UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2018

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

For the transition period from . to .

Commission File No. 1-35933 (Gramercy Property Trust)

Commission File No. 33-219049 (GPT Operating Partnership LP)

Gramercy Property Trust

GPT Operating Partnership LP

(Exact name of registrant as specified in its charter)



Gramercy Property Trust	Maryland	56-2466617
GPT Operating Partnership LP	Delaware	56-2466618
	(State or other jurisdiction incorporation or organization)	(I.R.S. Employer of Identification No.)

90 Park Avenue, 32^nd Floor, New York, NY 10016 (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.

Gramercy Property Trust Yes x No ¨ GPT Operating Partnership LP Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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).

Gramercy Property Trust Yes x No ¨ GPT Operating Partnership LP Yes x No ¨

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

Gramercy Property Trust



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

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

GPT Operating Partnership LP



Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x
Smaller reporting company ¨	Emerging growth 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).

Gramercy Property Trust Yes ¨ No x GPT Operating Partnership LP Yes ¨ No x

The number of shares outstanding of Gramercy Property Trust’s common shares of beneficial interest, $0.01 par value, was 160,785,498 as of April 27, 2018.

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended March 31, 2018 of Gramercy Property Trust and GPT Operating Partnership LP. Unless stated otherwise or the context otherwise requires, references to "Gramercy Property Trust," the "Company" or "Gramercy" mean Gramercy Property Trust and its consolidated subsidiaries; and references to "GPT Operating Partnership LP," the "Operating Partnership" or "GPTOP" mean GPT Operating Partnership LP and its consolidated subsidiaries. The terms "we," "our" and "us" mean the Company and all the entities owned or controlled by the Company, including the Operating Partnership.

The Company is a Maryland real estate investment trust, or REIT, which operates as a self-administered and self-managed entity and is the sole general partner of the Operating Partnership. As the general partner of the Operating Partnership, the Company has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Operating Partnership.

As of March 31, 2018, the Company owned 96.75% of the outstanding general and limited partnership interest in the Operating Partnership. As of March 31, 2018, noncontrolling investors owned approximately 3.25% of the outstanding limited partnership interest in the Operating Partnership. We refer to these interests as the noncontrolling interests in the Operating Partnership.

The Company and the Operating Partnership are managed and operated as one entity. The financial results of the Operating Partnership are consolidated into the financial statements of the Company. The Company has no significant assets other than its investment in the Operating Partnership. Substantially all of the Company’s assets are held by, and its operations are conducted through, the Operating Partnership. Therefore, the assets and liabilities of the Company and the Operating Partnership are substantially the same.

Noncontrolling interests in the Operating Partnership, shareholders' equity of the Company and partners' capital of the Operating Partnership are the main areas of difference between the consolidated financial statements of the Company and those of the Operating Partnership.

We believe combining the quarterly reports on Form 10-Q of the Company and the Operating Partnership into this single report results in the following benefits:


•	Combined reports enhance investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;


•	Combined reports eliminate duplicative disclosure and provides a more streamlined and readable presentation since a substantial portion of the Company's disclosure applies to both the Company and the Operating Partnership; and


•	Combined reports create time and cost efficiencies through the preparation of one combined report instead of two separate reports.

To help investors understand the significant differences between the Company and the Operating Partnership, this report presents the following separate sections for each of the Company and the Operating Partnership:


•	Consolidated financial statements; and


•	The following notes to the consolidated financial statements:


◦	Note 9, Shareholders' Equity (Deficit) of the Company;


◦	Note 10, Partners' Capital of the Operating Partnership; and


◦	Note 11, Noncontrolling Interests.

This report also includes separate Part I, Item 4. Controls and Procedures sections and separate Exhibit 31 and 32 certifications for each of the Company and the Operating Partnership, respectively, in order to establish that the Chief Executive Officer and the Chief Financial Officer of the Company, in both their capacity as the principal executive officer and principal financial officer of the Company and the principal executive officer and principal financial officer of the general partner of the Operating Partnership, have made the requisite certifications and that the Company and the Operating Partnership are compliant with Rule 13a-15 and Rule 15d-15 of the Securities Exchange Act of 1934, as amended.

GRAMERCY PROPERTY TRUST

FORM 10-Q

TABLE OF CONTENTS



		Page
PART I.	FINANCIAL INFORMATION	1
ITEM 1.	FINANCIAL STATEMENTS	1
	Financial Statements of Gramercy Property Trust	1
	Consolidated Balance Sheets as of March 31, 2018 (unaudited) and December 31, 2017	1
	Consolidated Statements of Operations for the three months ended March 31, 2018 and 2017 (unaudited)	2
	Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2018 and 2017 (unaudited)	3
	Consolidated Statement of Shareholders’ Equity (Deficit) and Noncontrolling Interest for the three months ended March 31, 2018 (unaudited)	4
	Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017 (unaudited)	5
	Financial Statements of GPT Operating Partnership LP	6
	Consolidated Balance Sheets as of March 31, 2018 (unaudited) and December 31, 2017	6
	Consolidated Statements of Operations for the three months ended March 31, 2018 and 2017 (unaudited)	7
	Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2018 and 2017 (unaudited)	8
	Consolidated Statement of Partners’ Capital for the three months ended March 31, 2018 (unaudited)	9
	Consolidated Statements of Cash Flows for the three months ended March 31, 2018 and 2017 (unaudited)	10
	Notes to Consolidated Financial Statements (unaudited)	11
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	45
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	61
ITEM 4.	CONTROLS AND PROCEDURES	64
PART II.	OTHER INFORMATION	66
ITEM 1.	LEGAL PROCEEDINGS	66
ITEM 1A.	RISK FACTORS	66
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	66
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	66
ITEM 4.	MINE SAFETY DISCLOSURES	66
ITEM 5.	OTHER INFORMATION	66
ITEM 6.	INDEX TO EXHIBITS	67
SIGNATURES		68

Gramercy Property Trust

Consolidated Balance Sheets

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


PART I.	FINANCIAL INFORMATION


ITEM I.	FINANCIAL STATEMENTS



	March 31, 2018			December 31, 2017
Assets:
Real estate investments, at cost:
Land	$	1,009,568		$	1,023,908
Building and improvements	4,821,301			4,863,916
Less: accumulated depreciation	(368,815		)	(333,151		)
Total real estate investments, net	5,462,054			5,554,673
Cash and cash equivalents	41,964			30,231
Restricted cash	15,041			12,723
Investment in unconsolidated equity investments	99,113			70,214
Assets held for sale, net	402			402
Tenant and other receivables, net	92,525			88,750
Acquired lease assets, net of accumulated amortization of $241,939 and $220,473	563,213			598,559
Other assets	127,664			100,484
Total assets	$	6,401,976		$	6,456,036
Liabilities and Equity:
Liabilities:
Senior unsecured revolving credit facility	$	292,543		$	357,162
Mortgage notes payable, net	559,473			563,521
Senior unsecured notes, net	496,887			496,785
Senior unsecured term loans, net	1,448,241			1,448,152
Total long-term debt, net	2,797,144			2,865,620
Accounts payable and accrued expenses	60,151			59,619
Dividends payable	62,380			61,971
Below market lease liabilities, net of accumulated amortization of $31,201 and $28,978	159,544			166,491
Other liabilities	55,873			50,002
Total liabilities	$	3,135,092		$	3,203,703
Commitments and contingencies
Noncontrolling interest in the Operating Partnership	137,800			113,530
Equity:
Common shares, par value $0.01, 160,782,765 and 160,686,822 issued and outstanding at March 31, 2018 and December 31, 2017, respectively	1,608			1,607
Series A cumulative redeemable preferred shares, par value $0.01, liquidation preference $87,500, and 3,500,000 shares authorized, issued and outstanding at March 31, 2018 and December 31, 2017	84,394			84,394
Additional paid-in-capital	4,411,605			4,409,677
Accumulated other comprehensive income	35,667			12,776
Accumulated deficit	(1,404,416		)	(1,369,872		)
Total shareholders' equity	3,128,858			3,138,582
Noncontrolling interest in other entities	226			221
Total equity	$	3,129,084		$	3,138,803
Total liabilities and equity	$	6,401,976		$	6,456,036

The accompanying notes are an integral part of these financial statements.

Gramercy Property Trust

Consolidated Statements of Operations

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



	Three Months Ended March 31,
	2018			2017
Revenues
Rental revenue	$	122,245		$	103,282
Operating expense reimbursements	23,310			20,368
Third-party management fees	2,790			4,592
Other income	1,135			1,752
Total revenues	149,480			129,994
Operating Expenses
Depreciation and amortization	71,516			62,217
Property operating expenses	27,088			23,186
General and administrative expenses	9,686			8,756
Property management expenses	2,542			3,084
Total operating expenses	110,832			97,243
Operating income	38,648			32,751
Other Expenses:
Interest expense	(25,492		)	(23,056		)
Other-than-temporary impairment	—			(4,081		)
Portion of impairment recognized in other comprehensive loss	—			(809		)
Net impairment recognized in earnings	—			(4,890		)
Equity in net loss of unconsolidated equity investments	(926		)	(94		)
Loss on extinguishment of debt	—			(208		)
Impairment of real estate investments	—			(12,771		)
Income (loss) from continuing operations before provision for taxes	12,230			(8,268		)
Provision for taxes	(621		)	196
Income (loss) from continuing operations	11,609			(8,072		)
Loss from discontinued operations	—			(24		)
Income (loss) before net gain on disposals	11,609			(8,096		)
Net gain on disposals	16,255			17,377
Net income	27,864			9,281
Net income attributable to noncontrolling interest	(802		)	(154		)
Net income attributable to Gramercy Property Trust	27,062			9,127
Preferred share dividends	(1,559		)	(1,559		)
Net income available to common shareholders	$	25,503		$	7,568
Basic earnings per share:
Net income from continuing operations, after preferred dividends	$	0.16		$	0.05
Net income from discontinued operations	—			—
Net income available to common shareholders	$	0.16		$	0.05
Diluted earnings per share:
Net income from continuing operations, after preferred dividends	$	0.16		$	0.05
Net income from discontinued operations	—			—
Net income available to common shareholders	$	0.16		$	0.05
Basic weighted average common shares outstanding	160,408,136			140,907,399
Diluted weighted average common shares outstanding	160,416,900			141,875,619

The accompanying notes are an integral part of these financial statements.

Gramercy Property Trust

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited, amounts in thousands)



	Three Months Ended March 31,
	2018			2017
Net income	$	27,864		$	9,281
Other comprehensive income (loss):
Unrealized loss on available for sale debt securities	(48		)	(2,820		)
Cumulative effect of accounting change	103			—
Unrealized gain on derivative instruments	22,050			4,378
Reclassification of unrealized gain on terminated derivative instruments into earnings	268			268
Foreign currency translation adjustments	518			691
Other comprehensive income	$	22,891		$	2,517
Comprehensive income	$	50,755		$	11,798
Net income attributable to noncontrolling interest	(802		)	(154		)
Other comprehensive (income) loss attributable to noncontrolling interest	697			(11		)
Comprehensive income attributable to Gramercy Property Trust	$	50,650		$	11,633

The accompanying notes are an integral part of these financial statements.

Gramercy Property Trust

Consolidated Statement of Shareholders’ Equity (Deficit) and Noncontrolling Interest

(Unaudited, amounts in thousands, except share data)



	Common Shares			Preferred Shares		Additional Paid-In-Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings / (Accumulated Deficit)			Total Gramercy Property Trust			Noncontrolling Interest		Total
	Shares	Par Value		Preferred Shares		Additional Paid-In-Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings / (Accumulated Deficit)			Total Gramercy Property Trust			Noncontrolling Interest		Total
Balance at December 31, 2017	160,686,822	$	1,607	$	84,394	$	4,409,677		$	12,776		$	(1,369,872	)	$	3,138,582		$	221	$	3,138,803
Net income	—	—		—		—			—			27,062			27,062			—		27,062
Cumulative effect of accounting changes	—	—		—		—			103			560			663			—		663
Change in net unrealized gain on derivative instruments	—	—		—		—			22,050			—			22,050			—		22,050
Change in net unrealized loss on debt securities	—	—		—		—			(48		)	—			(48		)	—		(48		)
Reclassification of unrealized gain on terminated derivative instruments into earnings	—	—		—		—			268			—			268			—		268
Offering costs	—	—		—		(39		)	—			—			(39		)	—		(39		)
Share based compensation - fair value	88,094	1		—		2,023			—			—			2,024			—		2,024
Dividend reinvestment program proceeds	1,811	—		—		46			—			—			46			—		46
Conversion of OP Units to common shares	6,038	—		—		130			—			—			130			—		130
Reallocation of noncontrolling interest in the Operating Partnership	—	—		—		(232		)	—			—			(232		)	—		(232		)
Foreign currency translation adjustment	—	—		—		—			518			—			518			—		518
Contributions to noncontrolling interest in other partnerships	—	—		—		—			—			—			—			5		5
Dividends on preferred shares	—	—		—		—			—			(1,559		)	(1,559		)	—		(1,559		)
Dividends on common shares	—	—		—		—			—			(60,607		)	(60,607		)	—		(60,607		)
Balance at March 31, 2018	160,782,765	$	1,608	$	84,394	$	4,411,605		$	35,667		$	(1,404,416	)	$	3,128,858		$	226	$	3,129,084

The accompanying notes are an integral part of these financial statements.

Gramercy Property Trust

Consolidated Statements of Cash Flows

(Unaudited, amounts in thousands)



	Three Months Ended March 31,
	2018			2017
Operating Activities:
Net income	$	27,864		$	9,281
Adjustments to net cash provided by operating activities:
Depreciation and amortization	71,516			62,217
Amortization of market lease intangibles	(392		)	(547		)
Amortization of deferred costs	825			615
Amortization of discounts and other fees	(632		)	(409		)
Straight-line rent adjustment	(7,025		)	(7,260		)
Other-than-temporary impairment on retained bonds	—			4,890
Impairment of real estate investments	—			12,771
Net gain on disposals	(16,255		)	(17,377		)
Distributions received from unconsolidated equity investments	—			352
Equity in net loss of unconsolidated equity investments	926			94
Loss on extinguishment of debt	—			208
Amortization of share-based compensation	1,856			2,054
Changes in operating assets and liabilities:
Payment of capitalized leasing costs	(4,526		)	(3,790		)
Tenant and other receivables	3,253			11,707
Other assets	(1,401		)	(4,368		)
Accounts payable and accrued expenses	(8,050		)	(9,755		)
Other liabilities	4,864			(2,204		)
Net cash provided by operating activities	72,823			58,479
Investing Activities:
Capital expenditures	(17,825		)	(18,429		)
Proceeds from sales of real estate	108,032			33,053
Contributions to unconsolidated equity investments	(5,856		)	(2,650		)
Acquisition of real estate	(10,971		)	(99,612		)
Net cash provided by (used in) investing activities	73,380			(87,638		)
Financing Activities:
Proceeds from unsecured term loan and credit facility	164,922			60,000
Repayment of unsecured term loans and credit facility	(230,000		)	(5,000		)
Proceeds from mortgage notes payable	—			2,582
Repayment of mortgage notes payable	(3,545		)	(3,915		)
Offering costs	—			(606		)
Proceeds from sale of common shares	—			20,081
Payment of deferred financing costs	—			(252		)
Preferred share dividends paid	(1,559		)	(1,559		)
Common share dividends paid	(60,568		)	(53,025		)
Distribution to noncontrolling interest in the Operating Partnership	(1,402		)	(118		)
Other financing activities	(138		)	—
Net cash provided by (used in) financing activities	(132,290		)	18,188
Net increase (decrease) in cash, cash equivalents, and restricted cash	13,913			(10,971		)
Increase (decrease) in cash, cash equivalents, and restricted cash related to foreign currency translation	138			(105		)
Cash, cash equivalents, and restricted cash at beginning of period	42,954			80,433
Cash, cash equivalents, and restricted cash at end of period	$	57,005		$	69,357

The accompanying notes are an integral part of these financial statements.

GPT Operating Partnership LP

Consolidated Balance Sheets

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



	March 31, 2018			December 31, 2017
Assets:
Real estate investments, at cost:
Land	$	1,009,568		$	1,023,908
Building and improvements	4,821,301			4,863,916
Less: accumulated depreciation	(368,815		)	(333,151		)
Total real estate investments, net	5,462,054			5,554,673
Cash and cash equivalents	41,964			30,231
Restricted cash	15,041			12,723
Investment in unconsolidated equity investments	99,113			70,214
Assets held for sale, net	402			402
Tenant and other receivables, net	92,525			88,750
Acquired lease assets, net of accumulated amortization of $241,939 and $220,473	563,213			598,559
Other assets	127,664			100,484
Total assets	$	6,401,976		$	6,456,036
Liabilities and Partners’ Capital:
Liabilities:
Senior unsecured revolving credit facility	$	292,543		$	357,162
Mortgage notes payable, net	559,473			563,521
Senior unsecured notes, net	496,887			496,785
Senior unsecured term loans, net	1,448,241			1,448,152
Total long-term debt, net	2,797,144			2,865,620
Accounts payable and accrued expenses	60,151			59,619
Dividends and distributions payable	62,380			61,971
Below market lease liabilities, net of accumulated amortization of $31,201 and $28,978	159,544			166,491
Other liabilities	55,873			50,002
Total liabilities	$	3,135,092		$	3,203,703
Commitments and contingencies
Limited partner interest in the Operating Partnership (5,388,995 and 4,398,935 limited partner common units outstanding at March 31, 2018 and December 31, 2017, respectively)	137,800			113,530
Partners’ Capital:
Series A cumulative redeemable preferred units, liquidation preference $87,500, and 3,500,000 units issued and outstanding at March 31, 2018 and December 31, 2017	84,394			84,394
GPT partners’ capital (1,658,060 and 1,650,858 general partner common units and 159,124,705 and 159,035,964 limited partner common units outstanding at March 31, 2018 and December 31, 2017, respectively)	3,008,797			3,041,412
Accumulated other comprehensive income	35,667			12,776
Total GPTOP partners' capital	3,128,858			3,138,582
Noncontrolling interest in other entities	226			221
Total partners’ capital	$	3,129,084		$	3,138,803
Total liabilities and partners’ capital	$	6,401,976		$	6,456,036

The accompanying notes are an integral part of these financial statements.

GPT Operating Partnership LP

Consolidated Statements of Operations

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



	Three Months Ended March 31,
	2018			2017
Revenues
Rental revenue	$	122,245		$	103,282
Operating expense reimbursements	23,310			20,368
Third-party management fees	2,790			4,592
Other income	1,135			1,752
Total revenues	149,480			129,994
Operating Expenses
Depreciation and amortization	71,516			62,217
Property operating expenses	27,088			23,186
General and administrative expenses	9,686			8,756
Property management expenses	2,542			3,084
Total operating expenses	110,832			97,243
Operating income	38,648			32,751
Other Expenses:
Interest expense	(25,492		)	(23,056		)
Other-than-temporary impairment	—			(4,081		)
Portion of impairment recognized in other comprehensive loss	—			(809		)
Net impairment recognized in earnings	—			(4,890		)
Equity in net loss of unconsolidated equity investments	(926		)	(94		)
Loss on extinguishment of debt	—			(208		)
Impairment of real estate investments	—			(12,771		)
Income (loss) from continuing operations before provision for taxes	12,230			(8,268		)
Provision for taxes	(621		)	196
Income (loss) from continuing operations	11,609			(8,072		)
Loss from discontinued operations	—			(24		)
Income (loss) before net gain on disposals	11,609			(8,096		)
Net gain on disposals	16,255			17,377
Net income	27,864			9,281
Net income attributable to noncontrolling interest in other partnerships	—			(120		)
Net income attributable to GPTOP	27,864			9,161
Preferred unit distributions	(1,559		)	(1,559		)
Net income available to common unitholders	$	26,305		$	7,602
Basic earnings per unit:
Net income from continuing operations, after preferred unit distributions	$	0.16		$	0.05
Net income from discontinued operations	—			—
Net income available to common unitholders	$	0.16		$	0.05
Diluted earnings per unit:
Net income from continuing operations, after preferred unit distributions	$	0.16		$	0.05
Net income from discontinued operations	—			—
Net income available to common unitholders	$	0.16		$	0.05
Basic weighted average common units outstanding	165,448,866			141,527,985
Diluted weighted average common units outstanding	165,457,630			142,496,205

The accompanying notes are an integral part of these financial statements.

GPT Operating Partnership LP

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited, amounts in thousands)



	Three Months Ended March 31,
	2018			2017
Net income	$	27,864		$	9,281
Other comprehensive income (loss):
Unrealized loss on available for sale debt securities	(48		)	(2,820		)
Cumulative effect of accounting change	103			—
Unrealized gain on derivative instruments	22,050			4,378
Reclassification of unrealized gain on terminated derivative instruments into earnings	268			268
Foreign currency translation adjustments	518			691
Other comprehensive income	$	22,891		$	2,517
Comprehensive income	$	50,755		$	11,798
Net income attributable to noncontrolling interest in other partnerships	—			(120		)
Comprehensive income attributable to GPTOP	$	50,755		$	11,678

The accompanying notes are an integral part of these financial statements.

GPT Operating Partnership LP

Consolidated Statement of Partners' Capital

(Unaudited, amounts in thousands, except unit data)



	Partners' Interest				Series A Preferred Units		Accumulated Other Comprehensive Income (Loss)			Total GPTOP			Noncontrolling Interest
	Common Units	Common Unitholders			Series A Preferred Units		Accumulated Other Comprehensive Income (Loss)			Total GPTOP			Noncontrolling Interest		Total
Balance at December 31, 2017	160,686,822	$	3,041,412		$	84,394	$	12,776		$	3,138,582		$	221	$	3,138,803
Net income	—	27,062			—		—			27,062			—		27,062
Cumulative effect of accounting changes	—	560			—		103			663			—		663
Change in net unrealized gain on derivative instruments	—	—			—		22,050			22,050			—		22,050
Change in net unrealized loss on debt securities	—	—			—		(48		)	(48		)	—		(48		)
Reclassification of unrealized gain of terminated derivative instruments into earnings	—	—			—		268			268			—		268
Offering costs	—	(39		)	—		—			(39		)	—		(39		)
Share based compensation - fair value	88,094	2,024			—		—			2,024			—		2,024
Distribution reinvestment program proceeds	1,811	46			—		—			46			—		46
Conversion of OP Units to common units	6,038	130			—		—			130			—		130
Reallocation of limited partner interest in the Operating Partnership	—	(232		)	—		—			(232		)	—		(232		)
Foreign currency translation adjustment	—	—			—		518			518			—		518
Contributions to noncontrolling interest in other partnerships	—	—			—		—			—			5		5
Distributions on preferred units	—	(1,559		)	—		—			(1,559		)	—		(1,559		)
Distributions on common units	—	(60,607		)	—		—			(60,607		)	—		(60,607		)
Balance at March 31, 2018	160,782,765	$	3,008,797		$	84,394	$	35,667		$	3,128,858		$	226	$	3,129,084

The accompanying notes are an integral part of these financial statements.

GPT Operating Partnership LP

Consolidated Statements of Cash Flows

(Unaudited, amounts in thousands)



	Three Months Ended March 31,
	2018			2017
Operating Activities:
Net income	$	27,864		$	9,281
Adjustments to net cash provided by operating activities:
Depreciation and amortization	71,516			62,217
Amortization of market lease intangibles	(392		)	(547		)
Amortization of deferred costs	825			615
Amortization of discounts and other fees	(632		)	(409		)
Straight-line rent adjustment	(7,025		)	(7,260		)
Other-than-temporary impairment on retained bonds	—			4,890
Impairment of real estate investments	—			12,771
Gain on sale of properties	(16,255		)	(17,377		)
Distributions received from unconsolidated equity investments	—			352
Equity in net loss of unconsolidated equity investments	926			94
Loss on extinguishment of debt	—			208
Amortization of share-based compensation	1,856			2,054
Changes in operating assets and liabilities:
Payment of capitalized leasing costs	(4,526		)	(3,790		)
Tenant and other receivables	3,253			11,707
Other assets	(1,401		)	(4,368		)
Accounts payable and accrued expenses	(8,050		)	(9,755		)
Other liabilities	4,864			(2,204		)
Net cash provided by operating activities	72,823			58,479
Investing Activities:
Capital expenditures	(17,825		)	(18,429		)
Proceeds from sales of real estate	108,032			33,053
Contributions to unconsolidated equity investments	(5,856		)	(2,650		)
Acquisition of real estate	(10,971		)	(99,612		)
Net cash provided by (used in) investing activities	73,380			(87,638		)
Financing Activities:
Proceeds from unsecured term loan and credit facility	164,922			60,000
Repayment of unsecured term loans and credit facility	(230,000		)	(5,000		)
Proceeds from mortgage notes payable	—			2,582
Repayment of mortgage notes payable	(3,545		)	(3,915		)
Offering costs	—			(606		)
Proceeds from issuance of common units	—			20,081
Payment of deferred financing costs	—			(252		)
Preferred unit distributions paid	(1,559		)	(1,559		)
Common unit distributions paid	(60,568		)	(53,025		)
Distribution to limited partnership interest in the Operating Partnership	(1,402		)	(118		)
Other financing activities	(138		)	—
Net cash provided by (used in) financing activities	(132,290		)	18,188
Net increase (decrease) in cash, cash equivalents, and restricted cash	13,913			(10,971		)
Increase (decrease) in cash, cash equivalents, and restricted cash related to foreign currency translation	138			(105		)
Cash, cash equivalents, and restricted cash at beginning of period	42,954			80,433
Cash, cash equivalents, and restricted cash at end of period	$	57,005		$	69,357

The accompanying notes are an integral part of these financial statements.

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

1. Business and Organization

Gramercy Property Trust, or the Company or Gramercy, a Maryland real estate investment trust, or REIT, together with its subsidiary, GPT Operating Partnership LP, or the Operating Partnership, is a leading global investor and asset manager of commercial real estate. Gramercy specializes in acquiring and managing high quality, income producing commercial real estate leased to high quality tenants in major markets in the United States and Europe.

Gramercy earns revenues primarily through rental revenues on properties that it owns in the United States. The Company also owns unconsolidated equity investments in the United States, Europe, and Asia. The Company's operations are conducted primarily through the Operating Partnership. As of March 31, 2018, third-party holders of limited partnership interests owned approximately 3.25% of the Operating Partnership. These interests are referred to as the noncontrolling interests in the Operating Partnership. See Note 11 for more information on the Company’s noncontrolling interests.

As of March 31, 2018, the Company’s wholly-owned portfolio consisted of 362 properties comprising 80,884,942 rentable square feet with 97.3% occupancy. As of March 31, 2018, the Company had ownership interests in 20 properties held in unconsolidated equity investments in the United States and Europe and one property held through the investment in CBRE Strategic Partners Asia. As of March 31, 2018, the Company managed approximately $1,960,000 of commercial real estate assets, including approximately $1,408,000 of assets in Europe.

During the three months ended March 31, 2018, the Company acquired one property with 162,056 square feet for a purchase price of approximately $10,550 and placed one development property into service with 126,722 square feet. During the three months ended March 31, 2018, the Company sold five properties and one warehouse from another asset aggregating 1,546,091 square feet for total gross proceeds of approximately $111,012.

Unless the context requires otherwise, all references to “Company," "Gramercy,” “we,” “our” and “us” mean Gramercy Property Trust and its subsidiaries, including the Operating Partnership and its consolidated subsidiaries.

2. Significant Accounting Policies

Basis of Quarterly Presentation

The accompanying 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, they do not include all of the information and footnotes required by GAAP for complete financial statements. In management’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. The 2018 operating results for the period presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. These Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2017 of the Company and the Operating Partnership. The Consolidated Balance Sheets at December 31, 2017 were derived from the audited Consolidated Financial Statements at that date.

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

Reclassifications

Certain prior year balances have been reclassified to conform with the current year presentation. During the fourth quarter of 2017, the Company adopted Accounting Standards Update, or ASU, No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires restricted cash and cash equivalents to be included with cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown on the Consolidated Statements of Cash Flows. As a result of the adoption, net cash provided by operating activities changed by $235, net cash used in investing activities changed by $(947), and net cash provided by financing activities changed by $909, for the three months ended March 31, 2017.

Principles of Consolidation

The 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.

Entities which the Company does not control and are considered VIEs, but where the Company is not the primary beneficiary, are accounted for under the equity method. All significant intercompany balances and transactions have been eliminated. The equity interests of other limited partners in the Company’s Operating Partnership are reflected as noncontrolling interests. See Note 11 for more information on the Company’s noncontrolling interests.

Real Estate Investments

Real Estate Acquisitions

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

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

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

To determine the fair value of assets acquired and liabilities assumed in an acquisition, which generally include land, building, improvements, and intangibles, such as the value of above- and below-market leases and origination costs associated with the in-place leases at the acquisition date, the Company utilizes various estimates, processes and information to determine the as-if-vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, and discounted cash flow analyses. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property. The Company assesses the fair value of leases assumed at acquisition based upon estimated cash flow projections that utilize appropriate discount rates and available market information. Refer to the policy section "Intangible Assets and Liabilities" for more information on the Company’s accounting for intangibles.

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

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

Capital Improvements

In leasing space, the Company may provide funding to the lessee through a tenant allowance. Certain improvements are capitalized when they are determined to increase the useful life of the building. During construction of qualifying projects, the Company capitalizes project management fees as permitted to be charged under the lease, if incremental and identifiable. In accounting for tenant allowances, the Company determines whether the allowance represents funding for the construction of leasehold improvements and evaluates the ownership of such improvements. If the Company is considered the owner of the leasehold improvements, 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.

Impairments and Disposals

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

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

as an impairment loss in the Consolidated Statements of Operations 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.

The Company recognizes sales of real estate properties upon closing, at which time the Company transfers control of the assets to the purchaser. Payments received from purchasers prior to closing are recorded as deposits. Profit on real estate sold is based on the transaction price and is recognized using the full accrual method upon closing.

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. The Company's restricted cash primarily consists of reserves for certain capital improvements, leasing, interest and real estate tax and insurance payments as required by certain mortgage note obligations, as well as proceeds from property sales held by qualified intermediaries to be used for tax-deferred, like-kind exchanges under section 1031 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sums to the total of the same such amounts shown in the Consolidated Statements of Cash Flows.



	As of March 31,
	2018		2017
Cash and cash equivalents	$	41,964	$	56,256
Restricted cash	15,041		13,101
Total cash, cash equivalents, and restricted cash	$	57,005	$	69,357

Variable Interest Entities

The Company had five consolidated VIEs and two unconsolidated VIEs as of March 31, 2018 and December 31, 2017, which were determined based on the structure and control provisions of each entity.

The Company’s five consolidated VIEs as of March 31, 2018 and December 31, 2017 included the Operating Partnership and four land parcels in Fort Mill, South Carolina acquired by an investment entity formed in December 2017, on which it will fund the development of four industrial facilities, or the Lakemont Development Investment. The Company has a 95.0% interest in the Lakemont Development Investment and will acquire the seller’s retained 5.0% interest when the properties are developed and leased. As of March 31, 2018 and December 31, 2017, the Company’s carrying value of the Lakemont Development Investment was $4,674 and $4,584, respectively.

Unconsolidated VIEs

The Company’s two unconsolidated VIEs as of March 31, 2018 and December 31, 2017 included its retained non-investment grade subordinate bonds, preferred shares and ordinary shares of two collateralized debt obligations, or CDOs, which are collectively herein referred to as the Retained CDO Bonds. Refer to the “Other Assets” section of this Note 2 and also to Note 7 for more information on the accounting and valuation of the Retained CDO Bonds. As of March 31, 2018 and December 31, 2017, the Company’s carrying value of the Retained CDO Bonds was $5,800 and $5,527, respectively.

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

Tenant and Other Receivables

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

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

Tenant and other receivables are recorded net of the allowances for doubtful accounts, which as of March 31, 2018 and December 31, 2017 were $670 and $638, respectively. The Company continually reviews receivables related to rent, tenant reimbursements, and management fees, including incentive fees, and determines collectability by taking into consideration the tenant or asset management clients’ payment history, the financial condition of the tenant or asset management client, business conditions in the industry in which the tenant or asset management client operates and economic conditions in the area in which the property or asset management client is located. In the event that the collectability of a receivable is in doubt, the Company increases the allowance for doubtful accounts or records a direct write-off of the receivable, as appropriate.

Intangible Assets and Liabilities

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

Above-market and below-market lease values for properties acquired are recorded based on the present value 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 present value calculation utilizes a discount rate that reflects the risks associated with the leases acquired. The above-market and below-market lease values are amortized as a reduction of and increase to rental revenue, respectively, over the remaining non-cancelable terms of the respective leases. If a tenant terminates its lease prior to its contractual expiration and no future rental payments will be received, any unamortized balance of the market lease intangibles will be written off to rental revenue.

The aggregate value of in-place leases represents the costs of leasing costs, other tenant related costs, and lost revenue that the Company did not have to incur by acquiring a property that is already occupied. 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

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

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 will be written off to depreciation and amortization expense.

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

Refer to Note 3 for further information on the Company’s intangible assets and liabilities.

Revenue

Adoption of ASC Topic 606, "Revenue from Contracts with Customers"

The Company adopted ASC Topic 606, which is described below in the section “Recently Issued Accounting Pronouncements,” on January 1, 2018 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under the new guidance, while prior period amounts are not adjusted and continue to be reported in accordance with the historic accounting guidance in ASC Topic 605. As a result of adoption, the Company recorded an increase to its opening retained earnings balance of $663 as of January 1, 2018, which represents the cumulative impact of the new guidance and is related to the Company’s sale of real estate to Strategic Office Partners in 2016. There was no impact to revenues recorded for the three months ended March 31, 2018 as a result of adoption of the new revenue guidance.

Revenue Recognition

The Company recognizes revenue when control of the promised goods or services is transferred to a customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company’s primary sources of revenue include rental revenue, third-party management fees, operating expense reimbursements, and other income, which are disaggregated on the Consolidated Statements of Operations and are described in detail below.

Real Estate Investments

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

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

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

Management Fees

The Company’s asset and property management agreements may contain provisions for fees related to dispositions, administration of the assets including fees related to accounting, valuation and legal services, and management of capital improvements or projects on the underlying assets. The Company recognizes revenue for fees pursuant to its management agreements in the period in which they are earned. Deferred revenue from management fees received prior to the date earned are included in other liabilities on the Consolidated Balance Sheets. For management fee agreements that include multiple performance obligations, the Company allocates revenue to each performance obligation based on its relative standalone selling price, which is primarily determined based on the prices charged to customers.

Certain of the Company’s asset management contracts and agreements with its unconsolidated equity investments include provisions that allow it to earn additional fees, generally described as incentive fees or promoted interests, based on the achievement of a targeted valuation or the achievement of a certain internal rate of return on the managed assets held by third parties or the equity investment. The Company’s incentive fees are accounted for as variable consideration and revenue is recognized for them based on the Company’s estimate of the expected amount to which it will be entitled in exchange for its services. The Company recognizes promoted interest in the period in which it is determined to be appropriately earned pursuant to the terms of the specific agreement. The values of incentive fees and promoted interest fees are periodically evaluated by management.

Other Income

Other income primarily consists of income accretion on the Company’s Retained CDO Bonds, realized foreign currency exchange gains (losses), and interest income.

Foreign Currency

The Company's European management platform performs asset and property management services in Europe. The Company has unconsolidated equity investments in Europe and Asia and previously had two wholly-owned properties in Canada until their dispositions in March 2017. The Company also has borrowings outstanding in euros and British pounds sterling under the multicurrency portion of its revolving credit facility. Refer to Note 4 for more information on the Company’s foreign unconsolidated equity investments.

Other Assets

The Company includes prepaid expenses, capitalized software costs, contract intangible assets, deferred costs, loan investments, goodwill, derivative assets, and Retained CDO Bonds in other assets.

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

Loan Investments

The Company may originate loans related to specific real estate development projects. In October 2017, the Company entered into an agreement to provide a mezzanine construction loan facility with a maximum commitment of $250,000 to an industrial developer as borrower. As of March 31, 2018 and December 31, 2017, the carrying value of the Company’s loan investments was $22,437 and $22,154, respectively, which represents the cost, net of accumulated amortization of loan costs. As of March 31, 2018, the loan investments had a weighted average interest rate of 10.47%. The Company evaluates its loan investments for possible credit losses each period. There were no loan reserves recorded during the three months ended March 31, 2018 and all of the Company’s loan investments were performing in accordance with the terms of the relevant investments as of March 31, 2018.

Goodwill

The Company recognized goodwill of $3,802 related to the acquisition of Gramercy Europe Limited, which it adjusts each reporting period for the effect of foreign currency translation adjustments and tests for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The carrying value of goodwill at March 31, 2018 and December 31, 2017 was $3,394 and $3,272, respectively. The Company did not record any impairment on its goodwill during the three months ended March 31, 2018.

Retained CDO Bonds

The Retained CDO Bonds are non-investment grade subordinate bonds, preferred shares and ordinary shares of two CDOs. Management estimated the timing and amount of cash flows expected to be collected and recognized an investment in the Retained CDO Bonds equal to the net present value of these discounted cash flows. There is no guarantee that the Company will realize any proceeds from this investment, or what the timing will be for the expected remaining life of the Retained CDO Bonds. The Company considers these investments to be not of high credit quality and does not expect a full recovery of interest and principal. Therefore, the Company has suspended interest income accruals on these investments. The Company classifies the Retained CDO Bonds as available for sale. On a quarterly basis, the Company evaluates the Retained CDO Bonds to determine whether significant changes in estimated cash flows or unrealized losses on these investments, if any, reflect a decline in value which is other-than-temporary. If there is a decrease in estimated cash flows and the investment is in an unrealized loss position, the Company will record an other-than-temporary impairment, or OTTI, in the Consolidated Statements of Operations. To determine the component of the OTTI related to expected credit losses, the Company compares the amortized cost basis of the Retained CDO Bonds to the present value of the revised expected cash flows, discounted using the pre-impairment effective yield. Conversely, if the security is in an unrealized gain position and there is a decrease or significant increase in expected cash flows, the Company will prospectively adjust the yield using the effective yield method. Refer to Note 7 for further discussion regarding the fair value measurement of the Retained CDO Bonds. For the three months ended March 31, 2018 and 2017, the Company recognized OTTI on its Retained CDO Bonds of $0 and $4,890, respectively.

A summary of the Company’s Retained CDO Bonds as of March 31, 2018 is as follows:



Number of Securities	Face Value		Amortized Cost		Gross Unrealized Gain		Other-Than-Temporary Impairment		Fair Value		Weighted Average Expected Life (years)
6	$	329,597	$	5,431	$	369	$	—	$	5,800	1.1

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

Concentrations of Credit Risk

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

Concentrations of credit risk also arise when a number of the Company’s tenants or asset management clients are engaged in similar business activities or are subject to similar economic risks or conditions that could cause their inability to meet contractual obligations to the Company. The Company regularly monitors its portfolio to assess potential concentrations of credit risk. Management believes the current credit risk portfolio is reasonably well diversified. During the three months ended March 31, 2018 and 2017, there were no tenants that accounted for 10.0% or more of the Company's rental revenue. Additionally, for the three months ended March 31, 2018, there were three states, Illinois, Texas, and Florida, that each accounted for 10.0% or more of the Company’s rental revenue.

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 May 2014, the FASB issued ASU 2014-09 (Topic 606), Revenue from Contracts with Customers, which is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to customers in an amount reflecting the consideration it expects to receive in exchange for those goods or services. In April 2016 and February 2017, the FASB issued ASU 2016-10 and ASU 2017-05, respectively, which further clarified the new revenue recognition guidance under ASC Topic 606. The Company adopted the guidance on January 1, 2018 using the modified retrospective method, which did not have a material impact on its Consolidated Financial Statements. Refer to the “Revenue” section above for further detail.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and to record changes in instruments specific credit risk for financial liabilities measured under the fair value option in other comprehensive income. The update is effective for fiscal years beginning after December 15, 2017, and for interim periods therein. The Company adopted this standard in the first quarter of 2018 and the adoption did not have a material impact on its Consolidated Financial Statements. Refer to Note 8 for more information.

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

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. The Company is continuing to evaluate the impact of adopting the new leases standard on its Consolidated Financial Statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows Classification of Certain Cash Receipts and Cash Payments, which serves to reduce the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The update is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. The Company adopted this standard in the first quarter of 2018 and the adoption did not have a material impact on its Consolidated Financial Statements.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation: Scope of Modification Accounting. The amendment provides guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting. The guidance is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted under certain circumstances. The Company adopted this standard in the first quarter of 2018 and the adoption did not have a material impact on its Consolidated Financial Statements.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities. The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The transition guidance provides companies with the option of early adopting the new standard using a modified retrospective transition method in any interim period after issuance of the update, or alternatively requires adoption for fiscal years beginning after December 15, 2018. In the first quarter of 2018, the Company early adopted this standard and the adoption did not have a material impact on its Consolidated Financial Statements.

3. Real Estate Investments

Investments in real estate properties consisted of the following:



	March 31, 2018					December 31, 2017
	Square feet¹	Number of properties	Investment			Square feet¹	Number of properties	Investment
Operating properties²	80,884,942	360	$	5,811,702		82,146,063	363	$	5,857,906
Land parcels		2	7,075				2	7,075
Less accumulated depreciation			(368,815		)			(333,151		)
Total operating properties and land parcels			$	5,449,962				$	5,531,830
Development properties	1,503,300	5	12,092			1,630,022	6	22,843
Total	82,388,242	367	$	5,462,054		83,776,085	371	$	5,554,673


1.	Represents rentable square feet for operating properties and projected rentable square feet upon completion for development properties.


2.	Includes development properties that have been completed as of the end of the period.

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

Acquisitions:

Real estate acquisition activity for the three months ended March 31, 2018 and 2017 was as follows:



	Three Months Ended March 31,
	2018		2017
Number of operating properties	1		7
Rentable square feet of operating properties	162,056		2,257,311
Total purchase price of all acquisitions	$	10,550	$	124,672

The total value of the properties acquired during the three months ended March 31, 2018 was comprised of $10,197 of real estate assets and $635 of intangible assets, including acquisition costs capitalized for the asset acquisitions. In addition to the operating property acquisition noted above, during the three months ended March 31, 2018 the Company also placed into service one development property which comprised 126,722 rentable square feet.

Dispositions:

Real estate disposition activity for the three months ended March 31, 2018 and 2017 was as follows:



	Three Months Ended March 31,
	2018		2017
Number of properties¹	5		7
Rentable square feet	1,546,091		487,872
Gross proceeds	$	111,012	$	51,683
Impairment of real estate investments related to asset dispositions during the period²	$	—	$	—
Net gain on disposals	$	16,255	$	17,377


1.	During the three months ended March 31, 2018, the Company sold five properties and one warehouse from another asset.


2.	Although there were no impairments recognized related to assets disposed during the three months ended March 31, 2018 and 2017, as presented in the table, the Company recognized impairments on real estate investments of $12,771 during the three months ended March 31, 2017 related to properties held as of March 31, 2017, for which the Company determined there were nonrecoverable declines in value.

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

Intangibles:

Intangible assets and liabilities consisted of the following:



	Weighted average amortization period (years)	March 31, 2018		December 31, 2017
Intangible assets:
In-place leases, net of accumulated amortization of $214,664 and $194,836	9.3	$	513,423	$	545,782
Above-market leases, net of accumulated amortization of $26,854 and $25,229	6.8	43,979		46,713
Below-market ground rent, net of accumulated amortization of $421 and $408	17.5	5,811		6,064
Total intangible assets		$	563,213	$	598,559
Intangible liabilities:
Below-market leases, net of accumulated amortization of $30,685 and $28,516	39.5	$	152,758	$	159,652
Above-market ground rent, net of accumulated amortization of $516 and $462	32.0	6,786		6,839
Total intangible liabilities		$	159,544	$	166,491

The following table provides the projected amortization expense of the intangible assets and liabilities for the next five years:



	April 1 to December 31, 2018			2019			2020			2021			2022
Depreciation and amortization expense	$	70,211		$	84,228		$	70,822		$	59,528		$	46,652
Rental revenue increase	$	(1,571	)	$	(2,520	)	$	(4,004	)	$	(4,168	)	$	(6,260	)

The Company recorded $26,159 and $24,172 of amortization of in-place lease intangible assets as part of depreciation and amortization expense for the three months ended March 31, 2018 and 2017, respectively. The Company recorded $494 and $621 of amortization of market lease intangible assets and liabilities as an increase to rental revenue for the three months ended March 31, 2018 and 2017, respectively.

Assets Held for Sale

In the normal course of business, the Company identifies non-strategic assets for sale. The Company separately classifies properties held for sale in its Consolidated Financial Statements. As of March 31, 2018 and December 31, 2017, the Company had one asset classified as held for sale, which had a net asset value of $402, all of which represented the value contained in real estate investments. Real estate investments to be disposed of are reported at the lower of carrying amount or estimated fair value, less costs to sell. Once an asset is classified as held for sale, depreciation and amortization expense is no longer recorded.

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

Discontinued Operations

The Company did not have significant discontinued operations for the three months ended March 31, 2018. The Company’s discontinued operations for the three months ended March 31, 2017 were related to the assets assumed in the Company’s merger transaction in 2015 and simultaneously designated as held for sale.

4. Unconsolidated Equity Investments

The Company has investments in a variety of ventures. The Company will co-invest in entities that own multiple properties with various investors or with one partner. The Company may manage the ventures and earn fees, such as asset and property management fees, incentive fees, and promoted interest for its services, or one of the other partners will manage the ventures for similar such fees. Depending on the structure of the venture, the Company’s voting interest may be different than its economic interest.

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

As of March 31, 2018 and December 31, 2017, the Company owned properties through unconsolidated equity investments and had investment interests in these unconsolidated entities as follows:



	As of March 31, 2018								As of December 31, 2017
Investment	Ownership %		Voting Interest %		Partner	Investment in Unconsolidated Equity Investment ¹		No. of Properties	Investment in Unconsolidated Equity Investment ¹		No. of Properties
Strategic Office Partners	25.0	%	25.0	%	TPG Real Estate	$	28,792	13	$	28,243	13
E-Commerce JV	51.0	%	50.0	%	Ample Glow Investments	43,502		2	17,798		—
Goodman UK JV	80.0	%	50.0	%	Goodman Group	15,980		1	15,768		1
Gramercy European Property Fund III	19.9	%	50.0	%	Various	5,363		2	2,949		—
Other²	5.1% - 50.0%		5.1% - 50.0%		Various	5,476		3	5,456		3
Total						$	99,113	21	$	70,214	17


1.	The amounts presented include a basis difference of $2,011 and $1,943, net of accumulated amortization, for the Goodman UK JV as of March 31, 2018 and December 31, 2017, respectively. The amounts presented include a basis difference of $(3,916), net of accumulated amortization, for the E-Commerce JV as of March 31, 2018.


2.	Includes CBRE Strategic Partners Asia, the Philips JV, and the Morristown JV.

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

The following is a summary of the Company’s unconsolidated equity investments for the three months ended March 31, 2018:



	Unconsolidated Equity Investments
Balance at January 1, 2018	$	70,214
Contributions to unconsolidated equity investments	28,731
Equity in net loss of unconsolidated equity investments, including adjustments for basis differences	(926		)
Other comprehensive income of unconsolidated equity investments	431
Cumulative effect of accounting change	663
Balance at March 31, 2018	$	99,113

Strategic Office Partners

In August 2016, the Company partnered with TPG Real Estate, or TPG, to form Strategic Office Partners, an unconsolidated equity investment created for the purpose of acquiring, owning, operating, leasing and selling single-tenant office properties located in high-growth metropolitan areas in the United States. The Company provides asset and property management, accounting, construction, and leasing services to Strategic Office Partners, for which it earns management fees and is entitled to a promoted interest. TPG and the Company have committed an aggregate $400,000 to Strategic Office Partners, including $100,000 from the Company. During the three months ended March 31, 2018, the Company did not make any contributions to or receive any distributions from Strategic Office Partners.

E-Commerce JV

In November 2017, the Company formed a joint venture with an investment partner, which will acquire, own and manage Class A distribution centers leased to leading e-commerce tenants on long-term leases across the United States, or the E-Commerce JV. The Company has joint control over the E-Commerce JV, which is shared equally with its investment partner. The Company provides asset and property management and accounting services to the E-Commerce JV, for which it earns management fees. The Company has committed capital to fund its initial acquisition of six properties, as well as the acquisition of additional properties in the future, subject to the partners' approval. The Company's pro rata funding commitment for the initial six properties is estimated at approximately $110,000, of which approximately $80,000 will be funded in OP Units issued to the seller of the property and approximately $30,000 will be funded in cash. During the three months ended March 31, 2018, the E-Commerce JV acquired two properties. During the three months ended March 31, 2018, the Company contributed $1,130 in cash and OP Units valued at approximately $25,141 to the E-Commerce JV.

Goodman UK JV

The Goodman UK JV invests in industrial properties in the United Kingdom. During the three months ended March 31, 2018 and 2017, the Company received no distributions from the Goodman UK JV.

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

European Investment Funds

Gramercy European Property Fund III

In October 2017, the Company formed a new European investment fund with several other equity investment partners, or the Gramercy European Property Fund III, which has total initial capital commitments of $323,359 (€262,622) from all investors, of which the Company’s initial capital commitment is $64,257 (€52,187), representing an interest of approximately 19.9%. The Company provides asset and property management and accounting services to the Gramercy European Property Fund III, for which it is entitled to management fees and a promoted interest. During the three months ended March 31, 2018, the Gramercy European Property Fund III acquired two properties. During the three months ended March 31, 2018, the Company contributed $2,460 (€1,977) to the Gramercy European Property Fund III.

Gramercy European Property Fund

In July 2017, the Gramercy European Property Fund sold 100.0% of its assets to a third party, and, concurrently, the Company sold its 5.1% direct interest in the Goodman Europe JV to the same entity that acquired the Gramercy European Property Fund's assets. In connection with the sale transactions, the Company's management contract arrangement with the Gramercy European Property Fund was terminated; however, the Company continues to manage the assets for the new owner through June 2018.

The following are the balance sheets for the Company’s unconsolidated equity investments at March 31, 2018:



	Strategic Office Partners		E-Commerce JV		Goodman UK JV		Gramercy European Property Fund III		Other¹
Assets:
Real estate assets, net²	$	264,099	$	149,895	$	19,150	$	62,284	$	108,993
Other assets	80,897		48,894		1,751		5,428		18,421
Total assets	$	344,996	$	198,789	$	20,901	$	67,712	$	127,414
Liabilities and members' equity:
Mortgage notes payable	$	213,699	$	108,473	$	—	$	35,873	$	38,341
Other liabilities	16,698		5,018		732		4,850		19,043
Total liabilities	230,397		113,491		732		40,723		57,384
Company's equity	28,792		43,502		15,980		5,363		5,476
Other members' equity	85,807		41,796		4,189		21,626		64,554
Liabilities and members' equity	$	344,996	$	198,789	$	20,901	$	67,712	$	127,414


1.	Includes CBRE Strategic Partners Asia, the Philips JV, and the Morristown JV.


2.	Includes basis adjustments recorded by the Company to adjust the unconsolidated equity investments to fair value.

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

The following are the balance sheets for the Company’s unconsolidated equity investments at December 31, 2017:



	Strategic Office Partners		E-Commerce JV		Goodman UK JV		Other¹
Assets:
Real estate assets, net²	$	265,014	$	—	$	18,633	$	107,949
Other assets	78,243		35,727		1,473		34,022
Total assets	$	343,257	$	35,727	$	20,106	$	141,971
Liabilities and members' equity:
Mortgage notes payable	$	213,205	$	—	$	—	$	38,662
Other liabilities	15,002		830		203		19,329
Total liabilities	228,207		830		203		57,991
Company's equity	28,243		17,798		15,768		8,405
Other members' equity	86,807		17,099		4,135		75,575
Liabilities and members' equity	$	343,257	$	35,727	$	20,106	$	141,971


1.	Includes CBRE Strategic Partners Asia, the Philips JV, the Morristown JV, and the Gramercy European Property Fund III.


2.	Includes basis adjustments recorded by the Company to adjust the unconsolidated equity investments to fair value.

Certain real estate assets in the Company’s unconsolidated equity investments are subject to mortgage notes. The following is a summary of the secured financing arrangements within the Company’s unconsolidated equity investments as of March 31, 2018:



					Outstanding Balance²
Property	Unconsolidated Equity Investment	Economic Ownership	Interest Rate¹	Maturity Date	March 31, 2018			December 31, 2017
Strategic Office Partners Facility 1³	Strategic Office Partners	25.0%	4.70%	10/7/2019	$	169,380		$	169,380
Strategic Office Partners Facility 2⁴	Strategic Office Partners	25.0%	9.21%	10/8/2020	39,540			39,540
E-Commerce JV Facility⁴	E-Commerce JV	51.0%	3.38%	2/10/2023	109,846			—
Gramercy European Property Fund III Facility⁴	Gramercy European Property Fund III	19.9%	1.57%	3/12/2023	36,084			—
Henderson, NV	Strategic Office Partners	25.0%	4.75%	8/6/2025	8,593			8,636
Somerset, NJ	Philips JV	25.0%	6.90%	9/11/2035	38,341			38,662
Total mortgage notes payable					$	401,784		$	256,218
Net deferred financing costs and net debt discount					(5,398		)	(4,351		)
Total mortgage notes payable, net					$	396,386		$	251,867


1.	Represents the current effective rate as of March 31, 2018, including the swapped interest rate for mortgage notes that have interest rate swaps. The current interest rate is not adjusted to include the amortization of fair market value premiums or discounts.


2.	Mortgage notes are presented at 100.0% of the amount held by the unconsolidated equity investment.


3.	As of March 31, 2018, there were ten properties under this mortgage note.


4.	As of March 31, 2018, there were two properties under each of these mortgage notes.

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

The following are the statements of operations for the Company’s unconsolidated equity investments for the three months ended March 31, 2018:



	Strategic Office Partners			E-Commerce JV			Goodman UK JV			Gramercy European Property Fund III			Other¹
Revenues	$	11,143		$	2,165		$	—		$	482		$	1,994
Operating expenses	4,151			583			260			682			106
Interest expense	3,113			669			—			97			666
Depreciation and amortization	4,823			862			206			209			333
Total expenses	12,087			2,114			466			988			1,105
Net income (loss) from operations	(944		)	51			(466		)	(506		)	889
Gain on derivatives	492			—			—			—			—
Loss on extinguishment of debt	—			(1,200		)	—						—
Net income (loss)	$	(452	)	$	(1,149	)	$	(466	)	$	(506	)	$	889
Company's share in net income (loss)	$	26		$	(520	)	$	(373	)	$	(93	)	$	20
Adjustments for REIT basis	—			18			(4		)	—			—
Company's equity in net income (loss) within continuing operations	$	26		$	(502	)	$	(377	)	$	(93	)	$	20


1.	Includes CBRE Strategic Partners Asia, the Philips JV, and the Morristown JV.

The following are the statements of operations for the Company’s unconsolidated equity investments for the three months ended March 31, 2017:



	Gramercy European Property Fund ¹
	Goodman Europe JV			Gramercy European Property Fund²		Total			Strategic Office Partners			Goodman UK JV			Other ³
Revenues	$	4,955		$	10,118	$	15,073		$	5,526		$	295		$	(1,331	)
Operating expenses	922			2,951		3,873			1,474			302			576
Interest expense	672			1,474		2,146			1,510			—			641
Depreciation and amortization	2,021			4,473		6,494			2,503			375			333
Total expenses	3,615			8,898		12,513			5,487			677			1,550
Net income (loss) from operations	1,340			1,220		2,560			39			(382		)	(2,881		)
Gain (loss) on derivatives	—			1,221		1,221			(349		)	—			—
Provision for taxes	(17		)	146		129			—			(8		)	—
Net income (loss)	$	1,323		$	2,587	$	3,910		$	(310	)	$	(390	)	$	(2,881	)
Company’s share in net income (loss)	$	67		$	446	$	513		$	(15	)	$	(312	)	$	(155	)
Adjustments for REIT basis	(36		)	—		(36		)	—			(89		)	—
Company’s equity in net income (loss) within continuing operations	$	31		$	446	$	477		$	(15	)	$	(401	)	$	(155	)

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


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


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

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

5. Debt Obligations

Secured Debt

Mortgage Notes

Certain real estate assets are subject to mortgage notes. During the three months ended March 31, 2018, the Company did not assume or pay off any mortgages notes. During the year ended December 31, 2017, the Company assumed $181,107 of non-recourse mortgages in connection with seven real estate acquisitions. During the three months ended March 31, 2017, the Company refinanced the debt on two properties encumbered by a mortgage note, subsequently transferred the mortgage on these two properties to the buyer of the properties, and, as a result, recorded a net loss on the early extinguishment of debt of $208. The Company’s mortgage notes include a series of financial and other covenants with which the Company must comply in order to borrow under them. The Company was in compliance with the covenants under the mortgage note facilities as of March 31, 2018.

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

The following is a summary of the Company’s secured financing arrangements as of March 31, 2018 and December 31, 2017:



Property	Interest Rate ¹	Maturity Date	Outstanding Balance
Property	Interest Rate ¹	Maturity Date	March 31, 2018		December 31, 2017
Greenwood, IN	3.59%	6/15/2018	$	7,211	$	7,257
Greenfield, IN	3.63%	6/15/2018	5,828		5,865
Logistics Portfolio - Pool 3²	3.96%	8/1/2018	43,302		43,302
Philadelphia, PA	4.99%	1/1/2019	11,842		11,943
Bridgeview, IL	3.90%	5/1/2019	5,792		5,838
Spartanburg, SC	3.20%	6/1/2019	530		632
Charleston, SC	3.11%	8/1/2019	320		457
Lawrence, IN	5.02%	1/1/2020	19,896		20,061
Charlotte, NC	3.28%	1/1/2020	1,363		1,538
Hawthorne, CA	3.52%	8/1/2020	17,042		17,207
Charleston, SC	3.32%	10/1/2020	696		758
Charleston, SC	2.97%	10/1/2020	684		746
Charleston, SC	3.37%	10/1/2020	684		746
Charlotte, NC	3.38%	10/1/2020	594		647
Des Plaines, IL	5.54%	10/31/2020	2,365		2,385
Waco, TX	4.75%	12/19/2020	14,815		14,890
Deerfield, IL	3.71%	1/1/2021	10,355		10,447
Winston-Salem, NC	3.41%	6/1/2021	3,135		3,354
Winston-Salem, NC	3.42%	7/1/2021	1,043		1,114
Logistics Portfolio - Pool 1²	4.27%	1/1/2022	37,856		38,107
CCC Portfolio²	4.24%	10/6/2022	22,691		22,814
Logistics Portfolio - Pool 4²	4.36%	12/5/2022	79,500		79,500
Romeoville, IL	3.80%	4/6/2023	24,835		24,951
Romeoville, IL³	9.37%	4/6/2023	6,613		6,623
KIK USA Portfolio²	4.31%	7/6/2023	7,077		7,154
Yuma, AZ	5.27%	12/6/2023	11,804		11,858
Allentown, PA	5.16%	1/6/2024	22,586		22,690
Spartanburg, SC	3.72%	2/1/2024	5,447		5,635
Natick, MA	5.21%	3/1/2024	31,121		31,224
Natick, MA³	10.38%	3/1/2024	3,458		3,469
Maple Grove, MN	3.88%	5/6/2024	16,291		16,380
Curtis Bay, MD	4.31%	7/1/2024	13,500		13,500
Rialto, CA	3.91%	8/1/2024	54,543		54,741
Houston, TX	3.68%	9/1/2024	26,000		26,000
Durham, NC	4.02%	9/6/2024	3,614		3,631
Charleston, SC	3.80%	2/1/2025	5,831		6,001
Hackettstown, NJ	5.49%	3/6/2026	9,420		9,455
Hutchins, TX	5.41%	6/1/2029	21,269		21,578
Total mortgage notes payable			$	550,953	$	554,498
Net deferred financing costs and net debt premium			8,520		9,023
Total mortgage notes payable, net			$	559,473	$	563,521


1.	Represents the interest rate as of March 31, 2018 that was recorded for financial reporting purposes, which reflects the effect of interest rate swaps and amortization of financing costs and fair market value premiums or discounts.


2.	As of March 31, 2018, there were two properties under the Logistics Portfolio - Pool 3 mortgage, three properties under the Logistics Portfolio - Pool 1 mortgage, five properties under the CCC Portfolio mortgage, six properties under the Logistics Portfolio - Pool 4 mortgage, and three properties under the KIK USA Portfolio mortgage.


3.	Mortgage notes represent mezzanine financing at the properties.

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

Unsecured Debt

2015 Credit Facility and Term Loans

In December 2015, the Company entered into an agreement, or the Credit Agreement, for a new $1,900,000 credit facility, or the 2015 Credit Facility, consisting of an $850,000 senior unsecured revolving credit facility, or the 2015 Revolving Credit Facility, and $1,050,000 term loan facility with JPMorgan Securities LLC and Merrill Lynch, Pierce, Fenner and Smith Incorporated. The 2015 Revolving Credit Facility consists of a $750,000 U.S. dollar revolving credit facility and a $100,000 multicurrency revolving credit facility. The 2015 Revolving Credit Facility matures in January 2020, but may be extended for two additional six-month periods upon the payment of applicable fees and satisfaction of certain customary conditions. The term loan facility, or the 2015 Term Loan, consists of a $300,000 term loan facility that matures in January 2019 with one 12-month extension option, or the 3-Year Term Loan, and a $750,000 term loan facility that matures in January 2021, or the 5-Year Term Loan. In December 2015, the Company also entered into a new $175,000 7-year unsecured term loan with Capital One, N.A, or the 7-Year Term Loan, which matures in January 2023. In October 2017, the Company modified the 7-Year Term Loan by increasing the loan amount to $400,000 and reducing the interest rate to the terms described below.

Outstanding borrowings under the 2015 Revolving Credit Facility incur interest at a floating rate based upon, at the Company's option, either (i) adjusted LIBOR plus an applicable margin ranging from 0.88% to 1.55%, depending on the Company's credit ratings, or (ii) the alternate base rate plus an applicable margin ranging from 0.00% to 0.55%, depending on the Company's credit ratings. The Company is also required to pay quarterly in arrears a 0.13% to 0.30% facility fee, depending on its credit ratings, on the total commitments under the 2015 Revolving Credit Facility. Outstanding borrowings under the 2015 Term Loan and the 7-Year Term Loan incur interest at a floating rate based upon, at the Company's option, either (i) adjusted LIBOR plus an applicable margin ranging from 0.90% to 1.75%, depending on the Company's credit ratings, or (ii) the alternate base rate plus an applicable margin ranging from 0.00% to 0.75%, depending on the Company's credit ratings. The alternate base rate for the 2015 Revolving Credit Facility and the 7-Year Term Loan is the greater of (x) the prime rate announced by JPMorgan Chase Bank, N.A. or Capital One, respectively, (y) 0.50% above the Federal Funds Effective Rate, and (z) the adjusted LIBOR for a one-month interest period plus 1.00%.

The Company’s unsecured borrowing facilities include a series of financial and other covenants with which the Company must comply in order to borrow under the facilities. The Company was in compliance with the covenants under the facilities as of March 31, 2018. Refer to the table at the end of this Note 5 for specific terms and the Company’s outstanding borrowings under the facilities.

Senior Unsecured Notes

During 2015 and 2016, the Company issued and sold an aggregate $500,000 principal amount of senior unsecured notes payable in private placements, which have maturities ranging from 2022 through 2026 and bear interest semiannually at rates ranging from 3.89% to 4.97%. Refer to the table later in Note 5 for specific terms of the Company's Senior Unsecured Notes.

Exchangeable Senior Notes

In September 2017, the Company's $115,000 of 3.75% Exchangeable Senior Notes were exchanged for 5,258,420 of the Company's common shares.

Gramercy Property Trust and GPT Operating Partnership LP

Notes to Consolidated Financial Statements

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

March 31, 2018

The terms of the Company’s unsecured debt obligations and outstanding balances as of March 31, 2018 and December 31, 2017 are set forth in the table below:



	Stated Interest Rate		Effective Interest Rate ¹		Maturity Date	Outstanding Balance
	Stated Interest Rate		Effective Interest Rate ¹		Maturity Date	March 31, 2018		December 31, 2017
2015 Revolving Credit Facility - USD tranche	2.89	%	2.89	%	1/8/2020	$	275,000	$	345,000
2015 Revolving Credit Facility - Multicurrency tranche	1.32	%	1.32	%	1/8/2020	17,543		12,162
3-Year Term Loan	2.91	%	2.33	%	1/8/2019	300,000		300,000
5-Year Term Loan	2.91	%	2.70	%	1/8/2021	750,000		750,000
7-Year Term Loan	2.76	%	3.00	%	1/9/2023	400,000		400,000
2015 Senior Unsecured Notes	4.97	%

Gramercy Property Trust 10-Q