Gramercy Property Trust 10Q 2013 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________

FORM 10-Q

______________________________________

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

For the quarterly period ended September 30, 2013

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

For the transition period from to

Commission File Number: 001-32248

______________________________________

GRAMERCY PROPERTY TRUST INC.

(Exact name of registrant as specified in its charter)

______________________________________

Maryland		06-1722127
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

521 5^th Avenue, 30^th Floor, New York, New York 10175

(Address of principal executive offices) (Zip Code)

(212) 297-1000

(Registrant's telephone number, including area code)

______________________________________

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. See the definitions of "large accelerated filer," "accelerated filer” and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

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

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, $0.001 par value, was 71,244,043 as of November 8, 2013.

GRAMERCY PROPERTY TRUST INC.

INDEX

		PAGE
PART I.	FINANCIAL INFORMATION	3
ITEM 1.	FINANCIAL STATEMENTS	3
	Condensed Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012 (unaudited)	3
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2013 and 2012 (unaudited)	4
	Condensed Consolidated Statement of Stockholders’ equity (deficit) and Non-controlling Interests for the nine months ended September 30, 2013 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	38
ITEM 3A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	52
ITEM 4.	CONTROLS AND PROCEDURES	53
PART II.	OTHER INFORMATION	54
ITEM 1.	LEGAL PROCEEDINGS	54
ITEM 1A.	RISK FACTORS	54
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	54
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	54
ITEM 4.	MINE SAFETY DISCLOSURES	54
ITEM 5.	OTHER INFORMATION	54
ITEM 6.	EXHIBITS	55
SIGNATURES		56

	2

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

Gramercy Property Trust Inc.

Condensed Consolidated Balance Sheets

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

	September 30,		December 31,
	2013		2012
Assets:
Real estate investments, at cost:
Land	$	43,821	$	1,800
Building and improvements		154,474		21,359
Less: accumulated depreciation		(2,279)		(50)
Total real estate investments, net		196,016		23,109
Cash and cash equivalents		28,747		105,402
Investment in joint ventures		46,800		72,742
Servicing advances receivable		9,973		-
Retained CDO bonds		7,992		-
Assets held-for-sale, net (includes consolidated VIEs of $0 and $1,913,353, respectively)		-		1,952,264
Tenant and other receivables, net		13,056		4,123
Acquired lease assets, net of accumulated amortization of $933 and $42		13,225		4,386
Deferred costs, net of accumulated amortization of $316 and $2,033		2,577		415
Other assets		9,705		6,395
Total assets	$	328,091	$	2,168,836

Liabilities and Equity (Deficit):
Liabilities:
Mortgage notes payable	$	48,436	$	-
Accounts payable and accrued expenses		7,703		8,908
Dividends payable		35,809		30,438
Deferred revenue		702		33
Below-market lease liabilities, net of accumulated amortization of $211 and $4		3,931		458
Liabilities related to assets held-for-sale (includes consolidated VIEs of $0 and $2,374,516, respectively)		-		2,380,162
Other liabilities		1,023		665
Total liabilities		97,604		2,420,664

Commitments and contingencies				-

Equity (deficit):
Common stock, par value $0.001, 98,000,000 and 96,000,000 shares authorized, 57,676,005 and 56,731,002 shares issued and outstanding at September 30, 2013 and December 31, 2012, respectively.		58		57
Common stock, Class B-1, par value $0.001, 0 and 2,000,000 shares authorized, issued and outstanding at September 30, 2013 and December 31, 2012, respectively.		-		2
Common stock, Class B-2, par value $0.001, 2,000,000 sharesauthorized, issued and outstanding at September 30, 2013 and December 31, 2012.		2		2
Series A cumulative redeemable preferred stock, par value $0.001, liquidation preference $88,146, 4,600,000 shares authorized, 3,525,822 shares issued and outstanding at September 30, 2013 and December 31, 2012.		85,235		85,235
Additional paid-in-capital		1,103,798		1,102,227
Accumulated other comprehensive loss		118		(95,265)
Accumulated deficit		(959,585)		(1,344,989)
Total Gramercy Property Trust Inc. stockholders' equity (deficit)		229,626		(252,731)
Non-controlling interest		861		903
Total equity (deficit)		230,487		(251,828)
Total liabilities and equity (deficit)	$	328,091	$	2,168,836

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

	3

Gramercy Property Trust Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Revenues
Management fees	$	8,343	$	8,833	$	30,275	$	26,762
Rental revenue		4,024		-		6,484		-
Investment income		464		299		1,233		299
Operating expense reimbursements		460		-		764		-
Other income		130		25		236		91
Total revenues		13,421		9,157		38,992		27,152
Expenses
Property operating expenses:
Property management expenses		4,842		5,666		16,015		17,466
Property operating expenses		479		-		903		-
Total property operating expenses		5,321		5,666		16,918		17,466
Other-than-temporary impairment		-		-		1,682		-
Portion of impairment recognized in other comprehensive loss		-		-		-		-
Net impairment recognized in earnings		-		-		1,682		-
Depreciation and amortization		1,886		44		3,142		130
Interest expense		538		-		623		-
Management, general and administrative		4,672		8,262		13,366		22,708
Acquisition expenses		238		-		1,487		-
Total expenses		12,655		13,972		37,218		40,304
Income (loss) from continuing operations before equity in income (loss) from joint ventures and provisions for taxes		766		(4,815)		1,774		(13,152)
Equity in net income (loss) of joint ventures		983		31		(2,808)		88
Income (loss) from continuing operations before provision for taxes and discontinued operations		1,749		(4,784)		(1,034)		(13,064)
Provision for taxes		(744)		39		(5,590)		(3,379)
Income (loss) from continuing operations		1,005		(4,745)		(6,624)		(16,443)
Income (loss) from discontinued operations		(514)		1,855		9,456		(18,513)
Gain on sale of joint venture interest to a director related entity		-		-		1,317		-
Gains from disposals		-		-		389,140		11,996
Provision for taxes		-		-		(2,515)		-
Income (loss) from discontinued operations		(514)		1,855		397,398		(6,517)
Net income (loss) attributable to Gramercy Property Trust Inc.		491		(2,890)		390,774		(22,960)
Accrued preferred stock dividends		(1,790)		(1,790)		(5,370)		(5,370)
Net income (loss) available to common stockholders	$	(1,299)	$	(4,680)	$	385,404	$	(28,330)
Other comprehensive income (loss):
Unrealized gain (loss) on debt securities and derivative instruments:
Unrealized holding gains (losses) arising during period	$	(65)	$	63,455	$	118	$	170,800
Other comprehensive income (loss):		(65)		63,455		118		170,800
Comprehensive income (loss) attributable to Gramercy Property Trust Inc.	$	426	$	60,565	$	390,892	$	147,840
Comprehensive income (loss) attributable to common stockholders	$	(1,364)	$	58,775	$	385,522	$	142,470
Basic earnings per share:
Net loss from continuing operations, after preferred dividends	$	(0.01)	$	(0.13)	$	(0.21)	$	(0.42)
Net income (loss) from discontinued operations		(0.01)		0.04		6.77		(0.13)
Net income (loss) available to common stockholders	$	(0.02)	$	(0.09)	$	6.56	$	(0.55)
Diluted earnings per share:
Net loss from continuing operations, after preferred dividends	$	(0.01)	$	(0.13)	$	(0.21)	$	(0.42)
Net income (loss) from discontinued operations		(0.01)		0.04		6.77		(0.13)
Net income (loss) available to common stockholders	$	(0.02)	$	(0.09)	$	6.56	$	(0.55)
Basic weighted average common shares outstanding		58,902,708		52,308,653		58,729,491		51,328,443
Diluted weighted average common shares and common share equivalents outstanding		58,902,708		52,308,653		58,729,491		51,328,443

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

	4

Gramercy Property Trust Inc.

Condensed Consolidated Statement of Stockholders’ Equity (Deficit) and Non-controlling Interests

(Unaudited, dollar amounts in thousands)

															Accumulated		Retained		Total
				Common Stock,				Common Stock,			Series A		Additional		Other		Earnings /		Gramercy		Non-
	Common Stock			Class B-1				Class B-2			Preferred		Paid-In-		Comprehensive		(Accumulated		Property		controlling
	Shares	Par Value		Par Value		Par Value		Shares	Par Value		Stock		Capital		Income (Loss)		Deficit)		Trust Inc.		interest		Total
Balance at December 31, 2012	56,731,002		57		2,000,000		2	2,000,000		2	$	85,235	$	1,102,227	$	(95,265)	$	(1,344,989)	$	(252,731)	$	903	$	(251,828)
Net loss	-		-		-		-	-		-		-		-		-		390,774		390,774		-		390,774
Change in net unrealized loss on derivative instruments	-		-		-		-	-		-		-		-		10,100		-		10,100		-		10,100
Change in net unrealized gain on debt securities	-		-		-		-	-		-		-		-		118		-		118		-		118
Change in net unrealized loss on available - for-sale securities	-		-		-		-	-		-		-		-		23,083		-		23,083		-		23,083
Gramercy Finance disposal	-		-		-		-	-		-		-		-		62,082		-		62,082		(42)		62,040
Conversion of Class B-1 shares into common stock	2,000,000		2		(2,000,000)		(2)	-		-		-		-		-		-		-		-		0
Issuance of stock - stock purchase plan	7,189		-		-		-	-		-		-		13		-		-		13		-		13
Stock based compensation- fair value ⁽¹⁾	(1,062,186)		(1)		-		-	-		-		-		1,558		-		-		1,557		-		1,557
Dividends accrued on preferred stock	-		-		-		-	-		-		-		-		-		(5,370)		(5,370)		-		(5,370)
Balance at September 30, 2013	57,676,005		58	$	-		-	2,000,000		2	$	85,235	$	1,103,798	$	118	$	(959,585)	$	229,626	$	861	$	230,487

⁽¹⁾ In the first quarter of 2013, the Company excluded unvested restricted share units from the outstanding share count.

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

	5

Gramercy Property Trust Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited, dollar amounts in thousands)

	Nine Months Ended September 30,
	2013		2012
Operating Activities:
Net income (loss)	$	390,774	$	(22,960)
Adjustments to net cash provided by operating activities:
Depreciation and amortization		3,565		1,007
Amortization of acquired leases to rental revenue		(125)		(155)
Amortization of deferred costs		149		2,909
Amortization of discount and other fees		(10,110)		(19,319)
Straight-line rent adjustment		(1,463)		(152)
Non-cash impairment charges		9,323		60,791
Net gain on sale of properties and lease terminations		-		(11,996)
Net realized gain on sale of joint venture to a director related entity		(1,317)		-
Net realized gain on loans		-		765
Net realized gain on disposal of Gramercy Finance		(389,140)		-
Equity in net (income) loss of joint ventures		3,612		(88)
Stock-based compensation		1,572		2,145
Distributions recieved from joint ventures		6,493
Provision for loan losses		-		(7,838)
Changes in operating assets and liabilities:
Restricted cash		(1,033)		8,084
Tenant and other receivables		(7,254)		(2,838)
Accrued interest		5,759		2,453
Other assets		10,983		(1,646)
Payment of capitalized tenant leasing costs		-		(67)
Accounts payable, accrued expenses and other liabilities		(6,451)		2,016
Deferred revenue		1,286		(140)
Net cash provided by operating activities		16,623		12,971
Investing Activities:
Capital expenditures and leasehold costs		(4,011)		(1,399)
Distribution received from joint ventures		18,391		289
Proceeds from sale of real estate		-		37,259
Proceeds from disposal of Gramercy Finance		6,291		-
Proceeds from sale of joint venture to a director related entity		8,275		-
Proceeds from repayments of servicing advances receivable		4,758		-
Payment of deferred investment costs		-		1,148
New loan investment originations and funded commitments		-		(19,295)
Principal collections on investments		34,990		195,052
Investment in joint ventures		(1,750)		-
Investment in commercial mortgage-backed securities		-		(535)
Acquisition of real estate		(143,203)		-
Net cash (used for) provided by investing activities		(76,259)		212,519
Financing Activities:
Repayment of collateralized debt obligations		(85,912)		(181,328)
Proceeds from mortgage note payables, net		14,500		-
Net proceeds from sale of common stock		-		2,677
Payment of deferred financing costs		(2,621)		-
Repayment of mortgage note payable		(298)		-
Proceeds from sale of repurchased bonds		34,364		-
Change in restricted cash from financing activities		22,948		(35,347)
Net cash used in financing activities		(17,019)		(213,998)
Net increase (decrease) in cash and cash equivalents		(76,655)		11,492
Cash and cash equivalents at beginning of period		105,402		163,725
Cash and cash equivalents at end of period	$	28,747	$	175,217
Non-cash activity:
Deferred gain (loss) and other non-cash activity related to derivatives	$	-	$	(8,113)
Land acquired for consideration of a note payable	$	4,839	$	-
Debt assumed in acquisition of real estate	$	31,312	$	-
Supplemental cash flow disclosures:
Interest paid	$	16,918	$	44,029
Income taxes paid	$	8,625	$	5,621

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

	6

Gramercy Property Trust Inc.

Notes to Condensed Consolidated Financial Statements

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

September 30, 2013

1. Business and Organization

Gramercy Property Trust Inc., or the Company, is a fully-integrated, self-managed commercial real estate investment company focused on acquiring and managing income-producing industrial and office properties net leased to high quality tenants in major markets throughout the United States. The Company also operates an asset management business that manages for third-parties, including the Company’s Bank of America joint venture, commercial real estate assets throughout the United States primarily leased to financial institutions and affiliated users.

The Company was founded in 2004 as a specialty finance Real Estate Investment Trust, or REIT, focused on originating and acquiring loans and securities related to commercial and multifamily properties. In July 2012, following a strategic review, the Company’s board of directors announced a repositioning of the Company as an equity REIT focused on acquiring and managing income producing net leased real estate. To reflect this transformation, in April 2013 the Company changed its name from Gramercy Capital Corp. to Gramercy Property Trust Inc. and began trading on the New York Stock Exchange under the new symbol GPT.

The Company seeks to acquire high quality net leased properties and construct a diversified portfolio that generates stable, predictable cash flows and protects investor capital over a long investment horizon. The Company approaches the net lease market as a value investor, looking to identify and acquire net leased properties that the Company believes offer the most attractive risk adjusted returns throughout market cycles. The Company focuses primarily on industrial and office properties in target markets with strong demographic and economic growth potential. The Company’s goal is to grow its existing portfolio through selective acquisition and become the pre-eminent owner of net leased commercial office and industrial properties.

As of September 30, 2013, the Company owns, either directly or in joint ventures, a portfolio of 106 net leased industrial and office properties with 96% occupancy. Tenants include Bank of America, Kar Auction Services, YRC Worldwide, Five Below, Nestle Waters and others. As of that date, the Company’s asset management business, which operates under the name Gramercy Asset Management, manages for third-parties approximately $1,500,000 of commercial real estate assets.

During the three months ended September 30, 2013, the Company acquired four properties aggregating approximately 258,000 square feet for a total purchase price of approximately $17,694. During the nine months ended September 30, 2013, the Company acquired 18 properties aggregating approximately 1,903,800 square feet for a total purchase price of approximately $175,914.

On March 15, 2013, the Company disposed of its Gramercy Finance segment and exited the commercial real estate finance business. The disposal was completed pursuant to a sale and purchase agreement to transfer the collateral management and sub-special servicing agreements for the Company’s three Collateralized Debt Obligations, or CDOs, to CWCapital Investments LLC, or CWCapital, for proceeds of $6,291 in cash, after expenses. The Company retained its non-investment grade subordinate bonds, preferred shares and ordinary shares, or the Retained CDO Bonds, in the CDOs, which may allow the Company to recoup additional proceeds over the remaining life of the CDOs based upon resolution of underlying assets within the CDOs. However, there is no guarantee that the Company will realize any proceeds from the Retained CDO Bonds or what the timing of these proceeds might be. The carrying value of the Retained CDO Bonds as of September 30, 2013 is $7,992. In February 2013, the Company also sold a portfolio of repurchased notes previously issued by two of its three CDOs, generating cash proceeds of $34,381. In addition, the Company expects to receive additional cash proceeds for past CDO servicing advances when specific assets within the CDOs are liquidated. The Company received reimbursements of $4,746 and $4,758 during the three and nine months ended September 30, 2013, respectively, and the carrying value of the receivable for servicing advance reimbursements as of September 30, 2013 is $9,973, including accrued interest at the prime rate of 3.25%. On March 15, 2013, the Company deconsolidated the assets and liabilities of Gramercy Finance from the Company’s Condensed Consolidated Financial Statements and recognized a gain on the disposal of $389,140 within discontinued operations. For a further discussion regarding the disposal of the Gramercy Finance segment see Note 3 “Dispositions and Assets Held-for-Sale”.

The Company has 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 it distributes its taxable income, if any, to its stockholders. In the past the Company has established, and may in the future establish taxable REIT subsidiaries, or TRSs, to effectuate various taxable transactions. Those TRSs would incur U.S. federal, state and local taxes on the taxable income from their activities. The Company’s Asset Management business is conducted in a TRS and substantially all of the provision for taxes on the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss) is related to this business.

	7

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share and per share data)
September 30, 2013

2. Significant Accounting Policies

Basis of Quarterly Presentation

The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, it does not include all of the information and footnotes required by GAAP for complete financial statements. In management’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. The 2013 operating results for the period presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. 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, 2012. The Condensed Consolidated Balance Sheet at December 31, 2012 has been derived from the audited Consolidated Financial Statements at that date, but does not include all the information and footnotes required by GAAP for complete financial statements.

Reclassification

Certain prior year balances have been reclassified to conform with current year presentation in the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) and footnote disclosures to reflect held-for-sale assets and discontinued operations as of September 30, 2013.

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. As of December 31, 2012, the Company had consolidated its three CDOs, which were classified as held-for-sale VIEs. On March 15, 2013, following the disposal of the Gramercy Finance segment as more fully discussed in Note 1, the CDOs were deconsolidated as the Company determined that it was no longer the primary beneficiary of the VIEs. For further discussion on the deconsolidation of the CDOs, see the discussion on VIEs below.

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.

Variable Interest Entities

The Company had no consolidated VIEs as of September 30, 2013. The following is a summary of the Company’s involvement with unconsolidated VIEs as of September 30, 2013:

	Company carrying				Company carrying	Face value of		Face value of liabilities
	value-assets				value-liabilities	assets held by the VIEs		issued by the VIEs
Assets
Unconsolidated VIEs
Retained CDO Bonds ⁽¹⁾	$	7,992	⁽¹⁾	$	-	$	2,213,144	$	1,978,315

⁽¹⁾ Retained CDO Bonds were previously eliminated in consolidation.

	8

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share and per share data)
September 30, 2013

The following is a summary of the Company’s involvement with VIEs as of December 31, 2012:

	Company carrying			Company carrying		Face value of		Face value of liabilities
	value-assets			value-liabilities		assets held by the VIEs		issued by the VIEs
Liabilities of assets held for sale
Consolidated VIEs
Collateralized debt obligations	$	1,913,353	⁽¹⁾	$	2,374,516	$	2,469,856	$	2,593,392

⁽¹⁾

Collateralized debt obligations are a component of non-recourse liabilities of consolidated VIEs held for sale on the Condensed Consolidated Balance Sheets.

Consolidated VIEs

Collateralized Debt Obligations

On March 15, 2013, as a result of the disposal of the Gramercy Finance segment as more fully described in Note 1, the Company deconsolidated three VIEs, the CDOs. The Company was the collateral manager of the three CDOs and in its capacity as collateral manager the Company made decisions related to the collateral that most significantly impacted the economic outcome of the CDOs, which was the basis upon which the Company concluded that it was the primary beneficiary of the CDOs as of December 31, 2012. In connection with the disposal of Gramercy Finance, the Company transferred the collateral management and sub-special servicing agreements for its three CDOs to CWCapital, thereby removing the Company as the collateral manager and its ability to make any and all decisions related to the collateral, including those that would most significantly impact the economic outcome of the CDOs. As of March 15, 2013, the Company had no continuing involvement with the collateral to the CDOs, and as a result, the Company determined that it was no longer the primary beneficiary of the CDOs, and therefore deconsolidated the CDOs.

The Company has retained its subordinate debt and equity ownership, or the Retained CDO Bonds, in the CDOs, which were previously eliminated in consolidation and were not sold as part of the disposal of Gramercy Finance. 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 these proceeds might be. These interests have been recognized at fair value as the Retained CDO Bonds on the Condensed Consolidated Balance Sheets. For further discussion of the measurement of fair value of the Retained CDO Bonds see Note 9.

Unconsolidated VIEs

Investment in Retained CDO Bonds

As further discussed above, on March 15, 2013, the Company recognized an asset in Retained CDO Bonds in connection with the disposal of the Gramercy Finance segment. The Company is not obligated to provide any financial support to these CDOs. The Company’s maximum exposure to loss is limited to its interest in the Retained CDO Bonds, which is a non-cash loss, and the Company does not control the activities that most significantly impact the VIEs’ economic performance.

Real Estate Investments

The Company records acquired real estate investments as business combinations when the real estate is occupied, at least in part, at acquisition. Costs directly related to the acquisition of such investments are expensed as incurred. The Company allocates the purchase price of real estate to land, building, improvements and intangibles, such as the value of above- and below-market leases and origination costs associated with the in-place leases at the acquisition date. The values of the above- and below-market leases are amortized and recorded as either an increase in the case of below-market leases or a decrease in the case of above-market leases to rental revenue over the remaining term of the associated lease. The values associated with in-place leases are amortized to depreciation and amortization expense over the remaining term of the associated lease. The Company assesses the fair value of the leases at acquisition based upon estimated cash flow projections that utilize appropriate discount and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property. 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.

	9

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share and per share data)
September 30, 2013

Acquisitions of real estate that do not meet the definition of a business combination are recorded at cost. Acquired real estate investments which are under construction are considered build-to-suit transactions and are also recorded at cost. In build-to-suit transactions, the Company engages a developer to construct a building and/or improvement or provide funds to a tenant to develop a building and/or improvement. The Company capitalizes the funds provided to the developer/tenant and the internal costs, including interest, real estate taxes and insurance, if applicable, during the construction period. These costs are capitalized as long as the construction activities are in progress. In the event that construction is abandoned or suspended, the Company will stop capitalizing costs until construction activities resume.

Certain improvements are capitalized when they are determined to increase the useful life of the property. Depreciation is computed using the straight-line method over the shorter of the estimated useful life of the capitalized item not to exceed 40 years for buildings, 15 years for land and building improvements, ten years for equipment and fixtures, and remaining lease term for tenant improvements. Maintenance and repair expenditures are charged to expense as incurred.

In leasing space, the Company may provide funding to the lessee through a tenant allowance. 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, 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 in 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.

The Company also reviews the recoverability of the property’s carrying value when circumstances indicate a possible impairment of the value of a property. 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, an impairment loss is recorded 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 to dispose. These assessments are recorded as an impairment loss in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) in the period the determination is made. The estimated fair value of the asset becomes its new cost basis. For a depreciable long-lived asset to be held and used, the new cost basis will be depreciated or amortized over the remaining useful life of that asset.

Investments in Joint Ventures

The Company accounts for its investments in joint ventures 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 the joint ventures, 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 an investment in joint ventures, and subsequently are adjusted for equity interest in net income (loss) and cash contributions and distributions. Any difference between the carrying amount of the investments on the Condensed Consolidated Balance Sheets and the underlying equity in net assets is evaluated for impairment at each reporting period. None of the joint venture debt is recourse to the Company. As of September 30, 2013 and December 31, 2012, the Company had equity investments of $46,800 and $72,742 in joint ventures, respectively.

Cash and Cash Equivalents

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

Assets Held for Sale

As of December 31, 2012, in connection with the Company’s efforts to dispose of Gramercy Finance and exit the commercial real estate finance business, the Company classified the assets and liabilities of Gramercy Finance as held for sale. As of December 31, 2012, the Company had assets classified as held for sale of $1,952,264 related to the disposal of Gramercy Finance. On March 15, 2013, the Company completed the disposal of Gramercy Finance. For further discussion on the disposal of Gramercy Finance see Note 3, “Dispositions and Assets Held for Sale.”

	10

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share and per share data)
September 30, 2013

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 expense is no longer recorded on real estate assets and current and prior periods are reclassified as “discontinued operations.” As of September 30, 2013 and December 31, 2012, the Company had real estate investments held for sale of $0 and $88,806, respectively. The Company did not record any impairment charges during the three and nine months ended September 30, 2013. The Company recorded impairment charges of $1,981 and $4,620 , respectively, on real estate investments within discontinued operations for the three and nine months ended September 30, 2012.

Tenant and Other Receivables

Tenant and other receivables are derived from the 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. Rental income 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 September 30, 2013 and December 31, 2012 were $278 and $211, respectively. The Company continually reviews receivables related to rent, tenant reimbursements and unbilled rent receivables and determines collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property 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.

Servicing Advances Receivable

Servicing advances receivable is comprised of the accrual for the reimbursement of servicing advances recognized as part of the disposal of Gramercy Finance, more fully described in Note 1. The accrual for reimbursement of servicing advances incurred while the Company was the collateral manager of the CDOs includes expenses such as legal fees incurred to negotiate modifications and foreclosures on loan investments, professional fees incurred on certain loans, or fees for services such as appraisals obtained on real estate properties that served as collateral for loan investments. These reimbursement proceeds will be realized when the related assets within the CDOs are liquidated in accordance with the terms of the collateral management and sub-special servicing agreements, which were sold in connection with the disposal of Gramercy Finance. The Company has no control over the timing of the resolution of the related assets, however, the Company earns accrued interest at the prime rate for the time that these reimbursements are outstanding. For the three and nine months ended September 30, 2013, the Company received reimbursements of $4,746 and $4,758, respectively. As of September 30, 2013, the servicing advances receivable is $9,973.

The Company reviews the servicing advances receivable on a quarterly basis and determines collectability by reviewing the expected resolution and timing of the underlying assets of the CDOs. As of September 30, 2013, the Company has reviewed the outstanding servicing advances and has determined that all amounts are collectible.

Retained CDO Bonds

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

	11

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share and per share data)
September 30, 2013

For the three and nine months ended September 30, 2013, the Company recognized an other-than-temporary impairment, or OTTI, of$0 and $1,682, respectively, on its Retained CDO Bonds. A summary of the Company’s Retained CDO Bonds as of September 30, 2013 is as follows:

Description	Number of Securities	Face Value		Amortized Cost		Gross Unrealized Gain (Loss)		Other-than-temporary impairment		Fair Value		Weighted Average Expected Life
Available for Sale, Non-investment Grade:
Retained CDO Bonds	9	$	354,600	$	7,874	$	118	$	1,682	$	7,992	5.7 years
Total	9	$	354,600	$	7,874	$	118	$	1,682	$	7,992	5.7 years

The following table summarizes the activity related to credit losses on the Retained CDO Bonds for the nine months ended September 30, 2013:

Balance as of December 31, 2012 of credit losses on Retained CDO Bonds for which a portion of an OTTI was recognized in other comprehensive income	$	-
Additions to credit losses:
On Retained CDO Bonds for which an OTTI was not previously recognized		1,682
On Retained CDO Bonds for which an OTTI was previously recognized and a portion of an other-than-temporary impairment was recognized in other comprehensive income		-
On Retained CDO Bonds for which an OTTI was previously recognized without any portion of other-than-temporary impairment recognized in other comprehensive income		-
Reduction for credit losses:
On Retained CDO Bonds for which no other-than-temporary impairment 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		-
Balance as of September 30, 2013 of credit losses on Retained CDO Bonds for which a portion of an OTTI was recognized in other comprehensive income	$	1,682

Intangible Assets and Liabilities

The Company follows the acquisition method of accounting for business combinations. The Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets and liabilities acquired based on their respective fair values. Tangible assets include land, buildings and improvements on an as-if vacant basis. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. Estimates of fair value are made using customary methods, including data from independent appraisals, comparable sales, discounted cash flow analyses and other methods. Identifiable intangible assets and liabilities 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 in estimating the fair value of the tangible and intangible assets and intangible liabilities acquired.

Above-market and below-market lease values for properties acquired are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of 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 above-market lease values are amortized as a reduction of rental revenue over the remaining non-cancelable term of the respective leases. The below-market lease values are amortized as an increase to rental revenue over the remaining non-cancelable term of the respective 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 market lease intangibles would be written off to rental revenue.

The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as-if vacant. Factors considered by management in its analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property taking into account current market conditions and costs to execute similar leases. 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. Management also estimates costs to execute similar leases including leasing commissions and other related expenses. The value of in-place leases is amortized to depreciation and amortization expense over the remaining non-cancelable term of the respective leases. In no event does the amortization period for intangible assets exceed 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 would be written off to depreciation and amortization expense.

	12

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share and per share data)
September 30, 2013

The Company recorded $336 and $7 of amortization of intangible assets as part of depreciation and amortization, including $0 and $7 within discontinued operations, for the three months ended September 30, 2013 and 2012, respectively. The Company recorded $778 and $43 of amortization of intangible assets as part of depreciation and amortization, including $3 and $43 within discontinued operations, for the nine months ended September 30, 2013 and 2012, respectively.

The Company recorded $49 and $42 of amortization of intangible assets and liabilities as a net increase to rental revenue, including $0 and $42 within discontinued operations, for the three months ended September 30, 2013 and 2012, respectively. The Company recorded $125 and $155 of amortization of intangible assets and liabilities as a net increase to rental revenue, including $34 and $155 within discontinued operations, for the nine months ended September 30, 2013 and 2012, respectively.

Intangible assets and liabilities consist of the following:

	September 30, 2013		December 31, 2012
Intangible assets:
In-place leases, net of accumulated amortization of $805 and $359	$	12,307	$	3,639
Above-market leases, net of accumulated amortization of $128 and $48		918		935
Amounts related to assets held for sale, net of accumulated amortization of $0 and $365		-		(188)
Total intangible assets	$	13,225	$	4,386

Intangible liabilities:
Below-market leases, net of accumulated amortization of $211 and $1,395	$	3,931	$	2,161
Amounts related to liabilities held for sale, net of accumulated amortization of $0 and $1,391		-		(1,703)
Total intangible liabilities	$	3,931	$	458

The following table provides the weighted-average amortization period as of September 30, 2013 for intangible assets and liabilities and the projected amortization expense for the next five years.

	Weighted- Average Amortization Period	October 1 to December 31, 2013		2014		2015		2016		2017
In-place leases	10.6	$	336	$	1,344	$	1,344	$	1,344	$	1,344
Total to be included in depreciation and amortization expense		$	336	$	1,344	$	1,344	$	1,344	$	1,344

Above-market lease assets	5.9	$	40	$	162	$	162	$	162	$	162
Below-market lease liabilities	12.8		(89)		(358)		(358)		(358)		(358)

Total to be included in rental revenue		$	(49)	$	(196)	$	(196)	$	(196)	$	(196)

Other Assets

The Company makes payments for certain expenses such as insurance and property taxes in advance of the period in which it receives the benefit. These payments are classified as other assets and amortized over the respective period of benefit relating to the contractual arrangement. The Company also escrows 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.

	13

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share and per share data)
September 30, 2013

Valuation of Financial Instruments

At December 31, 2012, the Company measured financial instruments, including loans and other lending investments, commercial mortgage-backed securities, or CMBS, and derivative instruments, which were disposed of in the first quarter of 2013 in connection with the disposal of Gramercy Finance at fair value on a recurring basis and non-recurring basis. These financial instruments were deconsolidated at fair value in connection with the disposal of Gramercy Finance on March 15, 2013.

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 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 the financial instruments. Financial instruments with readily available actively quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of pricing observability and will require a lesser degree of judgment to be utilized in measuring fair value. Conversely, financial instruments rarely traded or not quoted will generally have less, or no, pricing observability and will require a higher degree of judgment to be utilized in measuring fair value. Pricing observability is generally affected by such items as the type of financial instrument, whether the financial instrument is new to the market and not yet established, the characteristics specific to the transaction and overall market conditions. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair value amounts.

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.

The three broad levels are defined as follows:

Level I — This level is comprised of financial instruments that have quoted prices that are available in active markets for identical assets or liabilities. The type of financial instruments included in this category is highly liquid instruments with actively quoted prices.

Level II — This level is comprised of financial instruments that have pricing inputs other than quoted prices in active markets that are either directly or indirectly observable. The nature of these financial instruments includes instruments for which quoted prices are available but traded less frequently and instruments that are fair valued using other financial instruments, the parameters of which can be directly observed.

Level III — This level is comprised of financial instruments 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 included in this category are derivatives, whole loans, subordinate interests in whole loans and mezzanine loans.

For a further discussion regarding the measurement of financial instruments see Note 9, “Fair Value of Financial Instruments.”

	14

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share and per share data)
September 30, 2013

Revenue Recognition

Real Estate Investments

Rental revenue from leases is recognized on a straight-line basis regardless of when payments are contractually due. Certain lease agreements also contain provisions that require tenants to reimburse the Company for real estate taxes, common area maintenance costs and the amortized cost of capital expenditures with interest. Such amounts are included in both revenues and operating expenses when the Company is the primary obligor for these expenses and assumes the risks and rewards of a principal under these arrangements. Under leases where the tenant pays these expenses directly, such amounts are not included in revenues or expenses.

Deferred revenue represents rental revenue and management fees received prior to the date earned. Deferred revenue also includes rental payments received in excess of rental revenues recognized as a result of straight-line basis accounting.

Other income includes fees paid by tenants to terminate their leases, which are recognized when fees due are determinable, no further actions or services are required to be performed by the Company, and collectability is reasonably assured. In the event of early termination, the unrecoverable net carrying values of the assets or liabilities related to the terminated lease are recognized as depreciation and amortization expense in the period of termination.

Asset Management Business

Certain of the Company’s asset management contracts include provisions that may allow the Company 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, through the measurement date. If the contact may be terminated at will, revenue will only be recognized 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.

In the second quarter of 2013, after consideration of the termination provisions of the agreement and the sales of real estate assets made to date, the Company recognized incentive fees of $5,700 related to its Asset Management Services Agreement, or the Management Agreement, with KBS Acquisition Sub, LLC, or KBSAS, a wholly-owned subsidiary of KBS Real Estate Investment Trust, Inc., or KBS REIT, pursuant to which the Company provides asset management services to KBSAS with respect to a portfolio of office and banks branches, or the KBS Portfolio. The Management Agreement provides for an incentive fee, or the Threshold Value Profits Participation, in an amount equal to the greater of: (a) $3,500 or (b) 10% of the amount, if any, by which the portfolio equity value exceeds $375,000 (as adjusted for future cash contributions into, and distributions out of, KBSAS by KBS REIT). The Threshold Value Profits Participation is capped at a maximum of $12,000 and is payable 60 days after the earlier to occur of June 30, 2014 (or March 31, 2015 upon satisfaction of certain extension conditions including the payment by KBSAS of a $750 extension fee) and the date on which KBSAS, directly or indirectly sells, conveys or otherwise transfers at least 90% of the KBS portfolio. For the three and nine months ended September 30, 2013, the Company recognized incentive fees of $1,059 and $7,046, respectively.

Commercial Mortgage-Backed Securities

On March 15, 2013, the Company deconsolidated its CMBS in connection with the disposal of Gramercy Finance. On the date of disposal, the Company marked all CMBS to fair value and then recognized an other-than-temporary impairment for all CMBS in an unrealized loss position equal to the entire difference between the amortized cost basis and the fair value, before deconsolidating the Company’s portfolio of CMBS. The Company recorded the unrealized gain portion of CMBS equal to the excess of the fair value over the amortized cost as a component of accumulated other comprehensive income (loss) before deconsolidation. As of December 31, 2012, due to the expected disposal of Gramercy Finance at that reporting date, the Company recognized an other-than-temporary impairment for all CMBS in an unrealized loss position because it could no longer express the intent to hold its CMBS until maturity.

On the date of acquisition of the Company’s CMBS, the Company had determined the appropriate accounting model for impairment and revenue recognition based on management’s assessment of the risk of loss. The Company designated its entire CMBS portfolio as available-for-sale. Securities that were considered to have a remote risk of loss were those securities that management determined were of high credit quality and were sufficiently collateralized to protect the acquired class from losses. Management made this determination based upon an evaluation of the underlying collateral, which was performed on every acquisition, regardless of the acquisition price and rating.

	15

Gramercy Property Trust Inc.
Notes To Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share and per share data)
September 30, 2013

The Company determined the fair value of CMBS based on the types of securities in which the Company had invested. The Company consulted with dealers of securities to periodically obtain updated market pricing for the same or similar instruments. For securities for which there was no active market, the Company may have utilized a pricing model to reflect changes in projected cash flows. The value of the securities was derived by applying discount rates to such cash flows based on current market yields. The yields employed were obtained from the Company’s own experience in the market, advice from dealers when available, and/or information obtained in consultation with other investors in similar instruments. Because fair value estimates, when available, may vary to some degree, the Company made certain judgments and assumptions about the appropriate price to use to calculate the fair values for financial reporting purposes. Different judgments and assumptions could result in materially different presentations of value.

Stock-Based Compensation Plans

The Company has a stock-based compensation plan, described more fully in Note 11. The Company accounts for this plan using the fair value recognition provisions. The Company uses the Black-Scholes option-pricing model to estimate the fair value of a stock option award. This model requires inputs such as expected term, expected volatility and the risk-free interest rate. Further, the forfeiture rate also impacts the amount of aggregate compensation cost. These inputs are highly subjective and generally require significant analysis and judgment to develop.

Compensation cost for stock options, if any, is recognized ratably over the vesting period of the award. The Company’s policy is to grant options with an exercise price equal to the quoted closing market price of its stock on the business day preceding the grant date. Awards of stock or restricted stock are expensed as compensation over the benefit period. For three and nine months ended September 30, 2013 and 2012, basic EPS was determined by dividing net income allocable to common stockholders for the applicable period by the weighted-average number of shares of common stock outstanding during such period. Net income during the applicable period is also allocated to the time-based unvested restricted stock as these grants are entitled to receive dividends and are therefore considered a participating security. Time-based unvested restricted stock is not allocated net losses and/or any excess of dividends declared over net income; such amounts are allocated entirely to the common stockholders other than the holders of time-based unvested restricted stock. As of September 30, 2013, and December 31, 2012, the Company had 688,965 and 1,383,388 weighted-average unvested restricted shares outstanding, respectively.

The fair value of each stock option granted is estimated on the date of grant for options issued to employees using the Black-Scholes option pricing model with the following weighted average assumptions for grants in 2013 and 2012.

	2013			2012
Dividend yield		5.50	%		5.00	%
Expected life of option		5.0 years			5.0 years
Risk free interest rate		0.72	%		0.89	%
Expected stock price volatility		53.00	%		80.00	%

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 stockholders. 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 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 will be organized and 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.

	16

Gramercy Property Trust Inc.
Notes To Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share and per share data)
September 30, 2013

For the three and nine months ended September 30, 2013, the Company recorded $744 and $8,105 of income tax expense, including $0 and $2,515 within discontinued operations, respectively. For the three and nine months ended September 30, 2012, the Company reversed $39 and recorded $3,379 of income tax expense within continuing operations, respectively. Income taxes, 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 we believe 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 Condensed Consolidated Financial Statements is to classify these as interest expense and operating expense, respectively. As of September 30, 2013 and December 31, 2012, 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 common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, as long as their inclusion would not be anti-dilutive.

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. Prior to the disposal of Gramercy Finance in March 2013, the Company had also performed ongoing analysis of credit risk concentrations in its loan and other lending investment portfolio by evaluating exposure to various markets, underlying property types, investment structure, term, sponsors, tenants and other credit metrics.

One asset management client accounted for 66% and 73% of the Company’s management fee income for the three and nine months ended September 30, 2013, respectively. One asset management client accounted for 100% of the Company’s management fee income for the three and nine months ended September 30, 2012. One tenant accounted for 35% of the Company’s rental revenue for the three months ended September 30, 2013, and one tenant accounted for 23% of the Company’s rental revenue for the nine months ended September 30, 2013.

Use of Estimates

The preparation of financial statements in conformity with 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.

Recently Issued Accounting Pronouncements

In February 2013, the FASB issued additional guidance on comprehensive income (loss) which requires the provision of information about the amounts reclassified out of accumulated other comprehensive income (loss) by component. This guidance also requires presentation on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) or in the notes, significant amounts reclassified out of accumulated other comprehensive income (loss) by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, a cross-reference must be provided to other disclosures required under U.S. GAAP that provide additional detail about those amounts. This update is effective for reporting periods beginning after December 15, 2012 with early adoption permitted. The Company’s adoption resulted in increased disclosures; however, it did not have a material effect on the Company’s Condensed Consolidated Financial Statements.

	17

Gramercy Property Trust Inc.
Notes To Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share and per share data)
September 30, 2013

3. Dispositions and Assets Held-for-Sale

The Company did not classify any assets as held-for-sale as of September 30, 2013. The following operating results for Gramercy Finance and the assets previously sold for the three and nine months ended September 30, 2013 and 2012, are included in discontinued operations:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Operating Results:
Revenues	$	(44)	$	40,314	$	33,433	$	123,402
Operating expenses		(254)		(10,582)		(3,875)		(22,826)
Marketing, general and administrative		(216)		(8,844)		(2,313)		(13,028)
Interest expense		-		(19,735)		(14,735)		(60,575)
Depreciation and amortization		-		(298)		(15)		(878)
Loans held for sale and CMBS OTTI		-		(15,372)		(7,641)		(52,446)
Provision for loan losses		-		16,372		-		7,838
Expense reimbursements ⁽¹⁾		-		-		5,406		-
Equity in net income from joint venture		-		-		(804)		-
Net income (loss) from operations		(514)		1,855		9,456		(18,513)
Gain on sale of joint venture interests to a director related entity		-		-		1,317		-
Net gains from disposals		-		-		389,140		11,996
Provision for taxes		-		-		(2,515)		-
Net income from discontinued operations	$	(514)	$	1,855	$	397,398	$	(6,517)

⁽¹⁾

In the first quarter of 2013, the Company received reimbursements for enforcement costs of $5,406 incurred on the behalf of a pari-passu lender for one loan held by the CDOs, which the Company incurred in prior years. The Company fully reserved for these costs when incurred due to the uncertainty of recovery.

Discontinued operations have not been segregated in the Condensed Consolidated Statements of Cash Flows.

Gramercy Finance Segment

On March 15, 2013, the Company disposed of Gramercy Finance and exited the commercial real estate finance business, as discussed more fully in Note 1. The Company recognized a gain of $389,140 in discontinued operations related to the disposal. The gain was calculated based upon the difference between the proceeds received of $6,291, after expenses, the fair value of the Retained CDO Bonds of $8,492, the accrual for the reimbursement of past servicing advances paid plus accrued interest of $14,529 and the net difference of the carrying value of the liabilities and the assets of Gramercy Finance of ($421,911) as of the date of disposal, March 15, 2013.

The basis of the assets and liabilities of Gramercy Finance were derecognized as follows:

	-	Loans and other lending investments were derecognized at the lower of cost or market value as of the date of disposal. The fair value of the loans was measured by an internally developed model which considered the price that a third-party would pay to assume the loans and other lending investments at the disposal date;
	-	CMBS investments were derecognized at fair value as of the date of disposal. For CMBS investments in an unrealized loss position, the Company recognized an other-than-temporary impairment equal to the entire difference between the investment’s amortized cost basis and its fair value at the date of disposal which is included in net income from discontinued operations. For CMBS investments in an unrealized gain position as of the date of disposal, the Company recorded the unrealized gains as a component of accumulated other comprehensive income (loss) in stockholders’ equity;
	-	Derivative instruments were derecognized at fair value as of March 15, 2013. The derivatives were not terminated, but instead were transferred with the CDOs; and,
	-	The non-recourse CDOs were derecognized at carrying value, which represents the full amount of outstanding liabilities issued by the CDO trusts.

For a further discussion regarding the measurement of financial instruments see Note 9.

The Company recognized other assets and other receivables retained in the disposal of Gramercy Finance and previously eliminated in consolidation as follows:

	-	Retained CDO Bonds were recognized at the present value of cash flows expected to be collected, which is based upon management’s assumptions and judgments regarding the resolution of the underlying assets; and,
	-	The accrual for reimbursement of past servicing advances is based upon actual expenses incurred by the Company plus accrued interest at the prime rate for the time from which the expenses were incurred through March 15, 2013.

	18

Gramercy Property Trust Inc.
Notes To Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share and per share data)
September 30, 2013

4. Acquisitions

A summary of the Company’s acquisitions for the nine months ended September 30, 2013 is as follows:

Metropolitan

Building

Gross

Statistical

Acquisition

Number of

Square

Land

Purchase

Lease

Property Type

Location

Area (MSA)

Date

Buildings

Feet

Acres

Price

Expiration

Q1 2013 acquisitions

Olive Branch,

Memphis,

Warehouse/Industrial ⁽¹⁾

Mississippi

Tennessee

3/11/2013

605,000

24,650

December 2022

Garland,

Warehouse/Industrial ⁽¹⁾

Texas

Dallas/Fort Worth

3/19/2013

342,000

10,700

October 2032

Cross-Dock

East Brunswick,

Truck Terminal ⁽¹⁾

New Jersey

New York/New Jersey

3/28/2013

34,000

11,650

January 2019

Total Q1 2013 acquisitions

981,000

47,000

Q2 2013 acquisitions

Cross-Dock

Atlanta,

Truck Terminal ⁽¹⁾

Georgia

5/6/2013

130,000

7,850

May 2020

Bellmawr,

Philadelphia,

Warehouse/Industrial ⁽¹⁾

New Jersey

Pennsylvania

5/30/2013

62,000

4,175

October 2022

Hialeah Gardens,

Miami,

Build-to-Suit ^(1),(2)

Florida

5/30/2013

5,000

N/A

Emmaus,

Allentown,

Banking Center ⁽³⁾

Pennsylvania

6/6/2013

5,000

1,610

February 2019

Calabash,

Myrtle Beach,

Banking Center ⁽³⁾

North Carolina

South Carolina

6/6/2013

2,000

610

December 2018

Cross-Dock

Deer Park,

Truck Terminal ⁽³⁾

New York

New York/New Jersey

6/18/2013

18,000

3,900

December 2019

Cross-Dock

Elkridge,

Baltimore/

Truck Terminal ⁽³⁾

Maryland

Washington, D.C.

6/19/2013

34,000

5,900

May 2019

Cross-Dock

Houston,

Truck Terminal ⁽³⁾

Texas

6/26/2013

102,000

6,914

May 2019

Cross-Dock

Orlando,

Truck Terminal ⁽³⁾

Florida

6/26/2013

46,000

5,036

January 2019

Hutchins,

Specialty Asset ^(3),(4)

Texas

Dallas/Fort Worth

6/27/2013

196,000

175

58,500

July 2029

Logan Twp.,

Philadelphia,

Warehouse/Industrial ⁽³⁾

New Jersey

Pennsylvania

6/28/2013

70,000

11,725

May 2028

Total Q2 2013 acquisitions

665,000

301

111,220

Q3 2013 Acquisitions

Morristown,

October 2013

Banking Center (3),(5)

New Jersey

New York/New Jersey

8/1/2013

42,000

4,900

September 2024

Atlanta,

Warehouse/Industrial ⁽³⁾

Georgia

8/22/2013

133,000

4,000

April 2023

Manassas Park,

Baltimore/

Warehouse/Industrial ⁽³⁾

Virginia

Washington, D.C.

9/5/2013

83,000

8,794

December 2024

Total Q3 2013 Acquisitions

258,000

17,694

Total 2013 Acquisitions

1,904,000

392

175,914

	⁽¹⁾	The Company analyzed the fair value of the leases and real estate assets of these investments; and, accordingly, the purchase price allocation is finalized. The current allocation of the assets includes $50,272 of net real estate assets, $9,730 of intangible assets and $3,679 of intangible liabilities.
	⁽²⁾	The build-to-suit property located in Hialeah Gardens, Florida is a commitment to construct a 118,000 square foot cold storage facility which will be 100% leased for an initial term of 25 years when completed in the second quarter of 2014. The Company acquired the land for the property with a $4,990 zero-coupon mortgage note payable to the seller. Total costs are expected to be approximately $25,000, of which the unfunded amounts were estimated to be $20,669 at September 30, 2013.
	⁽³⁾	The Company is currently analyzing the fair value of the lease and real estate assets; and accordingly, the purchase price allocation is preliminary and subject to change. The initial recording of the assets included $114,894 of real estate assets.
	⁽⁴⁾	The Specialty Asset located in Hutchins, Texas is an auto auction facility encumbered with a mortgage of $26,322. The mortgage had a fair value at acquisition of $29,460 and the company capitalized loan assumption costs of $263.
	⁽⁵⁾	The original lease term for one tenant of the property located in Morristown, New Jersey expired in October 2013, however an amendment to the lease was signed and effective October 1, 2013, which extended the lease term to October 2018.

	19

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share and per share data)
September 30, 2013

All of the Company’s acquisitions are 100% leased. The Company recorded revenues and net income for the three months ended September 30, 2013 of $3,803 and $5,260, respectively, related to the above acquisitions. The Company recorded revenues and net income for the nine months ended September 30, 2013 of $1,414 and $1,994, respectively, related to the above acquisitions.

A summary of the Company’s acquisitions for the year ended December 31, 2012 is as follows:

Metropolitan

Building

Gross

Statistical

Acquisition

Number of

Square

Purchase

Lease

Property Type

Location

Area

Date

Buildings

Feet

Acres

Price

Expiration

Q4 2012 acquisitions

Mt. Comfort,

Indianapolis,

September 2021

Warehouse/Industrial

Indiana

11/20/2012

245,000

12,035

December 2018

Greenwood,

Indianapolis,

Warehouse/Industrial

Indiana

11/20/2012

294,000

15,090

July 2024

Total Q4 2012 acquisitions

539,000

27,125

Total 2012 acquisitions

539,000

27,125

Pro Forma

The following table summarizes, on an unaudited pro forma basis, the Company’s combined results of operations for the three and nine months ended September 30, 2013 and 2012 as though the acquisitions closed during the periods ended September 30, 2013 and December 31, 2012 were completed on January 1, 2012. 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.

		Three Months Ended September 30,			Nine Months Ended September 30,
		2013		2012	2013		2012
Pro forma revenues	$	13,533	$	13,523	$	45,087	$	40,251
Pro forma net income (loss) available to common stockholders	$	2,372	$	(3,090)	$	393,225	$	(23,614)
Pro forma earnings per common share-basic	$	0.04	$	(0.06)	$	6.70	$	(0.46)
Pro forma earnings per common share-diluted	$	0.04	$	(0.06)	$	6.70	$	(0.46)
Pro forma common shares-basic		58,902,708		52,308,663		58,729,491		51,328,443
Pro forma common share-diluted		58,902,708		52,308,663		58,729,491		51,328,443

	20

Gramercy Property Trust Inc.
Notes To Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share and per share data)
September 30, 2013

5. Investments in Joint Ventures

Bank of America Portfolio

The Company owns a 50% interest in a joint venture, or the Joint Venture, of a portfolio of 85 properties, or the Bank of America Portfolio, located across the United States totaling approximately 3,500,000 rentable square feet and 98% leased to Bank of America, N.A., under a master lease with expiration dates through 2023, with a total portfolio occupancy of approximately 93%. The Bank of America Portfolio was acquired by the Joint Venture in December of 2012. The acquisition was financed with a $200,000 floating rate, interest-only mortgage note maturing in 2014, collateralized by 67 properties of the portfolio. The mortgage note has three one-year extension options subject to satisfaction of certain terms and conditions. The remaining properties are unencumbered. During the three and nine months ended September 30, 2013, the Joint Venture sold three and 28 properties for proceeds of $1,874 and $33,122, respectively. At September 30, 2013 and December 31, 2012, the investment has a carrying value of $46,800 and $72,541, respectively, and for the three and nine months ended September 30, 2013, the Company recorded its pro rata share of net income (loss) of the Joint Venture of $936 and $(2,917), respectively. During the three and nine months ended September 30, 2013, the Company received distributions of $4,000 and $24,575 from the Joint Venture, respectively. The Joint Venture is currently analyzing the fair value of the leases and accordingly, the purchase price allocation has not been finalized.

In May 2013, the Joint Venture sold the successor borrower of a defeased mortgage and the related pledged treasury securities. The loan had previously encumbered the Bank of America Portfolio’s properties, which the Joint Venture had acquired at acquisition of the Bank of America Portfolio. The pledged treasury securities were U.S. Treasury bonds designated as collateral for the mortgage note payable. The Joint Venture received proceeds of $3,600 and recognized a loss on sale of $4,535.

Philips Building

The Company owns a 25% interest in the equity owner of a fee interest in 200 Franklin Square Drive, a 200,000 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. The property is financed by a $41,000 fixed rate mortgage note with an anticipated repayment date in 2015. As of September 30, 2013 and December 31, 2012, the investment had a carrying value of $0 and $201, respectively. The Company recorded its pro rata share of net income of the joint venture of $47 and $109 for the three and nine months ended September 30, 2013, respectively. The Company recorded its pro rata share of net income of the joint venture of $31 and $88 for the three and nine months ended September 30, 2012, respectively. During the three and nine months ended September 30, 2013, the Company received distributions of $103 and $309 from the joint venture, respectively. During the three and nine months ended September 30, 2012, the Company received distributions of $103 and $289 from the joint venture, respectively.

	21

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements

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

September 30, 2013

The Condensed Consolidated Balance Sheets for the Company’s joint ventures at September 30, 2013 and December 31, 2012 are as follows:

	September 30, 2013		December 31, 2012
Assets:
Real estate assets, net	$	382,262	$	452,692
Other assets ⁽¹⁾		43,943		219,760
Total assets	$	426,205	$	672,452
Liabilities and members' equity:
Mortgages payable ⁽¹⁾	$	241,000	$	553,140
Other liabilities		89,322		90,255
Members' equity		95,883		29,057
Liabilities and members' equity	$	426,205	$	672,452

⁽¹⁾

In May 2013, the Joint Venture sold a defeased mortgage and the corresponding pool of pledged treasury securities, which were acquired by the Joint Venture at acquisition of the Bank of America Portfolio.

The Condensed Consolidated Statements of Operations for the Company’s joint ventures for the three and nine months ended September 30, 2013 and 2012 or partial period for acquisitions or dispositions which closed during these periods, are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Revenues	$	18,160	$	914	$	55,959	$	2,743
Operating expenses		9,204		3		28,689		10
Interest ⁽¹⁾		2,876		525		15,498		1,576
Depreciation		4,451		268		14,014		805
Total expenses		16,531		796		58,201		2,391
Net income (loss) from operations		1,629		118		(2,242)		352
Net loss on disposals		(42)		-		(4,577)		-
Net income (loss)	$	1,587	$	118	$	(6,819)	$	352
Company's equity in net income (loss) within continuing operations	$	983	$	31	$	(2,808)	$	88
Company's equity in net income within discontinued operations	$	-	$	-	$	(804)	$	-

⁽¹⁾

The Bank of America Portfolio net loss includes interest expense of $0 and $7,092 for the three and nine months ended September 30, 2013 from the defeased mortgage acquired as part of the Joint Venture’s acquisition of the Bank of America Portfolio. The pool of treasury securities pledged as collateral for the mortgage generated sufficient cash flows to cover the debt service requirements, but did not generate income to offset the interest expense. The defeased mortgage and corresponding pool of pledged treasury securities were sold in May 2013 for a loss of $4,535.

	22

Gramercy Property Trust Inc.
Notes To Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share and per share data)
September 30, 2013

6. Debt Obligations

Certain real estate assets are subject to mortgage liens. The following is a summary of mortgage notes payable as of September 30, 2013:

	Encumbered Properties	Balance		Interest Rate	Maturity Date
Fixed-rate mortgages	4	$	45,515	0.00% to 6.95%	June 2014 to June 2029
Variable-rate mortgages	-		-	n/a	n/a
Total mortgage notes payable	4		45,515
Above/below market interest			2,921
Balance at September 30, 2013	4	$	48,436

On September 4, 2013, the Company entered into a Credit and Guaranty Agreement, or the Credit Facility, with Deutsche Bank Securities, Inc., as lead arranger and bookrunner, and Deutsche Bank AG New York Branch, as administrative agent, for a $100,000 senior secured revolving credit facility. The aggregate amount of the Credit Facility may be increased to a total of up to $150,000, subject to the approval of the administrative agent and the identification of lenders willing to make available additional amounts. The maturity date of the revolving credit facility is September 2015, with one 12-month extension option exercisable by the Company, subject, among other things, to there being an absence of an event of default under the Credit Facility and to the payment of an extension fee. The Credit Facility is guaranteed by Gramercy Property Trust Inc. and certain subsidiaries and is secured by first priority mortgages on designated properties, or the Borrowing Base. Outstanding borrowings under the Credit Facility are limited to the lesser of (i) the sum of the $100,000 revolving commitment and the maximum $50,000 commitment increase available or (ii) 60.0% of the value of the Borrowing Base. Interest on advances made on the Credit Facility, will be incurred at a floating rate based upon, at the Company’s option, either (i) LIBOR plus the applicable LIBOR margin, or (ii) the applicable base rate which is the greater of the Prime Rate, 0.50% above the Federal Funds Rate, or 30-day LIBOR plus 1.00%. The applicable LIBOR margin will range from 1.90% to 2.75%, depending on the ratio of the Company's outstanding consolidated indebtedness to the value of the Company’s consolidated gross assets. The Credit Facility will have an initial borrowing rate of LIBOR plus 1.90%. The Credit Facility includes a series of financial and other covenants that the Company must comply with in order to borrow under the facility. The Company was in compliance with the covenants under the Credit Facility at September 30, 2013. As of September 30, 2013, there were no borrowings outstanding under the Credit Facility and 13 properties were in the borrowing base.

During the second quarter of 2013, the Company acquired an auto auction facility located in the Dallas, Texas MSA, and assumed the fully-amortizing, first mortgage note of $26,322, encumbered by the property. The acquired property is 100% leased and the assumed mortgage note is co-terminus with the lease agreement. In addition, during the prior quarter, the Company obtained a $14,500 first mortgage secured by two previously acquired real estate properties and acquired one property with a $4,990 zero-coupon mortgage note payable to the property seller.

During the three months ended September 30, 2013 and 2012, the Company capitalized $54 and $0, respectively, and $54 and $0, respectively, during the nine months ended September 30, 2013 and 2012, of interest associated with redevelopment activities.

As of September 30, 2013, four of the Company’s real estate investments were encumbered with mortgage notes with a cumulative outstanding balance of $45,515 and the Company’s secured revolving line of credit had an outstanding balance of $0. Combined aggregate principal maturities of the Company's mortgage notes and credit facility as of September 30, 2013 are as follows:

	Credit Facility		Mortgage Notes Payable		Interest Payments		Total
2013 (October 1 - December 31)	$	-	$	302	$	570	$	872
2014		-		6,247		2,234		8,481
2015		-		1,335		2,155		3,490
2016		-		1,420		2,071		3,491
2017		-		1,509		1,981		3,490
Thereafter		-		34,702		10,033		44,735
Above / Below Market Interest		-		-		2,921		2,921
Total	$	-	$	45,515	$	21,965	$	67,480

	23

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements

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

September 30, 2013

7. Leasing Agreements

The Company’s properties are leased to tenants under operating leases with expiration dates extending through the year 2032. These leases generally contain rent increases and renewal options.

Future minimum rental revenue under non-cancelable leases excluding reimbursements for operating expenses as of September 30, 2013 are as follows:

	Operating Leases
October 1 to December 31, 2013	$	3,693
2014		16,846
2015		17,898
2016		18,060
2017		18,271
Thereafter		177,655
Total minimum lease rental income	$	252,423

8. Transactions with Director Related Entities

The Chief Executive Officer of SL Green Realty Corp. (NYSE: SLG), or SL Green, is one of the Company’s directors. In June 2013, the Company signed a lease agreement with 521 Fifth Fee Owner LLC, an affiliate of SL Green, for new corporate office space located at 521 Fifth Avenue, New York, New York. The lease commenced in September 2013 following the completion of certain improvements to the space. The lease is for approximately 6,580 square feet and carries a term of 10 years with rents of approximately $373 per annum for year one rising to $463 per annum in year ten. The Company commences rent payments on December 30, 2013.

From May 2005 through September 2013, the Company was party to a lease agreement with SLG Graybar Sublease LLC, an affiliate of SL Green, for its previous corporate offices at 420 Lexington Avenue, New York, New York. The lease was for approximately 7,300 square feet and carried an original term of 10 years with rents of approximately $249 per annum for year one rising to $315 per annum in year ten. In May and June 2009, the Company amended its lease with SLG Graybar Sublease LLC to increase the leased premises by approximately 2,260 square feet. The additional premises was leased on a co-terminus basis with the remainder of the Company’s leased premises and carried rents of approximately $103 per annum during the initial year and $123 per annum during the final lease year. On June 25, 2012, the lease was further amended to reduce the leased premises by approximately 600 square feet and to reduce rents by approximately $29 per annum during the initial year and $38 per annum during the final lease year. All other terms of the lease remained unchanged, except the Company obtained the right to cancel the lease with 90 days notice. For the three and nine months ended September 30, 2013, the Company paid $96 and $287 under this lease, respectively. For the three and nine months ended September 30, 2012, the Company paid $96 and $269 under this lease, respectively. In April 2013, the Company gave notice that that it was cancelling the lease for its corporate offices at 420 Lexington Avenue. The lease agreement with SLG Graybar Sublease LLC was terminated in September 2013.

In September 2012, the Company, an affiliate of SL Green and several other unrelated parties recapitalized a portfolio of office buildings located in Southern California, or the Southern California Office Portfolio, through the contribution of an existing preferred equity investment to a newly formed joint venture. As of December 31, 2012, the Company’s 10.6% interest in the joint venture had a carrying value of $7,215 and was classified as held for sale in connection with the classification of Gramercy Finance as held for sale. For the three and nine months ended September 30, 2013, the Company recorded its pro rata share of net losses on the joint venture of $0 and $458, within discontinued operations. In January 2013, the Company sold its 10.6% interest in the joint venture of the Southern California Office Portfolio, which was part of the Gramercy Finance segment and was owned within the Company’s CDOs, to an affiliate of SL Green for proceeds of $8,275 and recorded a gain on disposition to a director related entity of $1,317 within discontinued operations.

	24

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements

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

September 30, 2013

9. Fair Value of Financial Instruments

The Company discloses fair value information about financial instruments, whether or not recognized in the statement of financial condition, 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. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair value amounts.

In connection with the Company’s disposal of Gramercy Finance, more fully described in Note 3, the Company recorded recurring and non-recurring fair value measurements as of the date of disposal for certain financial instruments before derecognition.

The following table presents the carrying value in the Condensed Consolidated Balance Sheets, and approximate fair value of financial instruments at September 30, 2013 and December 31, 2012:

	September 30, 2013				December 31, 2012
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
Lending investments ⁽¹⁾^,⁽²⁾	$	-	$	-	$	784,135	$	816,283
CMBS ⁽²⁾	$	-	$	-	$	932,265	$	932,265
Derivative instruments ⁽²⁾	$	-	$	-	$	173	$	173
Retained CDO Bonds ⁽³⁾	$	7,992	$	7,992	$	-	$	-
Financial liabilities:
Collateralized debt obligations ⁽¹⁾^,⁽²⁾	$	-	$	-	$	2,188,579	$	1,474,236
Derivative instruments ⁽²⁾	$	-	$	-	$	173,623	$	173,623
Mortgage notes payable ⁽¹⁾	$	48,436	$	48,097	$	-	$	-

⁽¹⁾	Lending investments, mortgages notes payable, and CDOs are classified as Level III due to the significance of unobservable inputs which are based upon management assumptions.
⁽²⁾	In connection with the disposal of Gramercy Finance, lending investments, CMBS investments, derivative instruments, and collateralized debt obligations were classified as held-for-sale as of December 31, 2012.
⁽³⁾	Retained CDO Bonds represent the CDOs’ subordinate bonds, preferred shares, and ordinary shares, which were retained subsequent to the disposal of Gramercy Finance and were previously eliminated in consolidation.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments 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.

Lending investments : These instruments were presented in the Condensed Consolidated Financial Statements at the lower of cost or market value and not at fair value. The fair values were estimated by using market floating rate and fixed rate yields (as appropriate) for loans with similar credit characteristics.

CMBS investments : These investments were presented in the Condensed Consolidated Financial Statements at fair value. The fair values were based upon valuations obtained from dealers of those securities, third-party pricing services, and internal models.

Collateralized debt obligations : These obligations were presented in the Condensed Consolidated Financial Statements on the basis of proceeds received at issuance and not at fair value. The fair value was estimated based upon the amount at which similarly placed financial instruments would be valued at December 31, 2012.

	25

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements

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

September 30, 2013

Derivative instruments : The Company’s derivative instruments, which are primarily comprised of interest rate swap agreements, were carried at fair value in the Condensed Consolidated Financial Statements based upon third-party valuations.

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

Mortgage notes payable: These obligations are presented in the Condensed Consolidated Financial Statements based on the actual balance outstanding and not at fair value. The fair value was estimated using discounted cash flows methodology, using discount rates that best reflect current market rates for financing with similar characteristics and credit quality.

Disclosure about fair value of financial instruments is based on pertinent information available to the Company at September 30, 2013 and December 31, 2012. 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 Condensed Consolidated Financial Statements since September 30, 2013 and December 31, 2012, 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 financial instruments. Financial instruments with readily available actively quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of pricing observability and a lower degree of judgment utilized in measuring fair value. Conversely, financial instruments rarely traded or not quoted will generally have less, or no, pricing observability and a higher degree of judgment utilized in measuring fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair value amounts. Determining which category an asset or liability falls within the hierarchy requires significant judgment and the Company evaluates its hierarchy disclosures each quarter.

	26

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements

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

September 30, 2013

Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are categorized in the table below based upon the lowest level of significant input to the valuations.

At September 30, 2013	Total		Level I		Level II		Level III
Financial assets:
Retained CDO Bonds:
Non-investment grade,
subordinate CDO bonds	$	7,992	$	-	$	-	$	7,992
	$	7,992	$	-	$	-	$	7,992

At December 31, 2012	Total		Level I		Level II		Level III
Financial assets:
Derivative instruments:
Interest rate caps	$	173	$	-	$	-	$	173
Interest rate swaps		-		-		-		-
	$	173	$	-	$	-	$	173
CMBS available for sale:
Investment grade	$	281,495	$	-	$	-	$	281,495
Non-investment grade		650,770		-		-		650,770
	$	932,265	$	-	$	-	$	932,265
Financial liabilities:
Derivative instruments:
Interest rate caps	$	173,623	$	-	$	-	$	173,623
Interest rate swaps		-		-		-		-
	$	173,623	$	-	$	-	$	173,623

	27

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements

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

September 30, 2013

Derivative instruments: Interest rate caps and swaps were valued with the assistance of a third-party derivative specialist, who used a combination of observable market-based inputs, such as interest rate curves, and unobservable inputs which required significant judgment such as the credit valuation adjustments due to the risk of non-performance by both the Company and its counterparties. The fair value of derivatives classified as Level III was most sensitive to the credit valuation adjustment as all or a portion of the credit valuation adjustment may be reversed or otherwise adjusted in future periods in the event of changes in the credit risk of the Company or its counterparties.

Total losses or (gains) from derivatives for the period ended March 15, 2013 were $10,100 in accumulated other comprehensive income (loss), and then subsequently on the date of disposal, the Company reclassified the amounts out of accumulated other comprehensive income (loss) and derecognized the derivative instruments. During the three and nine months ended September 30, 2013, the Company entered into no interest rate caps.

CMBS: CMBS were generally valued on a recurring basis by (i) obtaining assessments from third-party dealers who primarily used market-based inputs such as changes in interest rates and credit spreads, along with recent comparable trade data; and (ii) pricing services that used a combination of market-based inputs along with unobservable inputs that require significant judgment, such as assumptions on the underlying loans regarding net property operating income, capitalization rates, debt service coverage ratios and loan-to-value default thresholds, timing of workouts and recoveries, and loan loss severities. Third-party dealer marks, which were used to value the majority of the Company’s CMBS, are indications received from dealers in the respective security, from which the Company could transact at on the valuation date. The Company used all data points obtained, including comparable trades completed by the Company or available in the market place in determining its fair value of CMBS. Pricing service models are designed to replicate a market view of the underlying collateral, however, the models are most sensitive to the unobservable inputs such as timing of loan defaults and severity of loan losses and 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 had designated its CMBS as Level III.

Retained CDO Bonds: Retained CDO Bonds are valued on a recurring basis using an internally developed discounted cash flow model. Management estimates the timing and amount of 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, real estate investments, and CMBS. 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.

Quantitative information regarding the valuation techniques and the range of significant unobservable Level III inputs used to determine fair value measurements of the Retained CDO Bonds on a non-recurring basis as of September 30, 2013 are:

	At September 30, 2013
Financial Asset	Fair Value		Valuation Technique	Unobservable Inputs	Range
Retained CDO Bonds
Non-investment grade, subordinate CDO bonds	$	7,992	Discounted cash flows	Discount rate	25.00% to 40.00%

	28

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements

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

September 30, 2013

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

	CMBS Available for sale - Investment Grade		CMBS Available for sale - Non- Investment Grade		Derivative Instruments		Retained CDO Bonds
Balance as of December 31, 2012	$	281,495	$	650,770	$	173	$	-
Change in CMBS investment		-		-		-		-
Change in CMBS investment status		(1,506)		1,506		-		-
Amortization of discounts or premiums		1,264		6,075		-		1,064
Proceeds from CMBS principal repayments		(10,526)		-		-		-
Gramercy Finance disposal		(274,133)		(670,387)		(219)		8,492
Adjustments to fair value:
Included in other comprehensive income		3,406		19,677		46		118
Other-than-temporary impairments		-		(7,641)		-		(1,682)
Balance as of September 30, 2013	$	-	$	-	$	-	$	7,992

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 - Interest
	Rate Swaps
Balance as of December 31, 2012	$	173,623
Gramercy Finance disposal		(163,716)
Adjustments to fair value:
Unrealized loss		(9,907)
Balance as of September 30, 2013	$	-

	29

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements

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

September 30, 2013

Fair Value on a Non-Recurring Basis

The Company used fair value measurements on a non-recurring basis in its assessment of fair value on loans and other lending investments that had been written down to fair value as a result of valuation allowances established for loan losses and loans and other lending investments classified as held-for-sale to adjust the carrying value to the lower of cost or fair value. As of March 15, 2013, or on the date of disposal of Gramercy Finance, the Company evaluated its loan investments for impairment before derecognizing the loan investments at the lower of cost or fair value. The Company recorded no impairments as of March 15, 2013. This differs from the Company’s determination of allowances for loan losses as the Company considered the value that a purchaser would be willing to acquire the asset at the date of disposal instead of at the ultimate resolution of the asset.

At September 30, 2013, the Company did not measure any assets at fair value on a non-recurring basis. The following table shows the fair value hierarchy for those assets measured at fair value on a non-recurring basis based upon the lowest level of significant input to the valuations for which a non-recurring change in fair value has been recorded during the year ended December 31, 2012.

At December 31, 2012	Total		Level I		Level II		Level III
Financial assets:
Lending investments - held-for-sale (allowance for loan loss):
Whole loans	$	60,335	$	-	$	-	$	60,335
Subordinate interests in whole loans		9,131		-		-		9,131
Mezzanine loans		-		-		-		-
Preferred equity		-		-		-		-
	$	69,466	$	-	$	-	$	69,466
Lending investments - held-for-sale (impairment for lower of cost or fair value):
Whole loans	$	174,477	$	-	$	-	$	174,477
Subordinate interests in whole loans		1,649		-		-		1,649
Mezzanine loans		20,422		-		-		20,422
Preferred equity		-		-		-		-
	$	196,548	$	-	$	-	$	196,548
Real estate investments:
Office	$	3,593	$	-	$	-	$	3,593
Land		24,195		-		-		24,195
Hotel		24,034		-		-		24,034
Branch		4,749		-		-		4,749
Industrial		-		-		-		-
	$	56,571	$	-	$	-	$	56,571

	30

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements

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

September 30, 2013

Real estate investments: The properties identified for impairment have been classified as assets held-for-sale. The impairment on properties classified as held-for-sale is calculated by comparing the results of the Company’s marketing efforts and unsolicited purchase offers to the carrying value of the respective property. The marketing valuations are based on internally developed discounted cash flow models which include assumptions that require significant management judgment regarding capitalization rates, lease-up periods, future occupancy rates, market rental rates, holding periods, capital improvements and other factors deemed necessary by management. The impairment is calculated by comparing the Company’s internally developed discounted cash flow methodology to the carrying value of the respective property.

Loans subject to impairments or reserves for loan loss: The loans identified for impairment or reserves for loan loss are collateral dependent loans. Impairment or reserves for loan loss are measured by comparing management’s estimated fair value of the underlying collateral to the carrying value of the respective loan. These valuations require significant judgments, which include assumptions regarding capitalization rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders and other factors deemed necessary by management.

The valuations derived from pricing models may include adjustments to the financial instruments. These adjustments may be made when, in management’s judgment, either the size of the position in the financial instrument or other features of the financial instrument such as its complexity, or the market in which the financial instrument is traded (such as counterparty, credit, concentration or liquidity) require that an adjustment be made to the value derived from the pricing models. Additionally, an adjustment from the price derived from a model typically reflects management’s judgment that other participants in the market for the financial instrument being measured at fair value would also consider such an adjustment in pricing that same financial instrument.

Assets and liabilities presented at fair value and categorized as Level III are generally those that are marked to model using relevant empirical data to extrapolate an estimated fair value. The models’ inputs reflect assumptions that market participants would use in pricing the instrument in a current period transaction and outcomes from the models represent an exit price and expected future cash flows. The parameters and inputs are adjusted for assumptions about risk and current market conditions. Changes to inputs in valuation models are not changes to valuation methodologies; rather, the inputs are modified to reflect direct or indirect impacts on asset classes from changes in market conditions. Accordingly, results from valuation models in one period may not be indicative of future period measurements.

10. Stockholders’ Equity

The Company’s authorized capital stock consists of 125,000,000 shares, $0.001 par value, of which the Company has authorized the issuance of up to 100,000,000 shares of common stock, $0.001 par value per share, and 25,000,000 shares of preferred stock, par value $0.001 per share. As of September 30, 2013, 57,676,005 shares of common stock and 3,525,822 shares of preferred stock were issued and outstanding. In the third quarter of 2013, all 2,000,000 shares of our Class B-1, non-voting common stock, par value $0.0001, issued as consideration for the Company’s contribution to the Joint Venture for its acquisition of the Bank of America Portfolio, were converted into common stock.

Preferred Stock

Beginning with the fourth quarter of 2008, the Company’s board of directors elected not to pay the quarterly Series A preferred stock dividends of $0.50781 per share. As of September 30, 2013 and December 31, 2012, the Company accrued Series A preferred stock dividends of $35,809 and $30,438, respectively. The Company may at its option redeem the Series A cumulative redeemable preferred stock at par for cash.

Equity Incentive Plan

As part of the Company’s initial public offering, the Company instituted its Equity Incentive Plan. The Equity Incentive Plan, as amended, authorizes (i) grants of shares of restricted and unrestricted common stock; (ii) the grant of stock options that qualify as incentive stock options under Section 422 of the Internal Revenue Code, or ISOs, (iii) the grant of stock options that do not qualify, or NQSOs; and, (iv) the grant of stock options in lieu of cash directors’ fees. The exercise price of stock options will be determined by the compensation committee, but may not be less than 100% of the fair market value of the shares of common stock on the date of grant. At September 30, 2013, 1,809,233 shares of common stock were available for issuance under the Equity Incentive Plan.

	31

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements

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

September 30, 2013

Through September 30, 2013, 1,787,872 restricted shares had been issued under the Equity Incentive Plan, of which 85% have vested. Except for certain performance based awards, the vested and unvested shares are currently entitled to receive distributions on common stock 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 $154 and $425 was recorded for the three and nine months ended September 30, 2013 and compensation expense of $523 and $1,170 was recorded for the three and nine months ended September 30, 2012, respectively, related to the issuance of restricted shares. Compensation expense of $1,687 will be recorded over the course of the next 53 months representing the remaining vesting period of equity awards issued under the Equity Incentive Plan as of September 30, 2013.

In March 2013, the Company granted to four senior officers of the Company pursuant to the Equity Incentive Plan a total of 115,000 time-based restricted stock awards and 345,000 performance-based restricted stock units. The time-based awards vest in five equal annual installments commencing December 15, 2013, subject to continued employment. Vesting of the performance-based units requires, in addition to continued employment over a 5-year period, achievement of absolute increases in either the Company’s stock price or an adjusted funds from operations (as defined by the Company’s compensation committee).

The Company has granted senior officers equity awards pursuant to the Company’s 2012 Long-Term Outperformance Plan, or 2012 Outperformance Plan, in the form of LTIP units. LTIP units are a class of limited partnership interests in GPT Property Trust LP, the Company’s operating partnership, that are structured to quality as “profits interests” for federal income tax purposes and do not have full parity, on a per unit basis, with the Class A limited partnership interests in the Company or its operating partnership with respect to liquidating distributions.

In July 2012, the Company adopted the 2012 Outperformance Plan in connection with the hiring of Gordon F. DuGan, Benjamin P. Harris, and Nicholas L. Pell, who joined the Company on July 1, 2012 as Chief Executive Officer, President and Managing Director, respectively, and granted equity awards to these new executives pursuant to the 2012 Outperformance Plan. The LTIP units had a fair value of $1,870 on the date of grant, which was calculated in accordance with ASC 718. The Company used a probabilistic valuation approach to estimate the inherent uncertainty that the LTIP units may have with respect to the Company’s common stock.

In March 2013, the Company granted four senior officers equity awards pursuant to the Company’s 2012 Long-Term Outperformance Plan, or 2012 Outperformance Plan, in the form of LTIP units having an aggregate maximum value of $4,000, and a fair value of $845, which was calculated in accordance with ASC 718. The Company used a probabilistic valuation approach to estimate the inherent uncertainty that the LTIP units may have with respect to the Company’s common stock. The amount of LTIP units actually earned by the executives under the 2012 Outperformance Plan can range from 20% of the maximum amount if the Company’s common stock price equals a minimum hurdle of $5.00 per share (less any dividends paid during the performance period) to 100% of the maximum amount if the Company’s common stock price equals or exceeds $9.00 per share (less any dividends paid during the performance period) on a valuation date during the four-year performance period. The executives will not earn any LTIP units under the 2012 Outperformance Plan to the extent that the Company’s common stock price on each of the four valuation dates is less than the $5.00 per share minimum hurdle.

During the performance period, which commenced on July 1, 2012 and ends on June 30, 2016, the executives may earn up to 12%, 24% and 36% of the maximum amount under the 2012 Outperformance Plan at the end of the first, second and third plan years, respectively, if the Company’s common stock price has equaled or exceeded the stock price hurdles as of the end of such years. If the minimum stock price hurdle is met as of the end of any such plan year, the actual amount earned will range on a sliding scale from 20% of the maximum amount that may be earned as of such date (at the minimum stock price hurdle) to 100% of the maximum amount that may be earned as of such date (at the maximum stock price hurdle). Any LTIP units earned under the 2012 Outperformance Plan will remain subject to vesting, with 50% of any LTIP units earned vesting on June 30, 2016 and the remaining 50% vesting on June 30, 2017 based, in each case, on continued employment through the vesting date.

Compensation expense of $147 and $408 was recorded for the three and nine months ended September 30, 2013 and compensation expense of $105 and $505 was recorded for the three and nine months ended September 30, 2012, respectively, for the 2012 Outperformance Plan. Compensation expense of $2,090 will be recorded over the course of the next 39 months, representing the remaining weighted average vesting period of the LTIP Units as of September 30, 2013.

As of September 30, 2013, there were approximately 518,075 phantom stock units outstanding, of which 507,575 units are vested.

	32

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements

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

September 30, 2013

Earnings per Share

Earnings per share for the three and nine months ended September 30, 2013 and 2012 are computed as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013		2012		2013		2012
Numerator - Income (loss):
Net income (loss) from continuing operations	$	1,005	$	(4,745)	$	(6,624)	$	(16,443)
Net income (loss) from discontinued operations		(514)		1,855		397,398		(6,517)
Net income (loss)		491		(2,890)		390,774		(22,960)
Accrued preferred stock dividends		(1,790)		(1,790)		(5,370)		(5,370)
Numerator for basic income per share - net income (loss) available to common stockholders:		(1,299)		(4,680)		385,404		(28,330)
Effect of dilutive securities		-		-		-		-
Diluted earnings:
Net income (loss) available to common stockholders	$	(1,299)	$	(4,680)	$	385,404	$	(28,330)
Denominator-Weighted average shares:
Weighted average shares outstanding		59,570,208		54,551,842		59,418,456		52,379,338
Less: Unvested restricted shares		(667,500)		(2,243,189)		(688,965)		(1,050,895)
Denominator for basic income per share		58,902,708		52,308,653		58,729,491		51,328,443
Effect of dilutive securities:
LTIP		-		-		-		-
Stock based compensation plans		-		-		-		-
Phantom stock units		-		-		-		-
Diluted Shares		58,902,708		52,308,653		58,729,491		51,328,443

Diluted income (loss) per share assumes the conversion of all common share equivalents into an equivalent number of common shares if the effect is not anti-dilutive. For the three months ended September 30, 2013, 50,828 share options and 518,075 phantom share units were computed using the treasury share method, which due to the net loss from continuing operations were anti-dilutive. For the nine months ended September 30, 2013, 49,136 share options and 518,075 phantom share units were computed using the treasury share method, which due to the net loss from continuing operations were anti-dilutive. For the three months ended September 30, 2012, 16,686 share options and 575,615 phantom share units were computed using the treasury share method, which due to the net loss from continuing operations were anti-dilutive. For the nine months ended September 30, 2012, 17,121 share options and 575,615 phantom share units were computed using the treasury share method, which due to the net loss from continuing operations were anti-dilutive.

Accumulated other comprehensive income (loss) for the period ended September 30, 2013 and 2012 is comprised of the following:

	As of September 30,
	2013		2012
Net realized and unrealized losses on interest rate swap and cap agreements accounted for as cash flow hedges	$	-	$	(190,214)
Net unrealized loss on available-for-sale securities		-		(79,925)
Net unrealized gain on debt securities		118		-
Total accumulated other comprehensive income (loss)	$	118	$	(270,139)

The Company reclassified unrealized gains on CMBS of $107,774 for the period ended September 30, 2013 into net income as a component of the gain on disposal of Gramercy Finance on the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss). The Company also reclassified the unamortized fair value of terminated swaps previously designated as cash flow hedges of $6,359 into net income as a component of the gain on disposal of Gramercy Finance presented Condensed Consolidated Statement of Operations and Comprehensive Income (Loss).

	33

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements

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

September 30, 2013

11. Commitments and Contingencies

The Company is obligated under certain tenant leases, to construct the underlying leased property or fund tenant expansions. As of September 30, 2013, the Company had four outstanding commitments: (1) the construction of a 118,000 square foot cold storage facility located in Hialeah Gardens, Florida, of which the unfunded amounts were estimated to be $20,669; (2) the contribution of $1,500 towards tenant improvements on a warehouse/industrial property in Garland, Texas, of which the unfunded amounts were estimated to be $854; (3) the expansion of a property located in Olive Branch, Mississippi, whereby the tenant has a one-time option to expand the building by 250,000 square feet; and (4) the expansion of a property located in Logan Township, New Jersey, whereby the tenant has a one-time option to expand the building by 25,000 square feet. The tenants have not noticed the Company for the building expansion options and as such, no amounts are due and no unfunded amounts have been estimated.

The Company’s corporate offices at 521 Fifth Avenue, New York, New York are subject to an operating lease agreement with 521 Fifth Fee Owner, LLC, an affiliate of SL Green, effective as of September 2013. The lease is for approximately 6,580 square feet and carries a term of 10 years with rents of approximately $373 per annum for year one rising to $463 per annum in year ten.

The Company’s previous corporate offices at 420 Lexington Avenue, New York, New York, were subject to an operating lease agreement with SLG Graybar Sublease LLC, an affiliate of SL Green, effective May 1, 2005, which was subsequently amended in May and June 2009 and in June 2012. In April 2013, the Company gave notice that it was cancelling the lease for the corporate offices at 420 Lexington Avenue effective in September 2013 concurrently with the commencement of the lease for the new corporate offices at 521 Fifth Avenue.

The Company’s regional management office located at 610 Old York Road, Jenkintown, Pennsylvania, is subject to an operating lease with an affiliate of KBS REIT. The lease is for approximately 17,000 square feet, and expires on April 30, 2014, with rents of approximately $322 per annum. The Company’s regional management office located at 800 Market Street, St. Louis, Missouri is subject to an operating lease with St. Louis BOA Plaza, LLC. The lease is for approximately 2,000 square feet, expires on September 30, 2014, and is cancelable with 60 days’ notice. The lease is subject to rents of $32 per annum.

In December 2010, the Company sold the Company's 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 $2,900 of real property transfer tax, plus interest, and, in the case of the NYS DOT notice, approximately $684 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 the 2 Herald Sale Transaction was exempt from New York City and New York State real property transfer taxes and intends to vigorously defend against the assessments. In September 2013, the Company filed a petition challenging the NYC DOF Transfer Tax Assessment with the New York City Tax Appeal Tribunal, and the Company intends to timely filing a similar petition challenging the NYS DOF Transfer Tax Assessment.

The Company believes that it has strong defenses against the Transfer Tax Assessments and intends to continue to vigorously assert same. The Company evaluates contingencies based on information currently available, including the advice of counsel. The Company establishes 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 contingences and may adjust the amount of the accrual if circumstances change. The outcome of a contingent 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. As of September 30, 2013, the Company had not established any accrual for the Transfer Tax Assessments, as the Company believes that a potential loss is not probable. If the Company is unsuccessful in its petition to set aside the Transfer Tax Assessments and is otherwise unable to compromise or settle the claim, the Company will incur an expense equal to the assessed tax plus interest within discontinued operations.

	34

Gramercy Property Trust Inc.

Notes To Condensed Consolidated Financial Statements

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

September 30, 2013

12. Income Taxes

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

Beginning with the third quarter of 2008, the Company’s board of directors elected to not pay a dividend to common stockholders. The board of directors also elected not to pay the Series A preferred stock dividend of $0.50781 per share beginning with the fourth quarter of 2008. The unpaid preferred stock dividend has been accrued for twenty quarters as of September 30, 2013. The Company has reevaluated its dividend policy and expects to resume timely payments of dividends on the Company’s Series A cumulative preferred stock, including payment of all accrued and unpaid dividends beginning with the fourth quarter of 2013. The Company also expects that in 2014, the Company will resume quarterly payment of dividends to common stockholders. However, in accordance with the provisions of the Company’s charter, the Company may not pay any dividends on its common stock until all accrued dividends and the dividend for the then current quarter on the Series A preferred stock are paid in full. The record and payment dates for the Company’s dividend payments will be made as and when the same are determined by the Company’s board of directors.

Net deferred tax assets of $1,793 and $0 are included in other assets on the accompanying Condensed Consolidated Balance Sheets at September 30, 2013 and December 31, 2012, respectively. Deferred tax assets as of December 31, 2012 relate to net operating loss carry forwards of TRSs, which are fully reserved. Deferred tax assets as of September 30, 2013 relate to the incentive fee from the management agreement with KBSAS earned by our asset management TRS and the fully reserved net operating loss carryforwards.

The Company’s policy for interest and penalties, if any, on material uncertain tax positions recognized in the Condensed Consolidated Financial Statements is to classify these as interest expense and operating expense, respectively. As of September 30, 2013, and December 31, 2012, the Company did not incur any material interest or penalties.

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Gramercy Property Trust Inc.
Notes To Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share and per share data)
September 30, 2013

13. Segment Reporting

As of September 30, 2013, the Company has determined that it has two reportable operating segments: Asset Management and Investments/Corporate. On March 15, 2013, the Company disposed of its third reportable segment, Gramercy Finance, as more fully discussed in Note 1. 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. In 2012, the Company changed the composition of its business segments to separate Asset Management from Investments.

The Investments/Corporate segment includes all of the Company’s activities related to net lease investments in markets across the United States. The Investments/Corporate segment generates revenues from rental revenues from properties owned by the Company.

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

The Finance segment was classified as held for sale at December 31, 2012 in connection with the disposal in the first quarter of 2013.

The Company’s reportable operating segments are summarized as follows:

			Asset		Investments /		Total
	Finance		Management		Corporate		Company
Three Months Ended September 30, 2013
Total revenues	$	-	$	8,343	$	5,078	$	13,421
Equity in net loss from unconsolidated joint ventures		-		-		983		983
Total operating and interest expense ⁽¹⁾		-		(6,456)		(6,943)		(13,399)
Net income (loss) from continuing operations ⁽²⁾	$	-	$	1,887	$	(882)	$	1,005

				Asset		Investments /		Total
		Finance		Management		Corporate		Company
Three Months Ended September 30, 2012
Total revenues	$	-	$	8,833	$	324	$	9,157
Equity in net loss from unconsolidated joint ventures		-		-		31		31
Total operating and interest expense ⁽¹⁾		-		(6,859)		(7,074)		(13,933)
Net income (loss) from continuing operations ⁽²⁾	$	-	$	1,974	$	(6,719)	$	(4,745)

			Asset		Investments /		Total
	Finance		Management		Corporate		Company
Nine Months Ended September 30, 2013
Total revenues	$	-	$	30,275	$	8,717	$	38,992
Equity in net loss from unconsolidated joint ventures		-		-		(2,808)		(2,808)
Total operating and interest expense ⁽¹⁾		-		(23,934)		(18,874)		(42,808)
Net income (loss) from continuing operations ⁽²⁾	$	-	$	6,341	$	(12,965)	$	(6,624)

			Asset		Investments /		Total
	Finance		Management		Corporate		Company
Nine Months Ended September 30, 2012
Total revenues	$	-	$	26,762	$	390	$	27,152
Equity in net loss from unconsolidated joint ventures		-		-		88		88
Total operating and interest expense ⁽¹⁾		-		(24,640)		(19,043)		(43,683)
Net income (loss) from continuing operations ⁽²⁾	$	-	$	2,122	$	(18,565)	$	(16,443)

			Asset		Investments /		Total
	Finance		Management		Corporate		Company
Total Assets:
September 30, 2013	$	-	$	16,625	$	311,466		328,091
December 31, 2012	$	1,937,554	$	-	$	231,282	$	2,168,836

	⁽¹⁾	Total operating and interest expense includes operating costs on commercial property assets for the Investments segment and costs to perform required functions under the management agreement for the Asset Management segment. Depreciation and amortization of $1,886 and $44 and provision for taxes of $744 and $(39) for the three months ended September 30, 2013 and 2012, respectively, are included in the amounts presented above. Depreciation and amortization of $3,142 and $130 and provision for taxes of $5,590 and $3,379 for the nine months ended September 30, 2013 and 2012, respectively, are included in the amounts presented above.
	⁽²⁾	Net income (loss) from continuing operations represents loss before discontinued operations.

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Gramercy Property Trust Inc.
Notes To Condensed Consolidated Financial Statements
(Unaudited, amounts in thousands, except share and per share data)
September 30, 2013

14. Subsequent Events

In October 2013, the Company entered into a common stock purchase agreement and related joinder agreements, or the Purchase Agreement, for the issuance of 11,535,200 unregistered shares of common stock at a purchase price of $4.11 per share, raising gross proceeds of $47,410. Pursuant to the Purchase Agreement, each purchaser has agreed that it will not, without the prior written consent of the Company, offer, sell, contract to sell, pledge or otherwise dispose any or all of the common stock purchased pursuant to the Purchase Agreement until March 25, 2014, or the Lock-Up Period. During the Lock-Up Period, if the Company issues common stock or securities convertible into common stock (except for certain permitted issuances), then the purchasers will have the ability to: (1) purchase their pro rata portion of all or any part of the new issuance and (2) elect the benefit of any different terms provided to the new investors.

Pursuant to the Purchase Agreement, the Company entered into contingent value rights agreements, or the CVR Agreements, with the Purchasers at the closing of the sale of common stock. Pursuant to each CVR Agreement, the Company issued to each purchaser the number of contingent value rights, or CVRs, equal to the number of common stock purchased. On March 25, 2014, or the CVR Test Date, the Company will calculate the volume-weighted average price, or the VWAP, for the common stock for the 10 trading days period ending on, and including, March 25, 2014, or the CVR Period VWAP. On April 1, 2014, the Company will pay to the holder of the contingent value rights, in immediately available funds, an amount in cash, equal to (a) the number of contingent value rights held by the holder on the CVR Test Date multiplied by (b) the amount, not to exceed $0.46 equal to the difference between the per share purchase price of $4.11 and the CVR Period VWAP.

In October 2013, the Company announced its intention to resume timely payments of dividends on its Series A cumulative redeemable preferred stock, beginning with the dividend due for the fourth quarter of 2013 and to satisfy and pay all accrued but unpaid preferred stock dividends for prior periods, which as of September 30, 2013, was $35,809. The Company also announced its intention to initiate payment of common stock dividends during 2014. The record and payment dates for all Company dividend payments will be made as and when the same are determined by the Company's board of directors.

On October 1, 2013, the Company closed on the acquisition of a 220,000 square foot, industrial property located in Yuma, Arizona in an all cash transaction for a purchase price of approximately $17,850. The property is 100% leased to one tenant through September 2033. The Company is currently analyzing the fair value of the leases and real estate assets and accordingly, the purchase price allocation is preliminary and subject to change.

On October 22, 2013, the Company closed on the acquisition of a 120,000 square foot, industrial property located in Austin, Texas in an all cash transaction for a purchase price of approximately $9,490. The property is 100% leased to one tenant through October 28, 2028. The Company is currently analyzing the fair value of the leases and real estate assets and accordingly, the purchase price allocation is preliminary and subject to change.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollar amounts in thousands, except for Overview section, share and per share data)

Overview

Gramercy Property Trust Inc. is a fully-integrated, self-managed commercial real estate investment company focused on acquiring and managing income-producing industrial and office properties net leased to high quality tenants in major markets throughout the United States. We also operate an asset management business that manages for third-parties, including our Bank of America joint venture, commercial real estate assets throughout the United States primarily leased to financial institutions and affiliated users.

We were founded in 2004 as a specialty finance REIT focused on originating and acquiring loans and securities related to commercial and multifamily properties. In July 2012, following a strategic review, our board of directors announced a repositioning of our company as an equity REIT focused on acquiring and managing income producing net leased real estate. To reflect this transformation, in April 2013 we changed our name from Gramercy Capital Corp. to Gramercy Property Trust Inc. and began trading on the New York Stock Exchange under the new symbol GPT.

We seek to acquire high quality net leased properties and construct a diversified portfolio that generates stable, predictable cash flows and protects investor capital over a long investment horizon. We approach the net lease market as a value investor, looking to identify and acquire net leased properties that we believe offer the most attractive risk adjusted returns throughout market cycles. We focus primarily on industrial and office properties in target markets with strong demographic and economic growth potential. Our goal is to grow our existing portfolio through the selective acquisition and become the pre-eminent owner of net leased commercial industrial and office properties.

As of September 30, 2013, we own, either directly or in joint ventures, a portfolio of 106 income producing net leased industrial and office properties with 96% occupancy. Tenants include Bank of America, Kar Auction Services, YRC Worldwide, Five-Below, Nestle Waters and others. As of that date, our asset management business, which operates under the name Gramercy Asset Management, manages for third-parties approximately $1.5 billion of commercial properties.

On March 15, 2013, we disposed of our Gramercy Finance segment and exited the commercial real estate finance business. The disposal was completed pursuant a purchase and sale agreement to transfer the collateral management and sub-special servicing agreements for our three Collateralized Debt Obligations, CDO 2005-1, CDO 2006-1 and CDO 2007-1, or the CDOs, to CWCapital Investments LLC or CWCapital for approximately $6.3 million, in cash after expenses. We retained our non-investment grade subordinate bonds, preferred shares and ordinary shares, or the Retained CDO Bonds, which may provide us with the potential to recoup additional proceeds over the remaining life of the CDOs based upon resolution of underlying assets within the CDOs. However, there is no guarantee that we will realize any proceeds from the Retained CDO Bonds, or what the timing of these proceeds may be. The carrying value of the Retained CDO Bonds as of September 30, 2013 is approximately $8.0 million. In February 2013, we also sold a portfolio of repurchased notes previously issued by two of our three CDOs, generating cash proceeds of approximately $34.4 million. In addition, we expect to receive additional cash proceeds for past CDO servicing advances of approximately $10.0 million, including accrued interest at the prime rate of 3.25%, when specific assets within the CDOs are liquidated. For the three and nine months ended September 30, 2013, we received reimbursements of $4.7 million and $4.8 million, respectively, We believe that the sale of the collateral management and sub-special servicing agreements and sale of repurchased notes of our CDOs achieved a number of important objectives, including (i) maximizing the value of the servicing business through the sale to a large servicing operation; (ii) simplifying our going-forward business and significantly reducing our ongoing management, general and administrative expenses through elimination of CDO related personnel costs and servicing advance requirements; (iii) generating in excess of $50.0 million in liquidity previously invested in the CDO business; and (iv) providing for potential future proceeds through Retained CDO Bonds. On March 15, 2013, subsequent to the transfer of the collateral management and sub-special serving agreements, the assets and liabilities of Gramercy Finance were deconsolidated from our Condensed Consolidated Financial Statements.

On September 4, 2013, we entered into a Credit and Guaranty Agreement, or the Credit Facility, with Deutsche Bank Securities, Inc., as lead arranger and bookrunner, and Deutsche Bank AG New York Branch, as administrative agent, for a $100.0 million senior secured revolving credit facility. The aggregate amount of the Credit Facility may be increased to a total of up to $150.0 million, subject to the approval of the administrative agent and the identification of lenders willing to make available additional amounts. The maturity date of the revolving credit facility is September 2015, with one 12-month extension option subject to certain requirements. The Credit Facility is guaranteed by Gramercy Property Trust Inc. and certain subsidiaries and is secured by first priority mortgages on designated properties, or the Borrowing Base. Outstanding borrowings under the Credit Facility are limited to the lesser of (i) the sum of the $100.0 million revolving commitment and the maximum $50.0 million commitment increase available or (ii) 60% of the value of the Borrowing Base. Interest on advances made on the Credit Facility, will be incurred at a floating rate based upon, at our option, either (i) LIBOR plus the applicable LIBOR margin, or (ii) the applicable base rate which is the greater of the Prime Rate, 0.50% above the Federal Funds Rate, or 30-day LIBOR plus 1.00%. The applicable LIBOR margin will range from 1.90% to 2.75%, depending on the ratio of our outstanding consolidated indebtedness to the value of our consolidated gross assets. The Credit Facility will have an initial borrowing rate of LIBOR plus 1.90%. The Credit Facility includes a series of financial and other covenants that we must comply with in order to borrow under the facility. We are in compliance with the covenants under the Credit Facility at September 30, 2013. As of September 30, 2013, there were no borrowings outstanding under the Credit Facility and 13 properties were in the borrowing base.

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In October 2013, we issued 11,535,200 unregistered shares of common stock at a purchase price of $4.11 per share, raising gross proceeds of $47.4 million in a private placement pursuant to a common stock purchase agreement and related joinder agreements, or the Purchase Agreement. Each purchaser has agreed that it will not sell the common stock purchased until March 25, 2014, or the Lock-Up Date. Prior to the Lock-Up Date, if we issue common stock or securities convertible into common stock (except for certain permitted issuances), then the purchasers will have the ability to: (1) purchase their pro rata portion of all or any part of our new issuance, and (2) elect the benefit of any different terms provided to the new investors. We also entered into contingent value rights agreements, or the CVR Agreements, with the purchasers at the closing of the sale of common stock. We issued one Contingent Value Right, or CVR, to each purchaser per common stock purchased. The CVR entitles the purchasers to receive a one-time cash payment on April 1, 2014, not to exceed $0.46 per share, equal to the amount per share that our volume weighted average share price for the ten trading day period ending on the Lock-Up Date, is less than the per share purchase price of $4.11 per share.

In October 2013, we also announced our intention to resume timely payments of dividends on our Series A cumulative redeemable preferred stock, beginning with the dividend due for the fourth quarter of 2013. We intend to satisfy and pay all accrued but unpaid preferred stock dividends for prior periods, which as of September 30, 2013, was $35.8 million. In addition, we also intend to initiate payment of common stock dividends during 2014. The record and payment dates for all our dividend payments will be made as and when the same are determined by our board of directors.

During the three months ended September 30, 2013, we acquired four properties aggregating approximately 258,000 square feet for a total purchase price of approximately $17.7 million. During the nine months ended September 30, 2013, we acquired 18 properties aggregating approximately 1,903,800 square feet for a total purchase price of approximately $175.9 million.

We have elected to be taxed as a real estate investment trust, or 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 stockholders. We have 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. Our Asset Management business is conducted in a TRS and substantially all of the provision for taxes is related to this business.

We conduct substantially all of our operations through our operating partnership, GPT Property Trust LP, or our Operating Partnership. We are the sole general partner of our Operating Partnership. Our Operating Partnership conducts our commercial real estate investment business through various wholly-owned entities and our realty management business through a wholly-owned TRS.

Unless the context requires otherwise, all references to “Gramercy,” “our Company,” “we,” “our” and “us” mean Gramercy Property Trust Inc., a Maryland corporation, and one or more of its subsidiaries, including our Operating Partnership.

Our principal business strategy is to acquire real estate assets that generate stable, recurring cash flows with minimal outgoing capital expenditures. We also general cash flows from management fees related to the management of commercial real estate for third-parties. For the near-term, these cash flows are used to fund our continuing operations and we intend to retain any excess cash flow to grow our investment portfolio.

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Property Investment

Property acquisitions during the nine months ended September 30, 2013 are summarized in the table below:

		Metropolitan
		Statistical	Acquisition	Number of	Square			Purchase Price	Lease
Property Type	Location	Area	Date	Buildings	Feet	Acres		(in thousands)	Expiration

Q1 2013 acquisitions
Warehouse/Industrial	Olive Branch, Mississippi	Memphis, Tennessee	3/11/2013	1	605,000	43	$	24,650	December 2022
Warehouse/Industrial	Garland, Texas	Dallas/Fort Worth	3/19/2013	1	342,000	20		10,700	October 2032
Cross-Dock Truck Terminal	East Brunswick, New Jersey	New York/New Jersey	3/28/2013	1	34,000	16		11,650	January 2019
Total Q1 2013 acquisitions				3	981,000	79		47,000

Q2 2013 acquisitions

Cross-Dock Truck Terminal	Atlanta, Georgia	Atlanta, Georgia	5/6/2013	1	130,000	38		7,850	May 2020
Warehouse/Industrial	Bellmawr, New Jersey	Philadelphia, Pennsylvania	5/30/2013	1	62,000	4		4,175	October 2022
Build-to-Suit ⁽¹⁾	Hialeah Gardens, Florida	Miami, Florida	5/30/2013	-	-	9		5,000	N/A
Banking Center	Emmaus, Pennsylvania	Allentown, Pennsylvania	6/6/2013	1	5,000	-		1,610	February 2019
Banking Center	Calabash, North Carolina	Myrtle Beach, South Carolina	6/6/2013	1	2,000	-		610	December 2018
Cross-Dock	Deer Park,
Truck Terminal	New York	New York/New Jersey	6/18/2013	1	18,000	5		3,900	December 2019
Cross-Dock	Elkridge,	Baltimore/
Truck Terminal	Maryland	Washington, D.C.	6/19/2013	1	34,000	11		5,900	May 2019
Cross-Dock	Houston,	Houston,
Truck Terminal	Texas	Texas	6/26/2013	3	102,000	33		6,914	May 2019
Cross-Dock	Orlando,	Orlando,
Truck Terminal	Florida	Florida	6/26/2013	1	46,000	15		5,036	January 2019
Specialty Asset Type ⁽²⁾	Hutchins, Texas	Dallas/Fort Worth	6/27/2013	3	196,000	175		58,500	July 2029
Warehouse/Industrial	Swedesboro, New Jersey	Philadelphia, Pennsylvania	6/28/2013	1	70,000	11		11,725	May 2028
Total Q2 2013 acquisitions				14	665,000	301		111,220

Q3 2013 acquisitions
Banking Center ⁽³⁾	Morristown, New Jersey	New York/New Jersey	8/1/2013	1	42,000	1	$	4,900	October 2013 September 2024
Warehouse/Industrial	Atlanta, Georgia	Atlanta, Georgia	8/22/2013	1	133,000	6		4,000	April 2023
Warehouse/Industrial	Manassas Park, Virginia	Baltimore/ Washington, DC	9/5/2013	2	83,000	5		8,794	December 2024
Total Q3 2013 acquisitions				4	258,000	12		17,694

Total 2013 acquisitions				21	1,904,000	392		175,914

	⁽¹⁾	The build-to-suit property located in Hialeah Gardens, Florida is a commitment to construct a 118,000 square foot cold storage facility which will be 100% leased for an initial term of 25 years when completed in the second quarter of 2014. We acquired the land for the property with a $5.0 million zero-coupon mortgage note payable to the seller. Total costs are expected to be approximately $25.0 million, of which the unfunded amounts were estimated to be $20.7 million at September 30, 2013.
	⁽²⁾	The Specialty Asset located in Hutchins, Texas is an auto auction facility encumbered with a mortgage of $26.3 million. The mortgage had a fair value at acquisition of $29.5 million and we capitalized loan assumption costs of $263 thousand.
	⁽³⁾	The original lease term for one tenant of the property located in Morristown, New Jersey expired in October 2013, however an amendment to the lease was signed and effective October 1, 2013, which extended the lease term to October 2018.

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Subsequent to September 30, 2013, we acquired a 220,000 square foot, industrial property for a total purchase price of approximately $17.9 million and a 120,000 square foot, industrial property for a total purchase price of approximately $9.5 million. The properties were acquired from unrelated third parties using existing cash on hand, summarized in the table below:

Property Type	Location	Acquisition Date	Number of Buildings		Square Feet		Purchase Price (in thousands)
Warehouse/Industrial	Yuma, Arizona	10/1/2013		1		220,000	$	17,850
Warehouse/Industrial	Austin, Texas	10/22/2013		1		120,000		9,490
Total				2		340,000	$	27,340

Asset and Property Management

Our asset and property management business, which operates under the name Gramercy Asset Management, currently manages for third-parties, approximately $1.5 billion of commercial properties leased primarily to regulated financial institutions and affiliated users throughout the United States.

We provide asset and property management business services to KBS Acquisition Sub, LLC, or KBSAS, with respect to a portfolio of office buildings and bank branches. Our Asset Management Services Agreement, or the Management Agreement, provides a base management fee of $9.0 million per year, payable monthly, plus the reimbursement of all property related expenses paid, and an incentive fee, or the Threshold Value Profits Participation, in an amount ranging from $3.5 million to $12.0 million and payable 60 days after the earlier to occur of June 30, 2014 (or March 31, 2015 upon satisfaction of certain extension conditions and payment of a $750 thousand extension fee) and the date on which KBSAS, directly or indirectly transfers at least 90% of the managed portfolio. In the second quarter of 2013, after considering the termination provisions of the agreement and the sales of real estate assets made to date, we recognized incentive fees of $5.7 million related to our Management Agreement with KBS. The Management Agreement may be terminated by KBSAS without cause but with an effective termination date of March 31 or September 30 of any year after September 30, 2013, or after April 1, 2013 for cause. In the event of a termination of the Management Agreement by KBSAS after April 1, 2013 but prior to December 31, 2015, we will be entitled to receive a declining balance termination fee, ranging from $5.0 million to $2.0 million.

We also provide asset and management business services for three other clients, including for our Bank of America Portfolio Joint Venture.

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Results of Operations

Comparison of the three months ended September 30, 2013 to the three months ended September 30, 2012

Revenues

	2013		2012		Change
Management fees	$	8,343	$	8,833	$	(490)
Rental revenue		4,024		-		4,024
Investment income		464		299		165
Operating expense reimbursements		460		-		460
Other income		130		25		105
Total revenue	$	13,421	$	9,157	$	4,264
Equity in net income (loss) of joint ventures	$	983	$	31	$	952

Management fees for the three months ended September 30, 2013 are $8,343 and $8,833 for the three months ended September 30, 2012. Management fees are comprised primarily of asset management, property management, incentive and administration fees earned pursuant to the Management Agreement with KBS and the Bank of America Portfolio Joint Venture. For the three months ended September 30, 2013, we earned $5,509 from our contract with KBS, $1,736 from our contract with the Bank of America Portfolio Joint Venture, and $1,098 from other management contracts. For the three months ended September 30, 2012, there was $8,833 earned from our contract with KBS. The decrease in the fees earned from the KBS contract relate to a $750 decrease in the base asset management fees, a $272 reduction in engineering fees due to expiration of the agreements and a $3,074 reduction in property management and administrative fees primarily related to property dispositions. The decrease is partially offset by a $772 increase in incentive fees recognized in the third quarter of 2013.

Rental revenue was $4,024 and $0 for the three months ended September 30, 2013 and 2012, respectively. The increase of $4,024 is due to the acquisition of 20 properties subsequent to September 30, 2012.

Investment income for the three months ended September 30, 2013 and 2012 was $464 and $299, respectively. The investment income consisted of $412 of income accretion on the Retained CDO Bonds and $52 of income from a residual finance asset during the three months ended September 30, 2013. The investment income for the three months ended September 30, 2012 consisted of $299 of income from a residual finance asset.

Operating expense reimbursements were $460 for the three months ended September 30, 2013 and are for reimbursement of property operating expenses for properties that we fully or partially manage the expenditures. Operating expense reimbursements were $0 for the three months ended September 30, 2012.

Other income of $130 for the three months ended September 30, 2013 is primarily comprised of $107 of interest earned on outstanding servicing advances and the remaining amount is primarily interest earned on cash balances. Other income of $23 for the three months ended September 30, 2012 is primarily interest earned on cash balances.

The equity in net income of joint ventures was income of $983 for the three months ended September 30, 2013 and represents our proportionate share of the income generated by two joint venture interests, including our Joint Venture which contains the Bank of America Portfolio acquired in December 2012. The equity in net income of joint ventures of $31 for the three months ended September 30, 2012 represents our proportionate share of the income generated by one joint venture interest owned. Our proportionate share of the income generated by our joint venture interests includes $2,159 and $67 of real estate-related depreciation and amortization, which when added back, results in a net contribution to Funds from Operations, or FFO, of $3,142 for the three months ended September 30, 2013, and $98 for the three months ended September 30, 2012.

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Expenses

	2013		2012		Change
Property management expenses	$	4,842	$	5,666	$	(824)
Property operating expenses		479		-		479
Other-than-temporary impairment		-		-		-
Depreciation and amortization		1,886		44		1,842
Interest expense		538		-		538
Management, general and administrative		4,672		8,262		(3,590)
Acquisition expenses		238		-		238
Provision for taxes		744		(39)		783
Total expenses	$	13,399	$	13,933	$	(534)

Property management expenses decreased by $824 to $4,842 for the three months ended September 30, 2013 from $5,666 for the three months ended September 30, 2012. The decrease is primarily related to $494 reduction in salaries and benefits for engineers due to the termination of the engineering agreement and reallocations of staff and reduced professional fees of $407. These reductions are partially offset by increased rent and occupancy expense of $102.

Property operating expenses increased by $479 from $0 recorded for the three months ended September 30, 2012 to $479 recorded for the three months ended September 30, 2013. The increase is attributable to the acquisition of 20 properties subsequent to September 30, 2012.

During the three months ended September 30, 2013 and the three months ended September 30, 2012, we did not record any other-than-temporary impairment related to our Retained CDO Bonds.

We recorded depreciation and amortization expenses of $1,886 for the three months ended September 30, 2013, compared to $44 for the three months ended September 30, 2012. The increase of $1,842 is primarily due to the acquisition of 20 properties subsequent to September 30, 2012.

We recorded interest expenses of $538 for the three months ended September 30, 2013, compared to $0 for the three months ended September 30, 2012. The increase of $538 is due to the financing we secured on our Indianapolis Industrial Portfolio and the loan assumed on the acquisition of the specialty asset located in Hutchins, Texas.

Management, general and administrative expenses were $4,672 for the three months ended September 30, 2013, compared to $8,262 for the same period in 2012. The decrease of $3,590 is primarily related to reduced salary and employee benefit costs of $2,678, which include payments to former executives pursuant to the expiration of employment contracts and the payment of signing bonuses for a new management team effective July 1, 2012, audit and tax fees of $173, legal fees of $390, rent allocation of $102, and the write-off of $297 related to our strategic review process in 2012.

Real estate acquisition costs were $238 for the three months ended September 30, 2013 and are primarily comprised of costs incurred to complete the acquisition of four properties during the three months ended September 30, 2013, which were accounted for as business combinations.

The provision for taxes was $744 for the three months ended September 30, 2013, versus negative $39 for the three months ended September 30, 2012. The increase of $783 is primarily related to taxes on our asset management business which is conducted in a TRS and is primarily attributable to additional incentive fees recognized.

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Comparison of the nine months ended September 30, 2013 to the nine months ended September 30, 2012

Revenues

	2013		2012		Change
Management fees	$	30,275	$	26,762	$	3,513
Rental revenue		6,484		-		6,484
Investment income		1,233		299		934
Operating expense reimbursements		764		-		764
Other income		236		91		145
Total revenue	$	38,992	$	27,152	$	11,840
Equity in net income (loss) of joint ventures	$	(2,808)	$	88	$	(2,896)

Management fees for the nine months ended September 30, 2013 are $30,275 and $26,762 for the nine months ended September 30, 2012. Management fees are comprised primarily of asset management, property management, incentive and administration fees earned pursuant to the Management Agreement with KBS and the Bank of America Portfolio Joint Venture. For the nine months ended September 30, 2013, we earned $22,137 from our contract with KBS, $6,051 from our contract with the Bank of America Portfolio Joint Venture, and $2,087 from other management contracts. For the nine months ended September 30, 2012, there was $26,762 earned from our contract with KBS. The increase in management fees is partially offset by an increase of $6,056 in incentive fees, a substantial portion of which we recognized in the second quarter of 2013 after consideration of the impact of the termination provisions of the agreement and the sales of real estate made to date. The increase in management fees is partially offset by a decrease in the base management fees received from the KBS contract related to a $1,750 decrease in the base asset management fee, $1,203 reduction in engineering fees due to expiration of the agreements and $7,728 reduction in property management and administrative fees primarily due to property dispositions.

Rental revenue was $6,484 and $0 for the nine months ended September 30, 2013 and 2012, respectively. The increase of $6,484 is due to the acquisition of 20 properties subsequent to September 30, 2012.

Investment income for the nine months ended September 30, 2013 was $1,233. The investment income consisted of $1,064 of income accretion on the Retained CDO Bonds and $169 of income from a residual finance asset. The investment income for the nine months ended September 30, 2012 consisted of $299 of income from a residual finance asset.

Operating expense reimbursements were $764 for the nine months ended September 30, 2013 and are for reimbursement of property operating expenses for properties that we fully or partially manage the expenditures. Operating expense reimbursements were $0 for the nine months ended September 30, 2012.

Other income of $236 for the nine months ended September 30, 2013 is primarily comprised of $185 of interest earned on outstanding servicing advances and remaining amount is primarily interest earned on cash balances. Other income of $91 for the nine months ended September 30, 2012 is primarily comprised of interest earned on cash balances.

The equity in net income (loss) of joint ventures was a loss of $2,808 for the nine months ended September 30, 2013 and represents our proportionate share of the loss generated by two joint venture interests, including our Joint Venture which contains the Bank of America Portfolio acquired in December 2012. The equity in net income of joint ventures of $88 for the nine months ended September 30, 2012 represents our proportionate share of the income generated by one of our joint venture interests. Our proportionate share of the income (loss) generated by our joint venture interests includes $6,806 and $201 of real estate-related depreciation and amortization, which when added back, results in a contribution to Funds from Operations, or FFO, of $3,998 and $289 for the nine months ended September 30, 2013 and 2012. The Bank of America Portfolio net loss for the nine months ended September 30, 2013 includes our pro-rata share of net loss of $4,577, including a loss on the sale of $2,267, from the defeased mortgage acquired as part of the joint venture’s acquisition. The pool of government securities which served as collateral for the mortgage, generated sufficient cash flows to cover the debt service requirements, but did not generate income to offset the corresponding interest expense.

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Expenses

	2013		2012		Change
Property management expenses	$	16,015	$	17,466	$	(1,451)
Property operating expenses		903		-		903
Other-than-temporary impairment		1,682		-		1,682
Depreciation and amortization		3,142		130		3,012
Interest expense		623		-		623
Management, general and administrative		13,366		22,708		(9,342)
Acquisition expenses		1,487		-		1,487
Provision for taxes		5,590		3,379		2,211
Total expenses	$	42,808	$	43,683	$	(875)

Property management expenses decreased by $1,451 to $16,015 for the nine months ended September 30, 2013 from $17,466 for the nine months ended September 30, 2012. The decrease is primarily related to $1,785 reduction in salaries and benefits for engineers due to the termination of the engineering agreement and reallocations of staff. The decrease is partially offset by increased rent and occupancy expense of $309.

Property operating expenses increased by $903 from $0 recorded for the nine months ended September 30, 2012 to $903 recorded for the nine months ended September 30, 2013. The increase is attributable to the acquisition of 20 properties subsequent to September 30, 2012.

During the nine months ended September 30, 2013, we recorded an other-than-temporary impairment charge of $1,682 due to adverse changes in expected cash flows related to the retained CDO bonds. During the nine months ended September 30, 2012, we did not record any other-than-temporary impairment charges.

We recorded depreciation and amortization expenses of $3,142 for the nine months ended September 30, 2013, compared to $130 for the nine months ended September 30, 2012. The increase of $3,012 is primarily due to the acquisition of 20 properties subsequent to September 30, 2012.

We recorded interest expenses of $623 for the nine months ended September 30, 2013, compared to $0 for the nine months ended September 30, 2012. The increase of $623 is primarily due to the financing we secured on our Indianapolis Industrial Portfolio and the loan assumed on the acquisition of the specialty asset located in Hutchins.

Management, general and administrative expenses were $13,366 for the nine months ended September 30, 2013, compared to $22,708 for the same period in 2012. The decrease of $9,342 is primarily related to reduced salary and employee benefit costs of $4,208, which include payments to former executives pursuant to the expiration of employment contracts and the payment of signing bonuses for a new management team effective July 1, 2012, audit and tax fees of $1,075, legal fees of $1,066, rent allocation of $405, and the write-off of $2,615 related to our strategic review process in 2012.

Real estate acquisition costs were $1,487 for the nine months ended September 30, 2013 and were comprised of costs incurred to complete the acquisition of 19 properties since the fourth quarter of 2012, which were accounted for as business combinations.

The provision for taxes was $5,590 for the nine months ended September 30, 2013, versus $3,379 for the nine months ended September 30, 2012. The increase of $2,211 is primarily related to taxes on our asset management business which is conducted in a TRS and is primarily attributable to additional incentive fees recognized.

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 (within the next 12 months) liquidity requirements, including working capital, distributions, debt service and additional investments, consist of: (i) cash flow from operations; (ii) proceeds from our private placement of common equity; (iii) borrowings under our credit facility; (iv) new financings, and; (v) proceeds from additional common or preferred equity offerings. We believe these sources of financing will be sufficient to meet our short-term liquidity requirements. Our future growth will depend, in large part, upon our ability to raise additional capital. In the event we are not able to successfully access new equity or debt capital, we will rely primarily on cash on hand and cash flows from operations to satisfy our liquidity requirements. If we are unable to raise new equity or debt capital or fully utilize available cash, it may have an adverse effect on our business, results of operations, and ability to make distributions to our stockholders.

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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. Beginning with the third quarter of 2008 our board of directors elected not to pay a dividend on our common stock. Additionally our board of directors elected not to pay the Series A preferred stock dividend of $0.50781 per share beginning with the fourth quarter of 2008. As of September 30, 2013 and December 31, 2012, we accrued $35,809 and $30,438, respectively, for the Series A preferred stock dividends. In October 2013, we announced our intention to resume timely payments of dividends on our Series A cumulative redeemable preferred stock, beginning with the dividend due for the fourth quarter of 2013. We intend to satisfy and pay all accrued but unpaid preferred stock dividends for prior periods. In addition, we also intend to initiate payment of common stock dividends during 2014. The record and payment dates for all our dividend payments will be made as and when the same are determined by our board of directors.

Our ability to meet our long-term (beyond the next 12 months) liquidity and capital resource requirements will be subject to obtaining additional debt financing and equity capital. Our inability expand our sources of financing may have an adverse effect on our business, results of operations and our ability to make distributions. Any indebtedness we incur will likely be subject to continuing or more restrictive covenants and we will likely be required to make continuing representations and warranties in connection with such debt.

Our debt financing terms may require us, among other restrictive covenants, to keep uninvested cash on hand, to maintain a certain minimum tangible net worth, to maintain a certain portion of our assets free from liens and to secure such borrowings with assets. These conditions could limit our ability to do further borrowings and may have a material adverse effect on our liquidity, the value of our common stock, and our ability to make distributions to our stockholders.

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.

To maintain our qualification as a REIT under the Internal Revenue Code, we must distribute annually at least 90% of our taxable income. This distribution requirement limits our ability to retain earnings and thereby replenish or increase capital for operations. In accordance with the provisions of our charter, we may not pay any dividends on our common stock until all accrued dividends and the dividend for the then current quarter on the Series A Preferred Stock are paid in full.

Cash Flows

Net cash provided by operating activities increased $3,652 to $16,623 for the nine months ended September 30, 2013 compared to $12,971 for the same period in 2012. Operating cash flow was generated primarily by management fees, servicing advance recoveries and net rental income from our real estate investments.

Net cash used for investing activities for the nine months ended September 30, 2013 was $76,259 compared to net cash provided by investing activities $212,519 during the same period in 2012. The decrease in investing cash flow was primarily attributable to the acquisition of 18 properties net of assumed mortgages. The change is also attributable to activities in our commercial real estate finance business which we disposed of in the first quarter of 2013 and classified as discontinued operations. The decrease in cash flows from our finance business is attributable to the decrease in proceeds from real estate sales and principal collections on investments, which is offset by proceeds from the sale of the collateral management and sub-special servicing agreements for our three CDOs and the sale of a joint venture to a director related entity.

Net cash used in financing activities for the nine months ended September 30, 2013 was $17,019 as compared to $213,998 during the same period in 2012. The change is primarily attributable to the decrease in restricted cash within the CDOs and proceeds from the sale of repurchased CDO bonds, and partially offset by an increase in repayments of liabilities issued by our CDOs. The decrease in cash flows in 2013 is also attributable to proceeds received from the origination of a mortgage note payable on our real estate assets.

Capitalization

Our authorized capital stock consists of 125,000,000 shares, $0.001 par value, of which we have authorized the issuance of up to 100,000,000 shares of common stock, $0.001 par value per share, and 25,000,000 shares of preferred stock, par value $0.001 per share. As of September 30, 2013, 57,676,005 shares of common stock, 2,000,000 shares of Class B-2 non-voting common stock and 3,525,822 shares of preferred stock were issued and outstanding.

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Preferred Stock

Beginning with the fourth quarter of 2008, our board of directors elected not to pay the quarterly Series A preferred stock dividends of $0.50781 per share. As of September 30, 2013 and December 31, 2012, we accrued Series A preferred stock dividends of $35,809 and $30,438, respectively. We may at our option redeem the Series A cumulative redeemable preferred stock at par for cash.

Market Capitalization

At September 30, 2013, our consolidated market capitalization is $384,237 based on a common stock price of $4.15 per share and the closing price of our common stock on the New York Stock Exchange on September 30, 2013. Market capitalization includes consolidated debt, if any, and common and preferred stock.

Contractual Obligations

We are obligated under certain tenant leases, to construct the underlying leased property or fund tenant expansions. As of September 30, 2013, we had four outstanding commitments: (1) the construction of a 118,000 square foot cold storage facility located in Hialeah Gardens, Florida, of which the unfunded amounts were estimated to be $20,669; (2) the contribution of $1,500 towards tenant improvements on a warehouse/industrial property in Garland, Texas, of which the unfunded amounts were estimated to be $854; (3) the expansion of a property located in Olive Branch, Mississippi whereby the tenant has a one-time option to expand the building by 250,000 square feet; and (4) the expansion of a property located in Logan Township, New Jersey whereby the tenant has a one-time option to expand the building by 25,000 square feet. The tenants have not noticed us for the building expansion options and therefore, no amounts are due and no unfunded amounts have been estimated.

Certain real estate assets are subject to mortgage liens. During the second quarter, we assumed a fully-amortizing, first mortgage note payable, encumbered by an auto auction facility located in the Dallas, Texas MSA, which we purchased in June 2013. The acquired property is 100% leased and the assumed mortgage note is co-terminus with the lease agreement. In addition, during the second quarter, we also obtained a $14,500 first mortgage note secured by two previously acquired real estate properties and acquired one property with a $4,990 zero-coupon mortgage note payable to the property seller.

On September 4, 2013, we entered into a Credit and Guaranty Agreement, or the Credit Facility, with Deutsche Bank Securities, Inc., as lead arranger and bookrunner, and Deutsche Bank AG New York Branch, as administrative agent, for a $100,000 senior secured revolving credit facility. The aggregate amount of the Credit Facility may be increased to a total of up to $150,000, subject to the approval of the administrative agent and the identification of lenders willing to make available additional amounts. The maturity date of the revolving credit facility is September 2015, with one 12-month extension option, subject, among other things, to there being an absence of an event of default under the Credit Facility and to the payment of an extension fee. We are guarantors of the Credit Facility and it is secured by first priority mortgages on designated properties that make up the Borrowing Base as defined under the agreement. Outstanding borrowings under the Credit Facility are limited to the lesser of (i) the sum of the $100,000 revolving commitment and the maximum $50,000 commitment increase available or (ii) 60% of the value of the Borrowing Base. Interest on advances made on the Credit Facility, will be incurred at a floating rate based upon, at our option, either (i) LIBOR plus the applicable LIBOR margin, or (ii) the applicable base rate which is the greater of the Prime Rate, 0.50% above the Federal Funds Rate, or 30-day LIBOR plus 1.00%. The applicable LIBOR margin will range from 1.90% to 2.75%, depending on the ratio of our outstanding consolidated indebtedness to the value of our consolidated gross assets. The Credit Facility will have an initial borrowing rate of LIBOR plus 1.90%. The Credit Facility includes a series of financial and other covenants that we must comply with in order to borrow under the revolving facility. As of September 30, 2013, there were no borrowings outstanding under the Credit Facility. As of September 30, 2013, we were in compliance with the covenants under the Credit Facility.

Combined aggregate principal maturities of our debt obligations as of September 30, 2013 are as follows:

	Credit Facility		Mortgage Notes Payable		Interest Payments		Total
2013 (October 1 - December 31)	$	-	$	302	$	570	$	872
2014		-		6,247		2,234		8,481
2015		-		1,335		2,155		3,490
2016		-		1,420		2,071		3,491
2017		-		1,509		1,981		3,490
Thereafter		-		34,702		10,033		44,735
Above / Below Market Interest		-		-		2,921		2,921
Total	$	-	$	45,515	$	21,965	$	67,480

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Leasing Agreements

Future minimum rental income excluding reimbursements for operating expenses as of September 30, 2013 are as follows:

	Operating Leases
October 1 to December 31, 2013	$	3,693
2014		16,846
2015		17,898
2016		18,060
2017		18,271
Thereafter		177,655
Total minimum lease rental income	$	252,423

Off-Balance-Sheet Arrangements

We have off-balance-sheet investments, including joint ventures. These investments all have varying ownership structures. Substantially all of our joint venture 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 arrangements. Our off-balance-sheet arrangements are discussed in Note 5 in the accompanying Condensed Consolidated Financial Statements.

Dividends

To maintain our qualification as a REIT, we must pay annual dividends to our stockholders of at least 90% of our REIT taxable income, determined before taking into consideration the dividends paid deduction and net capital gains. 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. In accordance with the provisions of our charter, we may not pay any dividends on our common stock until all accrued dividends and the dividend for the then current quarter on the Series A preferred stock are paid in full.

Beginning with the third quarter of 2008, our board of directors elected not to pay a dividend on our common stock. Our board of directors also elected not to pay the Series A preferred stock dividend of $0.50781 per share beginning with the fourth quarter of 2008. The unpaid preferred stock dividends have been accrued for twenty quarters as of September 30, 2013. In October 2013, we announced our intention to resume timely payments of dividends on our Series A cumulative redeemable preferred stock, beginning with the dividend due for the fourth quarter of 2013. We intend to satisfy and pay all accrued but unpaid preferred stock dividends for prior periods, which as of September 30, 2013, was $35,809. In addition, we also intend to initiate payment of common stock dividends during 2014. The record and payment dates for all our dividend payments will be made as and when the same are determined by our board of directors.

Transactions with Director Related Entities

The Chief Executive Officer of SL Green Realty Corp. (NYSE: SLG), or SL Green, is one of our directors. In June 2013, we signed a lease agreement with 521 Fifth Fee Owner LLC, an affiliate of SL Green, for new corporate office space located at 521 Fifth Avenue, New York, New York. The lease commenced in September 2013, following the completion of certain improvements to the space. The lease is for approximately 6,580 square feet and carries a term of 10 years with rents of approximately $373 per annum for year one rising to $463 per annum in year ten. We commence rent payments on December 30, 2013.

From May 2005 through September 2013, we were party to a lease agreement with SLG Graybar Sublease LLC, an affiliate of SL Green, for our previous corporate offices at 420 Lexington Avenue, New York, New York. The lease was for approximately 7,300 square feet and carried an original term of 10 years with rents of approximately $249 per annum for year one rising to $315 per annum in year ten. In May and June 2009, we amended our lease with SLG Graybar Sublease LLC to increase the leased premises by approximately 2,260 square feet. The additional premises was leased on a co-terminus basis with the remainder of our leased premises and carried rents of approximately $103 per annum during the initial year and $123 per annum during the final lease year. On June 25, 2012, the lease was further amended to reduce the leased premises by approximately 600 square feet and to reduce rents by approximately $29 per annum during the initial year and $38 per annum during the final lease year. All other terms of the lease remained unchanged, except we obtained the right to cancel the lease with 90 days notice. For the three and nine months ended September 30, 2013, we paid $96 and $287 under this lease, respectively. For the three and nine months ended September 30, 2012, we paid $96 and $269 under this lease, respectively. In April 2013, we gave notice that that we were cancelling the lease for our corporate offices at 420 Lexington Avenue. The lease agreement with SLG Graybar Sublease LLC was terminated in September 2013.

In September 2012, we recapitalized a portfolio of office buildings, which were part of the Gramercy Finance segment and owned within our CDOs, and located in Southern California, or the Southern California Office Portfolio, with an affiliate of SL Green and several other unrelated parties, through the contribution of an existing preferred equity investment to a newly formed joint venture. In January 2013, we sold our 10.6% interest in a joint venture of the Southern California Office Portfolio to an affiliate of SL Green for proceeds of $8,275 and recorded a gain on disposition to a director related entity of $1,317.

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Funds from Operations

We present FFO because we consider it an important supplemental measure of our operating performance and believe that it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITS. We also use FFO as one of several criteria to determine performance-based incentive compensation for members of our senior management, which may be payable in cash or equity awards. The revised White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as net income (loss) (determined in accordance with GAAP), excluding impairment write-downs of investments in depreciable real estate and investments in in-substance real estate investments, gains or losses from debt restructurings and sales of depreciable operating properties, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs), less distributions to non-controlling interests and gains/losses from discontinued operations and after adjustments for unconsolidated partnerships and joint ventures. FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of our financial performance, or to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it 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 for the three and nine months ended September 30, 2013 and 2012 are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Net income (loss) available to common shareholders	$	(1,299)	$	(4,680)	$	385,404	$	(28,330)
Add:
Depreciation and amortization		1,904		1,192		3,625		4,246
FFO adjustments for joint ventures		2,159		67		6,806		201
Non-cash impairment of real estate investments		-		5,706		-		8,345
Less:
Non real estate depreciation and amortization		(64)		(948)		(615)		(3,464)
Gain on sale		-		-		-		(11,996)
Funds from operations	$	2,700	$	1,337	$	395,220	$	(30,998)
Funds from operations per share - basic	$	0.05	$	0.03	$	6.73	$	(0.60)
Funds from operations per share - diluted	$	0.05	$	0.03	$	6.73	$	(0.60)

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Cautionary Note Regarding Forward-Looking Information

This report contains “forward-looking statements” within the meaning of Section 27A of 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;

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;

the continuity of the management agreement for the KBS portfolio;

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

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

our ability to maintain our current relationships with financial institutions and to establish new relationships with additional financial institutions;

reduction in cash flows received from our investments, in particular our Retained CDO Bonds;

our ability to profitably dispose of non-core assets, in particular those contained within our Bank of America Portfolio Joint Venture;

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

changes to our management and board of directors;

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);

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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 federal income tax purposes and qualify for our exemption under the Investment Company Act, our operating partnership’s ability to satisfy the rules in order for it to qualify as a partnership for 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 for 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; and

other factors discussed under Item 1A, “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 and those factors that may be contained in any filing we make with the Securities and Exchange Commission, or the SEC, including Part II, Item 1A of our Quarterly Reports on Form 10-Q.

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

In February 2013, the FASB issued additional guidance on comprehensive income (loss) which requires the provision of information about the amounts reclassified out of accumulated other comprehensive income (loss) by component. This guidance also requires presentation on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) or in the notes, significant amounts reclassified out of accumulated other comprehensive income (loss) by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, a cross-reference must be provided to other disclosures required under U.S. GAAP that provide additional detail about those amounts. This update is effective for reporting periods beginning after December 15, 2012 with early adoption permitted. We adopted this guidance for the first quarter or 2013, and our adoption resulted in increased disclosures but did not have a material effect on our Condensed Consolidated Financial Statements.

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ITEM 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 decease 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 an undrawn floating rate secured line of credit and our Bank of America Joint Venture financed the acquisition of its portfolio with a $200,000 floating rate, interest-only first mortgage note. The following chart shows a hypothetical 100 basis point increase in interest rates along the entire interest rate curve:

	Projected Increase
Change in LIBOR	(Decrease) in Net Income
Base case
+100 bps	$	(253)
+200 bps	$	(506)
+300 bps	$	(758)

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.

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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 periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e). 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.

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PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

In December 2010, the Company sold the Company's 45% joint venture interest in the leased fee of the 2 Herald Square property in New York, New York, for approximately $25,600,000 plus assumed mortgage debt of approximately $86,100,000 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 $2,900,000 of real property transfer tax, plus interest, and, in the case of the NYS DOT notice, approximately $684,000 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 NTS 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, and the Company intends to timely filing a similar petition challenging the NYS DOF Transfer Tax Assessment.

ITEM 1A.

RISK FACTORS

None

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On October 4, 2013, the Company entered into a common stock purchase agreement and related joinder agreements, or the Purchase Agreement, for the issuance of 11,535,200 shares of common stock at a purchase price of $4.11 per share, raising net proceeds of $45,603, to various purchasers in a private placement, or the Private Placement. Pursuant to the Purchase Agreement, each purchaser has agreed that it will not, without the prior written consent of the Company, offer, sell, contract to sell, pledge or otherwise dispose any or all of the common stock purchased until March 25, 2014, or the Lock-Up Period. During the Lock-Up Period, if the Company issues common stock or securities convertible into common stock (except for certain permitted issuances), then the purchasers will have the ability to: (1) purchase their pro rata portion of all or any part of the new issuance, and (2) elect the benefit of any different terms provided to the new investors.

Pursuant to the Purchase Agreement, the Company entered into contingent value rights agreements, or the CVR Agreements, with the Purchasers at the closing of the sale of common stock in the Private Placement. Pursuant to each CVR Agreement, the Company issued to each purchaser the number of contingent value rights, or CVRs, equal to the number of common stock purchased. On March 25, 2014, or the CVR Test Date, the Company will calculate the volume-weighted average price, or the VWAP, for the common stock for the 10 trading days period ending on, and including, March 25, 2014, or the CVR Period VWAP. On April 1, 2014, the Company will pay to the holder of the contingent value rights, in immediately available funds, an amount in cash (if any), equal to (a) the number of contingent value rights held by the holder on the CVR Test Date multiplied by (b) the amount, not to exceed $0.46 equal to the difference between the per share purchase price of $4.11 and the CVR Period VWAP.

The shares of common stock sold in the Private Placement were offered and sold pursuant to an exemption from the registration requirements under Rule 506 of Regulation D promulgated under the Securities Act of 1933. The purchasers were accredited investors as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933. Morgan Stanley & Co. LLC acted as the placement agent in connection with the Private Placement. The Private Placement was consummated on or about October 7, 2013.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable

ITEM 5.

OTHER INFORMATION

None

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ITEM 6.

INDEX TO EXHIBITS

Exhibit No.		Description
3.1		Articles of Incorporation of the Company, incorporated by reference to the Company’s Registration Statement on Form S-11 (No. 333-114673), filed with the SEC on July 26, 2004.
3.2		Amended and Restated Bylaws of the Company, incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on May 9, 2013.
3.3		Articles Supplementary designating the 8.125% Series A Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, par value $0.001 per share, dated April 18, 2007, incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on April 18, 2007.
3.4		Articles Supplementary designating the Class B-1 non-voting common stock, par value $0.001 per share, and Class B-2 non-voting common stock, par value $0.001 per share, filed herewith.
3.5		Articles of Amendment to the Articles of Amendment and Restatement of Gramercy Property Trust Inc., incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on April 18, 2013.
4.1		Form of specimen stock certificate representing the common stock of the Company, par value $.001 per share, incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on April 18, 2007.
4.2		Form of stock certificate evidencing the 8.125% Series A Cumulative Redeemable Preferred Stock of the Company, liquidation preference $25.00 per share, par value $0.001 per share, incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on April 18, 2007.
10.1		Third Amendment to the Third Amended and Restated Agreement of Limited Partnership of GKK Capital LP, dated as of August 7, 2013, incorporated by reference to the Company’s Quarterly Report on Form 10-Q/A, filed with the SEC on August 8, 2013.
10.2		Amended and Restated Credit and Guaranty Agreement, dated as of September 24, 2013, by and among GPT Property Trust LP, as borrower, the Company and certain of its subsidiaries, as guarantors, the lenders party thereto from time to time, Deutsche Bank AG New York Branch as administrative agent, Deutsche Bank Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith as joint lead arrangers, Deutsche Bank Securities Inc. as sole bookrunner, and Bank of America, N.A. and RBC Capital Markets as co-syndication agents, incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on September 30, 2013.
10.3		Common Stock Purchase Agreement, dated as of October 4, 2013, among the Company, BHR Master Fund, Ltd. and BHR OC Master Fund, Ltd., incorporated by reference to the Company’s Current Report on Form 8-K/A, filed with the SEC on October 7, 2013.
10.4		Form of Joinder Agreement pursuant to the Common Stock Purchase Agreement, dated as of October 4, 2013, among the Company, BHR Master Fund, Ltd. and BHR OC Master Fund, Ltd. (attached thereto is information with respect to the number of common shares and aggregate purchase price for each additional purchaser), incorporated by reference to the Company’s Current Report on Form 8-K/A, filed with the SEC on October 7, 2013.
10.5		Form of Contingent Value Rights Agreement pursuant to the Common Stock Purchase Agreement, dated as of October 4, 2013, among the Company, BHR Master Fund, Ltd. and BHR OC Master Fund, Ltd. (attached thereto is information with respect to the number of contingent value rights for each purchaser), incorporated by reference to the Company’s Current Report on Form 8-K/A, filed with the SEC on October 7, 2013.
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, furnished herewith.
101.SCH		XBRL Taxonomy Extension Schema, furnished herewith.
101.CAL		XBRL Taxonomy Extension Calculation Linkbase, furnished herewith.
101.DEF		XBRL Taxonomy Extension Definition Linkbase, furnished herewith.
101.LAB		XBRL Taxonomy Extension Label Linkbase, furnished herewith.
101.PRE		XBRL Taxonomy Extension Presentation Linkbase, furnished herewith.

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SIGNATURES

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

	GRAMERCY PROPERTY TRUST INC.

Dated: November 8, 2013	By:	/s/ Jon W. Clark
	Name: Jon W. Clark
	Title: Chief Financial Officer (duly authorized officer and principal
	financial and accounting officer)

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Positive
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Uncertain
Constraining
Legalese
Litigous
Readability	H.S. sophomore Avg

Gramercy Property Trust Inactive 10-Q2013 Q3 Quarterly report

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