~~three months ended March 31, 2016 and 2015 ~~and 2014~~		4(unaudited)
	~~Consolidated Statements of Equity for the Three Months Ended March 31, 2015 and 2014~~		5
	~~Notes to the Consolidated Financial Statements~~		6
~~Item 2.~~	~~Management's Discussion and Analysis of Financial Condition and Results of Operations~~		33
~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~		54
~~Item 4.~~	~~Controls and Procedures~~		55
		Notes to Condensed Consolidated Financial Statements (unaudited)	6
ITEM 2.		MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	55
ITEM 3A.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	72
ITEM 4.		CONTROLS AND PROCEDURES	75
PART II. ~~OTHER INFORMATION~~
~~Item 1.~~	~~Legal Proceedings~~		57OTHER INFORMATION	76
~~Item 1A.~~	~~Risk Factors~~ITEM 1.		57LEGAL PROCEEDINGS	76
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~ITEM 1A.		57RISK FACTORS	77
~~Item 3.~~	~~Defaults Upon Senior Securities~~ITEM 2.		57UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	78
~~Item 4.~~	~~Mine Safety Disclosure~~ITEM 3.		57DEFAULTS UPON SENIOR SECURITIES	78
~~Item 5.~~	~~Other Information~~ITEM 4.		57MINE SAFETY DISCLOSURES	78
~~Item 6.~~	~~Exhibits~~ITEM 5.		58OTHER INFORMATION	78
~~SIGNATURES~~ITEM 6.		59INDEX TO EXHIBITS	79
SIGNATURES			80



Property	Stated Interest Rate	Effective Interest Rate⁽¹⁾	Maturity Date	Outstanding Balance
				March 31,		December 31,
				2015		2014

Lakeside Office Center	6.03%	6.03%	9/1/2015	$	8,585	$	8,617
Celebration Office Center III⁽²⁾	4.25%	2.50%	12/1/2015	8,770		8,817
22535 Colonial Pkwy⁽²⁾	4.25%	2.50%	12/1/2015	7,847		7,889
Northpoint III⁽²⁾	4.25%	2.50%	12/1/2015	10,155		10,209
Goodyear Crossing II⁽²⁾	4.25%	2.50%	12/1/2015	19,386		19,489
3900 North Paramount Parkway⁽²⁾	4.25%	2.50%	12/1/2015	7,616		7,656
3900 South Paramount Parkway⁽²⁾	4.25%	2.50%	12/1/2015	7,616		7,656
1400 Perimeter Park Drive⁽²⁾	4.25%	2.50%	12/1/2015	2,308		2,320
Miramar I⁽²⁾	4.25%	2.50%	12/1/2015	9,047		9,095
Miramar II⁽²⁾	4.25%	2.50%	12/1/2015	12,185		12,250
70 Hudson Street ⁽³⁾	5.65%	5.15%	4/11/2016	113,570		114,108
Point West I - Swapped to Fixed	3.41%	3.41%	12/6/2016	10,635		10,716
100 Tice Blvd	5.97%	4.38%	9/15/2017	18,808		18,960
100 Tice Blvd	5.97%	4.38%	9/15/2017	18,808		18,960
4701 Gold Spike Drive⁽⁴⁾	4.45%	4.45%	3/1/2018	9,908		9,958
1985 International Way⁽⁴⁾	4.45%	4.45%	3/1/2018	6,883		6,920
3660 Deerpark Boulevard⁽⁴⁾	4.45%	4.45%	3/1/2018	7,117		7,153
Tolleson Commerce Park II⁽⁴⁾	4.45%	4.45%	3/1/2018	4,280		4,301
20000 S. Diamond Lake Road⁽⁴⁾	4.45%	4.45%	3/1/2018	6,233		6,265
Atrium I - Swapped to Fixed	3.78%	3.78%	5/31/2018	21,346		21,580
McAuley Place	3.98%	3.50%	9/1/2018	12,771		12,865
Easton III - Swapped to Fixed	3.95%	3.95%	1/31/2019	6,234		6,280
90 Hudson Street	5.66%	5.26%	5/1/2019	102,880		103,301
Fairforest Bldg. 6	5.42%	6.50%	6/1/2019	1,664		1,751
North Rhett I	5.65%	6.50%	8/1/2019	1,843		1,958
Kings Mountain II	5.47%	6.50%	1/1/2020	3,318		3,467
1 Rocket Road	6.60%	4.00%	8/1/2020	18,413		18,516
North Rhett II	5.20%	6.50%	10/1/2020	1,372		1,425
Mount Holly Bldg.	5.20%	6.50%	10/1/2020	1,372		1,425
Orangeburg Park Bldg.	5.20%	6.50%	10/1/2020	1,395		1,449
Kings Mountain I	5.27%	6.50%	10/1/2020	1,189		1,235
Ten Parkway North	4.75%	4.75%	1/1/2021	11,388		11,469
Union Cross Bldg. II	5.53%	6.50%	6/1/2021	5,570		5,755
Union Cross Bldg. I	5.50%	6.50%	7/1/2021	1,832		1,892



Property	Stated Interest Rate	Effective Interest Rate⁽¹⁾	Maturity Date	Outstanding Balance
				March 31,			December 31,
				2015			2014
Norman Pointe I	5.24%	3.50%	10/1/2021	20,091			20,177
Norman Pointe II	5.24%	3.50%	10/1/2021	22,119			22,214
The Landings I	5.24%	3.50%	10/1/2021	15,120			15,185
The Landings II	5.24%	3.50%	10/1/2021	13,336			13,393
Fairforest Bldg. 5	6.33%	6.50%	2/1/2024	7,522			7,678
North Rhett IV	5.80%	6.50%	2/1/2025	7,719			7,862
One Wayside Road⁽⁵⁾	5.66%	5.25%	8/1/2015	—			12,938
One Wayside Road⁽⁵⁾	5.92%	5.25%	8/1/2015	—			10,854
Total Secured Notes Payable				568,251			596,008
Plus Premium				14,291			15,494
Less Discount				(836		)	(894		)
Total Secured Notes Payable, Net				$	581,706		$	610,608



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



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



	Three Months Ended
	March 31,
	2015			2014
REVENUES
Rental	$	54,346		$	51,876
Tenant Reimbursements	16,439			15,220
Other Property Income	198			1,069
Total Revenues	70,983			68,165
EXPENSES
Property Operating	9,781			9,553
Real Estate Taxes	10,782			9,801
General and Administrative	9,873			6,864
Acquisition-Related	—			290
Depreciation and Amortization	27,920			27,238
Total Expenses	58,356			53,746
Income Before Other (Expenses) Income	12,627			14,419
OTHER EXPENSES AND INCOME
Interest and Other Income	80			167
Interest Expense	(13,059		)	(14,061		)
Interest Expense and Net Change in Fair Value of Non-Qualifying Derivative Financial Instruments	17			26
Total Other (Expenses)	(12,962		)	(13,868		)
(Loss) Income Before Provision for Income Taxes and Equity in Income of Unconsolidated Entities	(335		)	551
Provision For Income Taxes	(176		)	(58		)
Equity in Income of Unconsolidated Entities	6,505			2,826
NET INCOME	5,994			3,319
Basic and Diluted Net Income per Share	$	0.03		$	0.01
Weighted Average Common Shares Outstanding - Basic	236,940,134			236,583,752
Weighted Average Common Shares Outstanding - Diluted	236,963,354			236,583,752
Dividends Declared per Common Share	$	0.128		$	0.126



	Common Shares					Additional Paid-in- Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
	Shares		Amount			Additional Paid-in- Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance at January 1, 2015	236,920,675		$	2,364		$	2,071,526		$	(689,654	)	$	(23,269	)	$	1,360,967
Net Income	—		—			—			5,994			—			5,994
Other Comprehensive Loss	—		—			—			—			(24,779		)	(24,779		)
Share-Based Compensation	350,000		6			3,328			—			—			3,334
Repurchase and Cancellation of Vested Shares	(409,179	)	(4		)	(3,236		)	—			—			(3,240		)
Non-Cash Amortization of Share-Based Compensation	—		—			1,491			—			—			1,491
Distributions Declared ($0.128 per share)	—		—			—			(30,217		)	—			(30,217		)
Balance at March 31, 2015	236,861,496		$	2,366		$	2,073,109		$	(713,877	)	$	(48,048	)	$	1,313,550



	Duke JV		European JV		Other ⁽²⁾		Total
	Duke JV		European JV		Other ⁽²⁾		Total
Assets
Investments in Real Estate⁽¹⁾	$	319,663	$	241,518	$	184,245	$	745,426
Other Assets	32,886		42,108		10,379		85,373
Total Assets	$	352,549	$	283,626	$	194,624	$	830,799
Liabilities and Equity
Secured Notes Payable, net	$	56,948	$	119,897	$	—	$	176,845
Other Liabilities	7,581		6,413		20,150		34,144
Total Liabilities	64,529		126,310		20,150		210,989
CSP Equity	230,861		125,853		38,024		394,738
Other Investors' Equity	57,159		31,463		136,450		225,072
Total Liabilities and Equity	$	352,549	$	283,626	$	194,624	$	830,799



	Duke JV		European JV		Other⁽²⁾		Total
	Duke JV		European JV		Other⁽²⁾		Total
Assets
Investments in Real Estate⁽¹⁾	$	323,236	$	274,128	$	186,360	$	783,724
Real Estate Investments and Other Assets Held-for-Sale	17,230		—		—		17,230
Other Assets	32,474		49,435		11,553		93,462
Total Assets	$	372,940	$	323,563	$	197,913	$	894,416
Liabilities and Equity
Liabilities Related to Real Estate Investments Held-for-Sale	$	11,048	$	—	$	—	$	11,048
Secured Notes Payable, net	57,222		135,173		—		192,395
Other Liabilities	6,013		8,214		17,093		31,320
Total Liabilities	74,283		143,387		17,093		234,763
CSP Equity	239,376		144,141		40,176		423,693
Other Investors' Equity	59,281		36,035		140,644		235,960
Total Liabilities and Equity	$	372,940	$	323,563	$	197,913	$	894,416



	Three Months Ended
	March 31, 2015											March 31, 2014
	Duke JV			European JV		Other ⁽¹⁾			Total			Duke JV			European JV		Other ⁽²⁾			Total
Total Revenue	$	12,631		$	6,573	$	(2,334	)	$	16,870		$	14,660		$	7,336	$	(399	)	$	21,597
Operating Expenses	3,423			1,215		618			5,256			5,036			1,129		745			6,910
Net Operating Income	9,208			5,358		(2,952		)	11,614			9,624			6,207		(1,144		)	14,687
Depreciation and Amortization	5,214			2,601		484			8,299			7,516			2,929		523			10,968
Interest Expense	794			957		—			1,751			1,040			1,133		—			2,173
Gain on Sale of Real Estate	3,020			—		—			3,020			—			—		—			—
Loss on Extinguishment of Debt	(73		)	—		—			(73		)	—			—		—			—
Net Income (Loss)	6,147			1,800		(3,436		)	4,511			1,068			2,145		(1,667		)	1,546
Company Share in Net Income	4,917			1,439		175			6,531			854			1,716		287			2,857
Adjustments for REIT basis	(26		)	—		—			(26		)	(31		)	—		—			(31		)
CSP Equity in Net Income	$	4,891		$	1,439	$	175		$	6,505		$	823		$	1,716	$	287		$	2,826



	Intangible Assets								Intangible Liabilities
	Deferred Leasing Costs		Acquired Above-Market Leases		Acquired In-Place Leases		Other Intangible Assets		Acquired Below-Market Leases		Above-Market Ground Lease Obligations
Remaining 2015	$	1,424	$	6,327	$	27,236	$	108	$	3,368	$	53
2016	1,750		5,557		29,727		144		3,590		71
2017	1,604		4,466		25,254		144		3,098		71
2018	1,531		3,862		21,050		144		2,825		71
2019	1,332		3,300		17,284		144		2,604		71
Thereafter	10,246		7,605		37,833		542		8,330		915
	$	17,887	$	31,117	$	158,384	$	1,226	$	23,815	$	1,252


(1)	Represents the current interest rate ~~at which~~as of March 31, 2016, including the swapped interest ~~expense~~rate for loans that have interest rate swaps. The current interest rate is ~~recorded for financial reporting purposes, which reflects~~not adjusted to include the amortization of ~~any discounts/~~fair market value premiums ~~excluding debt issuance costs.~~or discounts.


~~(3)~~	In accordance with the provisions of this loan, ~~beginning in February 2015,~~ the ~~property's~~property’s excess cash proceeds after the payment of debt service, impounds and budgeted operating expenses ~~are being~~were held by the ~~lender until~~lender. In January 2016, the loan ~~is repaid or the property is re-leased under terms described~~was paid in ~~the loan agreement.~~full.


(4)	These ~~five~~mortgage loans ~~are cross-collaterialized.~~were related to properties that were classified as held for sale as of December 31, 2015, and accordingly the mortgage loans were included within liabilities related to assets held for sale on the Consolidated Balance Sheet as of December 31, 2015. These properties were sold during the three months ended March 31, 2016.


(5)	~~This loan was paid off in full~~Represents four properties under this mortgage loan.



Term Loan Facility	Unswapped Interest Rate	Effective Interest Rate⁽¹⁾	Maturity Date	Outstanding Balance
				March 31,		December 31,
				2015		2014

WF Term Loan #2⁽²⁾	LIBOR + 1.50%	2.49%	3/7/2018	$	200,000	$	200,000
WF Term Loan #3⁽²⁾	LIBOR + 1.50%	3.12%	1/15/2019	200,000		200,000
TD Term Loan⁽³⁾	LIBOR + 1.75%	3.28%	3/6/2020	50,000		50,000
Capital One Term Loan⁽²⁾	LIBOR + 1.75%	4.32%	1/31/2021	120,000		120,000
Total Unsecured Term Loan Facilities				$	570,000	$	570,000


(1)	Represents the rate at which interest expense is recorded for financial reporting purposes, which reflects the effect of the interest rate swaps, excluding debt issuance costs.



	2015 Revolving Credit Facility		Term Loans		Mortgage Notes Payable		Senior Unsecured Notes		Exchangeable Senior Notes		Interest Payments		Total
April 1 to December 31, 2016	$	—	$	—	$	43,429	$	—	$	—	$	47,739	$	91,168
2017	—		—		65,215		—		—		62,306		127,521
2018	—		—		92,589		—		—		60,263		152,852
2019	—		300,000		28,836		—		115,000		51,631		495,467
2020	122,760		—		174,103		—		—		44,519		341,382
Thereafter	—		925,000		76,050		150,000		—		58,373		1,209,423
Above market interest	—		—		—		—		—		2,278		2,278
Total	$	122,760	$	1,225,000	$	480,222	$	150,000	$	115,000	$	327,109	$	2,420,091



	March 31, 2016				December 31, 2015
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Retained CDO Bonds⁽¹⁾	$	8,786	$	8,786	$	7,471	$	7,471
Investment in CBRE Strategic Partners Asia	$	5,126	$	5,126	$	5,508	$	5,508
Real estate investments classified as held for sale at Merger closing⁽⁴⁾	$	10,522	$	10,522	$	393,984	$	393,984
Financial liabilities:
Derivative instruments	$	27,461	$	27,461	$	3,442	$	3,442
Long-term debt
Revolving credit facilities⁽²⁾	$	122,760	$	123,294	$	296,724	$	297,394
3-Year Term Loan⁽²⁾	$	300,000	$	300,304	$	300,000	$	300,349
5-Year Term Loan⁽²⁾	$	750,000	$	751,223	$	750,000	$	751,304
7-Year Term Loan⁽²⁾	$	175,000	$	175,024	$	175,000	$	175,338
Mortgage notes payable^{(2), (3)}	$	480,222	$	506,215	$	770,293	$	805,590
Senior Unsecured Notes⁽²⁾	$	150,000	$	156,254	$	100,000	$	100,528
Exchangeable Senior Notes⁽²⁾	$	107,205	$	117,069	$	109,394	$	115,524


(1)	Retained CDO Bonds represent the CDOs’ subordinate bonds, preferred shares, and ordinary shares, which were retained subsequent to the disposal of Gramercy Finance and were previously eliminated in consolidation.


(2)	AsLong-term debt instruments are classified as Level III due to the significance of ~~March 31, 2015 and December 31, 2014, the applicable LIBOR rate was 0.172% and 0.156%, respectively, for these loans.~~unobservable inputs which are based upon management assumptions.


(3)	AsAmounts include mortgage notes payable on assets held for sale as of ~~March~~December 31, 2015, which had total carrying value of $260,704 and total fair value of $263,308 as of December 31, ~~2014, the applicable LIBOR rate was 0.172% and 0.155%, respectively,~~2015. There were no mortgage notes payable on assets held for ~~this loan.~~


~~(1)~~	~~Calculated based on one-month LIBOR plus 1.30%~~sale as of March 31, ~~2015 and December 31, 2014.~~2016.


~~(2)~~(4)	~~The facility fee is based on the unsecured revolving credit facility's total borrowing capacity.~~


~~(3)~~	~~We may exercise an option to extend the maturity date by~~Amounts include one ~~year.~~and six real estate investments as of March 31, 2016 and December 31, 2015, respectively, classified as held for sale at Merger closing, which are included in discontinued operations.



Remaining 2015	$	103,960
2016	134,612
2017	46,822
2018	507,612
2019	308,768
Thereafter	271,521
	$	1,373,295



	Notional Amount				Fair Value						Rate
Type of Instrument	March 31,		December 31,		March 31,			December 31,			March 31,		December 31,		Index	Maturity Date
Type of Instrument	2015		2014		2015			2014			2015		2014		Index	Maturity Date
Interest Rate Swap⁽¹⁾	$	10,635	$	10,716	$	(146	)	$	(135	)	1.2	%	1.3	%	LIBOR	12/6/2016
Interest Rate Swap⁽²⁾	200,000		200,000		(116		)	1,467			0.8	%	0.8	%	LIBOR	3/7/2018
Interest Rate Swap⁽¹⁾	21,346		21,580		(478		)	(354		)	1.6	%	1.6	%	LIBOR	5/31/2018
Interest Rate Swap	200,000		200,000		(3,497		)	(1,540		)	1.5	%	1.5	%	LIBOR	1/15/2019
Interest Rate Swap⁽¹⁾	6,234		6,280		(177		)	(127		)	1.8	%	1.8	%	LIBOR	1/31/2019
Interest Rate Swap⁽²⁾	50,000		50,000		(399		)	266			1.4	%	1.4	%	LIBOR	3/6/2020
Interest Rate Swap	120,000		120,000		(7,179		)	(5,543		)	2.4	%	2.4	%	LIBOR	1/31/2021



	Asset Derivatives					Liability Derivatives
		Fair Value					Fair Value
		March 31,		December 31,			March 31,		December 31,
Type of Instrument	Balance Sheet Location	2015		2014		Balance Sheet Location	2015		2014
Derivatives designated as hedging instruments
Interest Rate Swaps	Prepaid Expenses and Other Assets	$	—	$	1,733	Accounts Payable, Accrued Expenses and Other Liabilities	$	11,992	$	7,699



Remaining 2015	$	162,143
2016	197,435
2017	185,133
2018	168,162
2019	149,110
Thereafter	463,068
	$	1,325,051



	Assumptions
Fair value per unit at March 13, 2015	$	6.00
Expected share price volatility	22.0		%
Dividend yield	6.0		%
Risk-free interest rate	0.99		%
Remaining expected life	2.8 years



	Nonvested Restricted Stock
	Common Shares		Weighted-Average Grant Date Fair Value per Share
Outstanding at January 1, 2015	800,699		$	8.68
Granted⁽¹⁾	200,000		8.10
Vested⁽¹⁾⁽²⁾	(728,963	)	8.50
Outstanding at March 31, 2015	271,736		$	8.53



	Nonvested RSUs
	Amount		Weighted-Average Grant Date Fair Value Per Share		Vested RSUs		Total RSUs
Outstanding at January 1, 2015	—		$	—	—		—
Granted	237,422		7.78		—		237,422
Vested	(75,000	)	7.78		75,000		—
Settled⁽¹⁾	—		—		(75,000	)	(75,000	)
Outstanding at March 31, 2015	162,422		$	7.78	—		162,422



	Nonvested PSUs
	Amount		Weighted-Average Grant Date Fair Value Per Share		Vested PSUs		Total PSUs
Outstanding at January 1, 2015	—		$	—	—		—
Granted	237,440		6.56		—		237,440
Vested	(75,000	)	7.78		75,000		—
Settled⁽¹⁾	—		—		(75,000	)	(75,000	)
Outstanding at March 31, 2015	162,440		$	6.00	—		162,440