UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended March 31, ~~2016~~2017



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

For the transition period from . to .

Commission File No. 1-35933

~~GRAMERCY PROPERTY TRUST~~

(Exact name of registrant as specified in its charter)



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

~~521 5~~90 Park Avenue, 32^th ~~Avenue, 30~~^thnd Floor, New York, NY ~~10175~~10016 (Address of principal executive offices – zip code)

(212) 297-1000 (Registrant’s telephone number, including area code)

~~Chambers Street Properties~~

~~47 Hulfish Street, Suite 210, Princeton, New Jersey 08542~~

~~(Former name, former address and former fiscal year, if changed since last report)~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated ~~filer”~~filer,” “smaller reporting company,” and ~~“smaller reporting~~“emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer x	Accelerated filer ¨	Non-accelerated filer ¨
Smaller reporting company ¨
	Emerging growth company ¨	(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

The number of shares outstanding of the registrant’s common ~~stock,~~shares of beneficial interest, $0.01 par value, was ~~421,637,223~~151,873,041 as of April ~~29, 2016.~~28, 2017.

GRAMERCY PROPERTY TRUST

FORM 10-Q

TABLE OF CONTENTS



		Page
PART I.	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	1
	Condensed Consolidated Balance Sheets as of March 31, ~~2016~~2017 and December 31, ~~2015~~2016 (unaudited)	1
	Condensed Consolidated Statements of Operations for the three months ended March 31, ~~2016~~2017 and ~~2015~~2016 (unaudited)	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, ~~2016~~2017 and ~~2015~~2016 (unaudited)	3
	Condensed Consolidated Statement of Equity for the three months ended March 31, ~~2016~~2017 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, ~~2016~~2017 and ~~2015~~2016 (unaudited)	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6
ITEM 2.	~~MANAGEMENT'S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	5552
ITEM ~~3A.~~3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	72
ITEM 4.	CONTROLS AND PROCEDURES	75
PART II.	OTHER INFORMATION	76
ITEM 1.	LEGAL PROCEEDINGS	76
ITEM 1A.	RISK FACTORS	77
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	7877
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	7877
ITEM 4.	MINE SAFETY DISCLOSURES	7877
ITEM 5.	OTHER INFORMATION	7877
ITEM 6.	INDEX TO EXHIBITS	7978
SIGNATURES		8079

Gramercy Property Trust

Condensed Consolidated Balance Sheets

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


PART I.	FINANCIAL INFORMATION


ITEM I.	FINANCIAL STATEMENTS


	March 31, 2016			December 31, 2015			March 31, 2017			December 31, 2016
Assets:
Real estate investments, at cost:
Land	$	683,110		$	702,557		$	804,044		$	805,264
Building and improvements	3,279,424			3,313,747			4,108,891			4,053,125
Less: accumulated depreciation	(114,389		)	(84,627		)	(235,318		)	(201,525		)
Total real estate investments, net	3,848,145			3,931,677			4,677,617			4,656,864
Cash and cash equivalents	67,124			128,031			56,256			67,529
Restricted cash	166,552			17,354			13,101			12,904
Investment in unconsolidated equity investments	527,269			580,000			105,187			101,807
Servicing advances receivable	—			1,382
Retained CDO bonds	8,786			7,471
Assets held for sale, net	10,548			420,485			8,962			—
Tenant and other receivables, net	43,209			34,234			75,730			72,795
Acquired lease assets, net of accumulated amortization of $84,671 and $54,323	631,048			682,174
Deferred costs, net of accumulated amortization of $1,558 and $892	17,152			13,950
Goodwill	3,477			3,568
Acquired lease assets, net of accumulated amortization of $154,753 and $133,710							596,811			618,680
Other assets	24,999			14,192			73,196			72,948
Total assets	$	5,348,309		$	5,834,518		$	5,606,860		$	5,603,527
Liabilities and Equity:
Liabilities:
Senior unsecured revolving credit facility	$	122,760		$	296,724		$	121,759		$	65,837
Exchangeable senior notes, net	107,205			106,581			109,488			108,832
Mortgage notes payable, net	491,360			530,222			549,924			558,642
Senior unsecured notes, net	148,935			99,124			496,524			496,464
Senior unsecured term loans, net	1,225,000			1,225,000
Senior unsecured term loans							1,225,000			1,225,000
Total long-term debt, net	2,095,260			2,257,651			2,502,695			2,454,775
Accounts payable and accrued expenses	29,667			59,808			42,381			58,380
Dividends payable	46,790			8,980			53,677			53,074
Accrued interest payable	5,860			4,546
Deferred revenue	36,041			36,031
Below market lease liabilities, net of accumulated amortization of $21,240 and $17,083	238,115			242,456
Below market lease liabilities, net of accumulated amortization of $28,350 and $26,416							216,401			230,183
Liabilities related to assets held for sale	376			291,364			3,128			—
Derivative instruments, at fair value	27,461			3,442
Other liabilities	9,060			8,271			49,409			46,081
Total liabilities	2,488,630			2,912,549			$	2,867,691		$	2,842,493
Commitments and contingencies
Noncontrolling interest in operating partnership	11,334			10,892
Noncontrolling interest in the Operating Partnership							6,129			8,643
Equity:
Common shares, par value $0.01, 421,500,741 and 420,523,153 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively.	4,215			4,205
Series A cumulative redeemable preferred shares, par value $0.01, liquidation preference $87,500, 3,500,000 shares authorized, issued and outstanding at March 31, 2016.	84,394			84,394
Common shares, par value $0.01, 141,522,527 and 140,647,971 issued and outstanding at March 31, 2017 and December 31, 2016, respectively							1,415			1,406
Series A cumulative redeemable preferred shares, par value $0.01, liquidation preference $87,500, and 3,500,000 shares authorized, issued and outstanding at March 31, 2017 and December 31, 2016							84,394			84,394
Additional paid-in-capital	3,880,925			3,879,932			3,911,889			3,887,793
Accumulated other comprehensive loss	(20,527		)	(5,751		)	(1,611		)	(4,128		)
Accumulated deficit	(1,100,285		)	(1,051,454		)	(1,262,842		)	(1,216,753		)
Total shareholders' equity	2,848,722			2,911,326			2,733,245			2,752,712
Noncontrolling interest in other partnerships	(377		)	(249		)	(205		)	(321		)
Total equity	2,848,345			2,911,077			$	2,733,040		$	2,752,391
Total liabilities and equity	$	5,348,309		$	5,834,518		$	5,606,860		$	5,603,527

Gramercy Property Trust

Condensed Consolidated Statements of Operations

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

Three Months Ended March 31,
2016 2015
Revenues

Rental revenue $ 92,095
$ 31,190
Third-party management fees 5,046
8,186
Operating expense reimbursements 22,582
8,138
Investment income 443
238
Other income 379
183
Total revenues 120,545
47,935
Operating Expenses

Property operating expenses 24,169
8,383
Property management expenses 4,521
5,166
Depreciation and amortization 58,248
18,698
General and administrative expenses 7,722
4,773
Acquisition and merger-related expenses 410
3,506
Total operating expenses 95,070
40,526
Operating Income 25,475
7,409
Other Expense:
Interest expense (21,953 ) (6,270 )
Equity in net loss of unconsolidated equity investments (2,755 ) (1 )
Loss on extinguishment of debt (5,757 ) —
Income (loss) from continuing operations before provision for taxes (4,990 ) 1,138
Provision for taxes (703 ) (1,114 )
Income (loss) from continuing operations (5,693 ) 24
Income (loss) from discontinued operations 2,710
(62 )
Gain on extinguishment of debt 1,930
—
Income (loss) from discontinued operations 4,640
(62 )
Net loss (1,053 ) (38 )
Net loss attributable to noncontrolling interest 120
42
Net income (loss) attributable to Gramercy Property Trust (933 ) 4
Preferred share dividends (1,559 ) (1,559 )
Net loss available to common shareholders $ (2,492 ) $ (1,555 )
Basic earnings per share:

Net loss from continuing operations, after preferred dividends $ (0.02 ) $ (0.01 )
Net income from discontinued operations 0.01
—
Net loss available to common shareholders $ (0.01 ) $ (0.01 )
Diluted earnings per share:

Net loss from continuing operations, after preferred dividends $ (0.02 ) $ (0.01 )
Net income from discontinued operations 0.01
—
Net loss available to common shareholders $ (0.01 ) $ (0.01 )
Basic weighted average common shares outstanding 420,181,216
149,115,357
Diluted weighted average common shares and common share equivalents outstanding 420,181,216
149,115,357



	Three Months Ended March 31,
	2017			2016
Revenues
Rental revenue	$	103,282		$	92,095
Third-party management fees	4,592			5,046
Operating expense reimbursements	20,368			22,582
Other income	1,752			822
Total revenues	129,994			120,545
Operating Expenses
Property operating expenses	23,186			24,169
Property management expenses	3,084			4,521
Depreciation and amortization	62,217			58,248
General and administrative expenses	8,756			7,722
Acquisition expenses	—			410
Total operating expenses	97,243			95,070
Operating Income	32,751			25,475
Other Expenses:
Interest expense	(23,056		)	(21,953		)
Other-than-temporary impairment	(4,081		)	—
Portion of impairment recognized in other comprehensive loss	(809		)	—
Net impairment recognized in earnings	(4,890		)	—
Equity in net loss of unconsolidated equity investments	(94		)	(2,755		)
Loss on extinguishment of debt	(208		)	(5,757		)
Impairment of real estate investments	(12,771		)	—
Loss from continuing operations before provision for taxes	(8,268		)	(4,990		)
Provision for taxes	196			(703		)
Loss from continuing operations	(8,072		)	(5,693		)
Income (loss) from discontinued operations before gain on extinguishment of debt	(24		)	2,710
Gain on extinguishment of debt	—			1,930
Income (loss) from discontinued operations	(24		)	4,640
Loss before net gain on disposals	(8,096		)	(1,053		)
Net gain on disposals	17,377			—
Net income (loss)	9,281			(1,053		)
Net (income) loss attributable to noncontrolling interest	(154		)	120
Net income (loss) attributable to Gramercy Property Trust	9,127			(933		)
Preferred share dividends	(1,559		)	(1,559		)
Net income (loss) available to common shareholders	$	7,568		$	(2,492	)
Basic earnings per share:
Net income (loss) from continuing operations, after preferred dividends	$	0.05		$	(0.05	)
Net income (loss) from discontinued operations	—			0.03
Net income (loss) available to common shareholders	$	0.05		$	(0.02	)
Diluted earnings per share:
Net income (loss) from continuing operations, after preferred dividends	$	0.05		$	(0.05	)
Net income (loss) from discontinued operations	—			0.03
Net income (loss) available to common shareholders	$	0.05		$	(0.02	)
Basic weighted average common shares outstanding	140,907,399			140,060,405
Diluted weighted average common shares outstanding	141,875,619			140,060,405

Gramercy Property Trust

Condensed Consolidated Statements of Comprehensive Income (Loss)

(~~Amounts~~Unaudited, amounts in thousands)

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



	Three Months Ended March 31,
	2017			2016
Net income (loss)	$	9,281		$	(1,053	)
Other comprehensive income (loss):
Unrealized gain (loss) on available for sale debt securities	(2,820		)	934
Unrealized gain (loss) on derivative instruments	4,378			(22,189		)
Foreign currency translation adjustments	691			6,119
Reclassification of unrealized loss on terminated derivative instruments into earnings	268			360
Other comprehensive income (loss)	2,517			(14,776		)
Comprehensive income (loss)	$	11,798		$	(15,829	)
Net (income) loss attributable to noncontrolling interest	(154		)	120
Other comprehensive (income) loss attributable to noncontrolling interest	(11		)	48
Comprehensive income (loss) attributable to Gramercy Property Trust	$	11,633		$	(15,661	)

Gramercy Property Trust

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

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

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 Total
Balance at December 31, 2015 420,523,153
$ 4,205
$ 84,394
$ 3,879,932
$ (5,751 ) $ (1,051,454 ) $ 2,911,326
$ (249 ) $ 2,911,077
Net loss —
—
—
—
—
(933 ) (933 ) (112 ) (1,045 )
Change in net unrealized loss on derivative instruments —
—
—
—
(22,189 ) —
(22,189 ) —
(22,189 )
Change in net unrealized gain on debt securities —
—
—
—
934
—
934
—
934
Reclassification of unrealized gain of terminated derivative instruments into earnings —
—
—
—
360
—
360
—
360
Share based compensation - fair value 860,103
9
—
1,510
—
—
1,519
—
1,519
Proceeds from share options exercised 47,844
—

167

167

167
Conversion of Legacy OP Units to common shares 69,641
1
—
523
—
—
524
—
524
Reallocation of noncontrolling interest in the operating partnership —
—
—
(1,207 ) —
—
(1,207 ) —
(1,207 )
Foreign currency translation adjustment —
—
—
—
6,119
—
6,119
(16 ) 6,103
Dividends on preferred shares —
—
—
—
—
(1,559 ) (1,559 ) —
(1,559 )
Dividends on common shares —
—
—
—
—
(46,339 ) (46,339 ) —
(46,339 )
Balance at March 31, 2016 421,500,741
$ 4,215
$ 84,394
$ 3,880,925
$ (20,527 ) $ (1,100,285 ) $ 2,848,722
$ (377 ) $ 2,848,345



	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, 2016	140,647,971	$	1,406	$	84,394	$	3,887,793		$	(4,128	)	$	(1,216,753	)	$	2,752,712		$	(321	)	$	2,752,391
Net income	—	—		—		—			—			9,127			9,127			120			9,247
Change in net unrealized loss on derivative instruments	—	—		—		—			4,378			—			4,378			—			4,378
Change in net unrealized gain on debt securities	—	—		—		—			(2,820		)	—			(2,820		)	—			(2,820		)
Reclassification of unrealized gain on terminated derivative instruments into earnings	—	—		—		—			268			—			268			—			268
Offering costs	—	—		—		(606		)	—			—			(606		)	—			(606		)
Issuance of shares	731,453	7		—		19,993			—			—			20,000			—			20,000
Share based compensation - fair value	59,311	1		—		2,169			—			—			2,170			—			2,170
Dividend reinvestment program proceeds	2,976	—		—		81			—			—			81			—			81
Conversion of OP Units to common shares	80,816	1		—		2,163			—			—			2,164			—			2,164
Reallocation of noncontrolling interest in the Operating Partnership	—	—		—		296			—			—			296			—			296
Foreign currency translation adjustment	—	—		—		—			691			—			691			(4		)	687
Dividends on preferred shares	—	—		—		—			—			(1,559		)	(1,559		)	—			(1,559		)
Dividends on common shares	—	—		—		—			—			(53,657		)	(53,657		)	—			(53,657		)
Balance at March 31, 2017	141,522,527	$	1,415	$	84,394	$	3,911,889		$	(1,611	)	$	(1,262,842	)	$	2,733,245		$	(205	)	$	2,733,040

Gramercy Property Trust

Condensed Consolidated Statements of Cash Flows

(~~Amounts~~Unaudited, amounts in thousands)


	Three Months Ended March 31,						Three Months Ended March 31,
	2016			2015			2017			2016
Operating Activities:
Net loss	$	(1,053	)	$	(38	)
Net income (loss)							$	9,281		$	(1,053	)
Adjustments to net cash provided by operating activities:
Depreciation and amortization	58,248			18,698			62,217			58,248
Amortization of acquired leases to rental revenue and expense	(163		)	(3,947		)	(633		)	(163		)
Amortization of deferred costs	2,675			601			615			2,675
Amortization of discounts and other fees	(1,109		)	(222		)	(409		)	(1,109		)
Amortization of lease inducement costs	86			44			86			86
Straight-line rent adjustment	(6,761		)	(2,172		)	(7,260		)	(6,761		)
Other-than-temporary impairment on retained bonds							4,890			—
Non-cash impairment charges							12,771			—
Net gain on sale of properties							(17,377		)	—
Distributions received from unconsolidated equity investments	9,961			103			352			9,961
Equity in net loss of unconsolidated equity investments	2,755			1			94			2,755
Loss on extinguishment of debt	3,827			—			208			3,827
Amortization of share-based compensation	1,150			733			2,054			1,150
Changes in operating assets and liabilities:
Restricted cash	5,598			(451		)	(235		)	5,598
Payment of capitalized leasing costs	(3,973		)	(143		)	(3,790		)	(3,973		)
Tenant and other receivables	(2,151		)	(6,124		)	11,707			(2,151		)
Accrued interest	(8		)	(10		)
Other assets	(10,519		)	7,686			(4,368		)	(10,519		)
Accounts payable, accrued expenses and other liabilities	(33,738		)	(147		)
Deferred revenue	(3,077		)	3,841
Accounts payable and accrued expenses							(9,755		)	(33,738		)
Other liabilities							(2,204		)	(3,085		)
Net cash provided by operating activities	21,748			18,443			58,244			21,748
Investing Activities:
Capital expenditures	(6,416		)	(1,196		)	(18,429		)	(6,416		)
Distributions received from unconsolidated equity investments	47,408			—
Distributions from investing activities received from unconsolidated equity investments							—			47,408
Proceeds from sale of real estate	416,094			—			33,053			416,094
Restricted cash held in escrow for 1031 exchange	(145,500		)	—
Contributions to unconsolidated equity investments	(4,790		)	(602		)
Return of restricted cash held in escrow for 1031 exchange							31			(145,500		)
Unconsolidated equity investments							(2,650		)	(4,790		)
Acquisition of real estate	(52,874		)	(423,147		)	(99,613		)	(52,874		)
Restricted cash for tenant improvements	198			(5,631		)	917			198
Proceeds from repayments of servicing advances receivable	1,390			—
Proceeds from servicing advances receivable							—			1,390
Net cash provided by (used in) investing activities	255,510			(430,576		)	(86,691		)	255,510
Financing Activities:
Proceeds from unsecured term loans and revolving credit facility	—			235,000
Proceeds from unsecured credit facility	75,000			—
Proceeds from unsecured term loan and credit facility							60,000			75,000
Proceeds from senior unsecured notes	50,000			—			—			50,000
Repayment of unsecured term loans and revolving credit facility	(250,000		)	—
Proceeds from mortgage notes payables	9,550			—
Repayment of unsecured term loans and credit facility							(5,000		)	(250,000		)
Proceeds from mortgage notes payable							2,582			9,550
Repayment of mortgage notes payable	(198,189		)	(971		)	(3,915		)	(198,189		)
Offering costs	—			(331		)	(606		)	—
Proceeds from sale of common stock	—			16,173
Proceeds from sale of common shares							20,081			—
Payment of deferred financing costs	(551		)	(3,248		)	(252		)	(551		)
Payment of debt extinguishment costs	(13,803		)				—			(13,803		)
Preferred shares dividends paid	(1,559		)	(1,559		)
Common shares dividends paid	(8,736		)	(9,354		)
Proceeds from exercise of stock options and employee purchase under the employee share purchase plan	167			14
Contributions from noncontrolling interests in other entities	—			169
Distribution to noncontrolling interest holders	(29		)	(117		)
Preferred share dividends paid							(1,559		)	(1,559		)
Common share dividends paid							(53,025		)	(8,736		)
Proceeds from exercise of share options and purchases under the employee share purchase plan							—			167
Distribution to noncontrolling interest in the Operating Partnership							(118		)	(29		)
Change in restricted cash from financing activities	(12		)	(12		)	(909		)	(12		)
Net cash provided by (used in) financing activities	(338,162		)	235,764			17,279			(338,162		)
Net decrease in cash and cash equivalents	(60,904		)	(176,369		)	(11,168		)	(60,904		)
Decrease in cash and cash equivalents related to foreign currency translation	(3		)	15			(105		)	(3		)
Cash and cash equivalents at beginning of period	128,031			200,069			67,529			128,031
Cash and cash equivalents at end of period	$	67,124		$	23,715		$	56,256		$	67,124

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

1. Business and Organization

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 commercial real estate. Gramercy specializes in acquiring and managing ~~single-tenant, net leased industrial, office, and specialty properties. The Company focuses on~~high quality, income producing ~~properties~~commercial real estate leased to high quality tenants in major markets in the United States and Europe.

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

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

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

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

As of March 31, ~~2016,~~2017, the ~~Company owns, either directly or in an unconsolidated equity investment, a~~Company’s wholly-owned portfolio consists of ~~316 industrial, office, and specialty~~318 properties comprising 66,732,561 rentable square feet with ~~98.7%~~98.4% occupancy. ~~Tenants include Bank of America, N.A., Healthy Way of Life II, LLC (d.b.a Life Time Fitness), Amazon.com, Inc., JPMorgan Chase Bank, N.A. Nuance Communications, Inc. and others.~~ As of March 31, ~~2016,~~2017, the Company has ownership interests in 48 industrial and office properties which are held in unconsolidated equity investments in the United States and Europe and two properties held through the investment in CBRE Strategic Partners Asia. As of March 31, 2017, the Company’s asset management business ~~which operates under the name Gramercy Asset Management,~~ manages ~~for third-parties~~ approximately ~~$900,000~~$1,147,000 of commercial real estate assets, primarily on behalf of its joint venture partners, including approximately ~~$459,000~~$918,000 of assets in Europe.

During the three months ended March 31, ~~2016,~~2017, the Company acquired ~~three~~seven properties aggregating ~~621,646~~2,257,311 square feet ~~in two separate transactions~~ for a total purchase price of approximately ~~$52,750.~~

$124,672, including the acquisition of a previously consolidated variable interest entity, or VIE, for $29,605 and the acquisition of a vacant property for $2,400. During the three months ended March 31, ~~2016,~~2017, the Company sold ~~nine~~seven properties aggregating ~~2,095,194~~487,872 square feet for total gross proceeds of approximately ~~$531,500.~~$51,683.

~~As of March 31, 2016,~~Prior to December 17, 2015, the ~~Company’s wholly-owned portfolio of net leased properties is summarized~~Company was known as ~~follows:~~

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

Chambers Street Properties, or Chambers. On December 17, 2015, Chambers completed a merger, or the Merger, with Gramercy Property Trust

~~Notes~~ Inc. While Chambers was the surviving legal entity, immediately following consummation of the Merger, the Company changed its name to ~~Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

“Gramercy Property Trust” and its New York Stock Exchange, or NYSE, trading symbol to “GPT.”

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

The Company’s operating partnership, GPT Operating Partnership LP, or the Operating Partnership, indirectly owns (i) all of the Company’s consolidated real estate investments, (ii) the Company’s interests in unconsolidated investments and (iii) the entities, primarily a TRS, that conduct the Company’s third-party asset management operations. The Company is the ~~sole general partner and 100% owner of the Operating Partnership. The Operating Partnership is the 100%~~100.0% owner of all of its direct and indirect ~~subsidiaries, except that, as~~subsidiaries. As of March 31, ~~2016,~~2017, third-party holders of limited partnership interests in ~~Legacy Gramercy’s operating partnership,~~ the ~~entity that owns substantially all of Legacy Gramercy’s assets and investments,~~Operating Partnership owned approximately ~~0.32%~~0.40% of the beneficial interest of the Company. These interests are referred to as the noncontrolling interests in ~~Legacy Gramercy’s operating partnership.~~the Operating Partnership. See Note 12 for more information on the Company’s noncontrolling interests.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

2. Significant Accounting Policies

Basis of Quarterly Presentation

The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, ~~it does~~they do not include all of the information and footnotes required by GAAP for complete financial statements. In management’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. The ~~2016~~2017 operating results for the period presented are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2016.~~2017. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2015.~~2016. The Condensed Consolidated Balance Sheet at December 31, ~~2015 has been~~2016 was derived from the audited Consolidated Financial Statements at that date.

Reclassifications

Certain prior year ~~amounts~~balances have been reclassified to conform towith the current year presentation. During the first quarter of 2016, the Company adopted ASU 2015-03, Simplifying the Presentation of Debt Issuances Costs, which requires the Company to reclassify debt financing costs, which were previously accounted forThese reclassifications had no effect on the deferred costs line within the asset section, and present them in the balance sheet as a direct deduction from the carrying amount of the corresponding debt liability, with the exception of deferred financing costs associated with the credit facility which remain in deferred costs in the asset section onpreviously reported net income (loss). On the Condensed Consolidated ~~Balance Sheets. Deferred financing costs totaling $6,389 have been~~Statements of Operations, the Company reclassified ininvestment income of $443 for the ~~December~~three months ended March 31, 2015 Condensed Consolidated Balance Sheet from the deferred costs line and netted against the corresponding debt liability. See “Recently Issued Accounting Pronouncements” below for further discussion of the new accounting guidance for deferred financing costs.2016 into other income.

Principles of Consolidation

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

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

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

Real Estate Investments

Real Estate Acquisitions

In January 2017, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2017-01, Amendments to Business Combinations, which clarifies the framework for determining whether an integrated set of assets and activities meets the definition of a business. The revised framework narrows the definition of a business, which is expected to result in fewer transactions being accounted for as business combinations. Acquisitions of integrated sets of assets and activities that do not meet the definition of a business are accounted for as asset acquisitions. Although the Company is not required to implement ASU 2017-01 until annual periods beginning after December 15, 2017, including interim periods within those periods, the Company early adopted the new standard in the

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

first quarter of 2017. As a result, the Company evaluated its real estate acquisitions during the first quarter of 2017 under the new framework and determined the properties acquired did not meet the definition of a business, thus the transactions were accounted for as asset acquisitions. Refer to the "Recently Issued Accounting Pronouncements" section below for more information on the new guidance and refer to Note 4 for more information on the transactions during the first quarter of 2017.

The Company ~~records~~evaluates its acquisitions of real estate, including equity interests in entities that predominantly hold real estate assets, to determine if the acquired assets meet the definition of a business and need to be accounted for as a business combination, or alternatively, should be accounted for as an asset acquisition. An integrated set of assets and activities acquired does not meet the definition of a business if either (i) substantially all the fair value of the gross assets acquired is concentrated in either a single identifiable asset or a group of similar identifiable assets, or (ii) the asset and activities acquired do not contain at least an input and a substantive process that together significantly contribute to the ability to create outputs. The Company expects that its acquisitions of real estate will continue to not meet the revised definition of a business.

Acquisitions of real estate that do not meet the definition of a business, including sale-leaseback transactions that have newly-originated leases and real estate investments under construction, or build-to-suit investments, are recorded as asset acquisitions. The accounting for asset acquisitions is similar to the accounting for business combinations, ~~when~~except that the acquisition consideration, including acquisition costs, is allocated to the individual assets acquired and liabilities assumed on a relative fair value basis. Based on this allocation methodology, asset acquisitions do not result in the recognition of goodwill or a bargain purchase. Additionally, for build-to-suit investments in which the Company may engage a developer to construct a property or provide funds to a tenant to develop a property, the Company capitalizes the funds provided to the developer/tenant and real estate ~~is occupied, at least~~taxes, if applicable, during the construction period.

To determine the fair value of assets acquired and liabilities assumed in ~~part, at acquisition. Costs directly related to the~~an acquisition, ~~of such investments are expensed as incurred. The Company allocates the purchase price of real estate to~~which generally include land, building, improvements, and intangibles, such as the value of above- and below-market leases and origination costs associated with the in-place leases at the acquisition ~~date. The values~~date, the Company utilizes various estimates, processes and information to determine the as-if-vacant property value. Estimates of ~~the above-~~value are made using customary methods, including data from appraisals, comparable sales, and below-market leases are amortized and recorded as either an increase, in the case of below-market leases, or a decrease, in the case of above-market leases, to rental revenue over the remaining term of the associated lease. The values associated with in-place leases are amortized to depreciation and amortization expense over the remaining term of the associated lease.

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

Acquired real estate investments involving sale-leasebacks that have newly-originated leases are recorded as asset acquisitions and accordingly, transaction costs incurred in connection with the acquisition are capitalized. Acquired real estate investments which are under construction are considered build-to-suit transactions and other acquired real estate investments that do not meet the definition of a business combination are recorded at cost. In build-to-suit transactions, the Company engages a developer to construct a property or provides funds to a tenant to develop a property. The Company ~~capitalizes~~assesses the ~~funds provided~~fair value of leases assumed at acquisition based upon estimated cash flow projections that utilize appropriate discount rates and available market information. Refer to the ~~developer/tenant~~policy section "Intangible Assets and ~~real estate taxes, if applicable, during~~Liabilities" for more information on the ~~construction period.~~Company’s accounting for intangibles.

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

For transactions that qualify as business combinations, the Company recognizes the assets acquired and liabilities assumed at fair value, including the value of intangible assets and liabilities, and any excess or deficit of the consideration transferred relative to the fair value of the net assets acquired is recorded as goodwill or a bargain purchase gain, as appropriate. Acquisition costs of business combinations are expensed as incurred.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

Capital Improvements

In leasing space, the Company may provide funding to the lessee through a tenant allowance. Certain improvements are capitalized when they are determined to increase the useful life of the building. During construction of qualifying projects, the Company capitalizes project management fees as permitted to be charged under the lease, if incremental and identifiable. In accounting for tenant allowances, the Company determines whether the allowance represents funding for the construction of leasehold improvements and evaluates the ownership of such improvements. If the Company is considered the owner of the leasehold improvements, ~~constructed using a tenant allowance,~~ the Company capitalizes the amount of the tenant allowance and depreciates it over the shorter of the useful life of the leasehold improvements or the lease term. If the tenant allowance represents a payment for a purpose other than funding leasehold improvements, or ifin the event the Company is not considered the owner of the improvements for accounting purposes, the allowance is considered to be a lease incentive and is recognized over the lease term as a reduction of rental revenue. Factors considered during this evaluation usually include (i) who holds legal title to the improvements, (ii) evidentiary requirements concerning the spending of the tenant allowance, and (iii) other controlling rights provided by the lease agreement (e.g. unilateral control of the tenant space during the build-out process). Determination of the accounting for a tenant allowance is made on a case-by-case basis, considering the facts and circumstances of the individual tenant lease.

Impairments

The Company ~~also~~ reviews the recoverability of ~~the~~a property’s carrying value when circumstances indicate a possible impairment of the value of a property, such as an adverse change in future expected occupancy or a significant decrease in the market price of an asset. The review of recoverability is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as changes in strategy resulting in an increased or decreased holding period, expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If management determines impairment exists due to the inability to recover the carrying value of a property, for properties to be held and used, an impairment loss is recorded ~~in the Condensed Consolidated Statements of Operations~~ to the extent that the carrying value exceeds the estimated fair value of the property ~~for properties to be held and used~~ and for assets held for sale, an impairment loss is recorded to the extent that the carrying value exceeds the fair value less estimated cost of disposal. These assessments are recorded as an impairment loss in the Condensed Consolidated Statements of Operations in the period the determination is made. The estimated fair value of the asset becomes its new cost ~~basis and if the~~basis. For a depreciable long-lived asset is to be held and used, the new cost basis will be depreciated or amortized over ~~its~~the remaining useful ~~life.~~

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

~~Intangible Assets and Liabilities~~

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

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

~~Intangible assets and liabilities consist of the following:~~

March 31, 2016 December 31, 2015
Intangible assets:

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

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

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

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

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

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

~~Goodwill~~

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

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

~~Unconsolidated Equity Investments~~

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

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

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

Cash and Cash Equivalents

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

Restricted Cash

The Company had restricted cash of ~~$166,552~~$13,101 and ~~$17,354~~$12,904 at March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively, which primarily ~~consists~~consisted of ~~proceeds from property sales held by qualified intermediaries to be used for tax-deferred, like-kind exchanges under IRC Section 1031, as well as~~ reserves for certain capital improvements, leasing, interest and real estate tax and insurance payments as required by certain mortgage loan obligations.

~~Variable Interest Entities~~

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

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

Variable Interest Entities

The Company had ~~four~~two and three consolidated VIEs as of March 31, ~~2016~~2017 and ~~two consolidated VIEs as of~~ December 31, ~~2015.~~2016, respectively. The Company had four unconsolidated VIEs as of March 31, ~~2016~~2017 and December 31, ~~2015.~~2016. The following is a summary of the Company’s involvement with VIEs as of March 31, ~~2016:~~2017:

Company carrying
value-assets

Company carrying
value-liabilities

Face value of assets
held by the VIEs

Face value of liabilities
issued by the VIEs
Assets

Consolidated VIEs
Operating partnerships $ 5,348,309
$ 2,488,630
$ 5,348,309
$ 2,488,630
Proportion Foods $ 8,329
$ 550
$ 8,329
$ 8,820
Gramercy Europe Asset Management (European Fund Manager) $ 276
$ 1,029
$ 276
$ 1,029
Unconsolidated VIEs
Gramercy Europe Asset Management (European Fund Carry Co.) $ —
$ —
$ 11
$ 28
Retained CDO Bonds $ 8,786
$ —
$ 1,202,885
$ 1,197,539



	Company carrying value-assets		Company carrying value-liabilities		Face value of assets held by the VIEs		Face value of liabilities issued by the VIEs
Consolidated VIEs:
Operating Partnership	$	5,606,860	$	2,867,691	$	5,606,860	$	2,867,691
Gramercy Europe Asset Management (European Fund Manager)	$	1,062	$	9	$	1,062	$	1,473
Unconsolidated VIEs:
Gramercy Europe Asset Management (European Fund Carry Co.)	$	7	$	—	$	28	$	—
Retained CDO Bonds	$	4,828	$	—	$	446,451	$	577,169

The following is a summary of the Company’s involvement with VIEs as of December 31, ~~2015:~~2016:


	Company carrying value-assets		Company carrying value-liabilities		Face value of assets held by the VIEs		Face value of liabilities issued by the VIEs		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
Consolidated VIEs:
Operating Partnership									$	5,603,527	$	2,842,493	$	5,603,527	$	2,842,493
Proportion Foods	$	7,949	$	16	$	7,949	$	8,183	$	22,836	$	3,041	$	22,836	$	23,514
Gramercy Europe Asset Management (European Fund Manager)	$	334	$	832	$	334	$	832	$	1,100	$	47	$	1,100	$	1,742
Unconsolidated VIEs
Unconsolidated VIEs:
Gramercy Europe Asset Management (European Fund Carry Co.)	$	—	$	—	$	11	$	16	$	8	$	—	$	31	$	—
Retained CDO Bonds	$	7,471	$	—	$	1,382,373	$	1,282,583	$	11,906	$	—	$	391,990	$	592,414

Consolidated VIEs

Operating Partnership

The Company’s Operating Partnership is a consolidated VIE because the Company is its primary beneficiary due to its majority ownership and ability to exercise control over every aspect of the Operating Partnership’s operations. The assets and liabilities of the Company and its Operating Partnership are substantially the same.

Gramercy Europe Asset Management (European Fund Manager)

In connection with the Company’s December 2014 investment in the Gramercy European Property Fund, the Company acquired equity interests in the entity, hereinafter European Fund Manager, which provides investment and asset management services to the Gramercy European Property Fund. The Company determined that European Fund

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

~~Consolidated VIEs~~Manager is a VIE, as the equity holders of that entity do not have controlling financial interests and do not have the obligation to absorb losses. As Gramercy Europe Asset Management, through an investment advisory agreement with the VIE, controls the activities that most significantly affect the economic outcome of European Fund Manager, the Company concluded that it is the entity’s primary beneficiary and has consolidated the VIE. The Company receives net cash inflows from European Fund Manager in the form of management fees, and if the VIE’s cash inflows are not sufficient to cover its obligations, the Company may provide financial support for the VIE.

Proportion Foods

In December 2015, the Company entered into a non-recourse financing arrangement with Big Proportion Austin LLC, or BIG, for a build-to-suit industrial property in Round Rock, Texas, or Proportion Foods. Concurrently, the Company entered into a forward purchase agreement with BIG, pursuant to which the Company will acquire the property, which is ~~100%~~100.0% leased to Proportion Foods, upon substantial completion of the facility’s development. The Company ~~has~~ determined that Proportion Foods iswas a VIE, as the equity holders of the entity dodid not have controlling financial interests and ~~the obligation~~were not obligated to absorb losses. The Company ~~controls~~controlled the activities that most significantly ~~affect~~affected the economic outcome of Proportion Foods through its financing arrangement to fund the property’s development and its forward purchase agreement with BIG. As such, the Company ~~has~~ concluded ~~that~~ it iswas the entity’s primary beneficiary and ~~has~~ consolidated the VIE. ~~The Company has a note receivable from BIG related to the financing arrangement, which is a note payable for BIG and thus eliminates upon consolidation of the VIE.~~

The construction of the facility on the property ~~is expected to be complete~~was completed in ~~December 2016 and~~March 2017. The Company acquired the ~~Company has committed $24,950~~property upon completion in ~~financing for the construction. BIG is responsible for funding in excess of the $24,950 mortgage note.~~March 2017. As of March 31, ~~2016,~~2017, the property was wholly-owned by the Company ~~has funded $8,270 for the property.~~

~~Gramercy Europe Asset Management (European Fund Manager)~~

In connection with the Company’s December 2014 investment in the Gramercy European Property Fund, the Company acquired equity interests in the entity, hereinafter European Fund Manager, which provides investment and ~~asset management services to Gramercy European Property Fund. The Company has determined that European Fund Manager is~~was no longer a VIE, as the equity holders of that entity do not have controlling financial interests and the obligation to absorb losses. As Gramercy Europe Asset Management, through an investment advisory agreement with the VIE, controls the activities that most significantly affect the economic outcome of European Fund Manager, the Company has concluded that it is the entity’s primary beneficiary and has consolidated ~~the VIE.~~

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

Unconsolidated VIEs

Gramercy Europe Asset Management (European Fund Carry Co.)

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

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

Investment in Retained CDO Bonds

The ~~Retained CDO Bonds are~~Company has retained non-investment grade subordinate bonds, preferred shares and ordinary shares of three collateralized debt obligations, or CDOs, ~~which~~together the ~~Company recognized subsequent to the disposal of its Gramercy Finance segment, or Gramercy Finance, and exit from the commercial real estate finance business in March 2013.~~Retained CDO Bonds. The Company does not control the activities that most significantly impact the Retained CDO Bonds’ economic performance and is not obligated to provide any financial support to ~~these CDOs.~~them, thus the Retained CDO Bonds have been determined to be unconsolidated VIEs, in which the Company’s interest is recorded at fair value within other assets on the Condensed Consolidated Balance Sheets. The Retained CDO Bonds may provide the potential for the Company to receive continuing cash flows in the future, however, there is no guarantee that the Company will realize any proceeds from the Retained CDO Bonds or what the timing of the proceeds may be. The Company’s maximum exposure to loss is limited to its interest in the Retained CDO ~~Bonds and the Company does not control the activities that most significantly impact the VIE’s economic performance.~~Bonds.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

~~Assets Held for Sale and Discontinued Operations~~

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

Tenant and Other Receivables

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

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

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

Tenant and other receivables are recorded net of the allowances for doubtful accounts, which as of March 31, ~~2016~~2017 and December 31, ~~2015~~2016 were ~~$261~~$230 and ~~$204,~~$57, respectively. The Company continually reviews receivables related to rent, tenant reimbursements, and management fees, including incentive fees, and determines collectability by taking into consideration the tenant or asset management clients’ payment history, the financial condition of the tenant or asset management client, business conditions in the industry in which the tenant or asset management client operates and economic conditions in the area in which the property or asset management client is located. In the event that the collectability of a receivable is in doubt, the Company increases the allowance for doubtful accounts or records a direct write-off of the ~~receivable.~~receivable, as appropriate.

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

~~Deferred costs consist~~Intangible Assets and Liabilities

As discussed above in the policy section “Real Estate Acquisitions” the Company follows the acquisition method of ~~deferred financing costs, deferred acquisition costs,~~accounting for its asset acquisitions and ~~deferred leasing costs. Deferred costs~~business combinations and thus allocates the purchase price of acquired properties to tangible and identifiable intangible assets acquired based on their respective fair values. Identifiable intangible assets include amounts allocated to acquired leases for above- and below- market lease rates and the value of in-place leases. Management also considers information obtained about each property as a result of its pre-acquisition due diligence.

Above-market and below-market lease values for properties acquired are ~~presented net~~recorded based on the present value of ~~accumulated amortization.~~

the difference between the contractual amount to be paid pursuant to each in-place lease and management’s estimate of the fair market lease rate for each such in-place lease, measured over a period equal to the remaining non-cancelable term of the lease. The ~~Company’s deferred financing costs are comprised of costs~~present value calculation utilizes a discount rate that reflects the risks associated with the ~~Company’s unsecured credit facilities~~leases acquired. The above-market and ~~include commitment fees, issuance costs, and legal and other third-party costs associated with obtaining the related financing. Deferred financing costs~~below-market lease values are amortized onas a ~~straight-line or effective interest basis~~reduction of and increase to rental revenue, respectively, over the ~~contractual~~remaining non-cancelable terms of the respective ~~agreements~~leases. If a tenant terminates its lease prior to its contractual expiration and no future rental payments will be received, any unamortized balance of the ~~amortization is reflected as interest expense. Unamortized deferred financing~~market lease intangibles will be written off to rental revenue.

The aggregate value of in-place leases represents the costs ~~are expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financing transactions that do not close are expensed in the period in which it is determined~~of leasing costs, other tenant related costs, and lost revenue that the ~~financing will~~Company did not ~~close. During the first quarter of 2016, the Company adopted accounting guidance related~~have to ~~the presentation of deferred financing costs on the balance sheet and reclassified amounts from the deferred costs line pertaining to debt arrangements other than~~incur by acquiring a property that is already occupied. Factors considered by management in its unsecured credit facilities, that were within the asset section, to instead be netted against the corresponding debt liability for all periods presented. See “Recently Issued Accounting Pronouncements” below for further discussionanalysis of the ~~new accounting guidance for deferred financing costs.~~in-place lease intangibles include an estimate of carrying costs during the expected

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

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

lease-up period for each property taking into account current market conditions and costs to execute similar leases, including leasing commissions and other related expenses. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the anticipated lease-up period. The value of in-place leases is amortized to depreciation and amortization expense over the remaining non-cancelable term of the respective leases, but never over a term that exceeds the remaining depreciable life of the building. If a tenant terminates its lease prior to its contractual expiration and no future rental payments will be received, any unamortized balance of the in-place lease intangible will be written off to depreciation and amortization expense.

Above-market and below-market ground rent intangibles are recorded for properties acquired in which the Company is the lessee pursuant to a ground lease assumed at acquisition. The above-market and below-market ground rent intangibles are valued similarly to above-market and below-market leases, except that, because the Company is the lessee as opposed to the lessor, the above-market and below-market ground lease values are amortized as a reduction of and increase to rent expense, respectively, over the remaining non-cancelable terms of the respective leases.

Intangible assets and liabilities consist of the following:



	March 31, 2017			December 31, 2016
Intangible assets:
In-place leases, net of accumulated amortization of $137,416 and $117,717	$	536,913		$	553,924
Above-market leases, net of accumulated amortization of $17,325 and $15,719	56,198			59,647
Below-market ground rent, net of accumulated amortization of $306 and $274	5,078			5,109
Amounts related to assets held for sale, net of accumulated amortization of $294 and $0	(1,378		)	—
Total intangible assets	$	596,811		$	618,680
Intangible liabilities:
Below-market leases, net of accumulated amortization of $28,485 and $26,168	$	212,415		$	223,110
Above-market ground rent, net of accumulated amortization of $302 and $248	7,000			7,073
Amounts related to liabilities of assets held for sale, net of accumulated amortization of $437 and $0	(3,014		)	—
Total intangible liabilities	$	216,401		$	230,183

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

The ~~Company’s deferred leasing costs include direct costs, such~~following table provides the weighted-average amortization period as of March 31, 2017 for intangible assets and liabilities and the projected amortization expense for the next five years.



	Weighted-Average Amortization Period	April 1 to December 31, 2017			2018			2019			2020			2021
In-place leases	9.7	$	68,372		$	83,678		$	70,384		$	58,007		$	50,453
Total to be included in depreciation and amortization expense		$	68,372		$	83,678		$	70,384		$	58,007		$	50,453

Above-market lease assets	7.3	$	8,236		$	10,510		$	9,340		$	7,224		$	6,012
Below-market lease liabilities	19.2	(9,844		)	(12,763		)	(12,414		)	(12,120		)	(11,984		)
Total to be included in rental revenue		$	(1,608	)	$	(2,253	)	$	(3,074	)	$	(4,896	)	$	(5,972	)

Below-market ground rent	41.1	$	95		$	127		$	127		$	127		$	127
Above-market ground rent	33.0	(161		)	(214		)	(214		)	(214		)	(214		)
Total to be included in property operating expense		$	(66	)	$	(87	)	$	(87	)	$	(87	)	$	(87	)

The Company recorded $24,172 and $27,560 of amortization of in-place lease ~~commissions, incurred~~intangible assets as part of depreciation and amortization for the three months ended March 31, 2017 and 2016, respectively. The Company recorded $621 and $181 of amortization of market lease intangible assets and liabilities as an increase to ~~initiate~~rental revenue for the three months ended March 31, 2017 and ~~renew operating leases~~2016, respectively. The Company recorded $21 and ~~are amortized on a straight-line basis over the related lease term~~$9 of amortization of ground rent intangible assets and liabilities as a reduction ~~from rental revenue.~~

~~Fair Value Measurements~~

Atof other property operating expense for the three months ended March 31, 2017 and 2016, and December 31, 2015, the Company measured its Retained CDO Bonds, derivative instruments, and CBRE Strategic Partners Asia on a recurring basis and measured its real estate investments classified as held for sale at Merger closing on a non-recurring basis. ASC 820-10, “Fair Value Measurements and Disclosures,” among other things, establishes a hierarchical disclosure framework associated with the level of pricing observability utilized in measuring financial instruments and other assets and liabilities at fair value. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, fair values are not necessarily indicative of the amounts the Company could realize on disposition of these assets and liabilities. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, or an exit price. The level of pricing observability generally correlates to the degree of judgment utilized in measuring the fair value of financial instruments and other assets and liabilities. The investment manager of CBRE Strategic Partners Asia applies valuation techniques for the Company’s investment carried at fair value based upon the application of the income approach, the direct market comparison approach, the replacement cost approach or third-party appraisals to the underlying assets held in the unconsolidated entity in determining the net asset value attributable to the Company’s ownership interest therein. The three broad levels defined are as follows:

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

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

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

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

Revenue Recognition

Real Estate Investments

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

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

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

The Company recognizes sales of real estate properties only upon closing. Payments received from purchasers prior to closing are recorded as deposits. Profit on real estate sold is recognized using the full accrual method upon

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

closing when the collectability of the sale price is reasonably assured and the Company is not obligated to perform significant activities after the sale. Profit may be deferred in whole or part until the sale meets the requirements of profit recognition on sale of real estate.

Asset Management Business

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

Certain of the Company’s asset management contracts include provisions that may allow it to earn additional fees, generally described as incentive fees or profit participation interests, based on the achievement of a targeted valuation of the managed assets or the achievement of a certain internal rate of return on the managed assets. The Company recognizes incentive fees on its asset management contracts based upon the amount that would be due pursuant to the contract, if the contract were terminated at the reporting date. If the contract may be terminated at will, revenue will only be recognized ~~for~~to the amount that would be due pursuant to that termination. If the incentive fee is a fixed amount, only a proportionate share of revenue is recognized at the reporting date, with the remaining fees recognized on a straight-line basis over the measurement period. The values of incentive management fees are periodically evaluated by management. For the three months ended March 31, ~~2016,~~2017 and ~~2015,~~2016, the Company recognized incentive fees of ~~$973~~$1,449 and ~~$3,035,~~$973, respectively.

~~Investment and~~ Other Income

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

~~Share-Based Compensation Plans~~

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

Foreign Currency

Gramercy Europe Asset Management operates an asset and property management business in the United Kingdom. The Company ~~owns one property located in the United Kingdom and~~ has unconsolidated equity investments in Europe and ~~Asia.~~Asia and had two wholly-owned properties in Canada and one wholly-owned property in the United Kingdom until their dispositions in March 2017 and December 2016, respectively. The Company also has ~~euro-denominated~~ borrowings outstanding in euros and British pounds sterling under the ~~multi-currency~~multicurrency portion of its revolving credit facility. Refer to Note 5 for more information on the Company’s foreign unconsolidated equity investments.

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

Foreign Currency Translation

~~The~~During the periods presented, the Company has had interests in ~~the European Union~~Europe and ~~United Kingdom~~Canada for which the functional ~~currency is~~currencies are the euro, ~~and~~ the British pound sterling, and the Canadian dollar, respectively. The Company performs the translation from ~~the euro or the British pound sterling~~these foreign currencies to the U.S. dollar for assets and liabilities using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using a ~~weighted-average~~weighted average exchange rate during the period. The Company reports the gains and losses resulting from such translation as a component of other comprehensive income (loss). ~~As of~~For the three months ended March 31, ~~2016~~2017 and ~~2015,~~2016, the Company recorded net translation gains ~~(losses)~~ of

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

$691 and $6,119, ~~and $(218),~~ respectively. ~~These translation~~Translation gains and losses are reclassified to other income within earnings when the Company has substantially exited from all investments in the related currency.

~~Transaction Gains or Losses~~Foreign Currency Transactions

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

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

Net realized gains (losses) are recognized on foreign currency transactions in connection with the transfer of cash from or to foreign operations of subsidiaries or equity investments to the parent company. For the three months ended March 31, ~~2016~~2017 and ~~2015,~~2016, the Company recognized net realized foreign currency transaction gains (losses) of ~~$105~~$(9) and ~~$(6),~~$105, respectively, on such transactions.

~~Derivative and Non-Derivative Hedging Instruments~~

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

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

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

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

Other Assets

The Company ~~makes payments for certain~~includes prepaid expenses, ~~such as insurance~~capitalized software costs, contract intangible assets, deferred costs, goodwill, derivative assets, servicing advances receivable, and ~~property taxes~~Retained CDO Bonds in ~~advance~~other assets.

Goodwill

Goodwill represents the fair value of the ~~period in which it receives the benefit. These payments are classified as other assets and amortized over the respective period~~collaboration expected to be achieved upon consummation of benefit relating to the contractual arrangement. Other assets also includes deposits related to pending acquisitions and financing arrangements, as required by a seller or lender, respectively. Costs prepaid in connection with securing financing for a property are reclassified into deferred financing costs at the time the transaction is completed. Additionally, other assets includes costs of software purchased for internal use and as well as the value of contracts assumed by the Company pursuant to a business combination ~~such~~and is measured as ~~asset~~the excess of consideration transferred over the net assets acquired at acquisition date. The Company initially recognized goodwill of $3,887 related to the acquisition of Gramercy Europe Limited, or ~~property management contracts.~~

~~Servicing Advances Receivable~~

Gramercy Europe Asset Management, which was adjusted to $3,802 in 2015 as a result of finalization of the purchase price allocation for the acquisition. The carrying value of goodwill is adjusted each reporting period for the effect of foreign currency translation adjustments. The carrying value of goodwill at March 31, 2017 and December 31, 2016 was $3,039 and $2,988, respectively. The Company’s ~~servicing advances receivable consisted~~goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company takes a qualitative approach to consider whether an impairment of ~~its accrual for~~goodwill exists prior to quantitatively determining the ~~reimbursement of servicing advances, including expenses such as legal fees and professional fees incurred while the Company was the collateral manager~~fair value of the ~~CDOs, which were recognized as part~~reporting unit in step one of the ~~disposal of Gramercy Finance in March 2013. For~~impairment test. The Company did not record any impairment on its goodwill during the three months ended March 31, 2016 and 2015, the Company received reimbursements from servicing advances of $1,390 and $0, respectively. As of March 31, 2016 and December 31, 2015, the servicing advances receivable was $0 and $1,382, respectively.2017 or 2016.

Retained CDO Bonds

The Retained CDO Bonds are non-investment grade subordinate bonds, preferred shares and ordinary shares of three ~~CDOs, which the Company recognized at fair value and retained in March 2013 subsequent to the disposal of Gramercy Finance.~~CDOs. Management estimated the timing and amount of cash flows expected to be collected and recognized an investment in the Retained CDO Bonds equal to the net present value of these discounted cash flows. There is no guarantee that the Company will realize any proceeds from this investment, or what the timing will be for the expected remaining life of the Retained CDO Bonds. The Company considers these investments to be not of high credit quality and does not expect a full recovery of interest and principal. Therefore, the Company has suspended interest income accruals on these investments. The Company classifies the Retained CDO Bonds as available for sale. On a quarterly basis, the Company evaluates the Retained CDO Bonds to determine whether significant changes in estimated cash flows or unrealized losses on these investments, if any, reflect a decline in value which is other-than-temporary. If there is a decrease in estimated cash flows and the investment is in an unrealized loss position, the Company will record an other-than-temporary impairment, or OTTI, in the Condensed Consolidated Statements of Operations. To determine the

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

component of the OTTI related to expected credit losses, the Company compares the amortized cost basis of the Retained CDO Bonds to the present value of the revised expected cash flows, discounted using the pre-impairment effective yield. Conversely, if the security is in an unrealized gain position and there is a decrease or significant increase in expected cash flows, the Company will prospectively adjust the yield using the effective yield method. Refer to Note 9 for further discussion regarding the fair value measurement of the Retained CDO Bonds. For the three months ended March 31, ~~2016~~2017 and ~~2015,~~2016, the Company recognized no OTTI of $4,890 and $0, respectively, on its Retained CDO Bonds.

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

A summary of the Company’s Retained CDO Bonds as of March 31, ~~2016~~2017 is as follows:

Description Number of Securities Face Value Amortized Cost Gross Unrealized Gain Other-than-temporary impairment Fair Value Weighted Average Expected Life
Available for Sale, Non- investment Grade:

Retained CDO Bonds 9
$ 376,972
$ 6,842
$ 1,944
$ —
$ 8,786
2.5
Total 9
$ 376,972
$ 6,842
$ 1,944
$ —
$ 8,786
2.5



Number of Securities	Face Value		Amortized Cost		Gross Unrealized Gain		Other-than-temporary impairment			Fair Value		Weighted Average Expected Life
9	$	387,304	$	8,839	$	879	$	(4,890	)	$	4,828	1.8

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

The following table summarizes the activity related to credit losses on the Retained CDO Bonds for the three ~~month period~~months ended March 31, ~~2016~~2017 and for the year ended December 31, ~~2015:~~2016:

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

~~Income Taxes~~

The Company elected to be taxed as a REIT, under Sections 856 through 860 of the Internal Revenue Code, beginning with its taxable year ended December 31, 2004. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its ordinary taxable income, to shareholders. As a REIT, the Company generally will not be subject to U.S. federal income tax on taxable income that the Company distributes to its shareholders. If the Company fails to qualify as a REIT in any taxable year, it will then be subject to U.S. federal income taxes on taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for U.S. federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income and net cash available for distributions to shareholders. However, the Company believes that it will be organized and will operate in 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 is subject to certain state and local taxes. The Company’s TRSs are subject to federal, state and local taxes.

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

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

primarily related to the Company’s TRSs, are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided if the Company believes it is more likely than not that all or a portion of a deferred tax asset will not be realized. Any increase or decrease in a valuation allowance is included in the tax provision when such a change occurs.

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

~~Earnings Per Share~~

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



	2017			2016
Balance as of January 1, 2017 and 2016, respectively, of credit losses on Retained CDO Bonds for which a portion of an OTTI was recognized in other comprehensive income (loss)	$	(491	)	$	3,196
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 (loss)	(4,890		)	—
On Retained CDO Bonds for which an OTTI was previously recognized without any portion of OTTI recognized in other comprehensive income (loss)	—			—
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	—			(3,687		)
Balance as of March 31, 2017 and December 31, 2016, respectively, of credit of losses on Retained CDO Bonds for which a portion of an OTTI was recognized in other comprehensive income (loss)	$	(5,381	)	$	(491	)

Concentrations of Credit Risk

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

Concentrations of credit risk also arise when a number of the Company’s tenants or asset management clients are engaged in similar business activities or are subject to similar economic risks or conditions that could cause their inability to meet contractual obligations to the Company. The Company regularly monitors its portfolio to assess potential concentrations of credit risk. Management believes the current credit risk portfolio is reasonably well diversified. ~~One asset~~Asset management ~~client,~~clients KBS and Gramercy Europe Asset Management accounted for ~~86%~~68.8% and ~~80%~~26.8%, respectively, of the Company's management fee income for the three months ended March 31, 2017 and 86.3% and 12.8%, respectively, of the Company’s management fee income for the three months ended March 31, ~~2016 and 2015, respectively. Gramercy Europe Asset Management~~2016. No single tenant accounted for ~~13% of the Company’s management fee income, including European asset management fee income, for the three months ended March 31, 2016. One tenant, Bank of America, N.A., accounted for 11% and 37%~~more than 10.0% of the Company’s rental revenue for the three months ended March 31, ~~2016 and 2015 respectively.~~2017. One tenant, Bank of America, N.A., or BOA, accounted for 10.8% of the Company’s rental revenue for the three months ended March 31, 2016. The concentration of rental revenue from BOA was partially due to amortization recorded on the BOA below-market lease liabilities, which accounted for 2.9% of total rental revenue for the three months ended March 31, 2016. Additionally, for the three months ended March 31, ~~2016,~~2017, there were three states, California, Florida, and Texas, that each accounted for ~~10%~~10.0% or more of the Company’s rental revenue.

Use of Estimates

The preparation of financial statements in conformity with Generally Accepted Accounting Principles, or GAAP, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

Recently Issued Accounting Pronouncements

In May 2014, the ~~Financial Accounting Standards Board, or~~ FASB issued ASU 2014-09, Revenue from Contracts with Customers, which ~~creates~~is a comprehensive new ~~Topic ASC 606, Revenue from Contracts with Customers. The core principle of the new guidance is that an entity should~~revenue recognition model requiring a company to recognize revenue to depict the transfer of ~~promised~~ goods or services to customers in an amount ~~that reflects~~reflecting the consideration ~~to which the entity~~it expects to ~~be entitled~~receive in exchange for those goods or services. ~~Additionally, the~~The guidance also requires ~~increased~~enhanced disclosures related to the nature, amount, timing, and uncertainty of revenue ~~recognition. The update was originally effective for fiscal years, and interim periods within those years, beginning after December 15,~~that is recognized. In April 2016, ~~with early adoption not permitted. In August 2015,~~ the FASB issued ASU ~~2015-14, Revenue~~2016-10, which amends the new revenue recognition guidance on identifying performance obligations. In February 2017, the FASB issued ASU 2017-05, which clarifies the scope of gains and losses from ~~Contracts with Customers, which deferred~~ the ~~effective date so that it~~derecognition of nonfinancial assets and provides guidance for the partial sales of nonfinancial assets in context of the new revenue standard. The new revenue recognition guidance is effective for ~~fiscal years, and~~the first interim ~~periods~~period within ~~those years,~~annual reporting periods beginning after December 15, 2017, with early adoption ~~only~~ permitted ~~as of~~for the first interim period within annual reporting periods beginning after December 15, ~~2016, including interim reporting periods within that reporting period. The~~2016. Companies may use either a full retrospective or a modified retrospective approach to adopt the new guidance. A substantial portion of the Company’s revenue consists of rental revenue from leasing arrangements, which is specifically excluded from the new revenue guidance, however the Company also generates revenue from operating expense reimbursements, management fees, and gains and impairments on disposals, which will ~~appropriately adopt and apply~~be impacted by the ~~guidance retrospectively for its fiscal year ended December 31, 2018 and the interim periods within that year.~~new revenue standard. The Company is ~~currently evaluating the guidance~~continuing to ~~determine~~analyze the impact ~~it may have~~of the new revenue guidance on its ~~Condensed Consolidated Financial Statements.~~

In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis, which amends the current consolidation guidance, including introducing a separate consolidation analysis specific to limited partnershipsrecognition and other similar entities. Under this analysis, limited partnerships and other similar entities will be considered a VIE unless the limited partners hold substantive kick-out rights or participating rights. The guidance is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted.disclosure of these streams of revenue. The Company ~~adopted this guidance during~~currently expects to adopt the standard in the first quarter of ~~2016, which did not result in changes to~~2018 using the ~~Company’s conclusions regarding consolidation of applicable entities.~~

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which serves to simplify the presentation of debt issuance costs in a company’s financial statements. The amendments in the update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that liability. The update is effective for annual and interim periods beginning after December 15, 2015, with early adoption permitted. In August 2015, the FASB issued ASU 2015-15, Interest – Imputation of Interest, which allows an entity to present the debt issuance costs from a line-of-credit arrangement as an asset. The Company adopted this guidance during the first quarter of 2016 and reclassified amounts in each period presented. The adoption of this guidance did not have a material impact on the Company’s Condensed Consolidated Financial Statements as the update relates only to changes in financial statement presentation. See the “Reclassification” section above for further details on the adoption of this guidance.

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

In February 2016, the FASB issued ASU 2016-02, Leases, which amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. The update will be effective beginning in the first quarter of 2019 and early adoption is permitted. The new standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company’s accounting for leases in which it is a lessor, which represents most of its leasing arrangements, will be largely unchanged under ASU 2016-02, however the Company is ~~currently evaluating~~a lessee in several operating and ground leases and the accounting for these arrangements is more significantly impacted by the new standard. Pursuant to the new guidance, lessees are required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. The Company is continuing to evaluate the impact of adopting the new leases standard on its Condensed Consolidated Financial Statements.

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting. The update serves to simplify the accounting for share-based payment award transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification of awards on the statement of cash flows. The guidance in the ASU is effective for fiscal years beginning after December 15, ~~2016, including interim periods within those fiscal years, with early adoption permitted for any interim or annual period.~~2016. The Company ~~has not elected early adoption of the amendments in the updates and expects that~~adopted the new guidance ~~will~~in the first quarter of 2017. The adoption of this guidance did not have a material impact on ~~its~~the Company’s Condensed Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-01, Amendments to Business Combinations, which amends the current guidance to clarify the definition of a business in order to assist entities in evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The guidance is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted under certain circumstances. The amendments must be applied prospectively as of the beginning of the period of adoption. The Company elected to early adopt ASU 2017-01 in the first quarter of 2017, as described in the “Real Estate Acquisitions” section above.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

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

Real Estate Dispositions and Impairments

During the three months ended March 31, ~~2016,~~2017, the Company sold ~~nine properties. During the three months ended March 31, 2015, the Company did not sell any properties. The nine property sales in 2016 consisted of all office~~seven properties, ~~that~~which comprised an aggregate ~~2,095,194~~487,872 square feet and generated gross proceeds of ~~$531,500.~~$51,683. The Company ~~did not recognize any gains or impairments~~recognized a gain on disposals of $17,377 during the three months ended March 31, ~~2016. Six~~2017 related to the properties sold during the period. Of the properties sold in 2017, one of the ~~property~~ sales ~~in 2016 were~~was structured as a like-kind ~~exchanges~~exchange within the meaning of Section 1031 of the IRC. As a result of the ~~sales,~~sale, the Company deposited ~~$175,808~~$23,218 of the total ~~sales~~sale proceeds into an IRC Section 1031 exchange escrow account with a qualified intermediary. The Company then used ~~$30,301~~$23,218 of these funds as consideration for one property acquisition during the three months ended March 31, ~~2016. Five of the properties sold during~~2017. During the three months ended March 31, ~~2016, which were sold for gross proceeds~~2017, the Company recognized an impairment on real estate investments of ~~$386,000, represent~~$12,771 related to two properties ~~assumed in~~held by the ~~Merger that were designated~~Company as ~~held for sale at the time~~ of ~~Merger closing, thus they are included in discontinued operations for all periods presented. Four of the properties sold during the three months ended~~ March 31, ~~2016,~~2017, for which the Company determined there were ~~sold~~non-recoverable declines in value. Refer to Note 9 for ~~gross proceeds~~more information on how the Company determined the non-recurring fair value of $145,500, were also assumed in the Merger and were classified as held for sale at the time of disposition, however they are not included in discontinued operations as they did not meet the definition of discontinued operations.these two properties.

Assets Held for Sale

The Company separately classifies properties held for sale in the Condensed Consolidated ~~Balance Sheets and Condensed Consolidated Statements of Operations.~~Financial Statements. The Company had one asset and ~~six assets~~two offices that are part of another asset classified as held for sale as of March 31, ~~2016~~2017 with total net asset value of $5,834 and no assets classified as held for sale as of December 31, ~~2015, respectively.~~2016. In the normal course of business, the Company identifies non-strategic assets for sale. ~~Changes in~~Real estate investments to be disposed of are reported at the ~~market may compel the Company~~lower of carrying amount or estimated fair value, less costs to ~~decide to classify a property held for sale or classify a property that was designated~~sell. Once an asset is classified as held for sale, ~~back to held for investment. During the three months ended March 31, 2016~~depreciation and ~~2015, the Company did not reclassify any properties previously identified as held for sale to held for investment.~~

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

amortization expense is no longer recorded.

The following table summarizes the assets held for sale and liabilities related to the assets held for sale as of March 31, ~~2016 and December 31, 2015:~~2017:


Assets held for sale	March 31, 2016		December 31, 2015		March 31, 2017
Real estate investments	$	10,522	$	348,582	$	7,538
Acquired lease assets	—		61,804		1,378
Other assets	26		10,099		46
Total assets	10,548		420,485		$	8,962
Liabilities related to assets held for sale
Mortgage notes payable, net	—		260,704
Below-market lease liabilities	—		16,518		3,014
Other liabilities	376		14,142		114
Total liabilities	376		291,364		$	3,128
Net assets held for sale	$	10,172	$	129,121	$	5,834

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

Discontinued Operations

The ~~following operating results~~Company’s discontinued operations for ~~Gramercy Finance,~~ the ~~assets previously sold~~three months ended March 31, 2017 and 2016 were related to the assets that were assumed in the Merger and simultaneously designated as held for ~~sale~~sale. The following operating results for the three months ended March 31, ~~2016~~2017 and ~~2015~~2016 are included in discontinued operations for all periods presented:


	Three Months Ended March 31,						Three Months Ended March 31,
	2016			2015			2017			2016
Operating Results:
Revenues	$	5,857		$	(100	)	$	(6	)	$	5,857
Operating expenses	(2,180		)	210			6			(2,180		)
General and administrative expense	(12		)	(172		)	(24		)	(12		)
Interest expense	(955		)	—			—			(955		)
Gain on extinguishment of debt	1,930			—			—			1,930
Net income (loss) from discontinued operations	$	4,640		$	(62	)	$	(24	)	$	4,640

Discontinued operations have not been segregated in the Condensed Consolidated Statements of Cash Flows. The table below presents additional relevant information pertaining to results of discontinued operations for the three months ended March 31, ~~2016~~2017 and ~~2015,~~2016, including depreciation, amortization, capital expenditures, and significant operating and investing noncash items:


	Three Months Ended March 31,					Three Months Ended March 31,
	2016			2015		2017		2016
Significant operating noncash items	$	(9,455	)	$	—	$	—	$	(9,455	)
Increase in cash and cash equivalents related to foreign currency translation	275			—		—		275
Total	$	(9,180	)	$	—	$	—	$	(9,180	)

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

4. Real Estate Investments

Property Acquisitions

During the three months ended March 31, ~~2016,~~2017, the ~~Company’s~~Company acquired seven properties comprising 2,257,311 square feet for an aggregate contract purchase price of approximately $124,672, including the acquisition of a consolidated VIE for $29,605 and the acquisition of a vacant property ~~acquisitions are summarized as follows:~~

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

~~During~~for $2,400. Total value of the ~~year ended December 31, 2015, the Company’s property acquisitions are summarized as follows:~~

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


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

~~(2)~~

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

~~The Company recorded revenues and net income for~~properties acquired during the three months ended March 31, ~~2016~~2017 was comprised of ~~$652~~$115,504 of real estate assets, $11,296 of intangible assets, and ~~$464, respectively, related~~$774 of intangible liabilities, including transaction costs capitalized for the asset acquisitions.

Property Purchase Price Allocations

During the first quarter of 2017, the Company adopted ASU 2017-01, Amendments to Business Combinations, which amends the definition of a business and provides a revised framework for the determination of whether an integrated set of assets and activities meets the definition of a business. The Company evaluated its ~~three~~ real estate acquisitions during the ~~period.~~first quarter of 2017 under the new framework and determined the properties acquired did not meet the definition of a business, thus the transactions were accounted for as asset acquisitions. The Company ~~recorded revenues and net loss for the three months ended March 31, 2015~~expects that its acquisitions of ~~$3,446 and $472, respectively, related to its 27~~ real estate will not meet the revised definition of a business and will be accounted for as asset acquisitions ~~during~~going forward. Refer to Note 2 for more information on the ~~period.~~new accounting standard and the Company’s adoption thereof.

~~Property Purchase Price Allocations~~

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

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


~~(1)~~	Allocations exclude the 104 properties acquired as part of the Merger Portfolio, which are separately disclosed below in the section, “Merger with Chambers.” Additionally, allocations include real estate assets of $7,947 for Proportion Foods, a consolidated VIE. Refer to Note 2 for more information on Proportion Foods.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

~~During~~As noted above, the ~~three months ended March 31,~~Company’s acquisitions in 2017 were accounted for as asset acquisitions, however the majority of the Company’s acquisitions prior to 2017 were accounted for as business combinations pursuant to the definition of a business prior to the adoption of ASU 2017-01. Of the acquisitions prior to 2017, there were 21 properties acquired in 2016 ~~and the year ended~~that were accounted for as business combinations which had preliminary purchase price allocations recorded as of December 31, ~~2015, the~~2016. The Company finalized the purchase price allocations ~~for five and 141~~of these 21 properties ~~acquired in prior periods, respectively, for which~~during the ~~Company had recorded preliminary purchase price allocations at the time~~first quarter of ~~acquisition.~~2017. The aggregate changes recorded from the preliminary purchase price allocations to the finalized purchase price allocations, ~~in accordance with ASU 2015-16, which the Company adopted in the third quarter of 2015,~~ are shown in the table below:

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


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

~~Pro Forma~~

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

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


~~(1)~~	~~Net income for each period has been adjusted for acquisition costs related to the property acquisitions during the period.~~

~~Merger with Chambers~~

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

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

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

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

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

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

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

~~Acquisition of Gramercy Europe Asset Management~~

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



	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		Decrease to Rental Revenue		Increase to Depreciation and Amortization Expense
Three Months Ended March 31, 2017	21	$	513,424	$	61,178	$	11,093	$	513,087	$	60,627	$	10,205	$	27	$	16

5. Unconsolidated Equity Investments

The Company has investments in a variety of ventures. The Company will co-invest in entities that own multiple properties with various investors or with one partner. The Company may manage the ventures and collect asset and property management fees as well as incentive fees, otherwise known as profit participation, from its investment partners, or one of the other partners will manage the ventures for asset and property management fees as well as incentive fees. Depending on the structure of the venture, the Company’s voting interest may be different than its economic interest. As the Company does not control these ventures, the Company accounts for ~~these~~substantially all of its unconsolidated equity investments under the equity method of ~~accounting.~~accounting because it exercises significant influence, but does not unilaterally control the entities, and is not considered to be the primary beneficiary. In unconsolidated equity investments, the rights of the other investors are protective and participating. Unless the Company is determined to be the primary beneficiary, these rights preclude it from consolidating the investments. The investments are recorded initially at cost as unconsolidated equity investments, as applicable, and subsequently are adjusted for equity interest in net income (loss) and contributions and distributions. The amount of the investments on the Condensed Consolidated Balance Sheets is evaluated for impairment at each reporting period. None of the unconsolidated equity investment debt is recourse to the Company. Transactions with unconsolidated equity method entities are eliminated to the extent of the Company’s ownership in each such entity. Accordingly, the Company’s share of net income (loss) of these equity method entities is included in consolidated net income (loss).

As a result of the Merger in 2015, the Company acquired an interest in four unconsolidated entities, the ~~Duke Joint Venture,~~ Goodman Europe ~~Joint Venture,~~JV, the Goodman UK ~~Joint Venture,~~JV, the Duke JV, and ~~the~~ CBRE Strategic Partners ~~Asia, a real estate investment fund.~~Asia. The Company’s equity investment in the entities was fair valued on the Merger closing date, and the difference between the historical carrying value of the net assets and the fair value ~~has been~~was recorded as a basis ~~difference. The basis~~ difference, ~~will be~~which is amortized to equity in net income (loss) from ~~joint ventures and~~unconsolidated equity investments over the remaining ~~weighted-average~~weighted average useful life of the underlying assets of each entity.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

As of March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, the Company owned properties through unconsolidated equity investments and had investment interests in these unconsolidated entities as follows:

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



	As of March 31, 2017								As of December 31, 2016
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	14.2	%	14.2	%	Various	$	51,524	27	$	50,367	26
Goodman Europe JV ³	5.1	%	5.1	%	Gramercy European Property Fund	3,269		8	3,491		8
Strategic Office Partners	25.0	%	25.0	%	TPG Real Estate	18,444		7	15,872		6
Goodman UK JV	80.0	%	50.0	%	Goodman Group	25,336		2	25,309		2
CBRE Strategic Partners Asia	5.07	%	5.07	%	Various	3,999		2	4,145		2
Philips JV	25.0	%	25.0	%	Various	—		1	—		1
Morristown JV	50.0	%	50.0	%	21 South Street	2,615		1	2,623		1
Total						$	105,187	48	$	101,807	46

~~(1)~~1.

The amounts presented include basis differences of ~~$101,236, $38,651~~$2,279 and ~~$6,140,~~$3,918, net of accumulated amortization, for the ~~Duke Joint Venture,~~ Goodman Europe ~~Joint Venture,~~JV and Goodman UK ~~Joint Venture,~~JV, respectively, as of March 31, ~~2016.~~2017. The amounts presented include basis differences of ~~$136,198, $37,371,~~$2,286 and ~~$6,578,~~$3,941, net of accumulated amortization, for the ~~Duke Joint Venture,~~ Goodman Europe ~~Joint Venture,~~JV and Goodman UK ~~Joint Venture,~~JV, respectively, as of December 31, ~~2015.~~2016.


~~(2)~~2.	Includes European Fund Carry Co., which has a carrying value of ~~$(7)~~$7 and $0$8 for the Company’s ~~25%~~25.0% interest as of March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively.

As of March 31, 2017, 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. In the table above, as of December 31, 2016, the Company’s 94.9% interest in Goodman Europe JV held through its 14.2% interest in the Gramercy European Property Fund is included in the amount shown for the Gramercy European Property Fund and the Company’s 5.1% direct interest in the Goodman Europe JV is presented separately as the amount shown for the Goodman Europe JV.

The following is a summary of the Company’s unconsolidated equity investments for the three months ended March 31, ~~2016:~~2017:

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



	Unconsolidated Equity Investments
Balance at January 1, 2017	$	101,807
Contributions to unconsolidated equity investments	2,650
Equity in net loss of unconsolidated equity investments, including adjustments for basis differences	(94		)
Other comprehensive loss of unconsolidated equity investments	1,176
Distributions from unconsolidated equity investments	(352		)
Balance at March 31, 2017	$	105,187

Gramercy European Property Fund

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

In December 2014, the Company, along with several equity investment partners, formed the Gramercy European Property Fund, a private real estate investment fund ~~which~~that targets single-tenant industrial, office and specialty retail assets throughout Europe. ~~The~~In the second quarter of 2016, the Gramercy European Property Fund acquired 74.9% of the Company’s 80.0% interest in the Goodman Europe JV. As of March 31, 2017 and December 31, 2016, the Company has a 14.2% interest in the Gramercy European Property Fund, which has a 94.9% ownership interest in the Goodman Europe JV. As of March 31, 2017 and December 31, 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 that is held through the Company’s 14.2% interest in the Gramercy European Property Fund.

Since inception, the equity investors, including the Company, have collectively ~~committed approximately $401,145~~funded $395,213 (€352,500) in equity capital ~~comprised of an initial commitment of approximately $287,345 (€252,500), including $56,900 (€50,000) from~~to the Company and $230,445 (€202,500) from its equity investment partners, plus an additional $113,800 (€100,000) from certain equity investment partners, not including the Company, after the first $287,345 (€252,500) has been invested.Gramercy European Property Fund. As of March 31, ~~2016~~2017 and December 31, ~~2015,~~2016 the ~~Company contributed $28,134 (€25,358) and $25,663 (€23,160)~~Company's cumulative contributions to the Gramercy European Property Fund ~~respectively.~~were $55,892 (€50,000). As of March 31, 2017, the remaining commitments of all equity investors to the Gramercy European Property Fund were $53,260 (€50,000), including $13,315 (€12,500) from the Company. During the three months ended March 31, 2017 and 2016, the Company received distributions of $352 and $3,561, respectively, from the Goodman Europe JV.

During three months ended March 31, 2017 and the year ended December 31, ~~2015,~~2016, the Gramercy European Property Fund acquired ~~three~~one and 1213 properties, respectively, located in Germany, the Netherlands, Poland, and the United ~~Kingdom.~~Kingdom, and in 2016 also acquired the Company's 5.1% interest in one property located in Lille, France held by the Goodman Europe JV. Refer to Note 8 for additional information on the equity transactions related to the Gramercy European Property Fund and Goodman Europe JV. As of March 31, 2017, there were 27 properties in the Gramercy European Property Fund and eight additional properties held in the Goodman Europe JV.

Strategic Office Partners

In August 2016, the Company partnered with TPG Real Estate, or TPG, to form Strategic Office Partners, an unconsolidated equity investment created for the purpose of acquiring, owning, operating, leasing and selling single-tenant office properties located in high-growth metropolitan areas in the United States. In September 2016, the Company contributed six properties to Strategic Office Partners and in the first quarter of 2017 Strategic Office Partners acquired one property. The Company provides asset and property management, accounting, construction, and leasing services to Strategic Office Partners, for which it earns management fees and is entitled to a promoted interest. TPG and the Company have committed to fund an aggregate $400,000 to Strategic Office Partners, including $100,000 from the Company. During the three months ended March 31, 2017, the Company contributed $2,650 to Strategic Office Partners and as of March 31, 2017, the Company's remaining commitment is $81,323. During the three months ended March 31, 2017, the Company received no distributions from the Strategic Office Partners.

Goodman UK JV

The Goodman UK JV invests in industrial properties in the United Kingdom. During the three months ended March 31, 2017 and 2016, the Company received no distributions from the Goodman UK JV.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

~~Philips Building~~

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

Duke JV

The Duke ~~Joint Venture invests~~JV invested in industrial and office properties located throughout the United States. ~~The Company’s investment partner,~~In June 2016, the Company and Duke ~~Realty, acts as the managing member of~~entered into a Dissolution and Liquidation Agreement, pursuant to which the Duke ~~Joint Venture, is entitled to receive fees in connection with the services it provides~~JV distributed seven of its properties to the Company and one of its properties to Duke ~~Joint Venture, including asset management, construction, development, leasing~~on June 30, 2016, then was dissolved in July 2016 following the disposition of its remaining property and property management services, and is entitled to a promoted interest in the Duke Joint Venture. The Company has joint approval rights with Duke over all major policy decisions. Pursuant to the Duke Amended and Restated Operating Agreement, the Company has the right to a call option to acquire Duke’s entire interest in the Duke Joint Venture, with the value of such interest based on the opinions of qualified appraisers and which the Company can exercise upon the occurrence and adoption by resolution of certain triggering events. Additionally, the Duke Joint Venture has certain rights to participate in the development of certain adjacent and nearby parcels of land currently owned by Duke. The Company receivedfinal distributions of ~~$53,807 from the Duke Joint Venture during the three months ended March 31, 2016.~~

~~Goodman Joint Ventures~~

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

If a deadlock has arisen pertaining to a major decision regarding a specific property, either shareholder may exercise a buy-sell option in relation to the relevant property for the Goodman UK and Goodman Europe Joint Ventures. After the initial investment period, either shareholder wishing to exit the Goodman Europe and Goodman UK Joint Venture may exercise a buy-sell option with respectcash to its ~~entire interest.~~members. During the three months ended March 31, 2016, the Company received cash distributions of ~~$0 and $3,561~~$53,807 from the ~~Goodman UK Joint Venture and the Goodman Europe Joint Venture, respectively.~~Duke JV.

CBRE Strategic Partners Asia

CBRE Strategic Partners Asia is a real estate investment fund with investments in China. CBRE Strategic Partners Asia ~~had~~has an eight-year ~~original~~ term, which began on January 31, 2008 and may be extended for up to two one-year periods with the approval of two-thirds of the limited partners. In March 2016, the limited partners approved a one-year extension. CBRE Strategic Partners ~~Asia’s~~Asia's commitment period has ~~ended;~~ended, however, it may call capital to fund operations, obligations and liabilities. For the three months ended March 31, ~~2016, no capital has been committed or distributed. In March 2016,~~2017, the ~~limited partners approved a one-year extension of the fund’s life.~~Company did not receive any distributions from CBRE Strategic Partners ~~Asia~~Asia. In February 2017, the fund commenced liquidation and will wind up over the succeeding 24 months.

Philips JV

The Company has a 25.0% interest in 200 Franklin Square Drive, a 199,900 square foot building located in Somerset, New Jersey which is ~~managed by CBRE Investors SP Asia II, LLC, an affiliate~~100.0% net leased to Philips Holdings, USA Inc., a wholly-owned subsidiary of ~~CBRE Global Investors. CBRE Strategic Partners Asia is not obligated to redeem~~Royal Philips Electronics, through December 2021, or the ~~interests of any of its investors, including of~~Philips JV. During the three months ended March 31, 2017 and 2016, the Company ~~prior to 2017. Except in certain limited circumstances such as transfers to affiliates or successor trustees or state agencies,~~received no distributions and recognized no revenue from the Company will not be permitted to sell its interest in CBRE Strategic Partners Asia without the prior written consent of the general partner, which the general partner may withhold in its sole discretion.Philips JV.

Morristown JV

OnIn October 8, 2015, the Company contributed ~~50%~~50.0% of its interest in an office property located in Morristown, New Jersey to a joint venture the Company formed with 21 South Street, a subsidiary of Hampshire Partners Fund VIII ~~LP. The~~LP, or the Morristown JV. Concurrent with the contribution, the Company sold the remaining ~~50%~~50.0% equity interest of the property to 21 South Street for gross proceeds of $2,600. In connection with the sale, the Company, entered into a joint venture agreement for the property with 21 South Street, or the Morristown Joint Venture. In October 2015, the Morristown Joint Venture entered into a leasing and construction management agreement with Prism Construction Management, LLC to manage the construction of specific improvements at the property.Street.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

The ~~Condensed Consolidated Balance Sheets~~balance sheets for the Company’s unconsolidated equity investments at March 31, ~~2016~~2017 are as follows:


	As of March 31, 2016														Gramercy European Property Fund ¹
	Duke Joint Venture		Goodman UK Joint Venture		Goodman Europe Joint Venture		Gramercy European Property Fund		CBRE Strategic Partners Asia		Other⁽¹⁾		Total		Goodman Europe JV		Gramercy European Property Fund ²		Total		Strategic Office Partners		Goodman UK JV		CBRE Strategic Partners Asia		Other ³
Assets:
Real estate assets, net⁽²⁾	$	342,437	$	41,011	$	287,922	$	282,178	$	109,554	$	50,423	$	1,113,525
Real estate assets, net ⁴															$	224,122	$	480,477	$	704,599	$	181,655	$	30,763	$	85,175	$	49,342
Other assets	25,138		6,122		40,106		58,861		9,337		3,390		142,954		27,485		94,407		121,892		46,673		2,057		11,992		3,251
Total assets	$	367,575	$	47,133	$	328,028	$	341,039	$	118,891	$	53,813	$	1,256,479	$	251,607	$	574,884	$	826,491	$	228,328	$	32,820	$	97,167	$	52,593
Liabilities and members’ equity:
Mortgages payable	$	12,992	$	—	$	127,137	$	170,431	$	—	$	40,127	$	350,687	$	140,245	$	285,499	$	425,744	$	142,498	$	—	$	—	$	39,557
Other liabilities	6,329		1,049		5,676		38,074		13,948		3,839		68,915		2,753		20,958		23,711		9,974		957		14,314		3,445
Total liabilities	19,321		1,049		132,813		208,505		13,948		43,966		419,602		142,998		306,457		449,455		152,472		957		14,314		43,002
Gramercy Property Trust equity	291,324		38,096		163,884		26,235		5,126		2,604		527,269		11,924		42,862		54,786		18,444		25,336		3,999		2,622
Other members’ equity	56,930		7,988		31,331		106,299		99,817		7,243		309,608		96,685		225,565		322,250		57,412		6,527		78,854		6,969
Liabilities and members’ equity	$	367,575	$	47,133	$	328,028	$	341,039	$	118,891	$	53,813	$	1,256,479	$	251,607	$	574,884	$	826,491	$	228,328	$	32,820	$	97,167	$	52,593

~~(1)~~1.

As of March 31, 2017, 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 that is held through the Company’s 14.2% interest in the Gramercy European Property Fund. In the table above, the Company’s equity interest in the Goodman Europe JV includes both its direct 5.1% interest as well as its indirect interest that is held through its 14.2%interest in the Gramercy European Property Fund, and the Company’s equity interest in the Gramercy European Property Fund represents its interest in all of the properties owned by the Gramercy European Property Fund except for the properties in the Goodman Europe JV.


2.	Excludes the Gramercy European Property Fund’s 94.9% interest in the Goodman Europe JV.


3.	Includes the Philips ~~Joint Venture,~~JV, the Morristown ~~Joint Venture,~~JV, and European Fund Carry Co.


~~(2)~~4.	Includes ~~REIT~~ basis adjustments that were recorded by the Company to adjust the unconsolidated equity investments to fair value upon closing of the Merger.

~~The~~

Gramercy Property Trust

Notes to Condensed Consolidated ~~Balance Sheets~~Financial Statements

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

March 31, 2017

The balance sheets for the Company’s unconsolidated equity investments at December 31, ~~2015~~2016 are as follows:


	As of December 31, 2015														Gramercy European Property Fund ¹
	Duke Joint Venture		Goodman UK Joint Venture		Goodman Europe Joint Venture		Gramercy European Property Fund		CBRE Strategic Partners Asia		Other⁽¹⁾		Total		Goodman Europe JV		Gramercy European Property Fund ²		Total		Strategic Office Partners		Goodman UK JV		CBRE Strategic Partners Asia		Other ³
Assets:
Real estate assets, net⁽²⁾	$	443,313	$	42,584	$	276,925	$	236,312	$	109,554	$	50,698	$	1,159,386
Real estate assets, net ⁴															$	285,087	$	347,069	$	632,156	$	149,484	$	25,128	$	87,852	$	49,580
Other assets	32,739		3,427		42,139		39,983		9,337		15,954		143,579		86,273		63,523		149,796		42,323		6,650		12,247		3,020
Total assets	$	476,052	$	46,011	$	319,064	$	276,295	$	118,891	$	66,652	$	1,302,965	$	371,360	$	410,592	$	781,952	$	191,807	$	31,778	$	100,099	$	52,600
Liabilities and members’ equity:
Liabilities and members' equity:
Mortgages payable	$	56,105	$	—	$	121,350	$	143,616	$	—	$	40,424	$	361,495	$	174,269	$	215,980	$	390,249	$	121,894	$	—	$	—	$	39,730
Other liabilities	6,035		1,783		8,622		14,581		13,948		16,540		61,509		7,778		19,940		27,718		4,347		934		14,383		3,259
Total liabilities	62,140		1,783		129,972		158,197		13,948		56,964		423,004		182,047		235,920		417,967		126,241		934		14,383		42,989
Gramercy Property Trust equity	352,932		36,698		158,863		23,385		5,508		2,614		580,000		12,734		41,116		53,850		15,872		25,309		4,145		2,631
Other members’ equity	60,980		7,530		30,229		94,713		99,435		7,074		299,961
Liabilities and members’ equity	$	476,052	$	46,011	$	319,064	$	276,295	$	118,891	$	66,652	$	1,302,965
Other members' equity															176,579		133,556		310,135		49,694		5,535		81,571		6,980
Liabilities and members' equity															$	371,360	$	410,592	$	781,952	$	191,807	$	31,778	$	100,099	$	52,600

~~(1)~~1.

As of December 31, 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 that is held through the Company’s 14.2% interest in the Gramercy European Property Fund. In the table above, the Company’s equity interest in the Goodman Europe JV includes both its direct 5.1% interest as well as its indirect interest that is held through its 14.2% interest in the Gramercy European Property Fund, and the Company’s equity interest in the Gramercy European Property Fund represents its interest in all of the properties owned by the Gramercy European Property Fund except for the properties in the Goodman Europe JV.


2.	Excludes the Gramercy European Property Fund’s 94.9% interest in the Goodman Europe JV.


3.	Includes the Philips ~~Joint Venture,~~JV, the Morristown ~~Joint Venture,~~JV, and European Fund Carry Co.


~~(2)~~4.	Includes ~~REIT~~ basis adjustments that were recorded by the Company to adjust the unconsolidated equity investments to fair value upon closing of the Merger.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

Certain real estate assets in the Company’s unconsolidated equity investments are subject to mortgage loans. The following is a summary of the secured financing arrangements within the Company’s unconsolidated equity investments as of March 31, ~~2016:~~2017:

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



						Outstanding Balance ²
Property	Unconsolidated Equity Investment	Economic Ownership		Interest Rate ¹	Maturity Date	March 31, 2017		December 31, 2016
Strategic Office Partners portfolio ³	Strategic Office Partners	25.0%		3.83%	10/7/2019	$	145,800	$	125,000
Durrholz, Germany	Gramercy European Property Fund	14.2%		1.52%	3/31/2020	12,303		12,289
Venray, Germany	Gramercy European Property Fund	14.2%		3.32%	12/2/2020	13,149		13,015
Lille, France	Gramercy European Property Fund	14.2%		3.13%	12/17/2020	27,429		27,081
Carlisle, United Kingdom	Gramercy European Property Fund	14.2%		3.32%	2/19/2021	10,620		10,443
Oud Beijerland, Netherlands	Gramercy European Property Fund	14.2%		2.09%	12/30/2022	8,148		8,077
Zaandam, Netherlands	Gramercy European Property Fund	14.2%		2.08%	12/30/2022	11,749		11,647
Kerkrade, Netherlands	Gramercy European Property Fund	14.2%		2.08%	12/30/2022	9,706		9,622
Friedrichspark, Germany	Gramercy European Property Fund	14.2%		2.08%	12/30/2022	8,770		8,694
Fredersdorf, Germany	Gramercy European Property Fund	14.2%		2.08%	12/30/2022	11,345		11,247
Breda, Netherlands	Gramercy European Property Fund	14.2%		1.90%	12/30/2022	10,035		9,948
Juechen, Germany	Gramercy European Property Fund	14.2%		1.89%	12/30/2022	19,017		18,852
Piaseczno, Poland	Gramercy European Property Fund	14.2%		1.98%	12/30/2022	8,212		8,141
Strykow, Poland	Gramercy European Property Fund	14.2%		1.98%	12/30/2022	19,335		19,167
Uden, Netherlands	Gramercy European Property Fund	14.2%		1.98%	12/30/2022	8,992		8,913
Rotterdam, Netherlands	Gramercy European Property Fund	14.2%		1.89%	12/30/2022	7,700		7,633
Frechen, Germany	Gramercy European Property Fund	14.2%		1.49%	12/30/2022	6,101		6,043
Meerane, Germany	Gramercy European Property Fund	14.2%		1.35%	12/30/2022	10,236		10,138
Amsterdam, Netherlands	Gramercy European Property Fund	14.2%		1.59%	12/30/2022	3,123		3,093
Tiel, Netherlands	Gramercy European Property Fund	14.2%		1.59%	12/30/2022	9,262		9,174
Netherlands portfolio ⁴	Gramercy European Property Fund	14.2%		3.02%	6/28/2023	13,581		13,409
Kutno, Poland	Gramercy European Property Fund	14.2%		1.91%	7/21/2023	5,965		5,890
European Facility 1 ⁵	Goodman Europe JV	18.6%	⁶	0.90%	11/16/2023	31,957		31,551
European Facility 2 ⁵	Goodman Europe JV	18.6%	⁶	1.75%	11/16/2023	108,289		106,917
Utrecht, Netherlands	Gramercy European Property Fund	14.2%		1.95%	1/16/2024	36,616		—
Worksop, United Kingdom	Gramercy European Property Fund	14.2%		3.94%	10/20/2026	10,668		10,551
Somerset, NJ	Philips JV	25.0%		6.90%	9/11/2035	39,557		39,730
Total mortgage notes payable						$	607,665	$	546,265
Net deferred financing costs and net debt premium						134		5,608
Total mortgage notes payable, net						$	607,799	$	551,873


~~(1)~~1.	Represents the current ~~interest~~effective rate as of March 31, ~~2016.~~2017, including the swapped interest rate for loans that have interest rate swaps. The current interest rate is not adjusted to include the amortization of fair market value premiums or discounts.


~~(2)~~2.	Mortgage loans amounts are presented at ~~100%~~100.0% of the amount in the unconsolidated equity investment.


~~(3)~~3.	~~Represents two~~There are seven properties under this mortgage loan.


~~(4)~~4.	~~Represents four~~There are five properties under this mortgage loan.


5.	There are eight properties under this loan facility.


6.	Represents the Company’s economic ownership in the Goodman Europe JV, which ~~were sold during~~includes both its 5.1% direct interest in the ~~three months ended March 31, 2016.~~Goodman Europe JV as well as an indirect interest in the remaining 94.9% interest that is held through the Company’s 14.2% interest in the Gramercy European Property Fund.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

The ~~Condensed Consolidated Statements~~statements of ~~Operations~~operations for the Company’s unconsolidated equity investments for the three months ended March 31, ~~2016 and 2015~~2017 or partial period for acquisitions or dispositions which closed during these periods, are as follows:


	For the Three Months Ended March 31, 2016																		For the Three Months Ended March 31, 2015			Gramercy European Property Fund ¹
	Duke Joint Venture			Goodman UK Joint Venture			Goodman Europe Joint Venture			Gramercy European Property Fund			Other⁽¹⁾			Total			Total⁽²⁾			Goodman Europe JV			Gramercy European Property Fund ²		Total			Strategic Office Partners			Goodman UK JV			CBRE Strategic Partners Asia			Other ³
Revenues	$	10,536		$	4,284		$	6,121		$	5,057		$	301		$	26,299		$	959		$	4,955		$	10,118	$	15,073		$	5,526		$	295		$	(2,445	)	$	1,114
Operating expenses	2,991			287			862			502			712			5,354			541			922			2,951		3,873			1,474			302			418			158
Acquisition expenses	—			—			—			666			—			666			—
Interest expense	436			—			923			927			729			3,015			522			672			1,474		2,146			1,510			—			—			641
Depreciation and amortization	3,729			750			2,290			2,345			333			9,447			313			2,021			4,473		6,494			2,503			375			—			333
Total expenses	7,156			1,037			4,075			4,440			1,774			18,482			1,376			3,615			8,898		12,513			5,487			677			418			1,132
Net income (loss) from operations	3,380			3,247			2,046			617			(1,473		)	7,817			(417		)	1,340			1,220		2,560			39			(382		)	(2,863		)	(18		)
Loss on derivatives	—			—			—			(3,814		)	—			(3,814		)	—
Loss on extinguishment of debt	(7,962		)	—			—			—			—			(7,962		)
Net gain on disposals	38,535			—			—			—			—			38,535			—
Gain (loss) on derivatives																						—			1,221		1,221			(349		)	—			—			—
Provision for taxes	—			—			—			(315		)	—			(315		)	—			(17		)	146		129			—			(8		)	—			—
Net income (loss)	$	33,953		$	3,247		$	2,046		$	(3,512	)	$	(1,473	)	$	34,261		$	(417	)	$	1,323		$	2,587	$	3,910		$	(310	)	$	(390	)	$	(2,863	)	$	(18	)
Company’s share in net income (loss)	$	27,162		$	2,597		$	1,637		$	(695	)	$	(79	)	$	30,622		(1		)
Company's share in net income (loss)																						$	67		$	446	$	513		$	(15	)	$	(312	)	$	(146	)	$	(9	)
Adjustments for REIT basis	(32,621		)	(270		)	(486		)	—			—			(33,377		)	—			(36		)	—		(36		)	—			(89		)	—			—
Company’s equity in net income (loss) within continuing operations	$	(5,459	)	$	2,327		$	1,151		$	(695	)	$	(79	)	$	(2,755	)	$	(1	)
Company's equity in net income (loss) within continuing operations																						$	31		$	446	$	477		$	(15	)	$	(401	)	$	(146	)	$	(9	)

~~(1)~~1.

As of and for the three months ended March 31, 2017, the Company had a 5.1% direct interest in the Goodman Europe JV as well as an indirect interest in the remaining 94.9% interest that is held through the Company’s 14.2% interest in the Gramercy European Property Fund. For the three months ended March 31, 2017, the Company’s equity in net income (loss) of the entities is based on these ownership interest percentages during the period.


2.	Excludes the results of the Gramercy European Property Fund’s 94.9% interest in the Goodman Europe JV, as the Goodman Europe JV is separately presented.


3.	Includes the Philips ~~Joint Venture,~~JV, the Morristown ~~Joint Venture,~~JV, and European Fund Carry Co.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

The statements of operations for the Company’s unconsolidated equity investments for the three months ended March 31, 2016 or partial period for acquisitions or dispositions which closed during these periods, are as follows:



	Goodman Europe JV			Gramercy European Property Fund			Goodman UK JV			Duke JV			Other ¹
Revenues	$	6,121		$	5,057		$	4,284		$	10,536		$	301
Operating expenses	862			502			287			2,991			712
Acquisition expenses	—			666			—			—			—
Interest expense	923			927			—			436			729
Depreciation and amortization	2,290			2,345			750			3,729			333
Total expenses	4,075			4,440			1,037			7,156			1,774
Net income (loss) from operations	2,046			617			3,247			3,380			(1,473		)
Loss on derivatives	—			(3,814		)	—			—			—
Loss on extinguishment of debt	—			—			—			(7,962		)	—
Net gain on disposals	—			—			—			38,535			—
Provision for taxes	—			(315		)	—			—			—
Net income (loss)	$	2,046		$	(3,512	)	$	3,247		$	33,953		$	(1,473	)
Company's share in net income (loss)	$	1,637		$	(695	)	$	2,597		$	27,162		$	(79	)
Adjustments for REIT basis	(486		)	—			(270		)	(32,621		)	—
Company's equity in net income (loss) within continuing operations	$	1,151		$	(695	)	$	2,327		$	(5,459	)	$	(79	)


1.	Includes the Philips JV, the Morristown JV, European Fund Carry Co., and CBRE Strategic Partners Asia.


~~(2)~~	~~Represents the Gramercy European Property Fund and the Philips Joint Venture.~~

6. Debt Obligations

Secured Debt

Mortgage Loans

Certain real estate assets are subject to mortgage loans. During the three months ended March 31, ~~2016,~~2017, the Company ~~did not assume any~~assumed $3,680 of non-recourse mortgages in connection with ~~real estate acquisitions, however the Company entered into~~ one ~~non-recourse mortgage for $9,550 related to a prior period~~ real estate acquisition. During the year ended December 31, ~~2015,~~2016, the Company assumed ~~$618,169~~$244,188 of non-recourse mortgages in connection with 4627 real estate ~~acquisitions, including $464,292~~acquisitions.

During the three months ended March 31, 2017, the Company refinanced the debt on two properties encumbered by a mortgage loan, subsequently transferred the mortgage on these two properties to the buyer of ~~non-recourse mortgages relating to 29~~the properties, ~~acquired in connection with~~and, as a result, recorded a net loss on the ~~Merger.~~

early extinguishment of debt of $208. During the three months ended March 31, 2016, the Company paid off the debt on six properties encumbered by mortgage loans and transferred one property encumbered by a mortgage loan, and as a result, the Company recorded a net loss on the early extinguishment of debt of ~~$(3,827),~~$3,827, including a net gain on extinguishment of debt of $1,930 within discontinued ~~operations,~~operations. The gains and losses recorded for extinguishments of debt are related to unamortized deferred financing costs and mortgage premiums (discounts) that were immediately expensed upon termination as well as early termination fees ~~incurred for the extinguishments. The Company did not pay off any mortgage loans during the three months ended March 31, 2015.~~incurred. The Company’s mortgage loans include a series of financial and other covenants ~~that~~with which the Company ~~has to~~must comply ~~with~~ in order to borrow under them. The Company was in compliance with the covenants under the mortgage loan facilities as of March 31, ~~2016.~~2017.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

The following is a summary of the Company’s secured financing arrangements as of March 31, ~~2016:~~2017:

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

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

Property
Interest Rate⁽¹⁾
Maturity Date Outstanding Balance
March 31, 2016 December 31, 2015
North Rhett IV 5.80% 2/1/2025 7,126
7,277
Hackettstown 5.15% 3/6/2026 9,550
—
Hutchins 6.95% 6/1/2029 23,597
23,870
70 Hudson Street^{(2), (4)}
N/A N/A —
112,000
90 Hudson Street⁽⁴⁾
N/A N/A —
101,726
The Landings I⁽⁴⁾
N/A N/A —
14,896
The Landings II⁽⁴⁾
N/A N/A —
13,139
McAuley Place⁽⁴⁾
N/A N/A —
12,485
Norman Pointe I N/A N/A —
19,824
Norman Pointe II N/A N/A —
21,825
Total mortgage notes payable 480,222
770,293
Plus net deferred financing costs and net debt premium⁽⁸⁾
11,138
20,633
Total mortgage notes payable, net 491,360
790,926
Total mortgage notes payable, net on assets held for sale —
(260,704 )
Total mortgage notes payable, net $ 491,360
$ 530,222



Property	Interest Rate ¹	Maturity Date	Outstanding Balance
Property	Interest Rate ¹	Maturity Date	March 31, 2017		December 31, 2016
Buford, GA	4.67%	7/1/2017	$	15,393	$	15,512
Woodcliff Lake, NJ	3.04%	9/15/2017	35,024		35,366
Logistics Portfolio - Pool 2 ²	4.48%	1/1/2018	36,139		36,279
Dallas, TX ³	3.05%	3/1/2018	9,485		9,540
Cincinnati, KY ³	3.29%	3/1/2018	6,590		6,628
Jacksonville, FL ³	3.05%	3/1/2018	6,813		6,852
Phoenix, AZ ³	3.05%	3/1/2018	4,097		4,120
Minneapolis, MN ³	3.05%	3/1/2018	5,967		6,001
Ames, IA	5.05%	5/1/2018	16,312		16,436
Columbus, OH	3.57%	5/31/2018	19,474		19,708
Greenwood, IN	3.59%	6/15/2018	7,392		7,436
Greenfield, IN	3.63%	6/15/2018	5,974		6,010
Logistics Portfolio - Pool 3 ²	3.96%	8/1/2018	43,300		43,300
Philadelphia, PA	4.99%	1/1/2019	12,232		12,328
Columbus, OH	3.94%	1/31/2019	5,862		5,908
Bridgeview, IL	3.90%	5/1/2019	5,971		6,014
Spartanburg, SC	3.20%	6/1/2019	929		1,025
Charleston, SC	3.11%	8/1/2019	856		986
Lawrence, IN	5.02%	1/1/2020	20,545		20,703
Charlotte, NC	3.28%	1/1/2020	2,051		2,217
Hawthorne, CA	3.52%	8/1/2020	17,556		17,638
Charleston, SC	2.97%	10/1/2020	925		984
Charleston, SC	3.37%	10/1/2020	925		984
Charleston, SC	3.32%	10/1/2020	941		1,001
Charlotte, NC	3.38%	10/1/2020	802		853
Des Plaines, IL	5.54%	10/31/2020	2,444		2,463
Waco, TX	4.75%	12/19/2020	15,113		15,187
Deerfield, IL	3.71%	1/1/2021	10,716		10,804
Winston-Salem, NC	3.41%	6/1/2021	3,992		4,199
Winston-Salem, NC	3.42%	7/1/2021	1,320		1,388
Logistics Portfolio - Pool 1 ²	4.29%	1/1/2022	38,842		39,002
CCC Portfolio ²	4.46%	10/6/2022	23,162		23,280
Durham, NC	4.02%	9/6/2024	3,680		—
Logistics Portfolio - Pool 4 ²	4.36%	12/5/2022	79,500		79,500
KIK USA Portfolio ²	4.63%	7/6/2023	7,376		7,450
Yuma, AZ	5.27%	12/6/2023	12,007		12,058
Allentown, PA	5.16%	1/6/2024	22,979		23,078
Spartanburg, SC	3.72%	2/1/2024	6,183		6,360
Charleston, SC	3.80%	2/1/2025	6,497		6,658
Hackettstown, NJ	4.95%	3/6/2026	9,550		9,550
Hutchins, TX	7.65%	6/1/2029	22,476		22,764
KIK Canada Portfolio ²	3.57%	5/5/2019	—		7,914
Total mortgage notes payable			$	547,392	$	555,484
Net deferred financing costs and net debt premium			2,532		3,158
Total mortgage notes payable, net			$	549,924	$	558,642

~~(1)~~1.

Represents the ~~current~~ interest rate as of March 31, ~~2016, including~~2017 or date of extinguishment if loan was extinguished during the ~~swapped~~period, that was recorded for financial reporting purposes, which reflects the effect of interest rate ~~for loans that have interest rate swaps. The current interest rate is not adjusted to include the~~swaps and amortization of financing costs and fair market value premiums or discounts.

~~(2)~~2.

~~In accordance with~~There are five properties under the ~~provisions of this~~Logistics Portfolio - Pool 2 loan, two properties under the ~~property’s excess cash proceeds after~~Logistics Portfolio - Pool 3 loan, three properties under the ~~payment of debt service, impounds~~Logistics Portfolio - Pool 1 loan, five properties under the CCC Portfolio loan, six properties under the Logistics Portfolio - Pool 4 loan, three properties under the KIK USA Portfolio loan, and ~~budgeted operating expenses were held by~~two properties under the ~~lender. In January 2016, the loan was paid in full.~~KIK Canada Portfolio loan.


~~(3)~~3.	These five mortgage loans are cross-collateralized.


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


~~(5)~~	~~Represents four properties under this mortgage loan.~~


~~(6)~~	~~Represents two properties under this mortgage loan.~~

~~(7)~~

As of March 31, 2016, due to non-renewal of the tenant’s lease, the lender has imposed a “cash trap” on this property. As a result, cash flows from the property will automatically be directed to the lender to satisfy required debt service payments, fund reserves required by the mortgage, and fund additional cash reserves for future required payments, including final payment, until the property’s leasing condition is cured.

~~(8)~~

During the first quarter of 2016, the Company adopted accounting guidance related to the presentation of deferred financing costs on the balance sheet and reclassified amounts from the deferred costs line to net against the liability for all periods presented, including for mortgage notes payable, as shown here. See Note 2, “Summary of Significant Accounting Policies,” for further information.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

Unsecured Debt

2015 Credit Facility and Term Loans

In December 2015, the Company entered into an agreement, or the Credit Agreement, for a new $1,900,000 credit facility, or the 2015 Credit Facility, consisting of an $850,000 senior unsecured revolving credit facility, or the 2015 Revolving Credit Facility, and $1,050,000 term loan facility with JPMorgan Securities LLC and Merrill Lynch, Pierce, Fenner and Smith Incorporated and terminated Legacy ~~Gramercy’s~~Gramercy's 2014 Credit Facility. The 2015 Revolving Credit Facility consists of a $750,000 U.S. dollar revolving credit facility and a $100,000 multicurrency revolving credit facility. The 2015 Revolving Credit Facility matures in January 2020, but may be extended for two additional ~~six-month~~six month periods upon the payment of applicable fees and satisfaction of certain customary conditions. Borrowings under the multicurrency loan denominated in euros are designated as a non-derivative net investment hedge to mitigate the risk from fluctuations in foreign currency exchange rates. Refer to Note 10, “Derivative and Non-Derivative Hedging Instruments,” for further information on the hedge. The term loan facility,

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

or the 2015 Term Loan, consists of a $300,000 term loan facility that matures in January 2019 with one 12-month extension option, or the 3-Year Term Loan, and a $750,000 term loan facility that matures in January 2021, or the 5-Year Term Loan.

Outstanding borrowings under the 2015 Revolving Credit Facility incur interest at a floating rate based upon, at the Company’s option, either (i) adjusted London Interbank Offered Rate, or LIBOR, plus an applicable margin ranging from 0.875% to 1.55%, depending on the Company’s credit ratings, or (ii) the alternate base rate plus an applicable margin ranging from 0.00% to 0.55%, depending on the Company’s credit ratings. The Company is also required to pay quarterly in arrears a 0.125% to 0.30% facility fee, depending on the ~~Company’s~~Company's credit ratings, on the total commitments under the 2015 Revolving Credit Facility. Outstanding borrowings under the 2015 Term Loan incur interest at a floating rate based upon, at the Company’s option, either (i) adjusted LIBOR plus an applicable margin ranging from 0.90% to 1.75%, depending on the Company’s credit ratings, or (ii) the alternate base rate plus an applicable margin ranging from 0.00% to 0.75%, depending on the Company’s credit ratings. The alternate base rate is the greater of (x) the prime rate announced by JPMorgan Chase Bank, N.A., (y) 0.50% above the Federal Funds Effective Rate and (z) the adjusted LIBOR for a one-month interest period plus 1.00%.

In December 2015, the Company also entered into a new $175,000 seven-year unsecured term loan with Capital One, N.A., or the 7-Year Term Loan, which matures in January 2023. Outstanding borrowings under the 7-Year Term Loan incur interest at a floating rate based upon, at the Company’s option, either (i) adjusted LIBOR plus an applicable margin ranging from 1.30% to 2.10%, depending on the Company’s credit ratings, or (iii) the alternate base rate plus an applicable margin ranging from 0.30% to 1.10%, depending on the Company’s credit ratings. The alternate base rate is the greatest of (x) the prime rate announced by Capital One, (y) 0.50% above the Federal Funds Effective Rate, and (z) the adjusted LIBOR for a one-month interest period plus 1.00%.

~~These~~The Company’s unsecured borrowing facilities include a series of financial and other covenants that the Company has to comply with in order to borrow under the facilities. The Company was in compliance with the covenants under the facilities as of March 31, ~~2016.~~

~~During the first quarter of 2016, the Company adopted accounting guidance related~~2017. Refer to the ~~presentation~~table at the end of ~~deferred financing costs on the balance sheet~~Note 6 for specific terms and ~~reclassified amounts from the deferred costs line to net against the liability for all periods presented. Deferred financing costs associated with~~ the Company’s ~~credit facility remain in deferred costs on~~outstanding borrowings under the ~~Condensed Consolidated Balance Sheets. See Note 2, “Summary of Significant Accounting Policies,” for further information.~~facilities.

~~The terms of the Company’s unsecured revolving credit facility and term loans, as well as outstanding balances as of March 31, 2016 and December 31, 2015, are set forth in the table below:~~

Unswapped Interest Rate
Effective Interest Rate⁽¹⁾
Maturity Date Outstanding Balance
March 31, 2016 December 31, 2015
2015 Revolving Credit Facility - USD tranche 1.70 % 1.70 % 1/8/2020 $ 100,000
$ 275,000
2015 Revolving Credit Facility - Multicurrency tranche 1.20 % 1.20 % 1/8/2020 22,760
21,724
3-Year Term Loan 1.85 % 1.85 % 1/8/2019 300,000
300,000
5-Year Term Loan 1.85 % 2.95 % 1/8/2021 750,000
750,000
7-Year Term Loan 2.19 % 3.57 % 1/9/2023 175,000
175,000
Total Unsecured Revolving Credit and Term Loan Facilities $ 1,347,760
$ 1,521,724


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

Senior Unsecured Notes

~~On December 17,~~During 2016 and 2015, the Company issued and sold $400,000 and $100,000 aggregate principal amount of senior unsecured notes ~~or the Senior Unsecured Notes, and on January 12, 2016, the Company issued and sold an additional $50,000 aggregate principal amount of the Senior Unsecured Notes~~payable, respectively, in private ~~placements. The Senior Unsecured Notes are guaranteed by the Company~~placements, which have maturities ranging from 2022 through 2026 and bear interest semiannually at ~~a rate~~rates ranging from 3.89% to 4.97%. Refer to the table later in Note 6 for specific terms of ~~4.97% per annum, with interest payable in arrears on June 17 and December 17 of each year until maturity, commencing June 17, 2016.~~the Company's Senior Unsecured Notes.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

Exchangeable Senior Notes

On March 18, 2014, the Company issued $115,000 of 3.75% ~~exchangeable senior notes, or the~~ Exchangeable Senior Notes. The Exchangeable Senior Notes are senior unsecured obligations of a subsidiary of the ~~Company’s operating partnerships~~Operating Partnership and are guaranteed by the Company on a senior unsecured basis. The Exchangeable Senior Notes mature on March 15, 2019, unless redeemed, repurchased or exchanged in accordance with their terms prior to such date and will be exchangeable, under certain circumstances, for cash, for common shares or for a combination of cash and common shares, at the election of the ~~Company’s operating partnerships.~~Operating Partnership. The Exchangeable Senior Notes will also be exchangeable prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date, at any time beginning on December 15, 2018, and also upon the occurrence of certain events. On or after March 20, 2017, in certain circumstances, the ~~Company’s operating partnership~~Operating Partnership may redeem all or part of the Exchangeable Senior Notes for cash at a price equal to ~~100%~~100.0% of the principal amount of the Exchangeable Senior Notes to be redeemed, plus accrued and unpaid interest up to, but excluding, the redemption date.

The Exchangeable Senior Notes had an initial exchange rate of 40.2966 units of merger consideration, or Units of Merger Consideration, per $1.0 principal amount of principal amount of the Exchangeable Senior Notes, where one Unit of Merger Consideration represents 3.1898 of the Company’s common shares, or approximately 128.5380 of the Company’s common shares per $1.0 principal amount of the Exchangeable Senior Notes. The initial exchange rate represents an exchange price of approximately $24.82 per Unit of Merger Consideration or $7.78 per share of the Company’s common shares. The initial exchange rate is subject to adjustment under certain circumstances. As of March 31, ~~2016,~~2017, the Exchangeable Senior Notes have a current exchange rate of ~~40.9434 Units~~14.0843 units of Merger ~~Consideration,~~consideration, where one unit of Merger consideration represents 3.1898 of the Company's common shares, or approximately ~~130.6013~~44.9261 of the ~~Company’s~~Company's common shares for each $1.0 principal amount of the Exchangeable Senior Notes, representing an exchange price of ~~$7.66~~$22.26 per common share of the ~~Company’s common shares.~~Company. The fair value of the Exchangeable Senior Notes was determined at issuance to be $106,689. The discount is being amortized to interest expense over the expected life of the Exchangeable Senior Notes. As of March 31, ~~2016~~2017 and December ~~31, 2015,~~2016, the Exchangeable Senior Notes were recorded as a liability at carrying value of ~~$107,205~~$109,488 and ~~$106,581,~~$108,832, respectively, net of unamortized discount and deferred financing costs of ~~$7,795~~$5,512 and ~~$8,419,~~$6,168, respectively. The fair value of the Exchangeable Senior Notes’ embedded exchange option of ~~the Exchangeable Senior Notes~~$11,726 was recorded in additional paid-in-capital within shareholders’ equity ~~of $11,726~~ as of March 31, ~~2016~~2017 and December 31, ~~2015.~~2016.

The terms of the Company’s unsecured debt obligations and outstanding balances as of March 31, 2017 and December 31, 2016 are set forth in the table below:



	Stated Interest Rate		Effective Interest Rate ¹		Maturity Date	Outstanding Balance
	Stated Interest Rate		Effective Interest Rate ¹		Maturity Date	March 31, 2017			December 31, 2016
2015 Revolving Credit Facility - U.S. dollar tranche	1.95	%	1.95	%	1/8/2020	$	55,000		$	—
2015 Revolving Credit Facility - Multicurrency tranche	1.02	%	1.02	%	1/8/2020	66,759			65,837
3-Year Term Loan	2.10	%	2.33	%	1/8/2019	300,000			300,000
5-Year Term Loan	2.10	%	2.70	%	1/8/2021	750,000			750,000
7-Year Term Loan	2.31	%	3.34	%	1/9/2023	175,000			175,000
2015 Senior Unsecured Notes	4.97	%	5.07	%	12/17/2024	150,000			150,000
2016 Senior Unsecured Notes	3.89	%	4.00	%	12/15/2022	150,000			150,000
2016 Senior Unsecured Notes	4.26	%	4.38	%	12/15/2025	100,000			100,000
2016 Senior Unsecured Notes	4.32	%	4.43	%	12/15/2026	100,000			100,000
Exchangeable Senior Notes	3.75	%	6.36	%	3/15/2019	115,000			115,000
Total unsecured debt						1,961,759			1,905,837
Net deferred financing costs and net debt discount						(8,988		)	(9,704		)
Total unsecured debt, net						$	1,952,771		$	1,896,133


1.	Represents the rate at which interest expense is recorded for financial reporting purposes as of March 31, 2017, which reflects the effect of interest rate swaps and amortization of financing costs and fair market value premiums or discounts.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

Combined aggregate principal maturities of the Company’s unsecured debt obligations, non-recourse mortgages, and Exchangeable Senior Notes, in addition to associated interest payments, as of March 31, ~~2016~~2017 are as follows:


	2015 Revolving Credit Facility		Term Loans		Mortgage Notes Payable		Senior Unsecured Notes		Exchangeable Senior Notes		Interest Payments		Total		2015 Revolving Credit Facility		Term Loans		Mortgage Notes Payable ¹		Senior Unsecured Notes		Exchangeable Senior Notes		Interest Payments ²			Total
April 1 to December 31, 2016	$	—	$	—	$	43,429	$	—	$	—	$	47,739	$	91,168
2017	—		—		65,215		—		—		62,306		127,521
April 1 to December 31, 2017															$	—	$	—	$	61,474	$	—	$	—	$	65,562		$	127,036
2018	—		—		92,589		—		—		60,263		152,852		—		—		170,819		—		—		80,435			251,254
2019	—		300,000		28,836		—		115,000		51,631		495,467		—		300,000		33,672		—		115,000		70,155			518,827
2020	122,760		—		174,103		—		—		44,519		341,382		121,759		—		60,103		—		—		65,605			247,467
2021															—		750,000		16,364		—		—		39,682			806,046
Thereafter	—		925,000		76,050		150,000		—		58,373		1,209,423		—		175,000		204,960		500,000		—		89,275			969,235
Above market interest	—		—		—		—		—		2,278		2,278		—		—		—		—		—		(6,456		)	(6,456		)
Total	$	122,760	$	1,225,000	$	480,222	$	150,000	$	115,000	$	327,109	$	2,420,091	$	121,759	$	1,225,000	$	547,392	$	500,000	$	115,000	$	404,258		$	2,913,409


1.	Mortgage loan payments reflect accelerated repayment dates, when applicable, pursuant to related loan agreement.


2.	Interest payments do not reflect the effect of interest rate swaps.

7. Leasing Agreements

The Company’s properties are leased to tenants under operating leases with expiration dates extending through the year 2039. These leases generally contain rent increases and renewal options.

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

Future minimum rental revenues under non-cancelable leases excluding reimbursements for operating expenses as of March 31, ~~2016~~2017 are as follows:


	Operating Leases		Operating Leases
April 1 to December 31, 2016	$	253,796
2017	331,621
April 1 to December 31, 2017			$	289,129
2018	315,992		385,259
2019	293,720		358,794
2020	260,728		330,608
2021			305,318
Thereafter	1,421,528		1,615,136
Total minimum lease rental income	$	2,877,385	$	3,284,244

8. Transactions with Trustee Related Entities and Related Parties

In December 2016, the Company sold its 5.1% interest in one property located in Lille, France held by the Goodman Europe JV to the Gramercy European Property Fund, in which the Company has a 14.2% ownership interest, for gross proceeds of $2,662 (€2,563).

On June 30, 2016, the Company sold 74.9% of its outstanding 80.0% interest in the Goodman Europe JV to the Gramercy European Property Fund, in which the Company has a 14.2% interest as of March 31, 2017. The Company has made cumulative contributions of $55,892 (€50,000) to the Gramercy European Property Fund and has a remaining funding commitment of $13,315 (€12,500) as of March 31, 2017. The Company’s CEO, who is on the board of directors, also has capital commitments to the investment, as noted below. The Company sold 74.9% of its interest in the Goodman

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

Europe JV to the Gramercy European Property Fund for gross proceeds of $148,884 (€134,336), based on third-party valuations for the underlying properties. The Company’s sale of 74.9% of its interest in the Goodman Europe JV resulted in the Company recording a gain of $5,341 during the period, primarily related to depreciation and amortization recorded since Merger closing date. Following the sale transaction, the Company has a 5.1% continuing direct interest in the Goodman Europe JV. The transaction was entered into in order to achieve efficiencies from the combination of the two European platforms.

The Company’s CEO, Gordon F. DuGan, is on the board of directors of the Gramercy European Property Fund and has committed and fully funded approximately ~~$1,423~~$1,388 (€1,250) in capital to the Gramercy European Property Fund. The two Managing Directors of Gramercy Europe Asset Management have collectively committed and fully funded approximately ~~$1,423~~$1,388 (€1,250) in capital to the Gramercy European Property Fund. Foreign currency commitments have been converted into U.S. dollars based on (i) the foreign exchange rate at the closing date for completed transactions and (ii) the exchange rate that prevailed on March 31, 2016, in the case of unfunded commitments.

One of the properties acquired in December 2015 as part of the Merger iswas partially leased to Duke Realty, the Company’s partner in the Duke ~~Joint Venture.~~JV. Duke Realty ~~acts~~acted as the managing member of the Duke ~~Joint Venture~~JV which was dissolved in July 2016 as described in Note 5, and ~~provides~~as such provided asset management, construction, development, leasing and property management services, for which it iswas entitled to ~~receive~~ fees as well as a promoted interest. From the date of the Merger through lease expiration in May 2016, Duke Realty ~~leases~~leased 30,777 square feet of one of the Company’s office properties located in Minnesota which ~~has~~had an aggregate ~~324,296~~322,551 rentable square feet. ~~The lease expires in May 2016 and~~ Duke Realty paid the Company $176 under the lease for the three months ended March 31, 2016.

~~The Company acquired three properties in January 2015 in an arms-length transaction from affiliates of KTR Capital Partners, a private industrial real estate investment company,~~ See Note 5 for ~~which one of~~more information on the Company’s ~~trustees, Jeffrey Kelter, served as Chief Executive Officer and Chairman of~~transactions with the ~~Board. The properties are located in Milwaukee, Wisconsin, comprise an aggregate 450,000 square feet and were acquired for an aggregate purchase price of approximately $19,750.~~Duke JV.

9. Fair Value Measurements

ASC 820-10, “Fair Value Measurements and Disclosures,” among other things, establishes a hierarchical disclosure framework associated with the level of pricing observability utilized in measuring financial instruments and other assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, or an exit price. The Company discloses fair value information, whether or not recognized in the financial statements, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based upon the application of discount rates to estimated future cash flows based upon market yields or by using other valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, fair values are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments and other assets and liabilities measured at fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair value amounts.

The level of pricing observability generally correlates to the degree of judgment utilized in measuring the fair value of financial instruments and other assets and liabilities. The three broad levels defined are as follows:

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

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

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

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

The following table presents the carrying value in the financial statements and approximate fair value of assets and liabilities measured on a recurring and ~~non-recurring~~nonrecurring basis at March 31, ~~2016~~2017 and December 31, ~~2015:~~2016:

March 31, 2016 December 31, 2015
Carrying Value Fair Value Carrying Value Fair Value
Financial assets:

Retained CDO Bonds⁽¹⁾
$ 8,786
$ 8,786
$ 7,471
$ 7,471
Investment in CBRE Strategic Partners Asia $ 5,126
$ 5,126
$ 5,508
$ 5,508
Real estate investments classified as held for sale at Merger closing⁽⁴⁾
$ 10,522
$ 10,522
$ 393,984
$ 393,984
Financial liabilities:

Derivative instruments $ 27,461
$ 27,461
$ 3,442
$ 3,442
Long-term debt

Revolving credit facilities⁽²⁾
$ 122,760
$ 123,294
$ 296,724
$ 297,394
3-Year Term Loan⁽²⁾
$ 300,000
$ 300,304
$ 300,000
$ 300,349
5-Year Term Loan⁽²⁾
$ 750,000
$ 751,223
$ 750,000
$ 751,304
7-Year Term Loan⁽²⁾
$ 175,000
$ 175,024
$ 175,000
$ 175,338
Mortgage notes payable^{(2), (3)}
$ 480,222
$ 506,215
$ 770,293
$ 805,590
Senior Unsecured Notes⁽²⁾
$ 150,000
$ 156,254
$ 100,000
$ 100,528
Exchangeable Senior Notes⁽²⁾
$ 107,205
$ 117,069
$ 109,394
$ 115,524



	March 31, 2017				December 31, 2016
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Interest rate swaps	$	8,010	$	8,010	$	3,769	$	3,769
Retained CDO Bonds	$	4,828	$	4,828	$	11,906	$	11,906
Investment in CBRE Strategic Partners Asia	$	3,999	$	3,999	$	4,145	$	4,145
Real estate investments ¹	$	46,188	$	46,188	$	2,413	$	2,413
Financial liabilities:
Interest rate swaps	$	517	$	517	$	700	$	700
Long-term debt
2015 Revolving Credit Facility ²	$	121,759	$	113,887	$	65,837	$	65,897
3-Year Term Loan ²	$	300,000	$	298,894	$	300,000	$	300,213
5-Year Term Loan ²	$	750,000	$	744,112	$	750,000	$	750,959
7-Year Term Loan ²	$	175,000	$	176,653	$	175,000	$	172,850
Mortgage notes payable ²	$	549,924	$	559,553	$	558,642	$	567,705
Senior Unsecured Notes ²	$	496,524	$	500,598	$	496,464	$	498,650
Exchangeable Senior Notes ²	$	109,488	$	116,382	$	108,832	$	115,625

~~(1)~~1.

~~Retained CDO Bonds~~Amounts as of March 31, 2017 and December 31, 2016 represent two and one real estate investments, respectively, that were impaired during the ~~CDOs’ subordinate bonds, preferred shares,~~three months ended March 31, 2017 and ~~ordinary shares, which were retained subsequent to~~ the ~~disposal of Gramercy Finance~~year ended December 31, 2016, respectively, and were ~~previously eliminated in consolidation.~~owned as of the end of the respective reporting periods.


~~(2)~~2.	Long-term debt instruments are classified as Level III due to the significance of unobservable inputs which are based upon management assumptions.


~~(3)~~	Amounts include mortgage notes payable on assets held for sale as of December 31, 2015, which had total carrying value of $260,704 and total fair value of $263,308 as of December 31, 2015. There were no mortgage notes payable on assets held for sale as of March 31, 2016.


~~(4)~~	Amounts include one and six real estate investments as of March 31, 2016 and December 31, 2015, respectively, classified as held for sale at Merger closing, which are included in discontinued operations.

The following methods and assumptions were used to estimate the fair value of each class of assets and liabilities for which it is practicable to estimate the value:

Cash and cash equivalents, accrued interest, and accounts payable:These balances in the Condensed Consolidated Financial Statements reasonably approximate their fair values due to the short maturities of these items.

Retained CDO Bonds: Non-investment grade, subordinate CDO bonds, preferred shares and ordinary shares are presented in other assets on the Condensed Consolidated Financial Statements at fair ~~value. The fair~~ value, which is determined byusing an internally developed discounted cash flow model.

CBRE Strategic Partners Asia:The investment manager of CBRE Strategic Partners Asia applies valuation techniques for the Company’s investment carried at fair value based upon the application of the income approach, the direct market comparison approach, the replacement cost approach or third-party appraisals to the underlying assets

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

held in the unconsolidated entity in determining the net asset value attributable to the Company’s ownership interest therein. Refer to Note 25 for more information on ~~these instruments.~~this investment.

Derivative instruments: The Company’s derivative instruments, which are ~~primarily~~ comprised of interest rate swap agreements, are carried at fair value in the Condensed Consolidated Financial Statements based upon third-party valuations. Derivative fair values are presented within other assets or other liabilities, depending on the balance at the end of the period. Changes in fair value of derivative instruments that represent realized gains (losses) are recorded within interest expense on the Condensed Consolidated Statements of Operations. Refer to Note 10 for more information on the derivative instruments.

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

Mortgage notes payable, unsecured term loans, unsecured revolving credit facilities and senior unsecured ~~notes~~notes:: These instruments are presented in the Condensed Consolidated Financial Statements at amortized cost and not at fair value. The fair value of each instrument is estimated by a discounted cash flows model, using discount rates that best reflect current market rates for financings with similar characteristics and credit quality. Mortgage premiums and discounts are amortized to interest expense on the Condensed Consolidated Statements of Operations using the effective interest method over the terms of the related notes. Refer to Note 6 for more information on these instruments.

Exchangeable Senior Notes:The Exchangeable Senior Notes are presented at amortized cost on the Condensed Consolidated Financial Statements. The fair value is determined based upon a discounted cash-flow methodology using discount rates that best reflect current market rates for instruments with similar with characteristics and credit quality. Refer to Note 6 ~~for more information on these instruments.~~

~~CBRE Strategic Partners Asia:~~ The Company’s unconsolidated equity investment, CBRE Strategic Partners Asia, is presented in the Condensed Consolidated Financial Statements at fair value. The investment manager of CBRE Strategic Partners Asia applies valuation techniques for the Company’s investment carried at fair value based upon the application of the income approach, the direct market comparison approach, the replacement cost approach or third-party appraisals to the underlying assets held in the unconsolidated entity in determining the net asset value attributable to the Company’s ownership interest therein. Refer to Note 2 and Note 5 for more information on these instruments.

~~Real estate investments designated as held for sale at Merger closing:~~ The Company designated six properties as held for sale at the closing of the Merger on December 17, 2015. There was one property in this classification as of March 31, 2016 and six properties as of December 31, 2015. These properties are reported at estimated fair value, less costs to sell and are included in discontinued operations. Refer to Note 2 and Note 3 for more information on these instruments.

Disclosure about fair value measurements is based on pertinent information available to the Company at the reporting date. Although the Company is not aware of any factors that would significantly affect the reasonable fair value amounts, such amounts have not been comprehensively revalued for the purpose of these financial statements since March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, and current estimates of fair value may differ significantly from the amounts presented herein.

The following discussion of fair value was determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, fair values are not necessarily indicative of the amounts the Company could realize on disposition of the assets or liabilities. Determining which category an asset or liability falls within the hierarchy requires significant judgment and the Company evaluates its hierarchy disclosures each quarter.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

Assets and liabilities measured at fair value on a recurring 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 March 31, 2016 Total Level I Level II Level III
Financial Assets:

Retained CDO Bonds:

Non-investment grade, subordinate CDO bonds $ 8,786
$ —
$ —
$ 8,786
Marketable securities:

Investment in CBRE Strategic Partners Asia 5,126
—
—
5,126
Real estate investments classified as held for sale at Merger closing 10,522
—
—
10,522
$ 24,434
$ —
$ —
$ 24,434
Financial Liabilities:

Derivative instruments:

Interest rate swaps $ 27,461
$ —
$ —
$ 27,461
$ 27,461
$ —
$ —
$ 27,461



At March 31, 2017	Total			Level I		Level II		Level III
Financial Assets:
Retained CDO Bonds	$	4,828		$	—	$	—	$	4,828
Real estate investments	46,188			—		—		46,188
Investment in CBRE Strategic Partners Asia	3,999			—		—		3,999
Interest rate swaps	8,010			—		—		8,010
	$	63,025		$	—	$	—	$	63,025
Financial Liabilities:
Interest rate swaps	$	(517	)	$	—	$	—	$	(517	)
	$	(517	)	$	—	$	—	$	(517	)

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



At December 31, 2016	Total			Level I		Level II		Level III
Financial Assets:
Retained CDO Bonds	$	11,906		$	—	$	—	$	11,906
Real estate investments	2,413			—		—		2,413
Investment in CBRE Strategic Partners Asia	4,145			—		—		4,145
Interest rate swaps	3,769			—		—		3,769
	$	22,233		$	—	$	—	$	22,233
Financial Liabilities:
Interest rate swaps	$	(700	)	$	—	$	—	$	(700	)
	$	(700	)	$	—	$	—	$	(700	)

~~Derivative instruments:~~ ~~Interest rate swaps are valued with the assistance~~Valuation of a third-party derivative specialist, who uses a combination of observable market-based inputs, such as interest rate curves, and unobservable inputs which require significant judgment such as the credit valuation adjustments due to the risk of non-performance by both the Company and its counterparties. The most significant unobservable input in the 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 swaps is the forward interest rate curve. Fair values of the Company’s derivative instruments were valued using a Black-Scholes model. Fair value of the Company’s embedded exchange option was determined using a probabilistic valuation model with the assistance of third-party valuation specialists.

~~Total unrealized losses from derivatives for the three months ended March 31, 2016 and 2015 were $(22,189) and $(2,132), respectively, in accumulated other comprehensive income (loss).~~

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

Level III Instruments

Retained CDO ~~Bonds~~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 cash flows expected to be collected and applies a discount rate equal to the yield that the Company would expect to pay for similar securities with similar risks at the valuation date. Future expected cash flows generated by management require significant assumptions and judgment regarding the expected resolution of the underlying collateral, which includes loans and other lending investments, and real estate ~~investments, and collateralized mortgage backed securities.~~investments. The resolution of the 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 unobservable inputs such as the timing of a loan default or property sale and the severity of loan losses. Significant increases (decreases) in any of those inputs in isolation as well as any change in the expected timing of those inputs would result in a significantly lower (higher) fair value measurement. Due to the inherent uncertainty in the determination of fair value, the Company has designated its Retained CDO Bonds as Level III.

Investment in CBRE Strategic Partners Asia: The Company’s investment in CBRE Strategic Partners Asia is based on the Level III valuation inputs applied by the investment manager of CBRE Strategic Partners Asia, utilizing a mix of different approaches for valuing the underlying real estate related investments within the investment company.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

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, CBRE Strategic Partners 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 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 fund’s term ended in January 2017 and commencement of the ~~Company obtains~~fund's liquidation was filed in early February 2017. The fund will wind up over the ~~financial results of CBRE Strategic Partners Asia and on an annual basis the Company receives audited financial statements.~~succeeding 24 months.

Real estate investments: Real estate investments impaired during a period are reported at estimated fair value and real estate investments impaired during a period that are classified as held for sale ~~at Merger closing:~~ ~~Real estate investments classified~~ as ~~held for sale at the time~~ of the ~~Merger~~end of the period are reported at estimated fair value less costs to sell. The fair value of real estate investments and their related lease intangibles is determined ~~by an independent~~using third-party valuation ~~firm using valuation techniques~~support, including ~~the~~purchase-sale contracts and other available market ~~approach, income approach, and cost approach.~~information. 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 value this liability falls within Level III for fair value reporting.

Derivative instruments: Interest rate swaps are valued with the assistance of a third-party derivative specialist using a discounted cash flow model, which requires a combination of observable market-based inputs, such as interest rate curves, and unobservable inputs which require significant judgment such as the credit valuation adjustments due to the risk of nonperformance by both the Company and its counterparties. The most significant unobservable input in the 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 swaps is the forward interest rate curve.

Total unrealized gains (losses) from derivatives for the three months ended March 31, 2017 and 2016 were $4,378 and $(22,189), respectively, in accumulated other comprehensive income (loss).

Fair Value on a Recurring Basis

Quantitative information regarding the valuation techniques and the range of significant unobservable Level III inputs used to determine fair value measurements on a recurring basis as of March 31, ~~2016 are:~~2017 are as follows:

At March 31, 2016

Financial Asset or Liability

Fair Value

Valuation Technique

Unobservable Inputs

Range

Financial Asset (Liability)

Fair Value

Valuation Technique

Unobservable Inputs

Range

Non-investment grade, subordinate CDO bonds

8,786

Discounted cash flows

Discount rate

22.50%

4,828

Discounted cash flows

Discount rate

16.5%

Interest rate swaps

27,461

Hypothetical derivative method

Credit borrowing spread

135 to 220 basis points

Interest rate swaps ¹

7,493

Hypothetical derivative method

Credit borrowing spread

135 to 230 basis points

Investment in CBRE Strategic Partners Asia

5,126

Discounted cash flows

Discount rate

20.00%

3,999

Discounted cash flows

Discount rate

20.0%


1.	Fair value includes interest rate swap liabilities with an aggregate value of $517.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

The following ~~roll forward~~rollforward table reconciles the beginning and ending balances of financial assets (liabilities) measured at fair value on a recurring basis using Level III ~~inputs:~~inputs as of March 31, 2017:

Retained CDO Bonds Investment in CBRE Strategic Partners Asia Total Financial Assets – Level III
Balance as of December 31, 2015 $ 7,471
$ 5,508
$ 12,979
Amortization of discounts or premiums 381
—
381
Adjustments to fair value:

Unrealized gain in other comprehensive income from fair value adjustment 934
—
934
Total income on fair value adjustment —
(68 ) (68 )
Purchase price allocation adjustments —
(314 ) (314 )
Balance as of March 31, 2016 $ 8,786

$ 5,126
$ 13,912

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

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



	Retained CDO Bonds			Investment in CBRE Strategic Partners Asia			Interest Rate Swaps		Total Financial Assets (Liabilities) - Level III
Balance at January 1, 2017	$	11,906		$	4,145		$	3,069	$	19,120
Amortization of discounts or premiums	632			—			—		632
Adjustments to fair value:
Ineffective portion of change in derivative instruments	—			—			46		46
Unrealized gain on derivatives	—			—			4,378		4,378
Unrealized loss in other comprehensive income from fair value adjustment	(2,820		)	—			—		(2,820		)
Other-than-temporary impairments	(4,890		)	—			—		(4,890		)
Total loss on fair value adjustments	—			(146		)	—		(146		)
Balance at March 31, 2017	$	4,828		$	3,999		$	7,493	$	16,320

Fair Value on a Non-Recurring Basis

The Company measured its real estate investments ~~classified as held for sale at~~that were impaired during the ~~time of the Merger~~period on a non-recurring basis at estimated fair value based on the respective selling prices as of March 31, ~~2016~~2017 and December 31, ~~2015.~~2016. The Company recorded impairment on these assets as a result of a change in intent to hold the real estate investments. The Company had ~~one and six~~two assets in this classification recorded at $46,188 as of March 31, ~~2016~~2017 and one asset in this classification recorded at $2,413 as of December 31, ~~2015, respectively, as the Company sold five of the assets during the first quarter of~~ 2016. These assets were recorded at fair value, less costs to sell of $10,522 and $393,984 as of March 31, 2016 and December 31, 2015, respectively, and are included in discontinued operations. Refer to Note 3 for further information on these assets.

10. ~~Derivative~~Derivatives and Non-Derivative Hedging Instruments

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

The Company recognizes all derivatives on the ~~interest rate swap~~Condensed Consolidated Balance Sheets at fair value within other assets or other liabilities, depending on ~~its unsecured $200,000 senior term loan and,~~the balance at the end of the period. Derivatives that are not designated as hedges must be adjusted to fair value through income. If a derivative is a hedge, depending on the nature of the hedge, changes in ~~connection with its entry into~~ the ~~2015 Revolving Credit Facility, entered into two new interest rate swap derivative contracts related to the 3-Year Term Loan and 7-Year Term Loan associated with its 2015 Revolving Credit Facility.~~

~~As of March 31, 2016, the Company’s derivative instruments consist of interest rate swaps, which are cash flow hedges. Changes in the effective portion of~~ fair value of the ~~derivatives are~~derivative will either be offset against the change in fair value of the hedged asset, liability or firm commitment through earnings, or recognized in other comprehensive income ~~(loss)~~ until the hedged item ~~expires or~~ is recognized in earnings. ~~Borrowings on the Company’s foreign currency denominated tranche~~The ineffective portion of ~~the 2015 Revolving Credit Facility and borrowings on the foreign currency~~a derivative’s change in fair value will be immediately recognized in earnings.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

~~denominated~~Derivative accounting may increase or decrease reported net income and shareholders’ equity prospectively, depending on future levels of the LIBOR swap spreads and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows, provided the contract is carried through to full term.

Borrowings on the Company’s multicurrency tranche of the ~~Company’s $200,000 million senior revolving credit facility that the Company terminated in December~~ 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). The ineffective portion of the change in fair value of a derivative or non-derivative hedging instrument will be immediately recognized in earnings. Derivative accounting may increase or decrease reported net income and shareholders’ equity, depending on future levels of LIBOR interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows, provided the contract is carried through to full term. Refer to ~~Note 2 and~~ Note 9 for additional information on the ~~Company’s derivative and non-derivative~~Company's hedging instruments, including the fair value measurement of these instruments.

The Company’s derivatives and hedging instruments as ~~applicable.~~of March 31, 2017 are as follows:

~~The following table summarizes the notional and fair value~~

Benchmark Rate

Notional Value

Strike Rate

Effective Date

Expiration Date

Fair Value

Interest Rate Swap - Waco

1 mo. USD-LIBOR-BBA

15,113 USD

4.55%

12/19/2013

12/19/2020

(356

)

Interest Rate Swap - Atrium I

1 mo. USD-LIBOR-BBA

19,474 USD

1.78%

8/16/2011

5/31/2018

(108

)

Interest Rate Swap - Easton III

1 mo. USD-LIBOR-BBA

5,862 USD

1.95%

8/16/2011

1/31/2019

(52

)

Interest Rate Swap - 3-Year Term Loan

1 mo. USD-LIBOR-BBA

100,000 USD

1.22%

12/19/2016

12/17/2018

371

Interest Rate Swap - 3-Year Term Loan

1 mo. USD-LIBOR-BBA

100,000 USD

1.23%

12/19/2016

12/17/2018

364

Interest Rate Swap - 3-Year Term Loan

1 mo. USD-LIBOR-BBA

100,000 USD

1.24%

12/19/2016

12/17/2018

345

Interest Rate Swap - 5-Year Term Loan

1 mo. USD-LIBOR-BBA

750,000 EUR

1.60%

12/17/2015

12/17/2020

5,328

Interest Rate Swap - 7-Year Term Loan

1 mo. USD-LIBOR-BBA

175,000 EUR

1.82%

12/17/2015

1/9/2023

1,601

Net Investment Hedge in EUR-denominated investments

USD-EUR exchange rate

45,000 GBP

N/A

9/28/2015

N/A

—

Net Investment Hedge in GBP-denominated investments

USD-GBP exchange rate

15,000 GBP

N/A

7/15/2016

N/A

—

Total hedging instruments

7,493

As of March 31, 2017, the Company’s derivative ~~and hedging~~ instruments ~~at March 31, 2016. The fair value~~consist of the derivatives is presented in the Company’s balance sheet in Derivative instruments, at fair value and the carrying value of the non-derivative net investment hedge is included in the balance of the Company’s 2015 Revolving Credit Facility. The notional value is an indication of the extent of the Company’s involvement in this instrument at that time, but does not represent exposure to credit, interest rate ~~or market risks:~~

Benchmark Rate Notional Value Strike Rate Effective Date Expiration Date Fair Value
Assets of Non-VIEs:
Interest Rate Swap - Waco 1 mo. USD-LIBOR-BBA 15,410 USD 4.55% 12/19/2013 12/19/2020 $ 953
Interest Rate Swap - Point West I 1 mo. USD-LIBOR-BBA 10,310 USD 1.41% 8/16/2011 12/6/2016 62
Interest Rate Swap - Atrium I 1 mo. USD-LIBOR-BBA 20,410 USD 1.78% 8/16/2011 5/31/2018 444
Interest Rate Swap - Easton III 1 mo. USD-LIBOR-BBA 6,048 USD 1.95% 8/16/2011 1/31/2019 188
Interest Rate Swap - 5-Year Term Loan 1 mo. USD-LIBOR-BBA 750,000 USD 1.60% 12/17/2015 12/17/2020 19,337
Interest Rate Swap - 7-Year Term Loan 1 mo. USD-LIBOR-BBA 175,000 USD 1.82% 12/17/2015 1/9/2023 6,477
Non-Derivative Net Investment Hedge
in Gramercy European Property Fund
EUR-USD exchange rate 20,000 Euros N/A 9/28/2015 N/A —
Total hedging instruments $ 27,461

swaps, which are cash flow hedges. Through its interest rate swaps, the Company is hedging exposure to variability in future interest payments on its debt facilities. At March 31, ~~2016,~~2017, the Company's interest rate swap derivative instruments were reported in other assets at ~~their~~ fair value ~~as a net liability~~ of ~~$27,461.~~$8,010 and in other liabilities at fair value of $(517). Swap ~~loss~~gain (loss) of ~~$1,830~~$46 and $(1,830), was recognized asin interest expense in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016, respectively, with respect to interest rate swap hedge ineffectiveness, or to amounts excluded from ineffectiveness, which relates to the off-market financing element associated with certain derivatives. ~~No gain or loss was recognized with respect to hedge ineffectiveness or to amounts excluded from ineffectiveness for the three months ended March 31, 2015.~~ During the three months ended March 31, 2017 and 2016, the Company reclassified $268 and $315, respectively, from accumulated other comprehensive income (loss) into interest expense related to a derivative terminated in 2015. Over time, the realized and unrealized gains and losses held in accumulated other comprehensive income (loss) will be reclassified into earnings in the same periods in which the hedged interest payments affect earnings. During the next 12 months, the Company expects that ~~$9,145~~$3,536 will be reclassified from other comprehensive income as an increase in interest expense for the Company’s interest rate swaps as of March 31, ~~2016.~~2017. Additionally, the Company will recognize ~~$3,468~~ $2,382

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

in interest expense on a straight-line basis over the remaining original term of terminated swaps through June 2019, representing

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

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

~~Through~~The Company hedges its investments based in foreign currencies using non-derivative net investment hedges in conjunction with borrowings under the multicurrency tranche of its 2015 Revolving Credit Facility. The Company’s non-derivative net investment hedge on its euro-denominated investments, which was entered into in September 2015, ~~the Company~~ is ~~hedging~~used to hedge exposure to changes in the ~~euro-U.S.~~euro U.S. dollar exchange rate ofunderlying its ~~net~~unconsolidated equity ~~investment~~investments in the Gramercy European Property Fund and the Goodman Europe JV, both of which ~~has~~have euros as their functional currency. The Company’s non-derivative net investment hedge on its British pound sterling-denominated investments, which was entered into in July 2016, is used to hedge exposure to changes in the British pound sterling U.S. dollar exchange rate underlying its unconsolidated equity investment in the Goodman UK JV and its wholly-owned property in Coventry, UK until its disposition in December 2016, both of which have British pounds sterling as their functional currency. At March 31, ~~2016,~~2017, the non-derivative net investment hedge ~~was~~value is reported at ~~its~~ carrying value as a net liability of ~~$22,760,~~$66,759, which is included in the balance of the senior unsecured revolving credit facility on the Condensed Consolidated Balance Sheets. During the three months ended March 31, 2017 and 2016, the Company recorded a net loss of ~~$(1,036)~~$923 and $1,036, respectively, in other comprehensive income (loss) from the impact of exchange rates related to the non-derivative net investment hedge. No gain or loss was recognized with respect to non-derivative net investment hedge ineffectiveness, or to amounts excluded from ineffectiveness, in interest expense in the Condensed Consolidated Statement of Operations for the three months ended March 31, 2016.hedges. When the non-derivative net ~~investment is~~investments being hedged are sold or substantially liquidated, the balance of the translation adjustment accumulated in other comprehensive income will be reclassified into earnings.

11. Shareholders’ Equity (Deficit)

The equity structure in the condensed consolidated financial statements following the reverse merger reflects the equity structure of the Company. As a result, the Company’s common shares outstanding have been adjusted retroactively for all prior periods presented computed on the basis of the number of shares outstanding multiplied by the exchange ratio of 3.1898 established in the Merger Agreement. As of March 31, 2017 and December 31, 2016, ~~and 2015,~~ the ~~Company’s~~Company's authorized capital shares ~~consist~~consists of ~~1,000,000,000~~500,000,000 shares of beneficial interest, $0.01 par value per share, of which the Company is authorized to issue up to ~~990,000,000~~490,000,000 common shares of beneficial interest, $0.01 par value ~~$0.01~~ per share, or common shares, and 10,000,000 preferred shares of beneficial interest, $0.01 par value ~~of $0.01,~~per share, or preferred shares. As of March 31, ~~2016, 421,500,741~~2017, 141,522,527 common shares and 3,500,000 preferred shares were issued and outstanding.

In December 2016, the Company's board of trustees approved a 1-for-3 reverse share split of its common shares and outstanding ~~respectively. All~~OP Units. The reverse share ~~share price,~~split was effective after the close of trading on December 30, 2016 and ~~per share data has been updated retroactively to reflect~~ the ~~Merger exchange ratio of 3.1898.~~Company's common shares began trading on a reverse-split-adjusted basis on the NYSE on January 3, 2017.

In February ~~2016,~~2017, the Company’s board of trustees authorized and the Company declared a dividend of ~~$0.11~~$0.375 per common share for the first quarter of 2017, which was paid on April ~~15, 2016~~14, 2017 to ~~common share and unitholders~~holders of record as of ~~the close of business on~~ March 31, ~~2016.~~2017.

Dividend Reinvestment Plan

In June 2016, the Company adopted a dividend reinvestment plan, or DRIP, under which shareholders may use their dividends and optional cash payments to purchase additional common shares of the Company. In August 2016, the Company registered 3,333,333 common shares related to the DRIP. During the three months ended March 31, 2017, 2,976 shares were issued under the DRIP and as of March 31, 2017 there were 3,329,660 shares available for issuance under the DRIP.

Share Repurchase Program

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

In February 2016, the Company’s board of trustees approved a share repurchase program authorizing the Company to repurchase up to $100,000 of the Company’s outstanding common shares. ~~Purchases~~As of March 31, 2017, the Company had not repurchased any shares under the share repurchase program.

At-The-Market Equity Offering Program

In July 2016, the Company’s board of trustees approved the establishment of an “at the market” equity issuance program, ~~will be made from time~~or ATM Program, pursuant to ~~time in the open market or in privately negotiated transactions. The timing, manner, price and amount of any repurchases will be determined by~~which the Company ~~in its discretion~~may offer and ~~will be subject~~sell common shares with an aggregate gross sales price of up to ~~economic and market conditions, stock price, applicable legal requirements and other factors. The program may be suspended or discontinued at any time. For~~$375,000. During the three months ended March 31, ~~2016,~~2017, the Company ~~did not repurchase any shares.~~

~~In February 2015, Legacy Gramercy’s board~~sold 731,453 common shares through the ATM Program for net proceeds of directors approved a 1-for-4 reverse stock split of its common stock and outstanding Class A limited partnership units of Legacy Gramercy's operating partnership, or Legacy OP Units. The reverse stock split was effective after the close of trading on March 20, 2015, and the Company’s common stock began trading on a reverse split-adjusted basis on the New York Stock Exchange on March 23, 2015.$19,700.

Preferred Shares

~~Upon closing~~Holders of the ~~Merger on December 17, 2015, each of Legacy Gramercy’s 3,500,000 shares of~~Company's 7.125% ~~Series B Cumulative Redeemable Preferred Stock, or Series B Preferred Stock, was exchanged for one share of the Company’s 7.125% Series A Cumulative Redeemable Preferred Shares, or~~ Series A Preferred Shares, ~~which have the same preferences, rights and privileges as the Series B Preferred Stock. Holders of the~~or Series A Preferred Shares, are entitled to receive annual dividends of $1.78125 per share on a quarterly basis and dividends are cumulative, subject to certain provisions. On or after August 15, 2019, the Company can, at its option, redeem the Series A Preferred Shares at par for cash. At March 31, ~~2016,~~2017, the Company ~~has~~had 3,500,000 of its Series A Preferred Shares outstanding with a mandatory liquidation preference of $25.00 per share.

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

~~Equity Plan Activities~~

~~Following the Merger, the Company’s active equity incentive plan, from which share awards are issued, is the legacy Chambers equity incentive plan, or the 2013~~ Equity Incentive ~~Plan. The 2013~~Plans

In June 2016, the Company instituted its 2016 Equity Incentive Plan, ~~allows for~~which was approved by the ~~following awards to be made: (i) stock options that qualify as incentive stock options under Section 422~~Company’s board of ~~the Internal Revenue Code, (ii) stock options that do not qualify, (iii) stock appreciation rights, (iv) share awards, (v) phantom shares,~~trustees and ~~(vi) dividend equivalents and other equity awards.~~shareholders. As of March 31, ~~2016,~~2017, there were ~~2,820,792~~3,343,365 shares available for grant under the ~~2013~~2016 Equity Incentive Plan. The ~~Company’s 2004 Equity Incentive Plan, 2012 Inducement Plan, 2012 Outperformance Plan,~~Company accounts for share-based compensation awards using fair value recognition provisions and ~~2015 Equity Incentive Plan continued to exist following~~assumes an estimated forfeiture rate which impacts the ~~Merger, however they became inactive and thus no new share awards will be issued out~~amount of ~~any of those plans.~~

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

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

Through March 31, ~~2016, 2,908,116~~2017, 908,985 restricted shares had been issued under the ~~Company’s~~equity incentive plans, including the 2016 Equity Incentive ~~Plans,~~Plan and the Company’s previous equity incentive plans, of which ~~59%~~73.1% have vested. Except for certain performance based awards, the vested and unvested shares are currently entitled to receive distributions on common shares if declared by the Company. Holders of restricted shares are prohibited from selling such shares until they vest but are provided the ability to vote such shares beginning on the date of grant. Compensation expense of ~~$483~~$817 and ~~$245~~$483 was recorded for the three months ended March 31, ~~2016~~2017 and ~~2015,~~2016, respectively, related to the issuance of restricted shares. Compensation expense of ~~$6,879~~$5,741 will be recorded over the course of the next 4233 months representing the remaining weighted average vesting period of equity awards issued under the ~~Equity Incentive Plans~~equity incentive plans as of March 31, ~~2016.~~2017. As of March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, the Company had ~~779,928~~334,689 and ~~684,199 weighted-average unvested~~318,807 weighted average restricted shares outstanding, respectively.

Compensation expense of ~~$488~~$1,056 and $488 was recorded for the three months ended March 31, ~~2016~~2017 and ~~2015,~~March 31, 2016, respectively, for the ~~2012~~Company's Outperformance ~~Plan.~~Plans. Compensation expense of ~~$2,438~~$6,969 will be recorded over the course of the next 1537 months, representing the remaining weighted average vesting period of the awards issued under the ~~2012~~ Outperformance ~~Plan~~Plans as of March 31, ~~2016.~~2017.

~~Deferred Stock Compensation Plan~~Earnings per Share

The Company presents both basic and diluted earnings per share, or EPS. Basic EPS is computed by dividing net income (loss) available to common shareholders, as adjusted for ~~Directors~~

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

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

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

~~Earnings~~into common shares, as long as their inclusion would not be anti-dilutive. The two-class method is an earnings allocation methodology that determines earnings per ~~Share~~

share for common shares and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. 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 unvestedcertain share-based payment ~~award containing non-forfeitable~~awards that contain nonforfeitable rights to dividends, ~~regardless of whether or not the awards ultimately vest or expire. Net losses~~which are ~~not allocated to~~considered participating securities ~~unless~~for the ~~holder has a contractual obligation~~purposes of computing earnings per share pursuant to ~~share~~the two-class method, and therefore the Company applies the two-class method in ~~the losses.~~its computation of EPS.

Earnings per share for the three months ended March 31, ~~2016~~2017 and ~~2015~~2016 are computed as follows:

Three Months Ended March 31,
2016 2015
Numerator – Income (loss):

Net income (loss) from continuing operations $ (5,693 ) $ 24
Net income (loss) from discontinued operations 4,640
(62 )
Net loss (1,053 ) (38 )
Net loss attributable to noncontrolling interest 120
42
Nonforfeitable dividends allocated to unvested restricted shareholders (199 ) (19 )
Preferred share dividends (1,559 ) (1,559 )
Net loss available to vested common shares outstanding $ (2,691 ) $ (1,574 )
Denominator – Weighted average shares ⁽¹⁾:

Weighted average basic shares outstanding 420,181,216
149,115,357
Effect of dilutive securities:

Unvested share based payment awards —
—
Options —
—
Phantom shares —
—
Shares related to OP Units —
—
Exchangeable Senior Notes —
—
Diluted Shares 420,181,216
149,115,357



	Three Months Ended March 31,
	2017			2016
Numerator – Income (loss):
Net loss from continuing operations	$	(8,072	)	$	(5,693	)
Net income (loss) from discontinued operations	(24		)	4,640
Loss before net gain on disposals	(8,096		)	(1,053		)
Net gain on disposals	17,377			—
Net income (loss)	9,281			(1,053		)
Less: Net (income) loss attributable to noncontrolling interest	(154		)	120
Less: Nonforfeitable dividends allocated to participating shareholders	(276		)	(199		)
Less: Preferred share dividends	(1,559		)	(1,559		)
Net income (loss) available to common shares outstanding	$	7,292		$	(2,691	)
Denominator – Weighted average shares ¹:
Weighted average basic shares outstanding	140,907,399			140,060,405
Effect of dilutive securities:
Unvested non-participating share based payment awards	71,848			—
Options	15,576			—
Exchangeable Senior Notes	880,796			—
Weighted average diluted shares outstanding	141,875,619			140,060,405

~~(1)~~1.

~~As a result of the Merger, each outstanding~~Share and per 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, 2015amounts have been adjusted byfor the ~~Merger exchange ratio of 3.1898.~~1-for-3 reverse share split completed on December 30, 2016.

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

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

The weighted average price of the Company’s common shares for the three months ended March 31, 2015 was above the exchange price of $7.76 for the period, however due to the net loss available to vested common shares outstanding, the excess conversion premium was excluded from the calculation of earnings per share for the three months ended March 31, 2015.

For the three months ended March 31, 2016, ~~16,336 share options, 2,883,465~~961,155 unvested share based payment awards, 5,445 share options, and ~~1,374,302~~458,101 common shares related to ~~Legacy OP Units~~outside interests in the Operating Partnership were computed using the treasury share method, which due to the net loss from continuing operations excluding amounts attributable to noncontrolling interest and adjusted for preferred dividends declared during the period were ~~anti-dilutive.~~anti-dilutive and excluded from Diluted EPS. The weighted average price of the Company’s common shares during the three months ended March 31, 2016 was below the exchange price of the Exchangeable Senior Notes for the period, thus there was no potential dilutive effect of the excess conversion premium and no effect was included in the calculation of Diluted EPS for the three months ended March 31, 2016. For the three months ended ended March 31, 2016, the Company excluded unvested restricted

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

share awards of ~~779,928~~259,976 from its weighted average basic shares outstanding due to the net loss from continuing operations excluding amounts attributable to noncontrolling interest and adjusted for preferred dividends declared during the period.

For the three months ended March 31, ~~2015, 50,058 share options, 2,039,175 unvested share based payment awards, 488,778 phantom share units, 1,701,391 Legacy OP Units, and 1,737,718 Exchangeable Senior Notes were computed using~~2017, the ~~treasury share method, which due~~net income attributable to the ~~net loss~~outside interests in the Operating Partnership has been excluded from ~~continuing operations excluding amounts attributable to noncontrolling interest~~the numerator and ~~adjusted for preferred dividends declared during the period were anti-dilutive. For the three months ended March 31, 2015, the Company excluded unvested restricted share awards~~620,586 of ~~520,585 from its~~ weighted average ~~basic~~ shares ~~outstanding due~~related to the ~~net loss~~outside interests in the Operating Partnership has been excluded from ~~continuing operations excluding~~the denominator for the purpose of calculating Diluted EPS as there would have been no effect had such amounts ~~attributable~~been included. Refer to ~~noncontrolling interest and adjusted~~Note 13 for ~~preferred dividends declared during~~more information on the ~~period.~~outside interests in the Operating Partnership.

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income (loss) as of March 31, ~~2016~~2017 and December 31, ~~2015~~2016 is comprised of the following:


	March 31, 2016			December 31, 2015			March 31, 2017			December 31, 2016
Net unrealized loss on derivative securities	$	(28,263	)	$	(6,074	)
Net unrealized gain (loss) on derivative securities							$	3,938		$	(440	)
Net unrealized gain on debt instruments	1,944			1,010			879			3,699
Foreign currency translation adjustments:
Gain (loss) on non-derivative net investment hedge⁽¹⁾	(1,022		)	14
Gain on non-derivative net investment hedges ¹							4,245			5,168
Write-off on non-derivative net investment hedge							(652		)	(652		)
Other foreign currency translation adjustments	6,499			(656		)	(9,638		)	(11,252		)
Reclassification of swap loss into interest expense	315			(45		)
Reclassification of accumulated foreign currency translation adjustments due to disposal							(3,737		)	(3,737		)
Disposition of European investment							1,944			1,944
Reclassification of swap gain into interest expense							1,410			1,142
Total accumulated other comprehensive loss	$	(20,527	)	$	(5,751	)	$	(1,611	)	$	(4,128	)


~~(1)~~1.	The foreign currency translation adjustment associated with the Company’s non-derivative net investment ~~hedge~~hedges related to its ~~equity investment in the Gramercy~~ European ~~Property Fund is~~investments are included in other comprehensive income (loss).

12. Noncontrolling Interest

Noncontrolling interests represent the ~~common units of limited partnership interest~~outside equity interests in ~~Legacy Gramercy’s operating partnership,~~ the ~~entity that owns substantially all of Legacy Gramercy’s assets and investments, or Legacy OP Units, not held by the Company~~Company’s Operating Partnership as well as third-party equity interests in the Company’s other consolidated subsidiaries. ~~Legacy~~

Outside equity interests in Operating Partnership

The outside equity interests in the Company’s Operating Partnership include common units of limited partnership interest in the Operating Partnership, or OP Units, ~~may be redeemed for one share~~and the earned and vested portion of limited partnership interests in the Operating Partnership granted by the Company pursuant to its share-based compensation plans, or LTIP Units, which are convertible on a one-for-one basis into OP Units. The aggregate outstanding noncontrolling interest in the Operating Partnership as of March 31, 2017 represented an interest of approximately 0.40% in the Company. The Company attributes a portion of its net income (loss) during each reporting period to noncontrolling interest based on the weighted average percentage ownership of both OP Unit holders and earned and vested LTIP Unit holders relative to the sum of the Company’s total outstanding common ~~stock. The redemption rights are outside of the Company’s control, and thus the Legacy~~shares, OP Units, ~~are classified as a component of temporary equity~~ and are shown in the mezzanine equity section of the Company’s Condensed Consolidated Financial Statements. The Company is party by assumption to a registration rights agreement with the holders of the Legacy OP Units that requires the Company, subject to the termsearned and ~~conditions and certain exceptions set forth therein, to file and maintain a registration statement relating to the issuance of shares of its common shares upon redemption of Legacy OP~~vested LTIP Units.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

~~Common Units of Limited Partnership Interest in the Operating Partnership~~

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

As of March 31, ~~2016, the noncontrolling interest unit holders owned 420,486 Legacy~~2017, 233,023 OP Units were outstanding, which can be redeemed for ~~1,341,268 shares, as each Legacy OP Unit is redeemable for 3.1898 shares~~233,023 of the ~~Company’s common stock following the Merger. The outstanding Legacy OP Units as of March 31, 2016 represent an interest of approximately 0.32% in the Company.~~Company's shares. During the three months ended March 31, ~~2016~~2017 and the year ended December 31, ~~2015, 21,832~~2016, 80,816 and ~~142,056 Legacy~~156,452 OP Units, respectively, were converted on a one-for-one basis into common shares of ~~Legacy Gramercy’s common stock.~~the Company. At March 31, ~~2016, 1,341,268~~2017, 233,023 common shares of the ~~Company’s common stock~~Company were reserved for issuance upon redemption of units of limited partnership interest of the ~~Company’s~~Company's Operating Partnership.

~~Legacy~~ OP Units are recorded at the greater of cost basis or fair market value based on the closing share price of the Company’s common shares at the end of the reporting period. As of March 31, ~~2016,~~2017, the value of the ~~Legacy~~ OP units was ~~$11,334. The Company attributes a portion~~$6,129.

LTIP Units

As of ~~its net income (loss) during each reporting period to~~March 31, 2017, noncontrolling interest ~~based on the percentage ownership~~owners held 329,759 earned and vested LTIP Units, which, upon conversion into OP Units, can be redeemed for 329,759 of ~~Legacy OP Unit holders relative to~~ the Company’s ~~total outstanding~~common shares. During the three months ended March 31, 2017 and year ended December 31, 2016, there were no earned and vested LTIP Units converted into OP Units or redeemed for common shares of the Company. At March 31, 2017, 329,759 common shares of the Company were reserved for issuance upon conversion of the earned and ~~Legacy OP Units. The Company recognizes changes in fair value in the Legacy~~vested LTIP Units into 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 fromand their subsequent redemption ~~of the Legacy OP Units.~~for common shares.

Below is the rollforward of the activity relating to the noncontrolling interests in ~~Legacy Gramercy’s operating partnership~~the Operating Partnership as of March 31, ~~2016:~~2017:

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



	Noncontrolling Interest
Balance at January 1, 2017	$	8,643
Redemption of noncontrolling interests in the Operating Partnership	(2,164		)
Net income attribution	34
Fair value adjustments	(296		)
Dividends	(88		)
Balance at March 31, 2017	$	6,129

Interests in Other Operating Partnerships

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

As of March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, the value of the Company’s interest in European Fund Manager was ~~$(377)~~$(205) and ~~$(249)~~$(321), respectively. The Company’s interest in European Fund Manager is presented in the equity section of ~~the Company’s~~its Condensed Consolidated ~~Financial Statements.~~Balance Sheets.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, ~~2016~~2017

13. Commitments and Contingencies

Funding Commitments

During the three months ended March 31, 2017, construction was completed on our build-to-suit property in Round Rock, Texas, which we acquired upon completion in March 2017 for $29,605. The Company is obligated to fund the development of ~~Proportion Foods, a~~one build-to-suit industrial property ~~in Round Rock, Texas,~~as of March 31, 2017, which is ~~a consolidated VIE,~~located in Summerville, South Carolina and projected to have 240,800 rentable square feet upon ~~substantial completion of the development to acquire the property through a forward purchase contract.~~completion. The Company’s remaining future commitment for ~~the~~this property atas of March 31, ~~2016~~2017 is approximately ~~$20,838.~~$24,382.

~~The~~As of March 31, 2017 and December 31, 2016, the Company has ~~committed approximately $56,900 (€50,000)~~made cumulative contributions to the Gramercy European Property Fund ~~which was formed in December 2014.~~of $55,892 (€50,000). As of March 31, ~~2016 and December 31, 2015,~~2017, the ~~Company had contributed $28,134 (€25,358) and $25,663 (€23,160), respectively. See Note 5, “Unconsolidated Equity Investments,” for further information on~~Company’s remaining commitment to the Gramercy European Property ~~Fund.~~Fund is $13,315 (€12,500). 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~~March 31, ~~2015,~~2017, in the case of unfunded commitments.

The Company has committed to fund $100,000 to Strategic Office Partners, of which $18,677 and $16,027 was funded as of March 31, 2017 and December 31, 2016, respectively. See Note 5 for further information on the Gramercy European Property Fund and Strategic Office Partners.

Legal Proceedings

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

Legacy Gramercy, its board of directors, and Chambers ~~and/or Merger Sub are~~were named as defendants in ~~two pending~~various putative class action lawsuits brought by purported Legacy Gramercy stockholders challenging the Merger. ~~Two suits that~~The lawsuits 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~~New York state court action, ~~under~~or the ~~caption In re Gramercy Property Trust Stockholder Litigation, Index No. 652424/2015 (the “New~~New York ~~Action”). In addition, four suits that were separately~~Action, and a Maryland state court action, or the Maryland Action. On March 1, 2017, the court entered a Final Order and Judgment approving the settlement, awarding plaintiffs’ attorney fees and expenses, and dismissing the New York Action with prejudice. On March 22, 2017, pursuant to the stipulation of settlement, plaintiffs in the Maryland Action filed in Circuit Court for Baltimore City, Maryland, captioned (i) Jobin v. DuGan, et al., Case No. 24-C-15-003942 (filed July 27, 2015); (ii) Vojik v. Gramercy Property Trust, et al., Case No. 24-C-15-004412 (filed August 25, 2015); (iii) Hoffbauer et al. v. Chambers Street Properties, et al., 24-C-15-004904 (filed September 24, 2015) (originally filed as two separate suits ina notice of dismissal with prejudice with the Circuit Court for Baltimore County, Maryland, captioned Plemons v. Chambers Street Properties, et al., Case No. 03-C-15-007943 (filed July 24, 2015) and Hoffbauer et al. v. Chambers Street Properties, et al., Case No. 03-C-15-008639 (filed August 12, 2015), and refiled as a single action in the Circuit Court for Baltimore County on September 24, 2015); and (iv) Morris v. Gramercy Property Trust, et al., Case No. 24-C-15-004972 (filed September 28, 2015) have been consolidated into a single action under the caption Glenn W. Morris v. Gramercy Property Trust Inc. et al., Case No. 24-C-15-004972 (the “Maryland Action,” and together with the New York Action, the “Actions”). The complaints allege, among other things, that the directors of Legacy Gramercy breached their fiduciary duties to Legacy Gramercy stockholders by agreeing to sell the Company for inadequate consideration and agreeing to improper deal protection terms in the merger agreement, and that the preliminary joint proxy statement/prospectus filed with the SEC on Form S-4 on September 11, 2015 was materially incomplete and misleading. The complaints also allege that Chambers, Merger Sub and/or Legacy Gramercy aided and abetted these purported breaches of fiduciary duty. The amended complaint in the Morris consolidated action also asserts derivative claims on behalf of Legacy Gramercy for breach of fiduciary duty against the directors of Legacy Gramercy. Plaintiffs seek, among other things, an injunction barring the Merger, rescission of the Merger to the extent it is already implemented, declaratory relief, an award of damages and/or costs/attorney fees.

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

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

The MOU contemplates that the parties will enter into a stipulation of settlement. The stipulation of settlement will be subject to customary conditions, including, among other things, confirmatory discovery and court approval following 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 not satisfied, the settlement may be terminated.

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

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

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

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

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

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

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

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

In April 2015, to stop the accrual of additional interest while the Company’s appeals are pending, the Company paid the NYC DOF $4,025 in full satisfaction of the NYC DOF Transfer Tax Assessment and the NYS DOT $617 in full satisfaction of the NYS DOF Transfer Tax Assessment. There was $0 and $68 of additional interest recorded in discontinued operations for the matter for the three months ended March 31, 2016 and 2015, respectively.11, 2017.

In connection with the Company’s property acquisitions and 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~~In 2017, the Company settled the majority of its operating expense reimbursement audits and paid $3,500 pursuant to the settlement in February 2017. As of March 31, 2017, the Company has estimated a range of loss of $0 to $360 and determined that its best estimate of total loss is ~~$8,000, including $1,000~~$360, which is related to the Merger ~~which~~and has been accrued and recorded in other liabilities as of March 31, ~~2016~~2017 and December 31, ~~2015. The Company has determined that there is a reasonable possibility that a loss may be incurred~~2016.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in ~~excess of $8,000~~thousands, except share, per share and ~~estimates this range to be $8,000 to $13,000.~~property data)

March 31, 2017

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~~90 Park Avenue, New York, New York, and the Company’s seven regional offices located ~~in Horsham, Pennsylvania, Clayton, Missouri,~~across the United States and ~~London, United Kingdom.~~

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

Europe.

Capital and Operating Ground Leases

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

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

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



	Ground Leases - Operating		Ground Leases - Capital		Total
April 1 to December 31, 2017	$	1,685	$	—	$	1,685
2018	2,262		1		2,263
2019	2,271		—		2,271
2020	2,263		—		2,263
2021	2,231		—		2,231
Thereafter	61,857		329		62,186
Total minimum rent expense	$	72,569	$	330	$	72,899

14. Income Taxes

The Company has elected to be taxed as a REIT, under Sections 856 through 860 of the Internal Revenue Code beginning with its taxable year ended December 31, 2004. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute annually at least ~~90%~~90.0% of its ordinary taxable income to ~~stockholders.~~its shareholders. As a REIT, the Company generally will not be subject to U.S. federal income tax on taxable income that it distributes to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it will then be subject to U.S. federal income taxes on taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for U.S. federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income and net cash available for distributions to stockholders. However, the Company believes that it is organized and will operate in such a manner as to qualify for treatment as a REIT and the Company intends to operate in the foreseeable future in such a manner so that it will qualify as a REIT for U.S. federal income tax purposes. The Company may, however, be subject to certain state and local taxes.shareholders. The Company’s TRSs are subject to federal, state and local taxes.

The ~~Company’s Asset and Property~~asset management ~~business, Gramercy Asset Management, conducts its business through a wholly-owned TRS. In addition to~~agreement with KBS has been terminated effective in the ~~limitation on~~first quarter of 2017, therefore the activity in the Company’s ~~use of its net operating losses under Section 382, since~~TRS will be immaterial going forward. Consequently, 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~~tax expense from our TRSs ~~are only available to offset taxable income derived by each respective subsidiary REIT or TRS.~~

~~For~~for the three months ended March 31, ~~2016~~2017 is immaterial. Prior to 2017, income taxes, primarily related to the Company’s TRSs, were accounted for under the asset and ~~2015~~liability method. Deferred tax assets and liabilities were recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities recorded in accordance with GAAP and their respective tax basis and operating loss carryforwards. Deferred tax assets and liabilities were measured using enacted tax rates in effect for the year in which those temporary differences were expected to be recovered or settled. A valuation allowance was provided if the Company believed it was more likely than not that all or a portion of a deferred tax asset would not be realized. Any increase or decrease in a valuation allowance was included in the tax provision when such a change occurs. The Company recorded ~~$703~~$(196) and ~~$1,114~~$703 of income tax ~~expense. Tax~~ expense for the three months ended March 31, 2017 and 2016, respectively.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands, except share, per share and ~~2015 in continuing operations is comprised of federal, state and local taxes primarily attributable to Gramercy Asset Management.~~property data)

March 31, 2017

The Company’s policy for interest and penalties, if any, on material uncertain tax positions recognized in the financial statements is to classify these as interest expense and operating expense, respectively. As of March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, the Company did not incur any material interest or penalties.

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

15. Segment Reporting

As of March 31, ~~2016,~~2017, the Company has determined that it has two reportable operating segments: Asset Management and Investments/Corporate. The reportable segments are determined based upon the management approach, which looks to the Company’s internal organizational structure. The Company’s lines of business require different support infrastructures. All significant inter-segment balances and transactions have been eliminated.

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

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

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

Asset Management Investments / Corporate Total Company
Three Months Ended March 31, 2016

Total revenues $ 5,151
$ 115,394
$ 120,545
Equity in net loss from unconsolidated equity investments —
(2,755 ) (2,755 )
Total operating and interest expense⁽¹⁾
(5,459 ) (118,024 ) (123,483 )
Net loss from continuing operations $ (308 ) $ (5,385 ) $ (5,693 )



	Asset Management			Investments / Corporate			Total Company
Three Months Ended March 31, 2017
Total revenues	$	4,584		$	125,410		$	129,994
Equity in net loss from unconsolidated equity investments	—			(94		)	(94		)
Total operating and interest expense ¹	(1,603		)	(118,696		)	(120,299		)
Other expenses	(41		)	(17,632		)	(17,673		)
Net income (loss) from continuing operations	$	2,940		$	(11,012	)	$	(8,072	)

Asset Management Investments / Corporate Total Company
Three Months Ended March 31, 2015

Total revenues $ 8,179
$ 39,756
$ 47,935
Equity in net loss from unconsolidated equity investments —
(1 ) (1 )
Total operating and interest expense⁽¹⁾
(6,673 ) (41,237 ) (47,910 )
Net income (loss) from continuing operations $ 1,506
�� $ (1,482 ) $ 24



	Asset Management			Investments / Corporate			Total Company
Three Months Ended March 31, 2016
Total revenues	$	5,151		$	115,394		$	120,545
Equity in net loss from unconsolidated equity investments	—			(2,755		)	(2,755		)
Total operating and interest expense ¹	(5,075		)	(111,948		)	(117,023		)
Other expenses	(384		)	(6,076		)	(6,460		)
Net loss from continuing operations	$	(308	)	$	(5,385	)	$	(5,693	)

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

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

March 31, 2017

Asset Management Investments / Corporate Total Company
Total Assets:

March 31, 2016 $ 11,216
$ 5,337,093
$ 5,348,309
December 31, 2015 $ 5,882
$ 5,828,636
$ 5,834,518



	Asset Management		Investments / Corporate		Total Company
Total Assets:
March 31, 2017	$	14,191	$	5,592,669	$	5,606,860
December 31, 2016	$	21,004	$	5,582,523	$	5,603,527

~~(1)~~1.

Total operating and interest expense includes operating costs on commercial property assets for the Investments/Corporate segment and costs to perform required functions under the management agreement for the Asset Management segment. Depreciation and amortization of ~~$58,248~~$62,217 and ~~$18,698~~$58,248 and provision for taxes of ~~$703~~$196 and ~~$1,114~~$(703) for the three months ended March 31, 2017 and 2016, ~~and 2015, respectively.~~respectively, are included in the amounts presented above.

~~Gramercy Property Trust~~

~~Notes to Condensed Consolidated Financial Statements~~

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

~~March 31, 2016~~

16. Supplemental Cash Flow Information

The following table represents supplemental cash flow disclosures for the three months ended March 31, ~~2016~~2017 and ~~2015:~~2016:


	Three Months Ended March 31,						Three Months Ended March 31,
	2016			2015			2017			2016
Supplemental cash flow disclosures:
Interest paid	$	20,638		$	5,769		$	17,447		$	20,638
Income taxes paid	322			167			$	71		$	322
Proceeds from 1031 exchanges from sale of real estate	175,808			—
Proceeds from 1031 exchanges from sales of real estate							$	23,219		$	175,808
Use of funds from 1031 exchanges for acquisitions of real estate	(30,308		)	—			$	(23,218	)	$	(30,308	)
Non-cash activity:
Fair value adjustment to noncontrolling interest in the operating partnership	$	1,207		$	350
Fair value adjustment to noncontrolling interest in the Operating Partnership							$	(296	)	$	1,207
Debt assumed in acquisition of real estate	—			141,033			$	3,680		$	—
Debt transferred in disposition of real estate	(101,432		)	—			$	(10,456	)	$	(101,432	)
Redemption of units of noncontrolling interest in the operating partnership for common shares	(524		)	(2,631		)
Non-cash activities recognized in other comprehensive income:
Deferred losses and other non-cash activity related to derivatives	$	(22,189	)	$	(2,132	)
Change in net unrealized loss on securities available for sale	934			5,750
Non-cash effect of foreign currency translation adjustments	6,119			(218		)
Non-cash acquisition of consolidated VIE							$	24,930		$	—
Dividend reinvestment plan proceeds							$	81		$	—
Redemption of units of noncontrolling interest in the Operating Partnership for common shares							$	(2,164	)	$	(524	)

17. Subsequent Events

~~Subsequent to March 31, 2016,~~In April 2017, the Company closed on the acquisition of ~~a portfolio of 12~~two industrial properties which comprise an aggregate ~~of 1,439,696~~787,074 rentable square feet and ~~were acquired~~are 100.0% occupied for an aggregate purchase price of $51,500 and also closed on the acquisition of a land parcel for $1,000, on which it has committed to construct an industrial facility for an estimated $25,805, with projected completion in October 2017. In April 2017, the Company closed on the disposition of three office properties which comprised an aggregate 208,336 rentable square feet for gross proceeds of $47,030.

On April 26, 2017, the Company completed an underwritten public offering of 10,350,000 common shares, which includes the exercise in full by the underwriters of their option to purchase 1,350,000 additional common shares. The common shares were issued at a public offering price of $27.60 per share and the net proceeds from the offering were approximately ~~$115,159. The properties are 100% leased with lease terms ending between September 2021~~$274,234.

Gramercy Property Trust

Notes to Condensed Consolidated Financial Statements

(Unaudited, amounts in thousands, except share, per share and ~~December 2032.~~property data)

March 31, 2017

In ~~May 2016,~~April 2017, the ~~Company’s partner in the Goodman Europe Joint Venture agreed~~Company entered into an agreement to sell its ~~20%~~14.2% interest toin the Gramercy European Property Fund ~~both of which are related parties of~~and its 5.1% interest in the ~~Company.~~Goodman Europe JV. The transaction is expected to close in the third quarter of 2017; however, there can be no assurances that the transaction will close at all or the amount and timing of the transaction.

In May 2017, the Company declared a second quarter 2017 common dividend of ~~2016.~~$0.375 per share, payable on July 14, 2017 to shareholders of record as of June 30, 2017. In May 2017, the Company also declared a second quarter 2017 dividend on its 7.125% Series A Preferred Shares in the amount of $0.44531 per share, payable on June 30, 2017 to preferred shareholders of record as of the close of business on June 20, 2017.


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

(~~Dollar~~Unaudited, amounts in thousands, except share, per share and property 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 commercial real estate. We specialize in acquiring and managing ~~single-tenant, net leased industrial, office, and specialty properties. We focus on~~high quality, income producing ~~properties~~commercial real estate 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)~~and asset management revenues on properties owned by third parties in the United States and ~~Europe and (iii) pro-rata rental revenues on our~~Europe. We also own unconsolidated equity investments in the United States, Europe, and Asia.

As of March 31, 2017, our wholly-owned portfolio consists of 318 properties comprising 66,732,561 rentable square feet with 98.4% occupancy. As of March 31, 2017, we have ownership interests in 48 industrial and office properties which are held in unconsolidated equity investments in the United States and Europe and two properties held through our investment in CBRE Strategic Partners Asia. As of March 31, 2017, our asset management business manages approximately $1,147,000 of commercial real estate assets, primarily on behalf of our joint venture partners, including approximately $918,000 of assets in Europe.

During the three months ended March 31, 2017, we acquired seven properties aggregating 2,257,311 square feet for a total purchase price of approximately $124,672, including the acquisition of a consolidated variable interest entity, or VIE, for $29,605 and the acquisition of a vacant property for $2,400. During the three months ended March 31, 2017, we sold seven properties aggregating 487,872 square feet for total gross proceeds of approximately $51,683.

Prior to December 17, 2015, we were known as Chambers Street Properties, or Chambers. On December 17, 2015, Chambers ~~Street Properties, or Chambers, a Maryland REIT,~~ completed a merger, or the Merger, with Gramercy Property Trust Inc.~~, or Legacy Gramercy, a Maryland corporation, pursuant to which Legacy Gramercy shareholders received 3.1898 common shares~~ While Chambers was the surviving legal entity, immediately following consummation of ~~beneficial interest of Chambers for each share of common stock of Legacy Gramercy held. Following~~ the Merger, ~~Chambers~~we changed ~~its~~our name to ~~Gramercy~~“Gramercy Property ~~Trust~~Trust” and ~~began trading on the~~our New York Stock Exchange, or NYSE, ~~using the “GPT” stock symbol. Legacy Gramercy’s executive management team manages the combined company.~~

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

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

As of March 31, 2016, our asset management business, which operates under the name Gramercy Asset Management, managed approximately $900,000 of commercial properties for third parties, including approximately $459,000 of assets in Europe.

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

~~As of March 31, 2016, our wholly-owned portfolio of net leased properties is summarized as follows:~~

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

We have elected to be taxed as a REIT 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 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 March 2004 and commenced operations in July 2004 following an initial private placement of our common shares. In May 2013, we listed our common shares on the NYSE under the symbol “CSG.” Following the Merger in December 2015, we changed our NYSE trading symbol to “GPT.” We conduct all of our operations throughOur operating partnership, GPT Operating Partnership LP, ~~our~~or the Operating ~~Partnership. We~~Partnership, is the 100.0% owner of all of its direct and indirect subsidiaries. As of March 31, 2017 third-party holders of limited partnership interests owned approximately 0.40% of the beneficial interest in us. These interests are referred to as the ~~sole general partner of our~~noncontrolling interest in the Operating Partnership. Our Operating Partnership conducts ~~our~~ commercial real estate investment business operations and third-party asset management business operations through various wholly-owned ~~entities and our realty management business through a wholly-owned TRS.~~entities.

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

~~Property Portfolio~~

~~Property acquisitions during the three months ended March 31, 2016 are summarized in the table below:~~

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

Asset and Property Management

In addition to net leased investing, we also operate a commercial real estate management business for third ~~parties. As~~parties and certain of ~~March 31, 2016, this business, which operates under the name Gramercy Asset Management, manages approximately $900,000 of commercial properties.~~our joint venture partners. We manage properties for companies including Strategic Office Partners, and the Gramercy European Property Fund. We managed properties for KBS Real Estate Investment Trust, Inc., or KBS, ~~and the Gramercy European Property Fund.~~until March 31, 2017 when our management agreement with KBS expired.

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

Results of Operations

Comparison of the three months ended March 31, ~~2016~~2017 to the three months ended March 31, ~~2015~~2016

Revenues


	2016			2015			Change			2017			2016			Change
Rental revenue	$	92,095		$	31,190		$	60,905		$	103,282		$	92,095		$	11,187
Third-party management fees	5,046			8,186			(3,140		)	4,592			5,046			(454		)
Operating expense reimbursements	22,582			8,138			14,444			20,368			22,582			(2,214		)
Investment income	443			238			205
Other income	379			183			196			1,752			822			930
Total revenues	$	120,545		$	47,935		$	72,610		$	129,994		$	120,545		$	9,449
Equity in net loss of unconsolidated equity investments	$	(2,755	)	$	(1	)	$	(2,754	)	$	(94	)	$	(2,755	)	$	2,661

The increase of ~~$60,905~~$11,187 in rental revenue is due to the increase in our wholly-owned property portfolio of 318 properties as of March 31, 2017 compared to 276 properties as of March 31, ~~2016 compared to 158 properties as of March 31, 2015.~~2016.

The decrease of ~~$3,140~~$454 in third-party management fees is primarily attributable to the $1,510 decrease in ~~disposition,~~asset management, property ~~management, asset~~ management, and accounting fees ~~of $1,577~~ earned from our ~~contracts~~contract with KBS ~~and other third-parties~~ primarily due to property sales from the ~~KBS~~ portfolio subsequent to March 31, ~~2015 and the cessation~~2016, which is partially offset by an increase of ~~one of our third-party management contracts following the sale of nearly all of its properties as of December 31, 2015. Additionally, $1,480 of the decrease is due to the reduction~~$443 in incentive fees earned from KBS as well as an increase of $591 in revenue from our European management platform during the three months ended March 31, ~~2016~~2017 compared to the three months ended March 31, ~~2015.~~2016.

The ~~increase~~decrease of ~~$14,444~~$2,214 in operating expense reimbursements is due to ~~our wholly-owned property portfolio of 276 properties~~decreases in utility-related expenses, real estate taxes, and miscellaneous operating expenses as ofwell as the related expense reimbursements during the three months ended March 31, ~~2016~~2017 compared to ~~158 properties as of~~the three months ended March 31, ~~2015.~~2016.

~~The increase of $205 in investment~~For the three months ended March 31, 2017, other income is primarily ~~attributable to changes in expected cash flows on our Retained CDO Bonds.~~

comprised of investment income of $633 and property related income of $1,127. For the three months ended March 31, 2016, other income is primarily comprised of ~~miscellaneous~~investment income of $381, property related income of $265, and realized foreign currency exchange gain of $105. ~~For the three months ended March 31, 2015, other income is primarily comprised of miscellaneous property related income of $178 and realized foreign currency exchange loss of $(6).~~

The equity in net loss of unconsolidated equity investments of $(2,755) and $(1) for the three months ended March 31, 2016 and 2015, respectively, represents our proportionate share of the income (loss) generated by our unconsolidated equity investments.

Expenses


	2016		2015		Change			2017			2016		Change
Property operating expenses	$	24,169	$	8,383	$	15,786		$	23,186		$	24,169	$	(983	)
Property management expenses	4,521		5,166		(645		)	3,084			4,521		(1,437		)
Depreciation and amortization	58,248		18,698		39,550			62,217			58,248		3,969
General and administrative expenses	7,722		4,773		2,949			8,756			7,722		1,034
Acquisition and merger-related expenses	410		3,506		(3,096		)
Acquisition expenses								—			410		(410		)
Interest expense	21,953		6,270		15,683			23,056			21,953		1,103
Net impairment recognized in earnings								4,890			—		4,890
Loss on extinguishment of debt	5,757		—		5,757			208			5,757		(5,549		)
Impairment of real estate investments								12,771			—		12,771
Provision for taxes	703		1,114		(411		)	(196		)	703		(899		)
Net gain on disposals								(17,377		)	—		(17,377		)
Total expenses	$	123,483	$	47,910	$	75,573		$	120,595		$	123,483	$	(2,888	)

Property operating expenses are comprised of expenses directly attributable to our real estate portfolio. Property operating expenses include property related costs which we are responsible for during the lease term but can be passed through to the tenant as operating expense reimbursement revenue. The ~~increase~~decrease of ~~$15,786~~$983 is due to ~~our wholly-owned property portfolio of 276 properties~~decreases in utility-related expenses, real estate taxes, and miscellaneous operating expenses as ofwell as the related expense reimbursements during the three months ended March 31, ~~2016~~2017 compared to ~~158 properties as of~~the three months ended March 31, ~~2015.~~2016.

Property management expenses are comprised of costs related to our asset and property management business. The decrease of ~~$645~~$1,437 in property management expenses is primarily related to ~~decreased third-party property~~the reduction of expenses related to KBS, which is partially offset by the increase in expenses related to our European management ~~expenses consistent with the decrease in property management fees.~~platform.

The increase of ~~$39,550~~$3,969 in depreciation and amortization expense is due to our wholly-owned property portfolio of 318 properties as of March 31, 2017 compared to 276 properties as of March 31, ~~2016 compared to 158 properties as of March 31, 2015.~~2016.

The increase of ~~$2,949~~$1,034 in general and administrative expense is primarily related to increased legal and professional fees and as well as increased compensation ~~costs.~~costs, including share-based compensation costs, related to the growth of the Company.

The decrease of ~~$3,096~~$410 in acquisition ~~and merger-related~~ expenses is attributable to the ~~acquisition~~adoption of ~~3 properties~~ASU 2017-01, Amendments to Business Combinations, in the ~~three months ended March 31, 2016 compared to~~first quarter of 2017, as a result of which our real estate acquisitions during the period were accounted for as asset acquisitions and thus the related acquisition costs were capitalized into the value of ~~27 properties in~~ the ~~three months ended March 31, 2015.~~real estate assets acquired.

The increase of ~~$15,683~~$1,103 in interest expense is primarily due to increased borrowings on our unsecured revolving credit facility and ~~term loans,~~ our ~~Unsecured Senior Notes, our Exchangeable Senior Notes and the mortgages we assumed on our real estate acquisitions subsequent to December 31, 2014.~~unsecured senior notes.

During the three months ended March 31, 2017, we recorded net impairment recognized in earnings of $4,890 on our Retained CDO Bonds due to adverse changes in expected cash flows related to the Retained CDO Bonds.

During the three months ended March 31, 2017 and 2016, we recorded loss on extinguishment of debt of $208 and $5,757, respectively, related to the unamortized deferred financing costs, premiums and discounts that were immediately

expensed upon termination as well as early termination ~~fees.~~fees incurred related to mortgages paid off and transferred during the periods.

During the three months ended March 31, 2017, we recognized an impairment on real estate investments of $12,771 related to two properties that were determined to have non-recoverable declines in value during the period.

The provision for taxes was ~~$703~~$(196) and ~~$1,114~~$703 for the three months ended March 31, ~~2016~~2017 and ~~2015,~~2016, respectively. The decrease in tax expense is primarily attributable to athe decrease in ~~incentive fees recognized.~~activity in our TRS.

~~Same-Store and Acquisition Portfolio Analysis~~

~~The tables and discussion below present the results related to our same-store and acquisition operations. The same-store category for~~During the three months ended March 31, ~~2016 and 2015 includes properties that were owned and placed in service as~~2017, we realized net gains on disposal of January 1, 2015 and are still owned and in service as of March 31, 2016. The acquisition category includes properties acquired and placed in service during 2015 and 2016, from the date they were acquired and placed in service through the end of the periods presented. The development and other category includes build-to-suit properties that are not placed in service as of January 1, 2015 and properties sold during the periods presented. Properties considered to be under development and included in the development and other classification consist of build-to-suit properties acquired as of January 1, 2015 for which Company is funding the development and which are not placed in service as of January 1, 2015, as well as build-to-suit properties acquired subsequent to January 1, 2015.

The financial information presented is not an alternative to GAAP. The same-store and acquisition results of operations may be calculated differently by other REITs and should be read in conjunction with our condensed consolidated financial statements and the accompanying footnotes.

~~Results of the same-store and acquisition properties in our portfolio, for the three months ended March 31, 2016 and 2015 are as follows:~~

Same-Store Acquisition Development and Other Asset Management and Corporate Total
2016 2015 $ Change 2016 2015 $ Change 2016 2015 2016 2015 2016 2015 $ Change
Revenues
Rental revenue $ 26,616
$ 27,043
$ (427 ) $ 62,906
$ 3,172
$ 59,734
$ 2,573
$ 975
$ —
$ —
$ 92,095
$ 31,190
$ 60,905
Third-party management fees —
—
—
—
—
—
—
—
5,046
8,186
5,046
8,186
(3,140 )
Operating expense reimbursements 9,507
7,671
1,836
12,320
192
12,128
755
275
—
—
22,582
8,138
14,444
Investment income —
—
—
—
—
—
—
—
443
238
443
238
205
Other income 3
156
(153 ) 223
—
223
8
—
145
27
379
183
196
Total revenues 36,126
34,870
1,256
75,449
3,364
72,085
3,336
1,250
5,634
8,451
120,545
47,935
72,610
Operating Expenses
Property operating expenses 9,413
7,687
1,726
15,789
238
15,551
1,003
392
(2,036 ) 66
24,169
8,383
15,786
Property management expenses —
—
—
—
—
—
—
—
4,521
5,166
4,521
5,166
(645 )
Depreciation and amortization 14,851
14,317
534
41,931
3,121
38,810
1,234
1,044
232
216
58,248
18,698
39,550
General and administrative expenses —
—
—
—
—
—
—
—
7,722
4,773
7,722
4,773
2,949
Acquisition and merger-related expenses —
—
—
89
2,453
(2,364 ) 6
46
315
1,007
410
3,506
(3,096 )
Total operating expenses 24,264
22,004
2,260
57,809
5,812
51,997
2,243
1,482
10,754
11,228
95,070
40,526
54,544
Operating Income 11,862
12,866
(1,004 ) 17,640
(2,448 ) 20,088
1,093
(232 ) (5,120 ) (2,777 ) 25,475
7,409
18,066
Other Income (Expense):
Interest expense (1,834 ) (1,860 ) 26
(3,720 ) (404 ) (3,316 ) (103 ) —
(16,296 ) (4,006 ) (21,953 ) (6,270 ) (15,683 )
Equity in net income of unconsolidated equity investments —
—
—
—
—
—
—
—
(2,755 ) (1 ) (2,755 ) (1 ) (2,754 )
Loss on extinguishment of debt —
—
—
(5,757 ) —
(5,757 ) —
—
—
—
(5,757 ) —
(5,757 )
Income (loss) from continuing operations before provision for taxes 10,028
11,006
(978 ) 8,163
(2,852 ) 11,015
990
(232 ) (24,171 ) (6,784 ) (4,990 ) 1,138
(6,128 )
Provision for taxes (1 ) 2
(3 ) —
—
—
—
—
(702 ) (1,116 ) (703 ) (1,114 ) 411
Income (loss) from continuing operations 10,027
11,008
(981 ) 8,163
(2,852 ) 11,015
990
(232 ) (24,873 ) (7,900 ) (5,693 ) 24
(5,717 )
Income (loss) from discontinued operations —
—
—
161
—
161
4,404
—
75
(62 ) 4,640
(62 ) 4,702
Net income (loss) $ 10,027
$ 11,008
$ (981 ) $ 8,324
$ (2,852 ) $ 11,176
$ 5,394
$ (232 ) $ (24,798 ) $ (7,962 ) $ (1,053 ) $ (38 ) $ (1,015 )

~~The decrease in net income of the same-store properties for the three months ended March 31, 2016 compared~~$17,377 related to the three months ended March 31, 2015 is primarily due to an increase in depreciation and amortization expense as well as a decrease in rental revenue. Depreciation and amortization expense increased and rental revenue decreased for the three months ended March 31, 2016 compared to the three months ended March 31, 2015 primarily due to the impactdisposal of ~~adjustments recorded for the finalization of the purchase price allocation for the Bank of America Portfolio same-store~~seven properties during the three months ended March 31, 2015. Additionally there was a further decrease in rental revenue for the three months ended March 31, 2016 compared to the three months ended March 31, 2015 due to straight-line rent adjustments on several same-store property leases. The increase in net income of the acquisition properties for the three months ended March 31, 2016 compared to the three months ended March 31, 2015 is due to our 158 property acquisitions during the year ended December 31, 2015, net of seven dispositions, and our three property acquisitions in the three months ended March 31, 2016, which are reflected in the 2016 results and not in the 2015 results.period.

Liquidity and Capital Resources

Liquidity is a measurement of our ability to meet cash requirements, including ongoing commitments to fund acquisitions of real estate assets, repay borrowings, pay dividends and other general business needs. In addition to cash on hand, our primary sources of funds for short-term and long-term liquidity requirements, including working capital, distributions, debt service and additional investments, consist of: (i) cash flow from operations; (ii) proceeds from our common equity and debt offerings; (iii) borrowings under our unsecured revolving credit facility and term loans; ~~(iii)~~and (iv) proceeds from ~~our common equity, preferred equity and debt offerings; and, (iv) new financings.~~sale of real estate. We believe these sources of financing will be sufficient to meet our short-term and long-term liquidity requirements.

Our cash flow from operations primarily consists of rental revenue, expense reimbursements from tenants, and third-party management fees. Our cash flow from operations is our principal source of funds that we use to pay operating expenses, debt service, general and administrative expenses, operating capital expenditures, dividends, and acquisition and merger-related expenses. Our ability to fund our short-term liquidity needs, including debt service and general operations (including employment related benefit expenses), through cash flow from operations can be evaluated through the Condensed Consolidated Statements of Cash Flows included in our Condensed Consolidated Financial Statements.

Our ability to borrow under our ~~Unsecured~~2015 Revolving Credit Facility and ~~Term Loan~~term loan facilities is subject to our ongoing compliance with a number of customary financial covenants including our maximum secured and unsecured leverage ratios, minimum fixed charge coverage ratios, consolidated adjusted net worth values, unencumbered asset values, occupancy rates, and portfolio lease terms.

We have several unconsolidated equity investments with partners who we consider to be financially stable. Our unconsolidated equity investments are financed with non-recourse debt or equity. We believe that cash flows from the underlying real estate investments and capital commitments will be sufficient to fund the capital needs of our unconsolidated equity investments.

To maintain our qualification as a REIT under the Internal Revenue Code, we must distribute annually at least ~~90%~~90.0% of our taxable income. This distribution requirement limits our ability to retain earnings and thereby replenish or increase capital for operations. As of the date of this filing, we expect that our cash on hand and cash flow from operations will be sufficient to satisfy our anticipated short-term and long-term liquidity needs as well as our recourse liabilities, if any.

Cash Flows

Net cash provided by operating activities increased ~~$3,307~~$36,496 to ~~$21,748~~$58,244 for the three months ended March 31, ~~2016~~2017 compared to ~~$18,443~~$21,748 for the same period in ~~2015.~~2016. Operating cash flow was generated primarily by net rental revenue from our real estate investments and management fees. Our net cash provided by operations for the three months ended March 31, 2016 was less than our common share dividend of $46,339 declared for the three months ended March 31, 2016 due to accrued merger-related expenses, accrued bonuses, and real estate investment deposits that were paid during the period.

Net cash ~~provided by~~used in investing activities for the three months ended March 31, ~~2016~~2017 was ~~$255,510~~$86,691 compared to net cash ~~used~~provided by investing activities of ~~$430,576~~$255,510 during the same period in ~~2015.~~2016. The ~~increase~~decrease in cash flow ~~provided by~~related to investing activities in ~~2016~~2017 is primarily attributable to fewer sales of real estate, which decreased proceeds received from sales, and the ~~disposition nine properties during the three months ended March 31, 2016, net~~increase in capital expenditures on our owned portfolio of ~~any assumed mortgages.~~real estate investments.

Net cash ~~used~~provided by financing activities for the three months ended March 31, ~~2016~~2017 was ~~$338,162~~$17,279 as compared to net cash ~~provided by~~used in financing activities of ~~$235,764~~$338,162 during the same period in ~~2015.~~2016. The ~~decrease~~increase in cash flow in 2017 is primarily attributable to ~~our~~payoffs of certain mortgage ~~loan payoffs~~loans and paydowns made on the unsecured revolving credit ~~facility.~~facility in 2016 as well as increased draws on the unsecured credit facility and proceeds from sales of common shares in 2017.

Equity Structure

Our equity structure following the reverse merger transaction reflects the equity structure of Chambers, the surviving corporation. As a result, our common shares outstanding have been adjusted retroactively for all prior periods presented computed on the basis of the number of shares outstanding multiplied by the Exchange Ratio of 3.1898 established in the Merger Agreement. As of March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, our authorized capital shares consists of ~~1,000,000,000~~500,000,000 shares of beneficial interest, $0.01 par value per share, of which we are authorized to issue up to ~~990,000,000~~490,000,000 common shares of beneficial interest, $0.01 par value ~~$0.01~~ per share, ~~of our~~or common shares, and 10,000,000 preferred shares of beneficial interest, $0.01 par value ~~of $0.01,~~per share, or preferred shares. There were 236,710,763 common shares issued at the closing of the Merger, representing the number of Legacy Gramercy’s outstanding shares multiplied by the Exchange Ratio of 3.1898, and there were 3,500,000 shares of 7.125% Series A Cumulative Redeemable Preferred Shares issued, which were exchanged from Legacy Gramercy’s outstanding 7.125% Series B Cumulative Redeemable Preferred Stock at Merger closing. As of March 31, ~~2016, 421,500,741~~2017, 141,522,527 common shares and 3,500,000 preferred shares were issued and outstanding.

In December 2016, our board of trustees approved a 1-for-3 reverse share split of our common shares and outstanding ~~respectively.~~OP Units. The reverse share split was effective after the close of trading on December 30, 2016 and our common shares began trading on a reverse-split-adjusted basis on the NYSE on January 3, 2017.

In April ~~2015,~~2017, we completed an underwritten public offering of ~~31,180,295~~10,350,000 common shares, ~~of our common stock,~~ which includes the exercise in full by the underwriters of their option to purchase ~~up to 4,066,995~~1,350,000 additional ~~shares of~~ common ~~stock.~~shares. The ~~shares of~~ common ~~stock~~shares were issued at a public offering price of ~~$8.70~~$27.60 per share and the net proceeds from the offering were approximately ~~$259,325, after expenses.~~

In February 2015, our board of directors approved a 1-for-4 reverse stock split of our common stock and outstanding Legacy OP Units. The reverse stock split was effective after the close of trading on March 20, 2015, and our common stock began trading on a reverse split-adjusted basis on the New York Stock Exchange on March 23, 2015.

~~Share Repurchase Program~~

In February 2016, our board of trustees approved a share repurchase program authorizing us to repurchase up to $100,000 of our outstanding common shares. Purchases under the program will be made from time to time in the open market or in privately negotiated transactions. The timing, manner, price and amount of any repurchases will be determined at our discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The program may be suspended or discontinued at any time. For the three months ended March 31, 2016, we did not repurchase any shares.$274,234.

Market Capitalization

At March 31, ~~2016,~~2017, our consolidated market capitalization was ~~$5,744,441~~$6,312,237 based on a common share price of ~~$8.45~~$26.30 per share, ~~and~~ the closing price of our common shares on the ~~New York Stock Exchange~~NYSE on March 31, ~~2016.~~2017. Market capitalization includes consolidated debt and common and preferred shares.

Dividends

To maintain our qualification as a REIT, we must pay annual dividends to our shareholders of at least 90.0% of our REIT taxable income, determined before taking into consideration the dividends paid deduction and net capital gains. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, which would only be paid out of available cash, we must first meet both our operating requirements and scheduled debt service on our mortgages and loans payable. Dividends per share declared during 2016 and 2017 are as follows:



Quarter Ended	Common dividends ¹		Preferred dividends
March 31, 2016	$	0.330	$	0.445
June 30, 2016	$	0.330	$	0.445
September 30, 2016	$	0.330	$	0.445
December 31, 2016	$	0.375	$	0.445
March 31, 2017	$	0.375	$	0.445


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

Indebtedness

Secured Debt

Mortgage Loans

Certain ~~of our~~ real estate assets are subject to mortgage loans. During the three months ended March 31, ~~2016,~~2017, we ~~did not assume any~~assumed $3,680 of non-recourse mortgages in connection with one real estate ~~acquisitions, however we entered into one non-recourse mortgage for $9,550.~~acquisition. During the year ended December 31, ~~2015,~~2016, we assumed ~~$618,169~~$244,188 of non-recourse mortgages in connection with 2927 real estate acquisitions.

During the three months ended March 31, 2017, we refinanced the debt on two properties encumbered by a mortgage loan, subsequently transferred the mortgage on these two properties to the buyer of the properties, and, as a result, recorded a net loss on the early extinguishment of debt of $208. During the three months ended March 31, 2016, we paid off the debt on six properties encumbered by mortgage loans and transferred one property encumbered by a mortgage loan, and as a result, we recorded a net loss on the early extinguishment of debt of ~~$(3,827),~~$3,827, including a gain on extinguishment of debt of $1,930 within discontinued ~~operations,~~operations. The gains and losses recorded for extinguishments of debt are related to unamortized deferred financing costs and mortgage premiums (discounts) that were immediately expensed upon termination as well as early termination ~~fees. We did not pay off any mortgage loans during the three months ended March 31, 2015.~~fees incurred. Our mortgage loans include a series of financial and other covenants that we have to comply with in order to borrow under them. We were in compliance with the covenants under the mortgage loan facilities as of March 31, ~~2016.~~2017.

As of March 31, 2017, we have $547,392 total outstanding principal under our mortgage loans, which encumber 59 properties, and have a weighted average remaining term of 3.7 years and a weighted average interest rate of 4.32%. Weighted averages are based on outstanding principal balances as of March 31, 2017 and interest rate reflects the effects of interest rate swaps and amortization of financing costs and fair market value premiums or discounts. Refer to Note 6 of the accompanying financial statements for additional information on our secured debt obligations.

Unsecured Debt

2015 Credit Facility and Term Loans

~~At the close of the Merger on~~In December ~~17,~~ 2015, ~~both Legacy Gramercy and Chambers terminated the Legacy Gramercy unsecured credit facilities and~~we entered into an agreement, or the Credit Agreement, for a new $1,900,000 credit facility, or the 2015 Credit Facility, consisting of an $850,000 senior unsecured revolving credit facility, or the 2015 Revolving Credit Facility, and $1,050,000 term loan facility, or the 2015 Term Loan, with JPMorgan ~~Chase~~ Securities LLC and Merrill Lynch, Pierce, Fenner and Smith ~~Incorporated.~~Incorporated and terminated Legacy Gramercy's 2014 Credit Facility. The ~~$850,000 senior unsecured revolving credit facility, or the~~ 2015 Revolving Credit Facility consists of a $750,000 U.S. dollar revolving credit facility and a $100,000 multicurrency revolving credit facility. The term loan facility, or the 2015 Term Loan, consists of a $300,000 term loan facility that matures in January 2019 with one 12-month extension, or the 3-Year Term Loan, and a $750,000 term loan facility that matures in January 2021, or the 5-Year Term Loan. The 2015 Revolving Credit Facility matures in January 2020, but may be extended for two additional six month periods upon the payment of applicable fees and satisfaction of certain customary conditions. ~~Net proceeds from~~The 2015 Term Loan consists of a $300,000 term loan facility that matures in January 2019 with one 12-month extension option, or the 3-Year Term Loan, and a $750,000 term loan facility that matures in January 2021, or the 5-Year Term Loan.

Outstanding borrowings under the 2015 Revolving Credit Facility ~~were used~~incur interest at a floating rate based upon, at our option, either (i) adjusted LIBOR plus an applicable margin ranging from 0.875% to ~~repay Legacy Gramercy’s unsecured~~1.55%, depending on our credit ~~facilities consisting of~~ratings, or (ii) the alternate base rate plus an applicable margin ranging from 0.00% to 0.55%, depending on our credit ratings. We are also required to pay quarterly in arrears a ~~$200,000 senior term loan and a $200,000 senior revolving~~0.125% to 0.30% facility fee, depending on our credit ~~facility, as well as for general corporate purposes. Borrowings~~ratings, on the total commitments under the ~~multicurrency loan denominated in euros are designated as~~2015 Revolving Credit Facility. Outstanding borrowings under the 2015 Term Loan incur interest at a ~~non-derivative net investment hedge~~floating rate based upon, at our option, either (i) adjusted LIBOR plus an applicable margin ranging

from 0.90% to ~~mitigate~~1.75%, depending on our credit ratings, or (ii) the ~~risk~~alternate base rate plus an applicable margin ranging from ~~fluctuations in foreign currency exchange rates. Refer~~0.00% to ~~Note 10~~0.75%, depending on our credit ratings. The alternate base rate is the greater of (x) the ~~accompanying financial statements~~prime rate announced by JPMorgan Chase Bank, N.A., (y) 0.50% above the Federal Funds Effective Rate, and (z) the adjusted LIBOR for ~~further information on the hedge. At the close of the Merger on~~a one-month interest period plus 1.00%.

In December ~~17,~~ 2015, we also entered into a new $175,000 ~~seven-year~~7-year unsecured term loan with Capital One, N.A., or the 7-Year Term Loan, which matures in January 2023. Outstanding borrowings under the 7-Year Term Loan incur interest at a floating rate based upon, at our option, either (i) adjusted LIBOR plus an applicable margin ranging from 1.30% to 2.10%, depending on our credit ratings, or (iii) the alternate base rate plus an applicable margin ranging from 0.30% to 1.10%, depending on our credit ratings. The alternate base rate is the greatest of (x) the prime rate announced by Capital One, (y) 0.50% above the Federal Funds Effective Rate, and (z) the adjusted LIBOR for a one-month interest period plus 1.00%.

~~These~~Our unsecured borrowing facilities include a series of financial and other covenants that we have to comply with in order to borrow under the facilities. We were in compliance with the covenants under the facilities as of March 31, ~~2016. As~~2017. Refer to the table at the end of ~~March 31, 2016, there were~~the section for specific terms and our outstanding borrowings ~~of $122,760 outstanding~~ under the 2015 Revolving Credit Facility, including $22,760 (€20,000) on the multicurrency tranche, borrowings of $1,050,000 outstanding under the 2015 Term Loan, and borrowings of $175,000 outstanding under the 7-Year Term Loan.facilities.

Senior Unsecured Notes

~~On December 17,~~During 2016 and 2015, we issued and sold $400,000 and $100,000 aggregate principal amount of senior unsecured notes ~~or the Senior Unsecured Notes, and on January 12, 2016 we issued and sold an additional $50,000 aggregate principal amount of the Senior Unsecured Notes~~payable, respectively, in private ~~placements. The Senior Unsecured Notes are guaranteed by us~~placements, which have maturities ranging from 2022 through 2026 and bear interest semi-annually at ~~a rate~~rates ranging from 3.89% to 4.97%. Refer to the table at the end of ~~4.97% per annum, with interest payable in arrears on June 17 and December 17~~the section for specific terms of ~~each year, commencing June 17, 2016, until~~ the ~~maturity date of December 17, 2024.~~outstanding notes.

Exchangeable Senior Notes

On March 18, 2014, we issued $115,000 of 3.75% Exchangeable Senior Notes. The Exchangeable Senior Notes are senior unsecured obligations of a subsidiary of the ~~Legacy Gramercy operating partnership~~Operating Partnership and are guaranteed by us on a senior unsecured basis. The Exchangeable Senior Notes mature on March 15, 2019, unless redeemed, repurchased or exchanged in accordance with their terms prior to such date and will be exchangeable, under certain circumstances, for cash, for common shares or for a combination of cash and common shares, at the ~~Legacy Gramercy operating partnership’s~~Operating Partnership's election. The Exchangeable Senior Notes will also be exchangeable prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date, at any time beginning on December 15, 2018, and also upon the occurrence of certain events. On or after March 20, 2017, in certain circumstances, the ~~Legacy Gramercy operating partnership~~Operating Partnership may redeem all or part of the Exchangeable Senior Notes for cash at a price equal to ~~100%~~100.0% of the principal amount of the Exchangeable Senior Notes to be redeemed, plus accrued and unpaid interest up to, but excluding, the redemption date.

As of March 31, ~~2016,~~2017, the Exchangeable Senior Notes have a current exchange rate of ~~40.9434~~14.0843 units of Merger consideration, ~~or Units~~where one unit of Merger ~~Consideration, where one Unit of Merger Consideration~~consideration represents 3.1898 of our common shares, or approximately ~~130.6013~~44.9261 of our common shares for each $1.0 principal amount of the Exchangeable Senior ~~Notes.~~Notes, representing an exchange price of $22.26 per common share. The fair value of the Exchangeable Senior Notes was determined at issuance to be $106,689. The discount is being amortized to interest expense over the expected life of the Exchangeable Senior Notes. As of March 31, ~~2016~~2017 and December ~~31, 2015,~~2016, the Exchangeable Senior Notes were recorded as a liability at carrying value of ~~$107,205~~$109,488 and ~~$106,581,~~$108,832, respectively, net of unamortized discount and deferred financing costs of ~~$7,795~~$5,512 and ~~$8,419,~~$6,168, respectively. The fair value of the Exchangeable Senior Notes’ embedded exchange option of ~~the Exchangeable Senior Notes~~$11,726 was recorded in additional paid-in-capital within shareholders’ equity ~~of $11,726~~ as of March 31, ~~2016~~2017 and December 31, ~~2015.~~2016.

The terms of our unsecured sources of financing and their combined aggregate principal maturities as of March 31, 2017 and December 31, 2016 are as follows:



	Stated Interest Rate	Effective Interest Rate ¹	Maturity Date	Outstanding Balance
	Stated Interest Rate	Effective Interest Rate ¹	Maturity Date	March 31, 2017			December 31, 2016
2015 Revolving Credit Facility - U.S. dollar tranche	1.95%	1.95%	1/8/2020	$	55,000		$	—
2015 Revolving Credit Facility - Multicurrency tranche	1.02%	1.02%	1/8/2020	66,759			65,837
3-Year Term Loan	2.10%	2.33%	1/8/2019	300,000			300,000
5-Year Term Loan	2.10%	2.70%	1/8/2021	750,000			750,000
7-Year Term Loan	2.31%	3.34%	1/9/2023	175,000			175,000
2015 Senior Unsecured Notes	4.97%	5.07%	12/17/2024	150,000			150,000
2016 Senior Unsecured Notes	3.89%	4.00%	12/15/2022	150,000			150,000
2016 Senior Unsecured Notes	4.26%	4.38%	12/15/2025	100,000			100,000
2016 Senior Unsecured Notes	4.32%	4.43%	12/15/2026	100,000			100,000
Exchangeable Senior Notes	3.75%	6.36%	3/15/2019	115,000			115,000
Total unsecured debt				1,961,759			1,905,837
Net deferred financing costs and net debt discount				(8,988		)	(9,704		)
Total unsecured debt, net				$	1,952,771		$	1,896,133


1.	Represents the rate at which interest expense is recorded for financial reporting purposes as of March 31, 2017, which reflects the effect of interest rate swaps and amortization of financing costs and fair market value premiums or discounts.

~~Derivative~~Derivatives and Non-Derivative Hedging Instruments

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

As of March 31, ~~2016,~~2017, our derivative instruments consist of interest rate swaps, which are cash flow hedges. Changes in the effective portion of the fair value of ~~the~~ 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. 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 ~~our foreign currency denominated~~the multicurrency tranche of ~~the~~our 2015 Revolving Credit Facility, ~~and borrowings on the foreign currency denominated tranche of our $200,000 million senior revolving credit facility that we terminated in December 2015,~~ which are designated as non-derivative net investment hedges, are recognized at par value based on the exchange rate in effect on the date of the draw. Subsequent changes in the exchange rate of our non-derivative net investment hedge are recognized as part of the cumulative foreign currency translation adjustment within other comprehensive income (loss). The ineffective portion of the change in fair value of a derivative or non-derivative hedging instrument will be immediately recognized in earnings. Derivative accounting may increase or decrease reported net income and shareholders’ equity, depending on future levels of LIBOR interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows, provided the contract is carried through to full term. Refer to Note 29 and Note 910 of the accompanying financial statements for additional information on our ~~derivative~~derivatives and non-derivative hedging instruments, including the fair value measurement of these instruments, as applicable.

The following table summarizes ~~the notional and fair value of~~ our ~~derivative~~derivatives and hedging instruments at March 31, ~~2016.~~2017. The aggregate fair value of ~~the~~our derivatives is presented in our ~~balance sheet~~Condensed Consolidated Balance Sheets in derivative instruments ~~at fair value~~ and the aggregate carrying value of the non-derivative net investment ~~hedge~~hedges is included in the balance of our 2015 Revolving Credit Facility. The notional value is an indication of the extent of our involvement in this instrument at that time, but does not represent exposure to credit, interest rate or market ~~risks:~~risks.

Benchmark Rate

Notional Value

Strike Rate

Effective Date

Expiration Date

Fair Value

Benchmark Rate

Notional Value

Strike Rate

Effective Date

Expiration Date

Fair Value

Assets of Non-VIEs:

Interest Rate Swap - Waco

1 mo. USD-LIBOR-BBA

15,410 USD

4.55%

12/19/2013

12/19/2020

953

1 mo. USD-LIBOR-BBA

15,113 USD

4.55%

12/19/2013

12/19/2020

(356

)

Interest Rate Swap - Point West I

1 mo. USD-LIBOR-BBA

10,310 USD

1.41%

8/16/2011

12/6/2016

Interest Rate Swap - Atrium I

1 mo. USD-LIBOR-BBA

20,410 USD

1.78%

8/16/2011

5/31/2018

444

1 mo. USD-LIBOR-BBA

19,474 USD

1.78%

8/16/2011

5/31/2018

(108

)

Interest Rate Swap - Easton III

1 mo. USD-LIBOR-BBA

6,048 USD

1.95%

8/16/2011

1/31/2019

188

1 mo. USD-LIBOR-BBA

5,862 USD

1.95%

8/16/2011

1/31/2019

(52

)

Interest Rate Swap - 3-Year Term Loan

1 mo. USD-LIBOR-BBA

100,000 USD

1.22%

12/19/2016

12/17/2018

371

Interest Rate Swap - 3-Year Term Loan

1 mo. USD-LIBOR-BBA

100,000 USD

1.23%

12/19/2016

12/17/2018

364

Interest Rate Swap - 3-Year Term Loan

1 mo. USD-LIBOR-BBA

100,000 USD

1.24%

12/19/2016

12/17/2018

345

Interest Rate Swap - 5-Year Term Loan

1 mo. USD-LIBOR-BBA

750,000 USD

1.60%

12/17/2015

12/17/2020

19,337

1 mo. USD-LIBOR-BBA

750,000 USD

1.60%

12/17/2015

12/17/2020

5,328

Interest Rate Swap - 7-Year Term Loan

1 mo. USD-LIBOR-BBA

175,000 USD

1.82%

12/17/2015

1/9/2023

6,477

1 mo. USD-LIBOR-BBA

175,000 USD

1.82%

12/17/2015

1/9/2023

1,601

Non-Derivative Net Investment Hedge in Gramercy European Property Fund

EUR-USD exchange rate

20,000 Euros

N/A

9/28/15

N/A

—

Net Investment Hedge in EUR-denominated investments

USD-EUR exchange rate

45,000 EUR

N/A

9/28/2015

N/A

—

Net Investment Hedge in GBP-denominated investments

USD-GBP exchange rate

15,000 GBP

N/A

7/15/2016

N/A

—

Total hedging instruments

27,461

Total hedging instruments

7,493

Through our interest rate swaps, we are hedging exposure to variability in future interest payments on our debt facilities. At March 31, ~~2016, the~~2017, our interest rate swap derivative instruments were reported in other assets at ~~their~~ fair value ~~as a net liability~~ of ~~$27,461.~~$8,010 and in other liabilities at fair value of $(517). Swap ~~loss~~gain (loss) of ~~$1,830~~$46 and $(1,830), was recognized as interest expense in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016, respectively, with respect to interest rate swap hedge ineffectiveness, or to amounts excluded from ineffectiveness, which relates to the off-market financing element associated with certain derivatives. ~~No gain or loss was recognized with respect to hedge ineffectiveness or to amounts excluded from ineffectiveness for the three months ended March 31, 2015.~~ During the three months ended March 31, 2017 and 2016, we reclassified $268 and $315, respectively, from accumulated other comprehensive income (loss) into interest expense related to a derivative terminated in 2015. Over time, the realized and unrealized gains and losses held in accumulated other comprehensive income (loss) will be reclassified into earnings in the same periods in which the hedged interest payments affect earnings. During the next 12 months, we expect that ~~$9,145~~$3,536 will be reclassified

from other comprehensive income as an increase in interest expense for our interest rate swaps as of March 31, ~~2016.~~2017. Additionally, we will recognize ~~$3,468~~$2,382 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~~We hedge our investments based in foreign currencies using non-derivative net investment hedges in conjunction with borrowings under the multicurrency tranche of our 2015 Revolving Credit Facility. Our non-derivative net investment hedge on our euro-denominated investments, which was entered into in September 2015, ~~we are hedging~~is used to hedge exposure to changes in the euro-U.S. dollar exchange rate ofunderlying our unconsolidated net equity ~~investment~~investments in the Gramercy European Property Fund and the Goodman Europe JV, both of which ~~has~~have euros as ~~its~~their functional currency. Our non-derivative net investment hedge on our British pound sterling-denominated investments, which was entered into in July 2016, is used to hedge exposure to changes in the British pound sterling-U.S. dollar exchange rate underlying our unconsolidated net equity investment in the Goodman UK JV and our wholly-owned property in Coventry, UK, both of which have British pounds sterling as their functional currency. At March 31, ~~2016,~~2017, the non-derivative net investment hedge ~~was~~value is reported at ~~our~~ carrying value as a net liability of ~~$22,760,~~$66,759, which is included in the balance of the senior unsecured revolving credit facility on the Condensed Consolidated Balance Sheets. During the three months ended March 31, 2017 and 2016, we recorded a net loss of ~~$(1,036)~~$923 and $1,036, respectively, in other comprehensive income (loss) from the impact of exchange rates related to the non-derivative net investment hedge. No gain or loss was recognized with respect to non-derivative net investment hedge ineffectiveness, or to amounts excluded from ineffectiveness, in interest expense in the Condensed Consolidated Statement of Operations for the three months ended March 31, 2016.hedges. When the non-derivative net investment is sold or substantially liquidated, the balance of the translation adjustment accumulated in other comprehensive income will be reclassified into earnings.

Contractual Obligations

We are obligated to fund capital expenditures related to our real estate investments, which primarily consist of expenditures to maintain assets, tenant improvement allowances and other construction or expansion obligations under tenant leases, and leasing commissions. As of March 31, ~~2016,~~2017, we had commitments relating to tenant improvement allowances and funding obligations under leases totaling approximately ~~$16,000~~$18,959 that are expected to be funded over the next five years. ~~Additionally,~~During the three months ended March 31, 2017, construction was completed on our build-to-suit property in Round Rock, Texas, which we acquired upon completion in March 2017 for $29,605. We are obligated to fund the development of ~~Proportion Foods, a~~one build-to-suit industrial property ~~in Round Rock, Texas,~~as of March 31, 2017, which is ~~a consolidated VIE,~~located in Summerville, South Carolina and projected to have 240,800 rentable square feet upon ~~substantial completion of the development to acquire the property through a forward purchase contract.~~completion. Our remaining future commitment for ~~the~~this property atas of March 31, ~~2016~~2017 is approximately ~~$20,838.~~

We$24,382. In April 2017, we closed on the acquisition of a land parcel for $1,000, on which we have committed ~~approximately $56,900 (€50,000)~~to construct an industrial facility for an estimated $25,805, with projected completion in October 2017.

As of March 31, 2017 and and December 31, 2016, our cumulative contributions to the Gramercy European Property Fund ~~which was formed in December 2014. The~~were $55,892 (€50,000), respectively. As of March 31, 2017, our remaining commitment to the Gramercy European Property Fund ~~has a total initial capital commitment of approximately $287,345~~is $13,315 (€252,500) from us and our investment partners, comprised of $56,900 (€50,000) from us, $230,445 (€202,500) from our investment partners, and an additional $113,800 (€100,000) from certain investment partners, not including us, after the first $287,345 (€252,500) has been invested. See Note 5, “Unconsolidated Equity Investments,” in the Condensed Consolidated Financial Statements for further information on the Gramercy European Property Fund.12,500). Foreign currency commitments have been converted into U.S. dollars based on (i) the foreign exchange rate at the closing date for completed transactions and (ii) the exchange rate that prevailed on March 31, ~~2016,~~2017, in the case of unfunded commitments.

We have committed to fund $100,000 to Strategic Office Partners, of which $18,677 and $16,027 was funded as of March 31, 2017 and December 31, 2016, respectively. See Note 5 in the accompanying financial statements for further information on the Gramercy European Property Fund and Strategic Office Partners.

We have certain properties acquired that are subject to ground leases, which are accounted for as operating leases. The ground leases have varying ending dates, renewal options and rental rate escalations, with the latest leases extending to June 2053. Combined aggregate principal maturities and future minimum payments of our unsecured debt obligations, non-recourse mortgages, Senior Unsecured Notes, Exchangeable Senior Notes, and ground leases, in addition to associated interest payments, as of March 31, ~~2016~~2017 are as follows:


	Unsecured Credit Facility		Term Loans		Mortgage Notes Payable		Senior Unsecured Notes		Exchangeable Senior Notes		Ground Leases		Interest Payments		Total		2015 Revolving Credit Facility		Term Loans		Mortgage Notes Payable ¹		Senior Unsecured Notes		Exchangeable Senior Notes		Ground Leases		Interest Payments			Total
April 1 through December 31, 2016	$	—	$	—	$	43,429	$	—	$	—	$	1,374	$	47,739	$	92,542
2017	—		—		65,215		—		—		1,728		62,306		129,249
April 1 to December 31, 2017																	$	—	$	—	$	61,474	$	—	$	—	$	1,685	$	65,562		$	128,721
2018	—		—		92,589		—		—		1,728		60,263		154,580		—		—		170,819		—		—		2,263		80,435			253,517
2019	—		300,000		28,836		—		115,000		1,707		51,631		497,174		—		300,000		33,672		—		115,000		2,271		70,155			521,098
2020	122,760		—		174,103		—		—		1,732		44,519		343,114		121,759		—		60,103		—		—		2,263		65,605			249,730
2021																	—		750,000		16,364		—		—		2,231		39,682			808,277
Thereafter	—		925,000		76,050		150,000		—		48,320		58,373		1,257,743		—		175,000		204,960		500,000		—		62,186		89,275			1,031,421
Above market interest	—		—		—		—		—		—		2,278		2,278		—		—		—		—		—		—		(6,456		)	(6,456		)
Total	$	122,760	$	1,225,000	$	480,222	$	150,000	$	115,000	$	56,589	$	327,109	$	2,476,680	$	121,759	$	1,225,000	$	547,392	$	500,000	$	115,000	$	72,899	$	404,258		$	2,986,308


1.	Mortgage loan payments reflect accelerated repayment dates, when applicable, pursuant to related loan agreement.

We have several office locations, which are each subject to operating lease agreements. These office locations include our corporate office at ~~521 Fifth~~90 Park Avenue, ~~30th Floor,~~ New York, New York, and our seven regional offices located ~~in Horsham, Pennsylvania, Clayton, Missouri, London,~~across the United ~~Kingdom.~~States and Europe.

Leasing Agreements

Future minimum rental revenue under non-cancelable leases, excluding reimbursements for operating expenses, as of March 31, ~~2016~~2017 are as follows:


	Operating Leases		Operating Leases
April 1 to December 31, 2016	$	253,796
2017	331,621
April 1 to December 31, 2017			$	289,129
2018	315,992		385,259
2019	293,720		358,794
2020	260,728		330,608
2021			305,318
Thereafter	1,421,528		1,615,136
Total minimum lease rental income	$	2,877,385	$	3,284,244

Future straight-line rent adjustments under non-cancelable leases as of March 31, ~~2016~~2017 are as follows:


	Straight-line Rent Adjustments			Straight-line Rent Adjustments
April 1 to December 31, 2016	$	15,830
2017	15,292
April 1 to December 31, 2017				$	20,913
2018	12,140			15,823
2019	5,460			8,145
2020	676			2,308
2021				(2,292		)
Thereafter	(73,452		)	(91,009		)
Total straight-line rent adjustments	$	(24,054	)	$	(46,112	)

~~Off-Balance-Sheet~~Off-Balance Sheet Arrangements

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

~~Dividends~~

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

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


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

Transactions with Trustee Related Entities and Related Parties

In December 2016, we sold our 5.1% interest in one property located in Lille, France held by the Goodman Europe JV to our joint venture partner, the Gramercy European Property Fund, in which we have a 14.2% ownership interest, for gross proceeds of $2,662 (€2,563).

On June 30, 2016, we sold 74.9% of our outstanding 80.0% interest in the Goodman Europe JV to the Gramercy European Property Fund, in which we have a 14.2% interest as of March 31, 2017. We have made cumulative contributions of $55,892 (€50,000) to the Gramercy European Property Fund and have a remaining funding commitment of $13,315 (€12,500) as of March 31, 2017. Our CEO, who is on the board of directors, also has capital commitments to the investment, as noted below. We sold 74.9% of our interest in the Goodman Europe JV to the Gramercy European Property Fund for gross proceeds of $148,884 (€134,336), based on third-party valuations for the underlying properties. The sale of 74.9% of our interest in the Goodman Europe JV resulted in us recording a gain of $5,341 during the period, primarily related to depreciation and amortization recorded since Merger closing date. Following the sale transaction, we have a continuing 5.1% interest in the Goodman Europe JV. The transaction was entered into in order to achieve efficiencies from the combination of the two European platforms.

Our CEO, Gordon F. DuGan, is on the board of directors of the Gramercy European Property Fund and has committed and fully funded approximately ~~$1,423~~$1,388 (€1,250) in capital to the Gramercy European Property Fund. The two Managing Directors of Gramercy Europe Asset Management have collectively committed and fully funded approximately ~~$1,423~~$1,388 (€1,250) in capital to the Gramercy European Property Fund. Foreign currency commitments have been converted into U.S. dollars based on (i) the foreign exchange rate at the closing date for completed transactions and (ii) the exchange rate that prevailed on March 31, ~~2016,~~2017, in the case of unfunded commitments.

One of the properties acquired in December 2015 as part of the Merger iswas partially leased to Duke Realty, our partner in the Duke ~~Joint Venture, a joint venture that investments in industrial and office properties located throughout the United States and in which we have an 80% interest and~~JV. Duke Realty ~~has a 20% interest. Duke Realty acts~~acted as the managing member of the Duke ~~Joint Venture~~JV which was dissolved in July 2016 as described in Note 5, and ~~provides~~as such provided asset management, construction, development, leasing and property management services, for which it iswas entitled to receive fees as well as a promoted interest. From the date of the Merger through lease expiration in May 2016, Duke Realty ~~leases~~leased 30,777 square feet of one of our office properties located in Minnesota which ~~has~~had an aggregate ~~324,296~~322,551 rentable square feet. ~~The lease expires in May 2016 and~~ Duke Realty paid us $176 under the lease for the three months ended March 31, 2016.

~~Three of~~ See Note 5 for more information on our transactions with the properties we acquired in January 2015 for an aggregate purchase price of approximately $19,750, which comprised an aggregate 450,000 square feet and are located in Milwaukee, Wisconsin, were acquired from affiliates of KTR Capital Partners, a private industrial real estate investment company, for which one of our trustees served as Chief Executive Officer and Chairman of the Board.Duke JV.

Non-GAAP Financial Measures

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

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

Core FFO and AFFO are presented excluding property acquisition costs, ~~loss on extinguishment of debt,~~ other-than-temporary impairments on retained bonds, mark-to-market on interest rate swaps, and ~~other~~ one-time charges. Our AFFO also excludes non-cash share-based compensation expense, amortization of ~~above-~~above and ~~below-market~~below market leases, amortization of deferred financing costs and non-cash interest, amortization of lease inducement costs, non-real estate depreciation and amortization,

amortization of free rent received at property acquisition and straight-line ~~rent, and these AFFO adjustments as they pertain to unconsolidated equity investments.~~rent. We believe that Core FFO and AFFO are useful supplemental measures regarding our operating ~~performances~~performance as they provide a more meaningful and consistent comparison of our operating performance.

FFO, Core FFO and AFFO do not represent cash generated from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of our financial performance, or to cash flow from operating activities as a measure of our liquidity, nor is it entirely indicative of funds available to fund our cash needs, including our ability to make cash distributions. Our calculation of FFO may be different from the calculation used by other companies and, therefore, comparability may be limited.

FFO, Core FFO and AFFO for the three months ended March 31, ~~2016~~2017 and ~~2015~~2016 are as follows:


	Three Months Ended March 31,						Three Months Ended March 31,
	2016			2015			2017			2016
Net loss attributable to common shareholders and unitholders	$	(2,492	)	$	(1,555	)
Net income (loss) attributable to common shareholders							$	7,568		$	(2,492	)
Add:
Depreciation and amortization	58,248			18,698			62,217			58,248
FFO adjustments for unconsolidated equity investments	11,306			78			2,253			11,306
Net loss attributed to noncontrolling interest	(120		)	(42		)
Net income (loss) from discontinued operations	(4,640		)	62
Net income (loss) attributable to noncontrolling interest							154			(120		)
Net (income) loss from discontinued operations							24			(4,640		)
Impairment of real estate investments							12,771			—
Less:
Non real estate depreciation and amortization	(236		)	(216		)
Non-real estate depreciation and amortization							(208		)	(236		)
Net gain on disposals							(17,377		)	—
Funds from operations attributable to common shareholders and unitholders	$	62,066		$	17,025		$	67,402		$	62,066
Add:
Acquisition costs	410			3,506			—			410
Core FFO adjustments for unconsolidated equity investments	4,123			—			—			4,123
Other-than-temporary impairments on retained bonds							4,890			—
Loss on extinguishment of debt	3,827			—			208			3,827
European Fund setup costs	—			221
Net income from discontinued operations related to properties	4,644			—			—			4,644
Mark-to-market on interest rate swaps	1,830			—			(46		)	1,830
Core funds from operations attributable to common shareholders and unitholders	$	76,900		$	20,752		$	72,454		$	76,900
Add:
Non-cash share-based compensation expense	1,150			834			2,054			1,150
Amortization of market lease assets	3,994			870			2,908			3,994
Amortization of deferred financing costs and non-cash interest	117			575			840			117
Amortization of lease inducement costs	86			44			86			86
Non-real estate depreciation and amortization	236			216			208			236
Amortization of free rent received at property acquisition	339			579			304			339
Less:
AFFO adjustments for unconsolidated equity investments	823			(1		)	14			823
Straight-lined rent	(6,761		)	(2,172		)	(7,260		)	(6,761		)
Amortization of market lease liabilities	(4,157		)	(4,822		)	(3,541		)	(4,157		)
Adjusted funds from operations attributable to common shareholders and unitholders	$	72,727		$	16,875		$	68,067		$	72,727
Funds from operations per share – basic	$	0.15		$	0.11		$	0.48		$	0.44
Funds from operations per share – diluted	$	0.15		$	0.11		$	0.47		$	0.44
Core funds from operations per share – basic	$	0.18		$	0.14		$	0.51		$	0.55
Core funds from operations per share – diluted	$	0.18		$	0.13		$	0.51		$	0.54
Adjusted funds from operations per share – basic	$	0.17		$	0.11		$	0.48		$	0.52
Adjusted funds from operations per share – diluted	$	0.17		$	0.11		$	0.48		$	0.51
Basic weighted average common shares outstanding – EPS	420,181,216			149,115,357			140,907,399			140,060,405
Weighted average non-vested share based payment awards	1,455,871			822,095			—			485,290
Weighted average partnership units held by noncontrolling interest	1,374,302			1,701,391			620,586			458,101
Weighted average common shares and units outstanding	423,011,389			151,638,843			141,527,985			141,003,796
Diluted weighted average common shares and common share equivalents outstanding – EPS⁽¹⁾	420,181,216			149,115,357
Diluted weighted average common shares and common share equivalents outstanding – EPS¹							141,875,619			140,060,405
Weighted average partnership units held by noncontrolling interest	1,374,302			1,701,391			620,586			458,101
Weighted average non-vested share based payment awards	2,883,465			2,039,175
Weighted average share based payment awards							471,328			961,155
Weighted average share options	16,336			50,058			—			5,445
Phantom shares	—			488,779
Dilutive effect of Exchangeable Senior Notes	—			1,737,718
Diluted weighted average common shares and units outstanding	424,455,319			155,132,478			142,967,533			141,485,106


~~(1)~~1.	For the three months ended March 31, 2016, ~~and 2015,~~ the diluted weighted average share calculation, which isrepresents the denominator in diluted earnings per share, excludes potentially dilutive securities because including them would have been anti-dilutive during ~~those periods.~~the period.

Cautionary Note Regarding Forward-Looking Information

This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. You can identify forward-looking statements by the use of forward-looking expressions such as “may,” “will,” “should,” “expect,” “believe,” “anticipate,” “estimate,” “intend,” “plan,” “project,” “continue,” or any negative or other variations on such expressions. Forward-looking statements include information concerning possible or assumed future results of our operations, including any forecasts, projections, plans and objectives for future operations. Although we believe that our plans, intentions and expectations as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that the plans, intentions or expectations will be achieved. We have listed below some important risks, uncertainties and contingencies which could cause our actual results, performance or achievements to be materially different from the forward-looking statements we make in this report. These risks, uncertainties and contingencies include, but are not limited to, the following:

the success or failure of our efforts to implement our current business ~~strategy, including our ability to timely and profitably dispose of non-core assets and reinvest in target assets;~~strategy;

our ability to accomplish our office asset disposition plan subject to the REIT prohibited transaction tax limitations;

our ability to identify and complete additional property acquisitions and risks of real estate acquisitions;

availability of investment opportunities on real estate assets and real estate-related and other securities;

the performance and financial condition of tenants and corporate customers;

the adequacy of our cash reserves, working capital and other forms of liquidity;

the availability, terms and deployment of short-term and long-term capital;

demand for industrial and office space;

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

the timing of cash flows from our investments;

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

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

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

changes in governmental regulations, tax rates and similar matters;

legislative and regulatory changes (including changes to real estate and zoning laws, laws governing the ~~banking industry specifically;~~taxation of REITs or the exemptions from registration as an investment company);

our international operations, including unfavorable foreign currency rate fluctuations, enactment or changes in laws relating to foreign ownership of property, and local economic or political conditions that could adversely affect our earnings and cash flows;

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

reduction in cash flows received from our investments;

volatility or reduction in the value or uncertain timing in the realization of our ~~Retained CDO Bonds;~~retained collateralized debt obligation bonds;

our ability to profitably dispose of non-core assets;

~~the high tenant concentration of our Bank of America Portfolio;~~

availability of, and ability to retain, qualified personnel and trustees;

changes to our management and board of trustees;

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

~~legislative and regulatory changes (including changes to real estate and zoning laws, laws governing the taxation of REITs or the exemptions from registration as an investment company);~~

environmental and/or safety requirements and risks related to natural disasters;

declining real estate valuations and impairment charges;

our ability to satisfy complex rules in order for us to qualify as a REIT for U.S. federal income tax purposes and qualify for our exemption under the Investment Company Act of 1940, as amended, our Operating ~~Partnership’s~~Partnership's ability to satisfy the rules in order to qualify as a partnership for U.S. federal income tax purposes, and the ability of certain of our subsidiaries to qualify as REITs and certain of our subsidiaries to qualify as ~~TRSs~~taxable REIT subsidiaries for U.S. federal income tax purposes, and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules;

uninsured or underinsured losses relating to our properties;

our inability to comply with the laws, rules and regulations applicable to companies, and in particular, public companies;

tenant bankruptcies and defaults on or non-renewal of leases by tenants;

decreased rental rates or increased vacancy rates;

the continuing threat of terrorist attacks on the national, regional and local economies;

reviewing adjustments and the discovery of new information that alters expectations about first quarter 2017 preliminary results or that impacts estimates and assumptions underlying these preliminary results; and

other factors discussed under Item 1A, ~~“Risk Factors”~~"Risk Factors" of our Annual Report on Form 10-K ~~for the year ended December 31, 2015~~ and those factors that may be contained in any subsequent filing we make with the ~~Securities and Exchange Commission, or the~~ SEC, which are or will be incorporated by reference herein.

We assume no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. In evaluating forward-looking statements, you should consider these risks and uncertainties, together with the other risks described from time-to-time in our reports and documents which are filed with the SEC, and you should not place undue reliance on those statements.

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

these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Recently Issued Accounting Pronouncements

Please refer to Note 2 in the accompanying footnotes to our financial statements.

ITEM ~~3A.~~3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

(dollar amounts in thousands)

~~Market Risk~~

Market risk includes risks that arise from changes in interest rates, credit, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business plan, we expect that the primary market risks to which we will be exposed are real estate, interest rate and credit risks. These risks are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control.

Real Estate Risk

Commercial property values and net operating income derived from such properties are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions, local real estate conditions (such as an oversupply of retail, industrial, office or other commercial or multi-family space), changes or continued weakness in specific industry segments, construction quality, age and design, demographic factors, retroactive changes to building or similar codes, and increases in operating expenses (such as energy costs). We may seek to mitigate these risks by employing careful business selection, rigorous underwriting and credit approval processes and attentive asset management.

Interest Rate Risk

Interest rate risk is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control. Our operating results will depend in large part on differences between the income from our assets and our borrowing costs. Our real estate assets generate income principally from fixed long-term leases and we are exposed to changes in interest rates primarily from floating rate borrowing arrangements. We expect that we will primarily finance our investment in commercial real estate with fixed rate, non-recourse mortgage financing, however, to the extent that we use floating rate borrowing arrangements, our net income from our real estate investments will generally decrease if LIBOR increases. We have used, and may continue to use, interest rate caps or swaps to manage our exposure to interest rate changes. We currently have a 2015 Revolving Credit Facility, several term loans and several mortgage notes payable which are based upon a floating rate which have an aggregate outstanding balance of ~~$1,399,938~~$1,387,208 at March 31, ~~2016,~~2017, of which ~~$977,178~~$1,265,449 is hedged effectively by interest rate swaps which we believe will mitigate the interest rate risk related to these borrowings.

The following chart shows our floating rate debt instruments, including debt that is hedged by interest rate swaps, and the related interest rates, maturity dates and balances as of March 31, ~~2016:~~2017:


Floating Rate Debt Instrument	Unswapped Interest Rate		Effective Interest Rate⁽¹⁾		Maturity Date	Balance at March 31, 2016			Stated Interest Rate		Effective Interest Rate ¹		Maturity Date	Balance at March 31, 2017
2015 Revolving Credit Facility	1.70	%	1.70	%	1/8/2020	$	100,000
2015 Revolving Credit Facility - multicurrency tranche	1.20	%	1.20	%	1/8/2020	22,760
2015 Revolving Credit Facility - U.S. dollar tranche ²									1.95	%	1.95	%	1/8/2020	$	55,000
2015 Revolving Credit Facility - Multicurrency tranche ²									1.02	%	1.02	%	1/8/2020	66,759
3-Year Term Loan	1.85	%	1.85	%	1/8/2019	300,000			2.10	%	2.33	%	1/8/2019	300,000
5-Year Term Loan	1.85	%	2.95	%	1/8/2021	750,000			2.10	%	2.70	%	1/8/2021	750,000
7-Year Term Loan	2.19	%	3.57	%	1/9/2023	175,000			2.31	%	3.34	%	1/9/2023	175,000
Mortgage note payable - Waco	2.26	%	4.55	%	12/19/2020	15,410			2.93	%	4.75	%	12/19/2020	15,113
Mortgage note payable - Point West I	2.25	%	3.41	%	12/6/2016	10,310
Mortgage note payable - Atrium I	2.25	%	3.78	%	5/31/2018	20,410			2.81	%	3.57	%	5/31/2018	19,474
Mortgage note payable - Easton III	2.25	%	3.95	%	1/31/2019	6,048			2.81	%	3.94	%	1/31/2019	5,862
Total Floating Rate Debt Instruments						$	1,399,938	Total Floating Rate Debt Instruments						$	1,387,208


~~(1)~~1.	Represents the rate at which interest expense is recorded for financial reporting purposes as of March 31, 2017, which reflects the effect of interest rate swaps and amortization of ~~any discounts/~~financing costs and fair market value premiums ~~excluding debt issuance costs.~~or discounts.


~~(2)~~2.	These floating rate debt instruments are not hedged by interest rate swaps.

The following chart shows a hypothetical 100 basis point increase in interest rates along the entire interest rate curve for the interest rate risk related to the 2015 Revolving Credit ~~Facility and $300.0 million of the balance on the term loans (amounts in thousands):~~Facility:


Change in LIBOR	Projected Decrease in Net Income			Projected Decrease in Net Income
Base case
+100 bps	$	(1,069	)	$	(308	)
+200 bps	$	(2,137	)	$	(616	)
+300 bps	$	(3,206	)	$	(923	)

Credit Risk

Credit risk refers to the ability of each tenant in our portfolio of real estate investments to make contractual lease payments on the scheduled due dates. We seek to reduce credit risk of our real estate investments by entering into long-term leases with tenants after a careful evaluation of credit worthiness as part of our property acquisition process. If defaults occur, we employ our asset management resources to mitigate the severity of any losses and seek to relet the property. In the event of a significant rising interest rate environment and/or economic downturn, tenant delinquencies and defaults may increase and result in credit losses that would materially and adversely affect our business, financial condition and results of operations.

Foreign Currency Exchange Rate Risk

WeDuring the periods presented, we have had investments, either directly or through unconsolidated equity interest, in Europe, Asia, and Canada and we operate an asset management business and have capital commitments to an equity investment in ~~the European Union.~~Europe. As a result, we are subject to risk from the effects of exchange rate risk from the effects of exchange rate movements in the euro, ~~and~~ the British pound sterling, and the Canadian dollar, which may affect future costs and cash flows. We ~~intend to~~ hedge our foreign currency exposure related to our foreign investments ~~in Europe~~ primarily by financing our investments in the local currency ~~denominations.~~denominations and through the use of net investment hedge instruments. Additionally,

we may enter into foreign currency forward contracts to manage our exposure to foreign currency exchange rate movements. We ~~are generally~~have historically been a net payer of various foreign currencies (we pay out more cash than we receive), and therefore our foreign operations benefit from a weaker U.S. dollar, and are adversely affected by a stronger U.S. dollar, relative to the foreign currency. In the future, we expect to be a net receiver of various foreign currencies as our commitments to the Gramercy European Property Fund have been substantially funded.

As of March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, we had outstanding borrowings of ~~$22,760~~$66,759 (€~~20,000)~~45,000 and ~~$21,724~~£15,000) and $65,837 (€~~20,000)~~45,000 and £15,000), respectively, under the ~~foreign currency denominated~~multicurrency tranche of our ~~Unsecured~~2015 Revolving Credit Facility, which we designated as a non-derivative net investment ~~hedge, beginning in September 2015,~~hedging instrument pursuant to ASC 815 to mitigate our risk from fluctuations in ~~foreign currency~~the exchange ~~rates.~~rates between the U.S. dollar and both the euro and British pound sterling. Our unhedged net investment in foreign currencies was ~~$3,468~~$13,363 and ~~$1,661~~$13,322 as of March 31, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively, based on the period ending U.S. dollar values of the hedge of ~~$22,760~~$66,759 and ~~$21,724,~~$65,837, respectively. For the three months ended March 31, 2016, we recorded net gains of $6,119 in other comprehensive income as the portion of the foreign currency net investment non-derivative hedging instrument used to hedge the currency exposure of our unconsolidated equity investment in the Gramercy European Property Fund which qualifies as a non-derivative net investment hedge under ASC Topic 815. For the three months ended March 31, 2016 and 2015, we recognized realized foreign currency transaction gains (losses) of $105 and $(6), respectively, and no unrealized foreign currency transaction gains or losses. Foreign currency transaction gains and losses are included in Other Income in the Condensed Consolidated Statement of Operations.


ITEM 4.	CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time frame specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e). Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within our company to disclose material information otherwise required to be set forth in our periodic reports. Also, we may have investments in certain unconsolidated entities. As we do not control these entities, our disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those we maintain with respect to our consolidated subsidiaries.

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

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II	OTHER INFORMATION


ITEM 1.	LEGAL ~~PROCEDINGS~~PROCEEDINGS

(Dollar amounts in thousands)

Putative Shareholder Actions against Legacy Gramercy - Dismissed

Legacy Gramercy, its board of directors, Chambers and/or Merger Sub ~~are~~were named as defendants in two ~~pending~~ putative class action lawsuits brought by purported Legacy Gramercy stockholders challenging the Merger. Two suits that were separately filed in New York Supreme Court, New York County, captioned (i) Berliner v. Gramercy Property Trust, et al., Index No. 652424/2015 (filed July 9, 2015) and (ii) Gensler v. Baum, et al., Index No. 157432/2015 (filed July 22, 2015), ~~have been~~were consolidated into a single action under the caption In re Gramercy Property Trust Stockholder Litigation, Index No. 652424/2015 (the “New York Action”). In addition, four suits that were separately filed in Circuit Court for Baltimore City, Maryland, captioned (i) Jobin v. DuGan, et al., Case No. ~~24-C-15-003942~~24C15003942 (filed July 27, 2015);; (ii) Vojik v. Gramercy Property Trust, et al., Case No. ~~24-C-15-004412~~24C15004412 (filed August 25, 2015);; (iii) Hoffbauer et al. v. Chambers Street Properties, et al., ~~24-C-15-004904~~24C15004904 (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~~03C15007943 (filed July 24, 2015) and Hoffbauer et al. v. Chambers Street Properties, et al., Case No. ~~03-C-15-008639~~03C15008639 (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~~24C15004972 (filed September 28, 2015) ~~have been~~were consolidated into a single action under the caption Glenn W. Morris v. Gramercy Property Trust Inc. et al., Case No. ~~24-C-15-004972~~24C15004972 (the “Maryland Action,” and together with the New York Action, the “Actions”). The complaints ~~allege,~~alleged, among other things, that the directors of Legacy Gramercy breached their fiduciary duties to ~~the~~ Legacy Gramercy stockholders by agreeing to sell the ~~company~~Company for inadequate consideration and agreeing to improper deal protection terms in the merger agreement, and that the preliminary joint proxy statement/prospectus filed with the SEC on Form ~~S-4~~S4 on September 11, 2015 was materially incomplete and misleading. The complaints also ~~allege~~alleged that Chambers, Merger Sub and/or Legacy Gramercy aided and abetted these purported breaches of fiduciary duty. The amended complaint in the Morris consolidated action also asserts derivative claims on behalf of Legacy Gramercy for breach of fiduciary duty against the directors of Legacy Gramercy. Plaintiffs seek, among other things, an injunction barring the Merger, rescission of the Merger to the extent it is already implemented, declaratory relief, an award of damages and/or costs/attorney fees.

On December 7, 2015, the parties to the Actions entered into a Memorandum of Understanding ~~or the MOU, which provides~~that provided for the settlement of the Actions. ~~While~~On March 1, 2017, the ~~defendants in~~court entered a Final Order and Judgment approving the ~~Actions continue to vigorously deny all allegations of wrongdoing, fault, liability or damage to any of~~settlement, awarding plaintiffs’ attorney fees and expenses, and dismissing 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~~Action with ~~the Actions, Chambers and Legacy Gramercy agreed, without admitting any liability or wrongdoing,~~prejudice. On March 22, 2017, pursuant to the ~~terms of the MOU, to make certain supplemental disclosures related to the proposed Merger, which were set forth in Legacy Gramercy’s Current Report on Form 8-K filed with on December 7, 2015.~~

~~The MOU contemplates that the parties will enter into a stipulation of settlement. The~~ stipulation of settlement, ~~will be subject to customary conditions, including, among other things, confirmatory discovery and court approval following~~plaintiffs in the Maryland Action filed a notice ~~to Legacy Gramercy’s stockholders. In~~of dismissal with prejudice with the ~~event that the parties enter into a stipulation of settlement, a hearing will be scheduled at~~Circuit Court for Baltimore County, Maryland, 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~~entered on April 11, 2017.

Putative Shareholder Action against 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 not satisfied, the settlement may be terminated.Chambers - Dismissed

On October 1, 2015, a putative class action lawsuit was filed in the Superior Court of New Jersey, Law Division, Mercer County by a purported shareholder of Chambers. The action, captioned Elstein v. Chambers Street Properties et al., Docket No. ~~L-002254-15~~L00225415 (the “New Jersey Action”), ~~names~~named as defendants Chambers, its board of trustees and ~~the~~ Legacy Gramercy. The complaint ~~alleges,~~alleged, among other things, that the trustees of Chambers breached their fiduciary duties to Chambers’ shareholders by agreeing to the Merger after a flawed sales process and by approving improper deal protection terms in the merger agreement, and that Legacy Gramercy aided and abetted these purported breaches of fiduciary duty. ~~The complaint also alleges that the preliminary joint proxy statement/prospectus was materially misleading and incomplete. Plaintiffs seek,~~

~~among other things, an injunction barring the Merger, rescission of the Merger to the extent it is already implemented, declaratory relief and an award of damages.~~

On December 3, 2015, the parties to the New Jersey Action entered into a Stipulation of Settlement providing for 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 an Order and Final Judgment approving the settlement and scheduled a hearing to consider final approval for May 20, 2016. If the settlement is finally approved by the court, it will resolve and release all claims by shareholders of Chambers challenging any aspect of the proposed Merger, the Merger Agreement and any disclosure made in connection therewith, including in the Definitive Proxy Statement, pursuant to terms set forth in the notice sent to Chambers’ shareholders. There can be no assurance that the court will approve the settlement. In the event that the settlement is not approved or that the conditions are not satisfied, the settlement may be terminated.

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

In December 2010, we sold our 45% joint venture interest in the leased fee of the 2 Herald Square property in New York, New York, for approximately $25,600 plus assumed mortgage debt of approximately $86,100, or the 2 Herald Sale Transaction. Subsequent to the closing of the transaction,dismissing 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 us in connection with the 2 Herald Sale Transaction. We believe that the NYC DOF and NYS DOT erred in issuing the Transfer Tax Assessments and intend to vigorously defend against same.Jersey Action.

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

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

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

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

In connection with our property acquisitions and the Merger, we determined that there is a risk we will have to pay future amounts to tenants related to continuing operating expense reimbursement audits. WeIn 2017, we settled the majority of our operating expense reimbursement audits and paid $3,500 pursuant to the settlement in February 2017. As of March 31, 2017, we have estimated a range of loss of $0 to $360 and determined that ~~its~~our best estimate of total loss is ~~$8,000, including $1,000~~$360, which is related to the Merger ~~which~~and has been accrued and recorded in other liabilities as of March 31, 2017 and December 31, 2016. ~~We have 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, we and/or one or more of our subsidiaries are party to various litigation matters that are considered routine litigation incidental to ~~its~~our business, none of which are considered material.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors as disclosed in the section entitled “Risk Factors” beginning on page 1712 of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2015~~2016 and filed with the SEC. Please review the Risk Factors set forth in the Form 10-K.


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.


ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 4.	MINE SAFETY DISCLOSURES

Not applicable.


ITEM 5.	OTHER INFORMATION

None.


ITEM 6.	INDEX TO EXHIBITS



Exhibit No.		Description

3.1		~~Amended and Restated Bylaws~~Articles of Amendment to the Declaration of Trust of Gramercy Property Trust, dated December 30, 2016, converting every three issued and outstanding common shares of beneficial interest, par value $0.01 per share, into one issued and outstanding common share of beneficial interest, par value $0.03 per share, incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed with the SEC on January 4, 2017.
3.2		Articles of Amendment to the Declaration of Trust of Gramercy Property Trust, dated December 30, 2016, decreasing the par value of every common share of beneficial interest from $0.03 to $0.01 per share, incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K, filed with the SEC on January 4, 2017.
3.3		Articles of Amendment to the Declaration of Trust of Gramercy Property Trust, dated December 30, 2016, decreasing the number of authorized common shares of beneficial interest from 990 million to 490 million, incorporated by reference to Exhibit 3.3 of the Company’s Current Report on Form 8-K, filed with the SEC on January 4, 2017.
10.1		Underwriting Agreement, dated April 20, 2017, by and among Gramercy Property Trust, GPT Operating Partnership LP, and Morgan Stanley & Co. LLC and J.P. Morgan Securities LLC, as representatives of the several underwriters named therein, incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on April ~~28, 2016.~~26, 2017.
10.2		Second Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of GPT Operating Partnership LP, dated as of December 30, 2016, incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on January 4, 2017.
10.3		Form of Equity Distribution Agreement, dated as of January 6, 2017, by and among the Company, GPT Operating Partnership LP and each sales agent, incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on January 6, 2017.
31.1		Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
31.2		Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.1		Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.
32.2		Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.
101.INS		XBRL Instance Document, filed herewith.
101.SCH		XBRL Taxonomy Extension Schema, filed herewith.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase, filed herewith.
101.DEF		XBRL Taxonomy Extension Definition Linkbase, filed herewith.
101.LAB		XBRL Taxonomy Extension Label Linkbase, filed herewith.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase, filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		GRAMERCY PROPERTY TRUST

Dated: May ~~5, 2016~~2, 2017		~~By:~~/s/ Jon W. Clark
		Name: Jon W. Clark
		Title: Chief Financial Officer (duly authorized officer and principal financial and accounting officer)

8079



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



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



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



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



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



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



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



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



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



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



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



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



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



	Same-Store									Acquisition									Development and Other						Asset Management and Corporate						Total
	2016			2015			$ Change			2016			2015			$ Change			2016			2015			2016			2015			2016			2015			$ Change
Revenues
Rental revenue	$	26,616		$	27,043		$	(427	)	$	62,906		$	3,172		$	59,734		$	2,573		$	975		$	—		$	—		$	92,095		$	31,190		$	60,905
Third-party management fees	—			—			—			—			—			—			—			—			5,046			8,186			5,046			8,186			(3,140		)
Operating expense reimbursements	9,507			7,671			1,836			12,320			192			12,128			755			275			—			—			22,582			8,138			14,444
Investment income	—			—			—			—			—			—			—			—			443			238			443			238			205
Other income	3			156			(153		)	223			—			223			8			—			145			27			379			183			196
Total revenues	36,126			34,870			1,256			75,449			3,364			72,085			3,336			1,250			5,634			8,451			120,545			47,935			72,610
Operating Expenses
Property operating expenses	9,413			7,687			1,726			15,789			238			15,551			1,003			392			(2,036		)	66			24,169			8,383			15,786
Property management expenses	—			—			—			—			—			—			—			—			4,521			5,166			4,521			5,166			(645		)
Depreciation and amortization	14,851			14,317			534			41,931			3,121			38,810			1,234			1,044			232			216			58,248			18,698			39,550
General and administrative expenses	—			—			—			—			—			—			—			—			7,722			4,773			7,722			4,773			2,949
Acquisition and merger-related expenses	—			—			—			89			2,453			(2,364		)	6			46			315			1,007			410			3,506			(3,096		)
Total operating expenses	24,264			22,004			2,260			57,809			5,812			51,997			2,243			1,482			10,754			11,228			95,070			40,526			54,544
Operating Income	11,862			12,866			(1,004		)	17,640			(2,448		)	20,088			1,093			(232		)	(5,120		)	(2,777		)	25,475			7,409			18,066
Other Income (Expense):
Interest expense	(1,834		)	(1,860		)	26			(3,720		)	(404		)	(3,316		)	(103		)	—			(16,296		)	(4,006		)	(21,953		)	(6,270		)	(15,683		)
Equity in net income of unconsolidated equity investments	—			—			—			—			—			—			—			—			(2,755		)	(1		)	(2,755		)	(1		)	(2,754		)
Loss on extinguishment of debt	—			—			—			(5,757		)	—			(5,757		)	—			—			—			—			(5,757		)	—			(5,757		)
Income (loss) from continuing operations before provision for taxes	10,028			11,006			(978		)	8,163			(2,852		)	11,015			990			(232		)	(24,171		)	(6,784		)	(4,990		)	1,138			(6,128		)
Provision for taxes	(1		)	2			(3		)	—			—			—			—			—			(702		)	(1,116		)	(703		)	(1,114		)	411
Income (loss) from continuing operations	10,027			11,008			(981		)	8,163			(2,852		)	11,015			990			(232		)	(24,873		)	(7,900		)	(5,693		)	24			(5,717		)
Income (loss) from discontinued operations	—			—			—			161			—			161			4,404			—			75			(62		)	4,640			(62		)	4,702
Net income (loss)	$	10,027		$	11,008		$	(981	)	$	8,324		$	(2,852	)	$	11,176		$	5,394		$	(232	)	$	(24,798	)	$	(7,962	)	$	(1,053	)	$	(38	)	$	(1,015	)



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