Gramercy Property Trust

Notes to ~~Martin A. Reid (Interim President~~Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands, except share and ~~Chief Executive Officer, and Chief Financial Officer) and Philip L. Kianka (Chief Operating Officer) (each, an “Executive”) providing that each Executive’s Initial Term (as~~

~~Table of Contents~~per share data)

~~CHAMBERS STREET PROPERTIES~~June 30, 2016

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

~~(Unaudited)~~

defined in each Executive’s respective executive employment agreement) would not be renewed. As a result, unless otherwise agreed, each Executive’s last day of employment will be December 31, 2015. However, to the extent agreed upon, the Executives may be employed on an at-will basis beginning January 1, 2016.

~~2014 Awards~~

~~On January 29, 2014, our Board's independent trustees, Messrs. Black, Brugger, Francis, Orphanides~~Assets 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 CSP OP 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 of the Board of Trustees of the Company (the “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 $170,000 and $563,000 during the three months ended September 30, 2015 and 2014, respectively, and $510,000 and $968,000 during the nine months ended September 30, 2015 and 2014, respectively, as a result of granting the awards to our named executive officers and our employees.

On July 31, 2014, 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.

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

~~A summary of our Time-Based Restricted Common Shares from January 1, 2015 through September 30, 2015 is presented below:~~

Nonvested Restricted Common Shares
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⁾
(766,463 ) 8.58
Forfeited (1,202 ) 8.37
Outstanding at September 30, 2015 233,034
$ 8.30

~~__________~~


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

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

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

~~(Unaudited)~~


~~(2)~~	Total shares vested include 336,041 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 RSUs~~

~~A summary of our Time-Based RSUs from January 1, 2015 through September 30, 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
—
Forfeited (397 ) 7.78
—
(397 )
Settled⁽¹⁾
—
—
(75,000 ) (75,000 )
Outstanding at September 30, 2015 162,025
$ 7.78
—
162,025

~~__________~~

~~(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.

~~Summary of PSUs~~

~~A summary of our PSUs from January 1, 2015 through September 30, 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
—
Forfeited (397 ) 6.00
—
(397 )
Settled⁽¹⁾
—
—
(75,000 ) (75,000 )
Outstanding at September 30, 2015 162,043
$ 6.00
—
162,043

~~__________~~

~~(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 Nine Months Ended September 30⁽¹⁾
$ 5,285
$ 1,924
Unamortized Compensation Costs $ 3,058
$ 7,351
Shares Available for the Future Awards⁽²⁾
3,323,441
4,041,992

~~__________~~


~~(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.~~

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

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

~~(Unaudited)~~

~~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 September 30, 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, subject to the restrictions contained in the Merger Agreement (as defined herein), 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 September 30, 2015 there have been no sales of common shares under the ATM program.

~~Accumulated Other Comprehensive Income (Loss)~~

~~The following presents the changes in the balances of each component of accumulated other comprehensive income (loss) for the nine months ended September 30, 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 (12,573 ) (15,671 ) (28,244 )
Amounts Reclassified from Accumulated Other Comprehensive Income to Interest Expense —
6,456
6,456
Balance at September 30, 2015 $ (30,086 ) $ (14,971 ) $ (45,057 )

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 (13,793 ) (11,041 ) (24,834 )
Amounts reclassified from Accumulated Other Comprehensive Income to Interest Expense —
6,955
6,955
Balance at September 30, 2014 $ (12,123 ) $ (1,160 ) $ (13,283 )

~~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

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

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

~~(Unaudited)~~

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.

~~As of September 30, 2015 and December 31, 2014, we held certain items that were required to be~~liabilities measured at fair value on a recurring ~~basis. These included cash equivalents, interest~~basis and on a non-recurring basis are categorized in the table below based upon the lowest level of significant input to the valuations.



At June 30, 2016	Total		Level I		Level II		Level III
Financial Assets:
Retained CDO Bonds:
Non-investment grade, subordinate CDO bonds	$	9,322	$	—	$	—	$	9,322
Marketable securities:
Investment in CBRE Strategic Partners Asia	5,162		—		—		5,162
Real estate investments classified as held for sale at Merger closing	9,752		—		—		9,752
	$	24,236	$	—	$	—	$	24,236
Financial Liabilities:
Derivative instruments:
Interest rate swaps	$	36,357	$	—	$	—	$	36,357
Foreign currency forward contract	378		—		378		—
	$	36,735	$	—	$	378	$	36,357



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

Valuation of Level III Instruments

Derivative instruments: Interest rate swap derivative contracts and our equity method investment 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 instrumentsswaps are ~~related to our economic hedging activities with respect to interest rates.~~

~~The fair values of the interest rate swap derivative agreements are estimated~~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 ~~specialist using~~adjustments due to the ~~market standard methodology~~risk of ~~discounting~~non-performance by both the ~~future expected cash payments~~Company and ~~receipts on~~its counterparties. The most significant unobservable input in the ~~pay and receive legs~~fair valuation of derivative instruments is the credit valuation adjustment as it requires significant management judgment regarding changes in the credit risk of the Company or its counterparties, however the primary driver of the fair value of the interest rate ~~swap agreements that swap~~swaps is the ~~estimated variable~~forward interest rate ~~mortgage note payment stream for a fixed rate receive payment stream over the period~~curve. Fair values of the ~~loan. The variable interest rates used~~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.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands, except share and per share data)

June 30, 2016

Total unrealized gains (losses) from derivatives for the ~~calculation~~three and six months ended June 30, 2016 were $(11,460) and $(33,649), respectively, in accumulated other comprehensive income (loss). Total unrealized gains (losses) from derivatives for the three and six months ended June 30, 2015 were $1,468 and $(664), respectively, in accumulated other comprehensive income (loss).

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 ~~projected receipts on~~cash flows expected to be collected and applies a discount rate equal to 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 determinedyield that the ~~majority~~Company would expect to pay for similar securities with similar risks at the valuation date. Future expected cash flows generated by management require significant assumptions and judgment regarding the expected resolution of the ~~inputs used to value our derivatives fall within Level 2~~underlying collateral, which includes loans and other lending investments, real estate investments, and collateralized mortgage backed securities. The resolution of the ~~fair value hierarchy,~~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 ~~credit valuation adjustments associated with our derivatives utilize Level 3~~unobservable inputs such as ~~estimates~~the timing of ~~current credit spreads to evaluate~~a loan default or property sale and the ~~likelihood~~severity of ~~default by us and our counterparties. However,~~loan losses. Significant increases (decreases) in any of those inputs in isolation as well as any change in the expected timing of September 30, 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 significantthose inputs would result in a significantly lower (higher) fair value measurement. Due to the ~~overall valuation~~inherent uncertainty in the determination of ~~our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the~~ fair value, ~~hierarchy. We have consistently applied these valuation techniques~~the Company has designated its Retained CDO Bonds as Level III.

Investment in ~~all periods presented and believe we have obtained the most accurate information available for the types of derivative contracts we hold.~~

~~Our~~CBRE Strategic Partners Asia: The 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 of Real Estate~~

~~During~~Real estate investments classified as held for sale at Merger closing: Real estate investments classified as held for sale at the ~~year ended December 31, 2014, we recognized an impairment charge~~time of ~~$27.6 millionin continuing operations related to our 70 Hudson Street property. Accordingly, we reduced~~ the ~~carrying value of this property to the property’s current~~Merger 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%.~~

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

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

~~(Unaudited)~~

~~The following items are measured at fair value~~measurements on a recurring basis ~~and non-recurring basis at September~~as of June 30, ~~2015 and December 31, 2014 (in thousands):~~

As of September 30, 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 $ 6,583
$ —
$ —
$ 6,583
Interest Rate Swaps Designated as Cash Flow Hedges - Assets —
—
—
—
Interest Rate Swaps Designated as Cash Flow Hedges - Liabilities —
(15,115 ) —
(15,115 )
Investment in CBRE Strategic Partners Asia —
—
5,194
5,194

2016 are:

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 June 30, 2016
Financial Asset or Liability	Fair Value		Valuation Technique	Unobservable Inputs	Range
Non-investment grade, subordinate CDO bonds	$	9,322	Discounted cash flows	Discount rate	25.00%
Interest rate swaps	$	36,357	Hypothetical derivative method	Credit borrowing spread	116 to 260 basis points
Investment in CBRE Strategic Partners Asia	$	5,162	Discounted cash flows	Discount rate	20.00%

~~__________~~

Gramercy Property Trust


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

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands, except share and per share data)

June 30, 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) for the nine months ended September 30, 2015 and 2014, respectively (in thousands):~~Level III inputs:

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Investment in
CBRE Strategic
Partners Asia
Balance at January 1, 2015 $ 6,870
Distributions (1,385 )
Total Income on Fair Value Adjustment 762
Unrealized Loss in Fair Value Adjustment (1,053 )
Balance at September 30, 2015 $ 5,194



	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	884		—			884
Adjustments to fair value:
Unrealized gain in other comprehensive income from fair value adjustment	967		—			967
Total income on fair value adjustment	—		(32		)	(32		)
Purchase price allocation adjustments	—		(314		)	(314		)
Balance as of June 30, 2016	$	9,322	$	5,162		$	14,484

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

~~CHAMBERS STREET PROPERTIES~~

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

~~(Unaudited)~~

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Investment in
CBRE Strategic
Partners Asia
Balance at January 1, 2014 $ 9,676
Distributions (2,724 )
Total Loss on Fair Value Adjustment (13 )
Balance at September 30, 2014 $ 6,939



	Derivative Instruments⁽¹⁾
Balance as of December 31, 2015	$	3,442
Adjustments to fair value:
Ineffective portion of change in derivative instruments	(734		)
Unrealized loss on derivatives	33,649
Balance as of June 30, 2016	$	36,357

~~Disclosure of~~ (1) The Company’s foreign currency forward contract is not included as it is classified as a Level II investment.

Fair Value ~~Financial~~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 June 30, 2016 and December 31, 2015. The Company had one and six assets in this classification as of June 30, 2016 and December 31, 2015, respectively, as the Company sold five of the assets during the six months ended June 30, 2016. These assets were recorded at fair value, less costs to sell of $9,752 and $393,984 as of June 30, 2016 and December 31, 2015, respectively, and are included in discontinued operations. Refer to Note 3 for further information on these assets.

10. Derivatives and Non-Derivative Hedging Instruments

~~For disclosure purposes only,~~In June 2016, the Company entered into a foreign currency forward contract to mitigate its exposure to foreign currency exchange rate movements in the euro, specifically in relation to funds received on its sale of 74.9% of its 80.0% interest in the Goodman Europe JV in June 2016. The foreign currency forward is a derivative contract, through which the Company is committed to deliver a certain amount of currency at a set price on a specific date in the future, or the settlement date. The forward contract locked in the Company’s future currency exchange rate for the term of the contract, thus minimizing the Company’s exposure to rate fluctuations during this period. The contract is not designated as a hedging instrument.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands, except share and per share data)

June 30, 2016

As of June 30, 2016, the Company’s derivative instruments consist of interest rate swaps, which are cash flow hedges, and a foreign currency forward contract, which is not designated as a hedging instrument. Changes in the effective portion of fair value of derivatives designated as hedging instruments are recognized in other comprehensive income (loss) until the hedged item expires or is recognized in earnings. The ineffective portion of a hedging derivative’s change in fair value and the change in value of a non-hedging derivative instrument are immediately recognized in earnings. Changes in the fair value of the Company’s foreign currency forward contract are recognized in other income on the Company’s Condensed Consolidated Statements of Operations. Derivative accounting may increase or decrease reported net income and shareholders’ equity, depending on future levels of LIBOR interest rates, foreign exchange 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.

Borrowings on the Company’s foreign currency denominated tranche of the 2015 Revolving Credit Facility , 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). Refer to Note 2 and Note 9 for additional information on the Company’s derivatives and non-derivative hedging instruments, including the fair value measurement of these instruments, as applicable.

The following table summarizes ~~our notes payable~~the notional and ~~their estimated~~ fair value of the Company’s derivatives and hedging instruments at ~~September~~June 30, 2016. The fair value of the all of the Company’s derivatives is presented on its Condensed Consolidated Balance Sheets 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 ~~and December 31, 2014 (in thousands):~~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:

September 30, 2015 December 31, 2014
Financial Instrument
Carrying
Value

Fair
Value

Carrying
Value

Fair
Value
Secured Notes Payable⁽¹⁾
$ 478,739
$ 495,673
$ 610,608
$ 628,194
Unsecured Term Loan Facilities⁽¹⁾
$ 570,000
$ 589,771
$ 570,000
$ 577,196
Unsecured Revolving Credit Facility⁽¹⁾
$ 290,044
$ 290,044
$ 200,044
$ 200,044

~~__________~~

Benchmark Rate

Notional Value

Strike Rate

Effective Date

Expiration Date

Fair Value

Interest Rate Swap - Waco

1 mo. USD-LIBOR-BBA

15,336 USD

4.55%

12/19/2013

12/19/2020

1,028

Interest Rate Swap - Point West I

1 mo. USD-LIBOR-BBA

10,228 USD

1.41%

8/16/2011

12/6/2016

Interest Rate Swap - Atrium I

1 mo. USD-LIBOR-BBA

20,176 USD

1.78%

8/16/2011

5/31/2018

445

Interest Rate Swap - Easton III

1 mo. USD-LIBOR-BBA

6,001 USD

1.95%

8/16/2011

1/31/2019

196

Interest Rate Swap - 5-Year Term Loan

1 mo. USD-LIBOR-BBA

750,000 USD

1.60%

12/17/2015

12/17/2020

25,621

Interest Rate Swap - 7-Year Term Loan

1 mo. USD-LIBOR-BBA

175,000 USD

1.82%

12/17/2015

1/9/2023

9,025

Foreign Currency Forward Contract⁽¹⁾

USD-EUR exchange rate

134,000 Euros

1.1081 USD-EUR

6/30/2016

7/6/2016

378

Non-Derivative Net Investment Hedge in the Gramercy European Property Fund

USD-EUR exchange rate

45,000 Euros

N/A

9/28/2015

N/A

—

Total

36,735


(1)	~~Items are measured using Level 2 inputs.~~Represents the exchange rate locked in by the Company for the term of the foreign currency forward contract. The Company settled the contract on July 6, 2016.

~~These financial~~Through its interest rate swaps, the Company is hedging exposure to variability in future interest payments on its debt facilities. At June 30, 2016, the interest rate swap derivative instruments ~~do not have two-way markets and are measured using management’s best estimate of~~were reported at their fair value ~~where~~as a net liability of $36,357. Swap (gain) loss of $(2,564) and $(734) was recognized as interest expense for the ~~inputs~~three and six months ended June 30, 2016, respectively, 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

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands, except share and per share data)

June 30, 2016

financing element associated with certain derivatives. As discussed in Note 6, during the six months ended June 30, 2016, the Company amended its 5-Year Term Loan and its 7-Year Term Loan in order to remove the 0.00% rate floor on the applicable LIBOR that existed in the original loan agreements, and as a result, during the three months ended June 30, 2016 the Company reversed previously recorded hedge ineffectiveness of $2,564. No gain or loss was recognized with respect to hedge ineffectiveness or to amounts excluded from ineffectiveness for the three and six months ended June 30, 2015. During the three and six months ended June 30, 2016, the Company reclassified $271 and $631, respectively, from accumulated other comprehensive income into interest expense related to a derivative terminated in 2015. Over time, the ~~determination~~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 $10,882 will be reclassified from other comprehensive income as an increase in interest expense for the Company’s interest rate swaps as of June 30, 2016. Additionally, the Company will recognize $3,197 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 its foreign currency forward contract, the Company is mitigating its foreign exchange rate exposure to variability in the euro-U.S. dollar exchange rate, specifically in relation to funds received on its sale of 74.9% of its interest in the Goodman Europe JV in June 2016, which are in euro-denominated funds as of June 30, 2016. At June 30, 2016, the foreign currency forward contract was reported at its fair value ~~require significant management judgment or estimation.~~

~~13. Commitments~~as a liability of $378 in derivative instruments on the Company’s Condensed Consolidated Balance Sheets and ~~Contingencies~~

~~Ground Leases - We own~~because it is not designated as a ~~property that is subject to~~hedging instrument, this value, which also represents its change in value during the period, was recognized as a ~~long-term noncancellable ground lease obligation that contractually expires~~reduction of other income on ~~November 30, 2032. We have three ten-year renewal options that will allow us to extend~~ the ~~expiration~~Condensed Consolidated Statements of Operations. The change in value of the ~~ground lease through November 30, 2062. The minimum commitment under~~euro-denominated asset underlying the ~~ground lease as~~contract was an increase of ~~September 30, 2015 and thereafter is as follows (in thousands):~~$228, thus the net impact recognized within other income on the Company’s the Condensed Consolidated Statements of Operations was a net loss of $150.

Remaining 2015 $ 68
2016 273
2017 273
2018 276
2019 308
Thereafter 4,474
$ 5,672

~~Proposed Merger with Gramercy—On July 1, 2015, we~~Through its non-derivative net investment hedge, which was entered into ~~an Agreement and Plan~~in September 2015, the Company is hedging exposure to changes in the euro-U.S. dollar exchange rate of ~~Merger (the “Merger Agreement”) with~~its net equity investment in the Gramercy ~~and Columbus Merger Sub, LLC,~~European Property Fund, which has euros as its functional currency. At June 30, 2016, the non-derivative net investment hedge was reported at its carrying value as a ~~Maryland limited~~net liability ~~company and a direct or indirect wholly owned subsidiary~~of $49,950, which is included in the balance of the ~~Company (“Merger Sub”~~senior unsecured revolving credit facility on the Condensed Consolidated Balance Sheets. During the three and ~~together with~~six months ended June 30, 2016, the Company recorded net gain (loss) of $970 and $(66), respectively, in other comprehensive income (loss) from the ~~“Company Parties”), pursuant~~impact of exchange rates related to ~~which Gramercy~~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 and six months ended June 30, 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 ~~merged with and~~reclassified into ~~Merger Sub (the “Merger”), with Merger Sub continuing as~~earnings.

11. Shareholders’ Equity (Deficit)

The equity structure in the ~~surviving entity~~condensed consolidated financial statements following the reverse merger reflects the equity structure of the ~~Merger.~~

~~Pursuant to~~Company. As a result, the ~~terms and conditions~~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, at~~Agreement. As of June 30, 2016 and 2015, the ~~effective time~~Company’s authorized capital shares consist of ~~the Merger, each~~1,000,000,000 shares of beneficial interest, $0.01 par value per share, of ~~Gramercy common stock issued and outstanding immediately prior~~which the Company is authorized to ~~the effective time will be converted into the right~~issue up to ~~receive 3.1898 (the “Exchange Ratio”) validly issued, fully paid and nonassessable Company~~990,000,000 common shares of beneficial interest, par value $0.01 per share, ~~(the “Merger Consideration”). Additionally, each~~or common shares, and 10,000,000 preferred shares of beneficial interest, par value of $0.01, or preferred shares. As of June 30, 2016, 421,696,772 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 ~~Gramercy’s 7.125% Series B Cumulative Redeemable Preferred Stock (“~~3.1898.

During the three and six months ended June 2016, the Company’s common dividends are as follows:



Quarter Ended	Record Date	Payment Date	Common dividend per share
March 31, 2016	March 31, 2016	April 15, 2016	$	0.110
June 30, 2016	June 30, 2016	July 15, 2016	$	0.110

Gramercy ~~Preferred Stock”) issued~~Property Trust

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands, except share and

~~Table of Contents~~ per share data)

~~CHAMBERS STREET PROPERTIES~~June 30, 2016

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

~~(Unaudited)~~

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 ~~prior to~~common shares. Purchases under the ~~effective time~~program will be ~~converted into a right~~made from time to ~~receive one newly issued share~~time in the open market or in privately negotiated transactions. The timing, manner, price and amount of ~~7.125% Series A Cumulative Redeemable Preferred Shares of~~any repurchases will be determined by the Company ~~(“New~~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 and six months ended June 30, 2016, the Company ~~Preferred Shares”), having preferences, rights~~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 ~~privileges substantially identical to~~outstanding OP Units. The reverse stock split was effective after the ~~preferences, rights~~close of trading on March 20, 2015, and ~~privileges of~~ the ~~Gramercy Preferred Stock. Following the completion of the Merger, we will change our name to “Gramercy Property Trust” and it is anticipated that our~~Company’s common ~~shares will cease to trade under their current ticker but rather trade~~stock began trading on a reverse split-adjusted basis on the New York Stock Exchange ~~under~~on March 23, 2015.

Preferred Shares

At June 30, 2016, the ~~Gramercy ticker symbol “GPT”.~~

~~The Merger Agreement provides that, at the effective time~~Company has 3,500,000 of its Series A Preferred Shares outstanding with a mandatory liquidation preference of $25.00 per share. Holders of the ~~Merger, Gramercy’s stock options, restricted stock awards,~~Series A Preferred Shares are entitled to receive annual dividends of $1.78125 per share on a quarterly basis and restricted stock unit awards generally will convert into share options, restricted share awards, and restricted share unit awards of the Company, as applicable, with respect to a number of Company common shares, after giving effect to appropriate adjustments to reflect the consummation of the Merger.

The Company Parties and Gramercy each made certain customary representations, warranties and covenants in the Merger Agreement, including, among others, covenants by each party to conduct its business in all material respects in the ordinary course of business and use commercially reasonable efforts to preserve its business organization intact during the period between the execution of the Merger Agreement and the consummation of the Merger.

~~The parties’ obligations to consummate the Merger~~dividends are cumulative, subject to certain ~~mutual conditions, including, without limitation, (i)~~provisions. On or after August 15, 2019, the ~~approval~~Company can, at its option, redeem the Series A Preferred Shares at par for cash.

Equity Plan Activities

In June 2016, the Company instituted its 2016 Equity Incentive Plan, which was approved by the ~~holders~~Company’s board of ~~a majority of~~trustees and shareholders. The 2016 Equity Incentive Plan allows for the outstanding shares of Gramercy common stock entitled to vote on the adoption of the Merger Agreement at the special meeting of the Gramercy stockholders (the “Gramercy Stockholder Approval”), (ii) the approval by the holders of a majority of the Company common shares cast by the Company shareholders entitled to vote on the issuance of Company common shares in connection with the Merger at the annual meeting of the Company shareholders (the “Company Shareholder Approval”), (iii) the absence of any law, order or injunction prohibiting the Merger, (iv) the effectiveness of the registration statement on Form S-4following awards to be filed by the Company for purposes of registering the Company common shares issuable in connection with the Merger and (v) the approval for listing on the New York Stock Exchange of the Company common shares to be issued in the Merger, the New Company Preferred Shares and Company common shares into which Gramercy’s 3.75% Exchangeable Senior Notes due 2019 may be converted. In addition, each party’s obligation to consummate the Merger is subject to certain other conditions, including, without limitation, (w) the accuracy of the other party’s representations and warranties (subject to customary materiality qualifiers) and the absence of any material adverse effect (as such term is defined in the Merger Agreement) with respect to the other party, (x) the other party’s compliance with its covenants and agreements contained in the Merger Agreement (subject to customary materiality qualifiers), (y) the receipt of opinionsmade: (i) stock options that ~~the Merger will~~ qualify as ~~a reorganization within the meaning of~~incentive stock options under Section ~~368(a)~~422 of the Internal Revenue Code, (ii) stock options that do not qualify, (iii) stock appreciation rights, (iv) share awards, (v) restricted share units, and (vi) dividend equivalents and other equity awards, including LTIP Units. The aggregate number of ~~1986, as amended, and (z) the receipt of customary opinions as to the qualification~~common shares of the Company ~~Gramercy~~that may be issued or transferred under the 2016 Equity Incentive Plan is 12,000,000 shares, subject to adjustment in certain circumstances. The Company’s common shares that are issued or transferred under the 2016 Equity Plan may be authorized but unissued common shares of the Company or reacquired common shares of the Company, including common shares of the Company purchased by it on the open market for purposes of the 2016 Equity Incentive Plan. The 2016 Equity Incentive Plan became effective on June 23, 2016 and ~~certain subsidiaries~~will terminate on the day immediately preceding the tenth anniversary of ~~Gramercy~~its effective date, unless sooner terminated by the board of trustees. As of June 30, 2016, there were 12,000,000 shares available for grant under the 2016 Equity Incentive Plan.

Following the Merger until the adoption of the 2016 Equity Incentive Plan in June 2016, the Company’s active equity incentive plan, from which share awards were issued, was the Chambers equity incentive plan, or the 2013 Equity Incentive Plan. The 2013 Equity Incentive Plan allowed for the following awards to be made: (i) stock options that qualify as ~~REITs~~incentive stock options under Section 422 of the Internal Revenue ~~Code.~~

~~From the date of~~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. The Company’s 2004 Equity Incentive Plan, 2012 Inducement Plan, 2012 Outperformance Plan, and 2015 Equity Incentive Plan continued to exist following the Merger, ~~Agreement until the earlier of the effective time of the Merger~~however they became inactive and ~~the termination of the Merger Agreement in accordance with its terms, we and Gramercy agree not to (and~~thus no new share awards will ~~cause our respective subsidiaries and representatives not to) (i) solicit, initiate, knowingly encourage or facilitate any inquiries or the making~~be issued out of any proposal or offer with respect to a Competing Proposal (as defined in the Merger Agreement), (ii) engage in, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any other person information in connection with or for the purpose of encouraging or facilitating, a Competing Proposal, (iii) approve, authorize or execute or enter into any letter of intent, option agreement, agreement or agreement in principle with respect to a Competing Proposal or (iv) propose or agree to do any of the foregoing. However, these restrictions are subject to customary “fiduciary-out” provisions which allow either the Company or Gramercy under certain circumstances to provide information to and participate in discussions with third parties with respect to unsolicited alternative acquisition proposals that our Board of Trustees or Gramercy's Board of Directors (as applicable) has reasonably determined in good faith (after consultation with its outside legal counsel and independent financial advisors) is, or could reasonably be expected to lead to, a transaction more favorable to such party and its shareholders than the Merger and is reasonably likely to receive all required governmental approvals and financing on a timely basis and is otherwise capable of being completed on the terms proposed.

The Merger Agreement also contains certain termination rights for both the Company and Gramercy, including, but not limited to, if the Merger is not consummated on or before January 31, 2016 or if the Company Shareholder Approval or Gramercy Stockholder Approval are not obtained at the applicable stockholder meeting. The Merger Agreement further provides that, upon termination of the Merger Agreement under certain specified circumstances, including, but not limited to, termination of the Merger Agreement by the Company or Gramercy as a result of an adverse change in the recommendation of the Company Board or the Gramercy Board, as applicable, the Company may be required

~~Table of Contents~~

~~CHAMBERS STREET PROPERTIES~~

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

~~(Unaudited)~~

to pay to Gramercy a termination fee of $61,198,934, or Gramercy may be required to pay to the Company a termination fee of $43,505,889, in each case, in addition to reimbursing $20 million of expenses of the other party.those plans.

In connection with the ~~transaction with~~ adoption of the 2015 Equity Incentive Plan, seven senior officers were issued a total of 308,444 restricted shares in June 2015, 50.0% 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.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands, except share and per share data)

June 30, 2016

Through June 30, 2016, 2,908,116 restricted shares had been issued under the Company’s Equity Incentive Plans, of which 59.5% 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 $604 and $1,087 was recorded for the three and six months ended June 30, 2016, respectively, related to the issuance of restricted shares. Compensation expense of $253 and $498 was recorded for the three and six months ended June 30, 2015, respectively, related to the issuance of restricted shares. Compensation expense of $6,270 will be recorded over the course of the next 39 months representing the remaining weighted average vesting period of equity awards issued under the Equity Incentive Plans as of June 30, 2016. As of June 30, 2016 and December 31, 2015, the Company ~~filed~~had 979,166 and 684,199 weighted-average unvested restricted shares outstanding, respectively.

Compensation expense of $488 and $976 was recorded for the three and six months ended June 30, 2016, respectively, for the 2012 Outperformance Plan. Compensation expense of $488 and $976 was recorded for the three and six months ended June 30, 2015, respectively, for the 2012 Outperformance Plan. Compensation expense of $1,950 will be recorded over the course of the next 12 months, representing the remaining weighted average vesting period of the awards issued under the 2012 Outperformance Plan as of June 30, 2016.

Deferred Stock Compensation Plan for Directors

The Legacy Gramercy’s Directors’ Deferral Program terminated upon consummation of the Merger. 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.

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.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands, except share and per share data)

June 30, 2016

Earnings per share for the three and six months ended June 30, 2016 and 2015 are computed as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Numerator – Income (loss):
Net income (loss) from continuing operations	$	23,565		$	(607	)	$	17,872		$	(583	)
Net income from discontinued operations	58			120			4,698			58
Income (loss) before gains on disposals	23,623			(487		)	22,570			(525		)
Net gains on disposals	—			201			—			201
Gain on sale of European unconsolidated equity investment interests held with a related party	5,341			—			5,341			—
Net income (loss)	28,964			(286		)	27,911			(324		)
Net (income) loss attributable to noncontrolling interest	(51		)	21			69			63
Nonforfeitable dividends allocated to unvested restricted shareholders	(201		)	—			(400		)	—
Preferred share dividends	(1,558		)	(1,558		)	(3,117		)	(3,117		)
Net income (loss) available to vested common shares outstanding	$	27,154		$	(1,823	)	$	24,463		$	(3,378	)
Denominator – Weighted average shares ⁽¹⁾:
Weighted average basic shares outstanding	422,330,927			177,393,521			421,994,655			163,332,554
Effect of dilutive securities:
Unvested share based payment awards	1,813,391			—			1,813,391			—
Options	43,618			—			31,176			—
Shares related to OP Units	1,208,309			—			1,291,305			—
Exchangeable Senior Notes	2,146,360			—			1,135,244			—
Diluted Shares	427,542,605			177,393,521			426,265,771			163,332,554


(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 and six months ended June 30, 2016 was above the exchange price of $7.54 for the periods and the Company had net income available to vested common shares outstanding during the periods, therefore, the potential dilutive effect of the excess conversion premium was included in the calculation of diluted earnings per share for the three and six months ended June 30, 2016. The weighted average price of the Company’s common shares for the three and six months ended June 30, 2015 was above the exchange price of $7.76 for the periods, however due to the net loss available to vested common shares outstanding during the periods, the excess conversion premium was excluded from the calculation of earnings per share for the three and six months ended June 30, 2015.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands, except share and per share data)

June 30, 2016

For the three months ended June 30, 2015, the Company excluded from its number of diluted shares used for EPS 48,051 share options, 2,209,912 unvested share based payment awards, 493,124 phantom share units, 1,548,246 OP Units, and 1,107,809 Exchangeable Senior Notes, because, due to the net loss from continuing operations excluding amounts attributable to noncontrolling interest and adjusted for preferred dividends declared during the period, these shares were anti-dilutive during the period. For the six months ended June 30, 2015, the Company excluded from its number of diluted shares used for EPS 49,062 share options, 2,198,126 unvested share based payment awards, 493,124 phantom share units, 1,624,396 OP Units, and 1,425,092 Exchangeable Senior Notes, because, due to the net loss from continuing operations excluding amounts attributable to noncontrolling interest and adjusted for preferred dividends declared during the period, these shares were anti-dilutive during the period. For the three and six months ended June 30, 2015, the Company excluded unvested restricted share awards of 544,288 and 532,502, respectively, 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 June 30, 2016 and December 31, 2015 is comprised of the following:



	June 30, 2016			December 31, 2015
Net unrealized loss on derivative securities	$	(39,723	)	$	(6,074	)
Net unrealized gain on debt instruments	1,977			1,010
Foreign currency translation adjustments:
Gain (loss) on non-derivative net investment hedge⁽¹⁾	(52		)	14
Other foreign currency translation adjustments	(3,157		)	(656		)
Reclassification of accumulated foreign currency translation adjustments due to disposal	(3,737		)	—
Reclassification of swap gain (loss) into interest expense	586			(45		)
Total accumulated other comprehensive loss	$	(44,106	)	$	(5,751	)


(1)	The foreign currency translation adjustment associated with the Company’s non-derivative net investment hedge related to its equity investment in 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 the Company’s Operating Partnership, or OP Units, not held by the Company as well as third-party equity interests in the Company’s other consolidated subsidiaries. OP Units are able to be redeemed at the election of the holder for cash equal to the then fair market value of one of the Company’s common shares, par value $0.01 per share, except that the Company may, at its election, acquire each OP Unit for one of its common shares. The 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 the Operating Partnership. The OP Unit holders do not have voting rights; however, they are entitled to receive dividends. The OP Unit redemption rights are outside of the Company’s control, and thus the 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 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 OP Units.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands, except share and per share data)

June 30, 2016

In April 2016, each of the outstanding common units of limited partnership interest not held by the Company or its subsidiaries, which represented interests in Legacy Gramercy’s operating partnership and were redeemable for 3.1898 of the Company’s common shares following the Merger, were exchanged for 3.1898 OP units, which are each redeemable for one of the Company’s common shares as described above. All references to OP Units in the Company’s Condensed Consolidated Financial Statements refer to common units of limited partnership interest in Legacy Gramercy’s operating partnership prior to the exchange and to common units of limited partnership interest in GPT Operating Partnership LP following the exchange, and reflect the updated exchange ratio of one OP Unit redeemable for one of the Company’s common shares.

As of June 30, 2016, the noncontrolling interest unit holders owned 1,145,220 OP Units, which can be redeemed for 1,145,220 of the Company’s common shares. The outstanding OP Units as of June 30, 2016 represent an interest of approximately 0.27% in the Company. During the six months ended June 30, 2016 and the year ended December 31, 2015, 265,689 and 453,129 OP Units, respectively, were converted into common shares of the Company. At June 30, 2016, 1,145,220 common shares of the Company were reserved for issuance upon redemption of OP Units.

OP Units are recorded at the greater of cost basis or fair market value based on ~~Form S-4~~the closing share price of the Company’s common shares at the end of the reporting period. As of June 30, 2016, the value of the OP units was $10,559. The Company attributes a portion of its net income (loss) during each reporting period to noncontrolling interest based on the percentage ownership of OP Unit holders relative to the Company’s total outstanding common shares and OP Units. The Company recognizes changes in fair value in the 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 OP Units.

Below is the rollforward of the activity relating to the noncontrolling interests in the Operating Partnership as of June 30, 2016:



	Noncontrolling Interest
Balance as of December 31, 2015	$	10,892
Issuance of noncontrolling interests in the Company’s Operating Partnership	—
Redemption of noncontrolling interests in the Company’s Operating Partnership	(2,204		)
Net loss attribution	70
Fair value adjustments	2,159
Dividends	(358		)
Balance as of June 30, 2016	$	10,559

Interests in Other Operating Partnerships

In connection with the ~~SEC containing~~Company’s December 2014 investment in the Gramercy European Property Fund, the Company acquired a ~~preliminary joint proxy statement~~50.0% equity interest in European Fund Manager, which provides investment and asset management services to the Gramercy European Property Fund. European Fund Manager is a VIE of the Company and ~~Gramercy that also constituted a preliminary prospectus~~is consolidated into its Condensed Consolidated Financial Statements. Refer to Note 2 for further discussion of the VIE and consolidation considerations.

As of June 30, 2016 and December 31, 2015, the value of the Company’s interest in European Fund Manager was $(394) 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.

13. Commitments and Contingencies

Funding Commitments

The Company is obligated to fund the development of Proportion Foods, a build-to-suit property in Round Rock, Texas, which ~~was declared effective~~is a consolidated VIE, and upon substantial completion of the development to acquire the property through

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands, except share and per share data)

June 30, 2016

a forward purchase contract. The Company’s remaining future commitment for the property at June 30, 2016 is approximately $20,182.

As of June 30, 2016, the Company has funded $55,892 (€50,000) to the Gramercy European Property Fund, representing its total funding commitment to the Gramercy European Property Fund. As of December 31, 2015, the Company had funded $25,663 (€23,160) to the Gramercy European Property Fund. See Note 5, “Unconsolidated Equity Investments,” for further information on ~~October 27, 2015. On October 30,~~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, ~~Gramercy~~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 ~~mailed~~will establish accruals for litigation and claims when a loss contingency is considered probable and the ~~definitive proxy statement/prospectus~~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 ~~stockholders~~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, ~~and shareholders~~its board of ~~the Company.~~

~~Litigation—Gramercy, the Company,~~directors, Chambers and/or Merger Sub ~~and/or the members of the Gramercy Board~~ are named as defendants in two pending putative class action ~~and/or shareholder derivative~~ lawsuits brought by purported ~~holders of~~Legacy Gramercy ~~common stock~~stockholders challenging the Merger. ~~One is pending~~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 ~~and one is pending~~(the “New York Action”). In addition, four suits that were separately filed in ~~the~~ Circuit Court for Baltimore City, Maryland, captioned ~~Morris~~ (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-15-004972. The New York case is a consolidation of two earlier-filed actions, originally captioned~~ ~~Berliner~~ v. ~~Gramercy Property Trust~~, ~~et al.,~~ ~~Index No. 652424/2015 and~~ ~~Gensler~~ v. ~~Baum, et al.,~~ ~~Index No. 157432/2015. The Maryland case is a consolidation of four earlier-filed actions, originally captioned~~ ~~Jobin~~ v. ~~DuGan, et al.,~~ ~~Case No. 24-C-15-003942;~~ ~~Vojik~~ v. ~~Gramercy Property Trust, et al., Case No. 24-C-15-004412;~~ 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.~~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 ~~pending~~ 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 ~~Company,~~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. ~~They also allege that there were material misstatements and omissions~~The amended complaint in the ~~preliminary joint proxy statement/prospectus~~Morris consolidated action also asserts derivative claims on ~~Form S-4 that was filed with~~behalf of Legacy Gramercy for breach of fiduciary duty against the ~~SEC on September 11, 2015.~~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,~~On December 7, 2015, the ~~Company, and members~~parties to the Actions entered into a Memorandum of Understanding (the “MOU”), which provides for the settlement of the ~~Company Board~~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.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands, except share and per share data)

June 30, 2016

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 notice to Legacy Gramercy stockholders. In the 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 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 connection therewith, pursuant to terms that will be set forth in the 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 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 ~~named as defendants in~~not satisfied, the settlement may be terminated.

On October 1, 2015, a putative class action lawsuit ~~brought by a purported holder of Company common shares challenging the Merger. The action~~ was filed in the Superior Court of New Jersey, Law Division, Mercer County ~~on October 1, 2015,~~by a purported shareholder of Chambers. The action, captioned Elstein v. Chambers Street Properties et al., Docket No. ~~L-002254-15.~~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 ~~the Company~~Chambers breached their fiduciary duties to ~~Company~~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. ItThe complaint also alleges that ~~there were material misstatements and omissions in~~ the preliminary joint proxy statement/prospectus ~~on Form S-4 that~~ was ~~filed with the SEC on September 11, 2015.~~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 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. On July 1, 2016 the court issued a final order approving the settlement.

The ~~Company believes~~defendants believe the lawsuits are without merit.

~~Environmental Matters—We are not aware~~In December 2010, the Company sold its 45.0% joint venture interest in the leased fee 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~~the 2 Herald Square property in New York, New York, for approximately $25,600 plus assumed mortgage debt of approximately $86,100, or the ~~recording~~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.

In September 2013, the Company filed a ~~loss contingency.~~

~~14. Segment Disclosure~~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.

~~We view our consolidated property operations as two reportable segments: Industrial Properties~~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 ~~Office Properties.~~ruled that the Company is liable for the NYC DOF Transfer Tax Assessment. In ~~addition, we had one non-reportable segment, which~~July 2015, the Company appealed the adverse decision of the NYC Tribunal. In July 2016, the Company’s appeal of the adverse NYC Tribunal decision was ~~Retail Properties. However, during~~denied. The Company has until November 2016 to elect to file a further appeal of the ~~third quarter ended September~~adverse NYC Tribunal decision.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands, except share and per share data)

June 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.2016

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)~~

In June 2016, the NY State Division of Tax Appeals ruled in the Company’s favor in connection with the NYS DOT Transfer Tax Assessment. The ~~following table compares~~Company anticipates that the ~~net operating income~~NYC DOF will appeal this adverse ruling and that the matter will be set for trial by late 2016 or early 2017.

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 no additional interest recorded for the matter for the three and ~~nine~~six months ended ~~September~~June 30, 2016. There was $$0 and $68 of additional interest recorded in discontinued operations for the matter for the three and six months ended June 30, 2015, respectively.

In connection with the Company’s property acquisitions and ~~2014 (in thousands):~~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 of June 30, 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, Chicago, Illinois, Dallas, Texas and London, United Kingdom. Additionally, in April 2016, the Company entered into a lease for a new corporate office location at 90 Park Avenue, New York, New York. The Company will relocate to the new office upon completion of improvements to the space, which is projected to be in the fourth quarter of 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 Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
Industrial Properties
Revenues:
Rental $ 18,493
$ 15,116
$ 55,448
$ 43,241
Tenant Reimbursements 4,787
3,997
14,667
11,967
Other Property Income 1,072
537
1,520
537
Total Revenues 24,352
19,650
71,635
55,745
Property and Related Expenses:
Property Operating 1,345
1,355
4,576
4,061
Real Estate Taxes 3,758
3,370
11,474
10,100
Total Property and Related Expenses 5,103
4,725
16,050
14,161
Net Operating Income $ 19,249
$ 14,925
$ 55,585
$ 41,584
Office Properties
Revenues:
Rental $ 36,422
$ 37,022
$ 110,572
$ 110,737
Tenant Reimbursements 10,859
11,243
32,250
33,019
Other Property Income —
—
—
1,069
Total Revenues 47,281
48,265
142,822
144,825
Property and Related Expenses:
Property Operating 7,143
7,615
21,828
22,714
Real Estate Taxes 6,936
6,692
20,576
20,228
Total Property and Related Expenses 14,079
14,307
42,404
42,942
Net Operating Income $ 33,202
$ 33,958
$ 100,418
$ 101,883
Non-Reportable Properties
Revenues:
Rental $ —
$ 253
$ —
$ 2,322
Tenant Reimbursements —
(21 ) —
48
Total Revenues —
232
—
2,370
Property and Related Expenses:
Property Operating —
8
—
148
Real Estate Taxes —
—
—
—
Total Property and Related Expenses —
8
—
148
Net Operating Income $ —
$ 224
$ —
$ 2,222



	Ground Leases - Operating		Ground Leases - Capital		Total
July 1 to December 31, 2016	$	889	$	—	$	889
2017	1,728		—		1,728
2018	1,731		—		1,731
2019	1,740		—		1,740
2020	1,732		—		1,732
Thereafter	48,062		329		48,391
Total minimum rent expense	$	55,882	$	329	$	56,211

The Company incurred rent expense on ground leases of $492 and $943 during the three and six months ended June 30, 2016, respectively. The Company incurred rent expense on ground leases of $394 and $778 during the three and six months ended June 30, 2015, respectively.

~~Table of Contents~~Gramercy Property Trust

~~CHAMBERS STREET PROPERTIES~~Notes to Condensed Consolidated Financial Statements

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~(Unaudited, amounts in thousands, except share and per share data)

~~(Unaudited)~~June 30, 2016

14. Income Taxes

Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
Reconciliation to Consolidated Net Income
Total Segment Net Operating Income $ 52,451
$ 49,107
$ 156,003
$ 145,689
Expenses:
General and Administrative 9,935
7,230
31,505
20,047
Acquisition-Related —
265
—
555
Depreciation and Amortization 28,489
27,208
84,342
81,572
Total Expenses 38,424
34,703
115,847
102,174
Income Before Other (Expenses) Income 14,027
14,404
40,156
43,515
Other Expenses and Income
Interest and Other Income 52
255
144
573
Interest Expense (12,352 ) (13,685 ) (38,397 ) (41,653 )
Interest Expense and Net Change in Fair Value of Non-Qualifying Derivative Financial Instruments 23
68
66
80
Gain on Sale of Real Estate —
13,175
5,844
13,175
Income Before Provision for Income Taxes and Equity in Income of Unconsolidated Entities 1,750
14,217
7,813
15,690
Benefit (Provision) for Income Taxes 42
(140 ) (521 ) (579 )
Equity in Income of Unconsolidated Entities 4,238
4,391
14,419
11,829
Net Income $ 6,030
$ 18,468
$ 21,711
$ 26,940
The Company has elected to be taxed as a REIT, and as such, generally will not be subject to U.S. federal income tax on taxable income that it distributes to its stockholders in accordance with REIT requirements. If the Company fails to qualify as a REIT in any taxable year, it will then be subject to U.S. federal income taxes until it is able to qualify for REIT status again, 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. Additionally, the Company’s TRSs are subject to federal, state and local taxes. The Company’s asset and property management business, Gramercy Asset Management, partially 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 and six months ended June 30, 2016 the Company recorded $2,700 and $3,403 of income tax expense, respectively. For the three and six months ended June 30, 2015, the Company recorded $17 and $1,131 of income tax expense, respectively. Tax expense for the three and six months ended June 30, 2016 and 2015 in continuing operations is comprised of federal, state and local taxes primarily attributable to Gramercy Asset Management.

To the extent the Company incurs any interest or penalties on its material uncertain tax positions, these amounts will be recognized in the financial statements as interest expense and operating expense, respectively. As of June 30, 2016 and December 31, 2015, the Company did not incur any material interest or penalties.

15. Segment Reporting

As of June 30, 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:

September 30, December 31,
Assets 2015 2014
Industrial Properties $ 885,496
$ 916,038
Office Properties 1,442,978
1,504,285
Non-Segment Assets⁽¹⁾
417,816
449,485
Total Assets $ 2,746,290
$ 2,869,808



	Asset Management			Investments / Corporate			Total Company
Three Months Ended June 30, 2016
Total revenues	$	18,423		$	121,002		$	139,425
Equity in net loss from unconsolidated equity investments	—			(168		)	(168		)
Total operating and interest expense⁽¹⁾	(8,523		)	(107,169		)	(115,692		)
Net income from continuing operations	$	9,900		$	13,665		$	23,565

~~_________~~



	Asset Management			Investments / Corporate			Total Company
Three Months Ended June 30, 2015
Total revenues	$	4,228		$	49,919		$	54,147
Equity in net loss from unconsolidated equity investments	—			123			123
Total operating and interest expense⁽¹⁾	(4,820		)	(50,057		)	(54,877		)
Net income (loss) from continuing operations	$	(592	)	$	(15	)	$	(607	)



	Asset Management			Investments / Corporate			Total Company
Six Months Ended June 30, 2016
Total revenues	$	23,574		$	236,396		$	259,970
Equity in net loss from unconsolidated equity investments	—			(2,923		)	(2,923		)
Total operating and interest expense⁽¹⁾	(13,982		)	(225,193		)	(239,175		)
Net income from continuing operations	$	9,592		$	8,280		$	17,872



	Asset Management			Investments / Corporate			Total Company
Six Months Ended June 30, 2015
Total revenues	$	12,408		$	89,674		$	102,082
Equity in net loss from unconsolidated equity investments	—			122			122
Total operating and interest expense⁽¹⁾	(11,358		)	(91,429		)	(102,787		)
Net income (loss) from continuing operations	$	1,050		$	(1,633	)	$	(583	)



	Asset Management		Investments / Corporate		Total Company
Total Assets:
June 30, 2016	$	23,711	$	5,386,516	$	5,410,227
December 31, 2015	$	5,882	$	5,828,636	$	5,834,518

(1)

~~Non-segment~~Total operating and interest expense includes operating costs on commercial property assets ~~primarily include our investments~~for the Investments/Corporate segment and costs to perform required functions under the management agreement for the Asset Management segment. Depreciation and amortization of $60,538 and $24,716 and provision for taxes of $2,700 and $17 for the three months ended June 30, 2016 and 2015, respectively, are included in ~~unconsolidated entities.~~the amounts presented above. Depreciation and amortization of $118,786 and $43,414 and provision for taxes of $3,403 and $1,131 for the six months ended June 30, 2016 and 2015, respectively, are included in the amounts presented above.

~~Table of Contents~~Gramercy Property Trust

~~CHAMBERS STREET PROPERTIES~~Notes to Condensed Consolidated Financial Statements

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(Continued)~~(Unaudited, amounts in thousands, except share and per share data)

~~(Unaudited)~~June 30, 2016

~~15. Earnings per Share~~16. Supplemental Cash Flow Information

The following table ~~reconciles the numerator and denominator in computing the Company's basic and diluted per-share computations for net income~~represents supplemental cash flow disclosures for the three and ~~nine~~six months ended ~~September~~June 30, ~~2015~~2016 and ~~2014 (in~~2015:



	Six Months Ended June 30,
	2016			2015
Supplemental cash flow disclosures:
Interest paid	$	40,639		$	11,820
Income taxes paid	743			1,065
Proceeds from 1031 exchanges from sale of real estate	270,429			8,619
Use of funds from 1031 exchanges for acquisitions of real estate	(227,521		)	(5,050		)
Non-cash activity:
Fair value adjustment to noncontrolling interest in the operating partnership	$	2,159		$	(1,490	)
Debt assumed in acquisition of real estate	45,958			141,033
Debt transferred in disposition of real estate	(101,432		)	—
Redemption of units of noncontrolling interest in the operating partnership for common shares	(2,204		)	(3,127		)
Distribution of real estate assets from unconsolidated equity investment	263,015			—
Non-cash activities recognized in other comprehensive income:
Change in net unrealized loss on securities available for sale	$	967		$	5,761
Deferred losses and other non-cash activity related to derivatives	(33,649		)	(664		)
Non-cash effect of foreign currency translation adjustments	(2,567		)	51

17. Subsequent Events

In July 2016, the Duke JV sold its remaining property and completed its planned dissolution. As part of the property sale and dissolution, the Company received a final distribution of $41,060 from the Duke JV.

In July 2016, the Company closed on the acquisition of three salvage yard industrial properties which comprise an aggregate 60.26 acres of land and were acquired for an aggregate purchase price of approximately $9,531. The properties are 100.0% leased with lease terms ending between August 2026 and August 2031. Additionally in July 2016, the Company closed on the acquisition of an industrial property which comprises 213,117 square feet, was acquired for a purchase price of approximately $17,750, and is 100.0% leased to three tenants with lease terms ending between December 2021 and November 2022.

In July 2016, the Company’s board of trustees approved the establishment of an “at-the-market” equity issuance program, or ATM, pursuant to which the Company may offer and sell common shares, with an aggregate gross sales price of up to $400,000. The Company expects to file a prospectus supplement to its currently effective registration statement with the SEC during the third quarter.


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

(Unaudited, amounts in thousands, except share ~~data):~~

Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
Numerator:
Net Income $ 6,030
$ 18,468
$ 21,711
$ 26,940
Allocation to Participating Securities (Nonvested Restricted Shares and Vested RSUs) (36 ) (101 ) (116 ) (353 )
Numerator for Basic and Diluted Net Income $ 5,994
$ 18,367
$ 21,595
$ 26,587
Denominator:

Basic Weighted Average Shares Outstanding 236,902,841
236,954,218
236,915,614
236,847,551
Effect of Dilutive Securities - Non-Vested Time-Based RSUs and PSUs 10,453
—
35,923
—
Diluted Weighted Average Shares Outstanding 236,913,294
236,954,218
236,951,537
236,847,551
Basic and Diluted Earnings Per Share:
Net Income per Share $ 0.03
$ 0.08
$ 0.09
$ 0.11

~~Share-based payment awards that contain non-forfeitable rights to dividend or dividend equivalents are considered participating securities~~ and ~~are considered in our basic earnings~~ per share ~~calculation. The impact~~data)

Overview

Gramercy Property Trust, or the Company or Gramercy, a Maryland real estate investment trust, or REIT, is a leading global investor and asset manager of ~~potentially dilutive common shares, including both Time-Based RSUs~~commercial real estate. We specialize in acquiring and ~~PSUs, are considered~~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 ~~diluted earnings per share calculation. We did not include~~unconsolidated equity investments in the ~~PSUs in our calculation of diluted earnings per share for the three months ended September 30, 2015 as they would be anti-dilutive.~~

~~16. Subsequent Events~~

United States, Europe, and Asia.

On ~~October 20,~~December 17, 2015, ~~our Board of Trustees approved~~Chambers Street Properties, or Chambers, a ~~monthly distribution of $0.0425 per common share for the month of November 2015 payable on December 8, 2015 to all shareholders of record on November 30, 2015.~~

~~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"Maryland REIT, completed a merger, 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;~~

~~the use of the proceeds of any offerings of securities; and~~

~~our proposed transaction~~Merger, with Gramercy Property Trust Inc. ~~("Gramercy").~~

~~The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available~~, or Legacy Gramercy, a Maryland corporation, pursuant 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 all of~~ which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. You should carefully consider these risks before you make an investment decision with respect to ourLegacy 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:~~Gramercy Property Trust and began trading on the New York Stock Exchange, or NYSE, using the “GPT” stock symbol. Legacy Gramercy’s executive management team manages the combined company.

~~general volatility~~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 ~~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 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);~~

~~Table of Contents~~

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

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

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

~~the actual outcome~~Merger on December 17, 2015 reflects results of the ~~resolution~~combined company, and financial information prior to the close of ~~any conflict;~~the Merger reflects Legacy Gramercy results. For this reason, period to period comparisons may not be meaningful.

~~material adverse actions or omissions by any~~During the three months ended June 30, 2016, we acquired 22 properties aggregating 3,857,982 square feet for a total purchase price of $296,059. During the six months ended June 30, 2016, we acquired 25 properties aggregating 8,669,258 square feet for a total purchase price of $348,809. Additionally, on June 30, 2016, we received 100.0% ownership of seven properties from our joint venture ~~partners;~~

~~our ability to operate as~~with Duke Realty through a ~~self-managed company;~~

~~availability~~distribution of ~~and ability to retain our 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")~~assets by the joint venture, which have an aggregate 4,189,630 square feet and total fair value of $276,100.

During the three months ended June 30, 2016, we sold four properties aggregating 539,805 square feet 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~~total gross proceeds of $116,200. During the ~~real estate business;~~

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

~~our ability to obtain the required shareholder approval required to consummate the merger with Gramercy and the timing and closing~~six months ended June 30, 2016, we sold 10 properties aggregating 2,634,999 square feet for total gross proceeds of ~~such merger, including the risks that a condition to closing would not be satisfied or that the closing of such merger will not occur;~~

~~the outcome of any legal proceedings that may be instituted against us and others related to the merger with Gramercy; and~~

~~other factors discussed under Item 1A "Risk Factors"~~$647,700. Additionally, on June 30, 2016, we sold 74.9% of our ~~Annual Report on Form 10-K for the year ended December 31, 2014 and those factors that may be contained~~80.0% interest in ~~any filing we make~~our European joint venture with the ~~Securities and Exchange Commission (the "SEC"),~~Goodman Group to our unconsolidated equity investment in Europe, the Gramercy European Property Fund, for gross proceeds of $148,884 (€134,336).

As of June 30, 2016, our asset management business, which operates under the name Gramercy Asset Management, managed approximately $1,100,000 of commercial properties for third parties, including ~~Part II, Item 1A~~approximately $837,000 of ~~Form 10-Qs.~~assets in Europe.

~~Except as required by law,~~As of June 30, 2016, we ~~undertake no obligation to publicly update~~owned interests (either directly or ~~revise any forward-looking statements, whether as a result~~in an unconsolidated equity investment) in 327 properties containing an aggregate of ~~future events, new information or otherwise. For a further discussion~~approximately 65,240,943 rentable square feet.

As of ~~these and other factors that could impact~~June 30, 2016, our ~~future results, performance or transactions, see Item1A. "Risk Factors"~~wholly-owned portfolio 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 our day-to-day operations, with certain services provided by third parties. All of our real estate investments are held directly by, or indirectly through wholly-owned subsidiaries of CSP OP of which we are the 100% direct and indirect owner and sole general partner. is summarized as follows:



Properties	Number of Properties	Rentable Square Feet	Occupancy
Industrial	172	42,216,785	98.9	%
Office	108	9,539,561	98.2	%
Specialty retail	9	1,187,258	100.0	%
Total	289	52,943,604	98.8	%

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. On July 1, 2015, we entered into an Agreement~~business through various wholly-owned entities and ~~Plan of Merger with Gramercy, which agreement is further discussed below.~~

~~As of September 30, 2015, we owned, on~~our realty management business through a consolidated basis, 100 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 24.9 million rentable square feet. Our consolidated properties were approximately 97.6% leased (based upon rentable square feet) as of September 30, 2015. As of September 30, 2015, 76 of our consolidated properties were net leased to single tenants, which encompassed approximately 20.2 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

~~Table of Contents~~

Kingdom) encompassing approximately 12.3 million rentable square feet. Our unconsolidated properties were approximately 99.9% leased (based upon rentable square feet) as of September 30, 2015. As of September 30, 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 ~~the "Company," "we," "our"~~“Company,” “Gramercy,” “we,” “our,” and "us" refer to the activities of and the assets and liabilities 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 CB Richard Ellis Strategic Partners Asia II-A, L.P. ("CBRE Strategic Partners Asia").

~~Proposed Merger Transaction with Gramercy~~

~~On July 1, 2015, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with~~“us” mean Legacy Gramercy and ~~Columbus Merger Sub, LLC, a Maryland limited liability company and a direct~~one or ~~indirect wholly owned subsidiary~~more of our subsidiaries for the Company (“Merger Sub” and together with the Company, the “Company Parties”), pursuant to which Gramercy will be merged with and into Merger Sub (the “Merger”), with Merger Sub continuing as the surviving entity of the Merger.

~~Pursuant to the terms and conditions in the Merger Agreement, at the effective time of the Merger, each share of Gramercy common stock issued and outstanding immediately~~period prior to the ~~effective time will be converted into the right to receive 3.1898 (the “Exchange Ratio”) validly issued, fully paid~~Merger closing and ~~nonassessable Company common shares~~Gramercy Property Trust and one or more of beneficial interest, par value $0.01 per share (the “Merger Consideration”). Additionally, each share of Gramercy’s 7.125% Series B Cumulative Redeemable Preferred Stock (“Gramercy Preferred Stock”) issued and outstanding prior to the effective time will be converted into a right to receive one newly issued share of 7.125% Series A Cumulative Redeemable Preferred Shares of the Company (“New Company Preferred Shares”), having preferences, rights and privileges substantially identical to the preferences, rights and privileges of the Gramercy Preferred Stock. Following the completion ofour subsidiaries for periods following the Merger ~~we will change our name to “Gramercy~~ closing.

Property ~~Trust” and it is anticipated that our common shares will cease to trade under their current ticker but rather trade on the New York Stock Exchange under the Gramercy ticker symbol “GPT”.~~Portfolio

The Merger Agreement provides that, at the effective time of the Merger, Gramercy’s stock options, restricted stock awards, and restricted stock unit awards generally will convert into share options, restricted share awards, and restricted share unit awards of the Company, as applicable, with respect to a number of Company common shares, after giving effect to appropriate adjustments to reflect the consummation of the Merger.

The Company Parties and Gramercy each made certain customary representations, warranties and covenants in the Merger Agreement, including, among others, covenants by each party to conduct its business in all material respects in the ordinary course of business and use commercially reasonable efforts to preserve its business organization intactProperty acquisitions during the ~~period between the execution of the Merger Agreement and the consummation of the Merger.~~

The parties’ obligations to consummate the Merger are subject to certain mutual conditions, including, without limitation, (i) the approval by the holders of a majority of the outstanding shares of Gramercy common stock entitled to vote on the adoption of the Merger Agreement at the special meeting of the Gramercy stockholders (the “Gramercy Stockholder Approval”), (ii) the approval by the holders of a majority of the Company common shares cast by the Company shareholders entitled to vote on the issuance of Company common shares in connection with the Merger at the annual meeting of Company shareholders (the “Company Shareholder Approval”), (iii) the absence of any law, order or injunction prohibiting the Merger, (iv) the effectiveness of the registration statement on Form S-4 to be filed by the Company for purposes of registering the Company common shares issuable in connection with the Merger and (v) the approval for listing on the New York Stock Exchange of the Company common shares to be issued in the Merger, the New Company Preferred Shares and Company common shares into which Gramercy’s 3.75% Exchangeable Senior Notes due 2019 may be converted. In addition, each party’s obligation to consummate the Merger is subject to certain other conditions, including, without limitation, (w) the accuracy of the other party’s representations and warranties (subject to customary materiality qualifiers) and the absence of any material adverse effect (as such term is defined in the Merger Agreement) with respect to the other party, (x) the other party’s compliance with its covenants and agreements contained in the Merger Agreement (subject to customary materiality qualifiers), (y) the receipt of opinions that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986 (the "Internal Revenue Code"), as amended, and (z) the receipt of customary opinions as to the qualification of the Company, Gramercy and certain subsidiaries of Gramercy as REITs under the Internal Revenue Code.

From the date of the Merger Agreement until the earlier of the effective time of the Merger and the termination of the Merger Agreement in accordance with its terms, we and Gramercy agree not to (and will cause our respective subsidiaries and representatives not to) (i) solicit, initiate, knowingly encourage or facilitate any inquiries or the making of any proposal or offer with respect to a Competing Proposal (as defined in the Merger Agreement), (ii) engage in, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any other

~~Table of Contents~~

person information in connection with or for the purpose of encouraging or facilitating, a Competing Proposal, (iii) approve, authorize or execute or enter into any letter of intent, option agreement, agreement or agreement in principle with respect to a Competing Proposal or (iv) propose or agree to do any of the foregoing. However, these restrictions are subject to customary “fiduciary-out” provisions which allow either the Company or Gramercy under certain circumstances to provide information to and participate in discussions with third parties with respect to unsolicited alternative acquisition proposals that our Board of Trustees or Gramercy's Board of Directors (as applicable) has reasonably determined in good faith (after consultation with its outside legal counsel and independent financial advisors) is, or could reasonably be expected to lead to, a transaction more favorable to such party and its shareholders than the Merger and is reasonably likely to receive all required governmental approvals and financing on a timely basis and is otherwise capable of being completed on the terms proposed.

This description of certain terms of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is filed as an exhibit to a Current Report on Form 8-K which was filed on July 1, 2015.

~~Additional Information And Where to Find It~~

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the transaction with Gramercy, the Company has filed with the SEC a registration statement on Form S-4 that includes a definitive joint proxy statement of the Company and Gramercy that also constitutes a definitive prospectus of the Company. On October 30, 2015, Gramercy and the Company mailed the definitive proxy statement/prospectus to stockholders of Gramercy and shareholders of the Company. This material is not a substitute for the joint proxy statement/prospectus or registration statement or for any other document that Gramercy or the Company may file with the SEC and send to Gramercy’s stockholders and/or the Company’s shareholders in connection with the proposed transactions. INVESTORS AND SECURITY HOLDERS OF GRAMERCY AND THE COMPANY ARE URGED TO READ THE DEFINITIVE PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION.

Investors and security holders are able to obtain free copies of the definitive proxy statement/prospectus and other documents filed with the SEC by Gramercy or the Company through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by Gramercy are also available free of charge on Gramercy’s website at www.gptreit.com, or by contacting Gramercy’s Investor Relations Department at (212) 297-1000. Copies of the documents filed with the SEC by the Company are also available free of charge on the Company’s website at www.chambersstreet.com or by contacting the Company’s Investor Relations Department at (609) 806-2682.

Gramercy, the Company, their respective directors/trustees and certain of their respective executive officers may be considered participants in the solicitation of proxies with respect to the proposed transactions under the rules of the SEC. Information about the directors and executive officers of Gramercy is set forth in its Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the SEC on March 9, 2015, its proxy statement for its 2015 annual meeting of stockholders, which was filed with the SEC on May 11, 2015, and other filings filed with the SEC. Information about the trustees and executive officers of the Company is set forth in its Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the SEC on March 2, 2015, the amendments thereto on Form 10-K/A, which were filed with the SEC on March 30, 2015 and April 30, 2015, and other filings filed with the SEC. These documents can be obtained free of charge from the sources indicated above. Additional information regarding the participants in the proxy solicitations and a description of their direct and indirect interests, by security holdings or otherwise, is also included in the proxy statement and other relevant materials filed with the SEC.

~~Business Strategy~~

We focus on investing in industrial and office properties that are primarily net leased to investment grade or creditworthy tenants on long-term leases through acquisitions of existing properties or build-to-suit projects. We believe the credit quality of many of our tenants, 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

~~Table of Contents~~

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, subject to the restrictions contained in the Merger Agreement:

~~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 nine months ended~~September 30, 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 nine months ended~~September 30, 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/Hulfish, LLC joint venture (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. In addition, we sold two wholly-owned properties for approximately $57.3 million with a gain of of approximately $5.8 million, after closing and other transaction related costs.

~~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 nine months endedSeptember 30, 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 its maturity date of August 1, 2015.~~

~~On June 3, 2015, we paid off the note payable secured by Lakeside Office Center in the amount of approximately $8.6 million prior to its maturity date of September 1, 2015.~~

~~On September 2, 2015, we paid off nine notes payable secured by their respective properties in the amount of approximately $84.0 million prior to their maturity dates of December 1, 2015.~~

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

Overall economic conditions, leasing activity and real estate capital availability all remain positive. 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 has been improving with recovering employment, particularly in the tech sector, and more recently broadening across other sectors including business and financial services, and healthcare. Whereas industrial and office leasing activity over the past few years was initially weighted toward large corporate tenants, starting in 2013, it has trended towards normalization in many markets 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 remains broadly available. Rents have generally continued to grow and vacancies are trending downward. We continue to see suitable investments with shorter duration lease terms. E-commerce sales growth has been strong and continues to be a 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~~six months ended ~~September~~June 30, ~~2015 is presented~~2016 are summarized in the table ~~below ($ in thousands):~~below:

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 381,632
$ 2,152
$ 2,035
$ 1,759
$ 1,871
$ 1,090
8.77
New Tenants - Previously Leased Space⁽⁶⁾
149,213
672
672
601
595
463
3.79
New Tenants - Not Previously Leased Space⁽⁷⁾
—
—
—
—
—
—
—
Total Consolidated 530,845
2,824
2,707
2,360
2,466
1,553
7.50
Consolidated & Unconsolidated
Renewals 381,632
2,152
2,035
1,759
1,871
1,090
8.77
New Tenants - Previously Leased Space⁽⁶⁾
149,213
672
672
601
595
463
3.79
New Tenants - Not Previously Leased Space⁽⁷⁾
—
—
—
—
—
—
—
Total Consolidated & Unconsolidated 530,845
2,824
2,707
2,360
2,466
1,553
7.50
Office Properties
Consolidated
Renewals 1,262,982
27,596
25,195
26,533
26,959
25,590
8.17
New Tenants - Not Previously Leased Space⁽⁷⁾
789
—
—
11
11
10
4.00
Total Consolidated 1,263,771
27,596
25,195
26,544
26,970
25,600
8.17
Consolidated & Unconsolidated
Renewals 1,262,982
27,596
25,195
26,533
26,959
25,590
8.17
New Tenants - Not Previously Leased Space⁽⁷⁾
789
—
—
11
11
10
4.00
Total Consolidated & Unconsolidated 1,263,771
27,596
25,195
26,544
26,970
25,600
8.17
Total Properties
Consolidated
Renewals 1,644,614
29,748
27,230
28,292
28,830
26,680
8.21
New Tenants - Previously Leased Space⁽⁶⁾
149,213
672
672
601
595
463
3.79
New Tenants - Not Previously Leased Space⁽⁷⁾
789
—
—
11
11
10
4.00
Total Consolidated 1,794,616
30,420
27,902
28,904
29,436
27,153
8.11
Consolidated & Unconsolidated
Renewals 1,644,614
29,748
27,230
28,292
28,830
26,680
8.21
New Tenants - Previously Leased Space⁽⁶⁾
149,213
672
672
601
595
463
3.79
New Tenants - Not Previously Leased Space⁽⁷⁾
789
—
—
11
11
10
4.00
Total Consolidated & Unconsolidated 1,794,616
$ 30,420
$ 27,902
$ 28,904
$ 29,436
$ 27,153
8.11

~~__________~~



Property Type⁽¹⁾	Number of Properties	Square Feet	Purchase Price
Industrial⁽²⁾	28	8,359,186	$	566,859
Office⁽²⁾	4	310,072	58,050
Total	32	8,669,258	$	624,909

(1)

~~Prior lease amounts represent rents in place~~Includes seven properties distributed to us from the Duke JV, of which five were industrial properties that comprise 3,909,945 square feet and two were office properties that comprise 278,451 square feet. Two of the properties distributed to us were encumbered by mortgages, of which the unpaid aggregate principal value was $12,931 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).~~

distribution.

(2)

~~Cash Annualized Base Rent for each lease equals (i) 12 times the monthly cash base rent due as~~We assumed mortgages on 11 of ~~September 30, 2015, or (ii) for any lease still~~our property acquisitions in ~~an initial free or reduced rent period as of September 30, 2015, 12 times the monthly cash base rent due upon expiration~~2016. The unpaid principal value 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~~mortgages assumed at acquisition was $45,958. Refer to Note 6 for ~~unconsolidated properties are included at pro rata share.~~

more information on our debt obligations related to acquisitions.


~~(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.~~

Asset and Property Management



~~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 ~~September~~June 30, ~~2015~~2016 and December 31, ~~2014~~	2015 (unaudited)	1
		Condensed Consolidated Statements of Operations for the ~~Three~~three and ~~Nine Months Ended September~~six months ended June 30, 2016 and 2015 ~~and 2014~~	(unaudited)	2
		Condensed Consolidated Statements of Comprehensive Income (Loss) for the ~~Three~~three and ~~Nine Months Ended September~~six months ended June 30, 2016 and 2015 ~~and 2014~~	(unaudited)	3
		Condensed Consolidated Statement of Equity for the six months ended June 30, 2016 (unaudited)	4
		Condensed Consolidated Statements of Cash Flows for the ~~Nine Months Ended September~~six months ended June 30, 2016 and 2015 ~~and 2014~~		4(unaudited)
	~~Consolidated Statements of Equity for the Nine Months Ended September 30, 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~~		35
~~Item 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~		61
~~Item 4.~~	~~Controls and Procedures~~		62
		Notes to Condensed Consolidated Financial Statements (unaudited)	6
ITEM 2.		MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	61
ITEM 3A.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	84
ITEM 4.		CONTROLS AND PROCEDURES	87
PART II. ~~OTHER INFORMATION~~
~~Item 1.~~	~~Legal Proceedings~~		63OTHER INFORMATION	88
~~Item 1A.~~	~~Risk Factors~~ITEM 1.		63LEGAL PROCEEDINGS	88
~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~ITEM 1A.		64RISK FACTORS	89
~~Item 3.~~	~~Defaults Upon Senior Securities~~ITEM 2.		65UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	90
~~Item 4.~~	~~Mine Safety Disclosure~~ITEM 3.		65DEFAULTS UPON SENIOR SECURITIES	90
~~Item 5.~~	~~Other Information~~ITEM 4.		65MINE SAFETY DISCLOSURES	90
~~Item 6.~~	~~Exhibits~~ITEM 5.		65OTHER INFORMATION	90
~~SIGNATURES~~ITEM 6.		66INDEX TO EXHIBITS	91
SIGNATURES			92



	September 30,			December 31,
	2015			2014
	(unaudited)
ASSETS
Investments in Real Estate:
Land	$	617,867		$	630,840
Land Available for Expansion	24,218			23,368
Buildings and Improvements	1,652,766			1,674,955
	2,294,851			2,329,163
Less: Accumulated Depreciation and Amortization	(284,579		)	(239,973		)
Net Investments in Real Estate	2,010,272			2,089,190
Investments in Unconsolidated Entities	385,220			423,693
Cash and Cash Equivalents	53,955			40,139
Restricted Cash	18,909			14,718
Tenant and Other Receivables, Net	11,553			11,216
Deferred Rent	45,072			39,429
Deferred Leasing Costs and Intangible Assets, Net	194,109			220,490
Deferred Financing Costs, Net	7,237			9,321
Prepaid Expenses and Other Assets	19,963			21,612
Total Assets	$	2,746,290		$	2,869,808
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Secured Notes Payable, Net	$	478,739		$	610,608
Unsecured Term Loan Facilities	570,000			570,000
Unsecured Revolving Credit Facility	290,044			200,044
Accounts Payable, Accrued Expenses and Other Liabilities	86,352			76,421
Intangible Liabilities, Net	21,759			26,248
Prepaid Rent and Security Deposits	16,255			15,569
Distributions Payable	10,117			9,951
Total Liabilities	1,473,266			1,508,841
COMMITMENTS AND CONTINGENCIES (NOTE 13)
SHAREHOLDERS' EQUITY
Common Shares of Beneficial Interest, $0.01 par value, 990,000,000 shares authorized; 236,855,738 and 236,920,675 issued and outstanding as of September 30, 2015 and December 31, 2014, respectively	2,366			2,364
Additional Paid-in-Capital	2,074,326			2,071,526
Accumulated Deficit	(758,611		)	(689,654		)
Accumulated Other Comprehensive Loss	(45,057		)	(23,269		)
Total Shareholders' Equity	1,273,024			1,360,967
Total Liabilities and Shareholders' Equity	$	2,746,290		$	2,869,808



	June 30, 2016			December 31, 2015
Assets:
Real estate investments, at cost:
Land	$	763,248		$	702,557
Building and improvements	3,627,815			3,313,747
Less: accumulated depreciation	(142,824		)	(84,627		)
Total real estate investments, net	4,248,239			3,931,677
Cash and cash equivalents	185,141			128,031
Restricted cash	65,748			17,354
Investment in unconsolidated equity investments	145,252			580,000
Servicing advances receivable	—			1,382
Retained CDO bonds	9,322			7,471
Assets held for sale, net	10,074			420,485
Tenant and other receivables, net	57,572			34,234
Acquired lease assets, net of accumulated amortization of $112,588 and $54,323	641,829			682,174
Deferred costs, net of accumulated amortization of $2,319 and $892	21,829			13,950
Goodwill	3,223			3,568
Other assets	21,998			14,192
Total assets	$	5,410,227		$	5,834,518
Liabilities and Equity:
Liabilities:
Senior unsecured revolving credit facility	$	169,950		$	296,724
Exchangeable senior notes, net	107,550			106,581
Mortgage notes payable, net	532,981			530,222
Senior unsecured notes, net	148,953			99,124
Senior unsecured term loans, net	1,225,000			1,225,000
Total long-term debt, net	2,184,434			2,257,651
Accounts payable and accrued expenses	35,339			59,808
Dividends payable	46,855			8,980
Accrued interest payable	5,321			4,546
Deferred revenue	30,142			36,031
Below market lease liabilities, net of accumulated amortization of $28,785 and $17,083	241,059			242,456
Liabilities related to assets held for sale	371			291,364
Derivative instruments, at fair value	36,735			3,442
Other liabilities	11,835			8,271
Total liabilities	2,592,091			2,912,549
Commitments and contingencies
Noncontrolling interest in operating partnership	10,559			10,892
Equity:
Common shares, par value $0.01, 421,696,772 and 420,523,153 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively.	4,217			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 June 30, 2016 and December 31, 2015.	84,394			84,394
Additional paid-in-capital	3,882,921			3,879,932
Accumulated other comprehensive loss	(44,106		)	(5,751		)
Accumulated deficit	(1,119,455		)	(1,051,454		)
Total shareholders' equity	2,807,971			2,911,326
Noncontrolling interest in other partnerships	(394		)	(249		)
Total equity	2,807,577			2,911,077
Total liabilities and equity	$	5,410,227		$	5,834,518



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						Nine Months Ended
	September 30,						September 30,
	2015			2014			2015			2014
REVENUES
Rental	$	54,915		$	52,391		$	166,020		$	156,300
Tenant Reimbursements	15,646			15,219			46,917			45,034
Other Property Income	1,072			537			1,520			1,606
Total Revenues	71,633			68,147			214,457			202,940
EXPENSES
Property Operating	8,488			9,113			26,404			27,058
Real Estate Taxes	10,694			9,927			32,050			30,193
General and Administrative	9,935			7,230			31,505			20,047
Acquisition-Related	—			265			—			555
Depreciation and Amortization	28,489			27,208			84,342			81,572
Total Expenses	57,606			53,743			174,301			159,425
Income Before Other (Expenses) Income	14,027			14,404			40,156			43,515
OTHER EXPENSES AND INCOME
Interest and Other Income	52			255			144			573
Interest Expense	(12,352		)	(13,685		)	(38,397		)	(41,653		)
Interest Expense and Net Change in Fair Value of Non-Qualifying Derivative Financial Instruments	23			68			66			80
Gain on Sale of Real Estate	—			13,175			5,844			13,175
Total Other Expenses	(12,277		)	(187		)	(32,343		)	(27,825		)
Income Before Provision for Income Taxes and Equity in Income of Unconsolidated Entities	1,750			14,217			7,813			15,690
Benefit (Provision) For Income Taxes	42			(140		)	(521		)	(579		)
Equity in Income of Unconsolidated Entities	4,238			4,391			14,419			11,829
NET INCOME	$	6,030		$	18,468		$	21,711		$	26,940
Basic and Diluted Net Income per Share	$	0.03		$	0.08		$	0.09		$	0.11
Weighted Average Common Shares Outstanding - Basic	236,902,841			236,954,218			236,915,614			236,847,551
Weighted Average Common Shares Outstanding - Diluted	236,913,294			236,954,218			236,951,537			236,847,551
Dividends Declared per Common Share	$	0.128		$	0.126		$	0.384		$	0.378



	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 income (loss)	—	—		—		—			—			27,980			27,980			(139		)	27,841
Change in net unrealized loss on derivative instruments	—	—		—		—			(33,649		)	—			(33,649		)	—			(33,649		)
Change in net unrealized gain on debt securities	—	—		—		—			967			—			967			—			967
Reclassification of unrealized gain of terminated derivative instruments into earnings	—	—		—		—			631			—			631			—			631
Share based compensation - fair value	860,103	9		—		2,780			—			—			2,789			—			2,789
Proceeds from share options exercised	47,844	—				167									167						167
Conversion of OP Units to common shares	265,672	3		—		2,201			—			—			2,204			—			2,204
Reallocation of noncontrolling interest in the operating partnership	—	—		—		(2,159		)	—			—			(2,159		)	—			(2,159		)
Reclassification of accumulated foreign currency translation adjustments due to disposal	—	—		—		—			(3,737		)	—			(3,737		)	—			(3,737		)
Foreign currency translation adjustment	—	—		—		—			(2,567		)	—			(2,567		)	(6		)	(2,573		)
Dividends on preferred shares	—	—		—		—			—			(3,117		)	(3,117		)	—			(3,117		)
Dividends on common shares	—	—		—		—			—			(92,864		)	(92,864		)	—			(92,864		)
Balance at June 30, 2016	421,696,772	$	4,217	$	84,394	$	3,882,921		$	(44,106	)	$	(1,119,455	)	$	2,807,971		$	(394	)	$	2,807,577



	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	—		—			—			21,711			—			21,711
Other Comprehensive Loss	—		—			—			—			(21,788		)	(21,788		)
Share-Based Compensation	348,798		6			6,066			—			—			6,072
Repurchase and Cancellation of Vested Shares	(413,735	)	(4		)	(3,266		)	—			—			(3,270		)
Distributions Declared ($0.384 per share)	—		—			—			(90,668		)	—			(90,668		)
Balance at September 30, 2015	236,855,738		$	2,366		$	2,074,326		$	(758,611	)	$	(45,057	)	$	1,273,024



Property Type	Number of Properties ⁽¹⁾	Rentable Square Feet	Occupancy
Industrial	172	42,216,785	98.9	%
Office	108	9,539,561	98.2	%
Specialty retail	9	1,187,258	100.0	%
Total	289	52,943,604	98.8	%


(1)	Property counts have been adjusted to reflect number of properties instead of number of buildings. Adjustments are reflected throughout the financial statements.



	June 30, 2016		December 31, 2015
Intangible assets:
In-place leases, net of accumulated amortization of $100,377 and $49,125	$	564,060	$	644,540
Above-market leases, net of accumulated amortization of $12,001 and $5,051	72,596		94,202
Below-market ground rent, net of accumulated amortization of $210 and $147	5,173		5,236
Amounts related to assets held for sale, net of accumulated amortization of $0	—		(61,804		)
Total intangible assets	$	641,829	$	682,174
Intangible liabilities:
Below-market leases, net of accumulated amortization of $28,590 and $16,934	$	237,584	$	255,452
Above-market ground rent, net of accumulated amortization of $195 and $149	3,475		3,522
Amounts related to liabilities of assets held for sale, net of accumulated amortization of $0	—		(16,518		)
Total intangible liabilities	$	241,059	$	242,456



	Weighted-Average Amortization Period	July 1 to December 31, 2016			2017			2018			2019			2020
In-place leases	9.8	$	54,962		$	90,370		$	77,469		$	63,672		$	51,078
Total to be included in depreciation and amortization expense		$	54,962		$	90,370		$	77,469		$	63,672		$	51,078
Above-market lease assets	7.9	$	7,406		$	12,991		$	11,487		$	9,873		$	7,390
Below-market lease liabilities	19.8	(12,612		)	(13,243		)	(12,920		)	(12,697		)	(12,431		)
Total to be included in rental revenue		$	(5,206	)	$	(252	)	$	(1,433	)	$	(2,824	)	$	(5,041	)

Below-market ground rent	41.8	$	64		$	127		$	127		$	127		$	127
Above-market ground rent	37.0	(47		)	(94		)	(94		)	(94		)	(94		)
Total to be included in property operating expense		$	17		$	33		$	33		$	33		$	33



	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 Partnership	$	5,410,227	$	2,592,091	$	5,410,227	$	2,592,091
Proportion Foods	$	10,993	$	2,613	$	10,993	$	11,539
Gramercy Europe Asset Management (European Fund Manager)	$	491	$	1,279	$	491	$	1,279
Unconsolidated VIEs
Gramercy Europe Asset Management (European Fund Carry Co.)	$	—	$	—	$	11	$	30
Retained CDO Bonds	$	9,322	$	—	$	1,094,732	$	1,152,434



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	$	379,515	$	7,345	$	1,977	$	—	$	9,322	2.2
Total	9	$	379,515	$	7,345	$	1,977	$	—	$	9,322	2.2



	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	(2,121		)	(3,622		)
Balance as of June 30, 2016 and December 31, 2015, respectively, of credit losses (gains) on Retained CDO Bonds for which a portion of an OTTI was recognized in other comprehensive income	$	1,075		$	3,196



Assets held for sale	June 30, 2016		December 31, 2015
Real estate investments	$	9,752	$	348,582
Acquired lease assets	—		61,804
Other assets	322		10,099
Total assets	10,074		420,485
Liabilities related to assets held for sale
Mortgage notes payable, net	—		260,704
Below-market lease liabilities	—		16,518
Other liabilities	371		14,142
Total liabilities	371		291,364
Net assets held for sale	$	9,703	$	129,121


(1)	Includes 95 properties acquired as part of the Merger, of which 57 were industrial properties that comprise 17,355,358 square feet and 38 were office properties that comprise 7,205,381 square feet.



		Preliminary Allocations recorded
Period of Acquisition	Number of Acquisitions	Real Estate Assets		Intangible Assets		Intangible Liabilities
Six Months Ended June 30, 2016	23	$	410,164	$	56,754	$	9,797
Year Ended December 31, 2015⁽¹⁾	1	$	7,947	$	—	$	—


(1)	Allocations exclude the properties acquired as part of the Merger, which are separately disclosed below in the section, “Merger with Chambers.” Additionally, allocations represent the real estate assets of Proportion Foods, a consolidated VIE. Refer to Note 2 for more information on Proportion Foods.



	Preliminary Allocations recorded							Finalized Allocations recorded
Period Finalized	No. of Acquisitions	Real Estate Assets		Intangible Assets		Intangible Liabilities		Real Estate Assets		Intangible Assets		Intangible Liabilities		Increase to Rental Revenue		Increase to Depreciation and Amortization Expense
Six Months Ended June 30, 2016	20	$	432,401	$	2,084	$	184	$	410,859	$	26,589	$	3,146	$	18	$	(13	)
Year Ended December 31, 2015⁽¹⁾	136	$	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 as part of the Bank of America Portfolio.


(1)	The pro forma results for all periods presented include adjustments to reflect the Company’s continuing 5.1% interest in the Goodman Europe JV as well as its 100.0% interest in the seven properties it received through distribution from the Duke JV on June 30, 2016.


(2)	Net income for each period has been adjusted for acquisition costs related to the property acquisitions during the period.



Assets
Investments:
Land	$	261,514
Buildings and improvements	1,653,634
Net investments	1,915,148
Cash and cash equivalents	24,687
Restricted cash	8,990
Unconsolidated equity investments	561,752
Tenant and other receivables, net	11,166
Acquired lease assets	387,988
Deferred costs and other assets	5,002
Assets held for sale	412,565
Total assets	$	3,327,298
Liabilities
Mortgage notes payable	$	216,754
Revolving credit facilities and term loans	860,000
Below-market lease liabilities	40,593
Accounts payable, accrued expenses, and other liabilities	87,434
Liabilities related to assets held for sale	293,276
Total liabilities	$	1,498,057
Estimated fair value of net assets acquired	$	1,829,241


	Ownership %	Number of Properties		As of June 30, 2016					As of June 30, 2016			As of December 31, 2015
		September 30,	December 31,
		2015	2014
Investment				Ownership %		Voting Interest %		Partner	Investment in Unconsolidated Equity Investment⁽¹⁾		No. of Properties	Investment in Unconsolidated Equity Investment⁽¹⁾		No. of Properties
Gramercy European Property Fund ^{(2), (3)}				14.2	%	14.2	%	Various	$	52,056	21	$	23,381	12
Philips JV				25.0	%	25.0	%	Various	—		1	—		1
Duke JV	80.0%	13	14	80.0	%	50.0	%	Duke Realty	41,133		1	352,932		13
European JV	80.0%	9	9
UK JV	80.0%	3	3
Goodman Europe JV ⁽³⁾				5.1	%	5.1	%	Gramercy European Property Fund	8,918		9	158,863		9
Goodman UK JV				80.0	%	50.0	%	Goodman Group	35,361		3	36,698		3
CBRE Strategic Partners Asia	5.07%	2	3	5.07	%	5.07	%	Various	5,162		2	5,508		2
		27	29
Morristown JV				50.0	%	50.0	%	21 South Street	2,622		1	2,618		1
Total									$	145,252	38	$	580,000	41


(2)	Includes European Fund Carry Co., which has a carrying value of $12 and $0 for the Company’s 25.0% interest as of June 30, 2016 and December 31, 2015, respectively.


(3)	As of June 30, 2016, the Company has a 5.1% direct interest in the Goodman Europe JV as well as an indirect interest in the remaining 94.9% interest of Goodman Europe JV through its 14.2% interest in the Gramercy European Property Fund.



	Duke JV		European JV		Other ⁽²⁾		Total
	Duke JV		European JV		Other ⁽²⁾		Total
Assets
Investments in Real Estate⁽¹⁾	$	312,494	$	248,204	$	147,646	$	708,344
Other Assets	28,523		40,130		13,910		82,563
Total Assets	$	341,017	$	288,334	$	161,556	$	790,907
Liabilities and Equity
Secured Notes Payable, net	$	56,390	$	124,884	$	—	$	181,274
Other Liabilities	8,025		4,531		16,285		28,841
Total Liabilities	64,415		129,415		16,285		210,115
CSP Equity	221,716		127,135		36,369		385,220
Other Investors' Equity	54,886		31,784		108,902		195,572
Total Liabilities and Equity	$	341,017	$	288,334	$	161,556	$	790,907


(1)	Includes ~~REIT Basis Adjustments for costs incurred~~the fair value of the seven properties of $276,100 distributed by the Duke JV to the Company.



	As of June 30, 2016
	Gramercy European Property Fund⁽¹⁾
	Goodman Europe JV		Gramercy European Property Fund, excluding legacy Goodman Europe JV		Total		Goodman UK JV		Duke JV		CBRE Strategic Partners Asia		Other⁽²⁾		Total
Assets:
Real estate assets, net⁽³⁾	$	306,922	$	321,234	$	628,156	$	37,805	$	47,386	$	110,927	$	50,136	$	874,410
Other assets	34,900		74,255		109,155		6,211		7,907		8,901		3,430		135,604
Total assets	$	341,822	$	395,489	$	737,311	$	44,016	$	55,293	$	119,828	$	53,566	$	1,010,014
Liabilities and members’ equity:
Mortgages payable	$	135,177	$	188,469	$	323,646	$	—	$	—	$	—	$	39,688	$	363,334
Other liabilities	7,026		20,846		27,872		1,235		5,026		14,149		4,186		52,468
Total liabilities	142,203		209,315		351,518		1,235		5,026		14,149		43,874		415,802
Gramercy Property Trust equity	32,524		28,438		60,962		35,361		41,133		5,162		2,634		145,252
Other members’ equity	167,095		157,736		324,831		7,420		9,134		100,517		7,058		448,960
Liabilities and members’ equity	$	341,822	$	395,489	$	737,311	$	44,016	$	55,293	$	119,828	$	53,566	$	1,010,014


(2)	Includes the ~~Goodman Princeton Holdings (Jersey) Limited joint venture (the "UK JV")~~Philips JV, the Morristown JV, and ~~CBRE Strategic Partners Asia.~~European Fund Carry Co.


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


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