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Section 1: 10-K (FORM 10-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-K 
 
ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2017
or
 
¨ 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, 32nd Floor, New York, NY 10016
(Address of principal executive offices – zip code)
 
 
 
 
 
(212) 297-1000
(Registrant’s telephone number, including area code)
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: 
Registrant
 
Title of Each Class
 
Name of Each Exchange on Which Registered
Gramercy Property Trust
 
Common Shares, $0.01 Par Value
 
New York Stock Exchange
Gramercy Property Trust
 
Series A Cumulative Redeemable Preferred Shares, $0.01 Par Value
 
New York Stock Exchange
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Gramercy Property Trust    Yes x      No ¨        GPT Operating Partnership LP Yes x    No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Gramercy Property Trust    Yes ¨      No x        GPT Operating Partnership LP Yes ¨      No x
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 (Section 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Gramercy Property Trust    x        GPT Operating Partnership LP    x
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)

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Gramercy Property Trust    Yes ¨      No x        GPT Operating Partnership LP Yes ¨      No x

As of February 23, 2018, Gramercy Property Trust had 160,782,974 common shares outstanding. The aggregate market value of common shares held by non-affiliates of Gramercy Property Trust (150,748,342 shares) at June 30, 2017, was $4,478,733,231. The aggregate market value was calculated by using the closing price of the common shares as of that date on the New York Stock Exchange, which was $29.71 per share.

 
DOCUMENTS INCORPORATED BY REFERENCE

Portions of Gramercy Property Trust’s Definitive Proxy Statement for its 2018 Annual Meeting of Shareholders expected to be filed within 120 days after the close of Gramercy Property Trust's fiscal year are incorporated by reference into Part III of this Annual Report on Form 10-K.





EXPLANATORY NOTE
This report combines the annual reports on Form 10-K for the year ended December 31, 2017 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 December 31, 2017, the Company owned 97.33% of the outstanding general and limited partnership interest in the Operating Partnership. As of December 31, 2017, noncontrolling investors owned approximately 2.67% 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 annual reports on Form 10-K 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 11, Shareholders' Equity (Deficit) of the Company;
Note 12, Partners' Capital of the Operating Partnership;
Note 13, Noncontrolling Interests;




Note 18, Selected Quarterly Financial Data of the Company (unaudited); and
Note 19, Selected Quarterly Financial Data of the Operating Partnership (unaudited).
This report also includes separate Part II, Item 5. Market for Registrants' Common Equity and Related Shareholder Matters and Issuer Purchases of Equity Securities, Item 6. Selected Financial Data and Item 9A. 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 AND GPT OPERATING PARTNERSHIP LP

TABLE OF CONTENTS
10-K PART AND ITEM NO.
 
Page
PART I
PART II
 
PART III
PART IV
 
 

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Part I
ITEM 1.    Business 
ABOUT US
Gramercy Property Trust, a Maryland real estate investment trust ("REIT"), is a leading global investor and asset manager of commercial real estate. We specialize in acquiring and managing income producing commercial real estate leased to high quality tenants in major markets throughout the United States and Europe.
Our commercial real estate holdings predominantly consist of industrial properties comprising 78.0% of our Annualized Base Rent (“ABR”) as of December 31, 2017. We also own a number of single and multi-tenant office properties and a portfolio of specialty retail assets, which include retail bank branches, fitness centers and rental car facilities.
At December 31, 2017, our wholly-owned industrial portfolio was comprised of 75.8 million aggregate rentable square feet with a total ABR of $358.1 million and an average building age of approximately 14 years. The industrial portfolio's largest markets at year end (weighted by ABR) were Chicago, Atlanta, Dallas, Los Angeles/Inland Empire, Indianapolis, Baltimore/Washington, South Florida, Memphis, Spartanburg, and Central Pennsylvania. Our wholly-owned office portfolio was comprised of 5.0 million aggregate rentable square feet with a total ABR of $83.7 million. Lastly, our wholly-owned specialty retail portfolio was comprised of 1.3 million aggregate rentable square feet of building space with a total ABR of $17.5 million that we lease to fitness centers, a rental car operator and various retail bank branches in infill locations, predominantly leased by Bank of America, N.A.
As of December 31, 2017, our wholly-owned portfolio had 96.5% occupancy and a weighted average remaining lease term of 7.2 years (based on ABR). As of December 31, 2017, our tenants were 33.3% investment grade rated or were the subsidiaries of parents with investment grade ratings (based on ABR). The top five tenants by ABR include FedEx Corp. and subsidiaries (5.6%), Life Time Fitness (3.1%), Bank of America, N.A. (2.5%), Amazon and subsidiaries (1.9%), and The Clorox International Company (1.9%).
As of December 31, 2017, we also own unconsolidated equity investments comprised of industrial and office properties with an aggregate 2.3 million rentable square feet and an average base rent per square foot of $19.24 (based on ABR).
Corporate Structure
We were formed as a Maryland REIT in March 2004. In December 2015, we completed a merger (the “Merger”) of Gramercy Property Trust Inc. ("Legacy Gramercy") into Chambers Street Properties ("Chambers"), with Chambers as the surviving entity. Following the Merger, we changed our name to “Gramercy Property Trust” and our New York Stock Exchange (“NYSE”) trading symbol to “GPT.”
Our operating partnership, GPT Operating Partnership LP (the "Operating Partnership"), indirectly owns all of our consolidated real estate investments and our interests in unconsolidated investments. We are the sole general partner of the Operating Partnership. The Operating Partnership is the 100.0% owner of all of its direct and indirect subsidiaries. As of December 31, 2017, third-party holders of limited partnership interests owned approximately 2.67% of the Operating Partnership.

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We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code") and generally will not be subject to U.S. federal income taxes to the extent we timely distribute our taxable income, if any, to our shareholders. We have in the past established, and may in the future establish, taxable REIT subsidiaries ("TRSs") to effect various taxable transactions. Those TRSs would incur U.S. federal, state and local taxes on the taxable income from their activities.
Unless the context requires otherwise, all references to “Company,” “Gramercy,” “we,” “our,” and “us” mean Legacy Gramercy and its subsidiaries, including Legacy Gramercy's operating partnership and its subsidiaries, for periods prior to the Merger closing and Gramercy Property Trust and its subsidiaries, including the Operating Partnership, for periods following the Merger closing.
Investment Strategy
Our strategy is to focus on stabilized, income producing industrial properties and to pursue office properties on an opportunistic basis. We believe industrial properties offer compelling risk adjusted returns in the net leased marketplace. In our experience, industrial assets have more stable tenancy and a more direct and critical relationship to the tenant’s underlying operations. Industrial assets also have lower carrying costs when vacant, lower re-leasing costs to replace tenants and lower ongoing capital requirements during the period of ownership.
Focus on Real Estate Fundamentals
We believe that real estate underwriting is an important aspect of our investment process in the net lease market, and that traditional real estate fundamentals will be the primary driver of investment performance in the current environment, in contrast to past practices where long lease terms and tenant credit quality were the primary drivers.

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Target Real Estate Markets with Attractive Fundamentals - We will continue to concentrate our investment activity in target markets with growing populations, high quality infrastructure, diversified local economies with multiple economic drivers, strong demographics, pro-business local governments and high quality local labor pools. We believe that these markets offer a higher probability of producing long-term rent growth and/or capital appreciation.
Buy and Own Properties with Contract Rents that are Competitive with Market Rents - We target properties with contract rents that are competitive with rents for similar properties in the market as a way to reduce the volatility of cash flows that can occur upon the expiration of a lease or the loss of a tenant.
Properties with Long Lease Terms - We generally target properties that have between five and 20 years of lease term. We believe that longer lease terms provide more stable cash flows, are less susceptible to short term changes in market conditions and require less capital expenditures to maintain tenancy. We also consider properties with shorter lease terms individually or as part of portfolio transactions where we believe that compelling returns can be achieved.
Properties Acquired at Above Market Yields Due to Some Market Inefficiency - We seek opportunities to acquire properties at attractive prices due to a mispricing of tenant credit or real estate risk, or a misunderstanding of the nature of the investment that may limit the competitive environment.
Target Mission Critical, Non-Traditional Net Leased Properties - We target specialized properties that we believe fall outside many traditional institutional investor parameters, but offer unique utility to a tenant or an industry and can therefore be acquired at attractive yields relative to the underlying risk. Examples of specialized properties include cross-dock truck terminals, cold storage facilities, parking facilities, air-freight facilities, steel distribution facilities, properties with high parking requirements and other mission critical facilities.
Target Transactions Where We Have a Competitive Advantage
Individual Properties - We seek to acquire individual properties where the size of the transaction causes less competition from larger institutions who generally look for larger properties and portfolios.
Portfolios - We believe there are also opportunities to purchase portfolios of properties from existing owners who are either investor owners or corporations that occupy their properties. The market for large portfolios currently has many well-capitalized buyers actively bidding for these portfolios and we expect this market to remain competitive for the foreseeable future.
Sale Leasebacks - We believe our management team is among the most experienced and well known in the sale leaseback industry, such that we can source and effectively compete on sale leaseback transactions.
Developments - We engage in select development activities, which are primarily build-to-suit transactions, where we acquire newly constructed buildings that are pre-leased to a tenant. We will also opportunistically invest in limited speculative industrial development either directly or with developers through joint venture and mezzanine debt structures.
Actively Manage the Portfolio
Seek Opportunities to Extend Leases through Expansions or Capital Investments - We focus on net leased investment properties where, in our view, there is the potential to invest incremental capital or expand buildings to accommodate a tenant’s business, extend lease terms and increase the value of a property. We believe these opportunities can generate attractive returns due to the nature of the relationship between the landlord and tenant.

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Acquire Assets at Competitive Rent Levels - We target industrial and office properties with rents that we believe are competitive with, or slightly below, market rents. We believe that the net leased marketplace does not properly differentiate and price these properties and that these investment opportunities can generate growth in income and residual value over time.
Identify Long-term Appreciation Opportunities - We believe there are opportunities to acquire properties with longer term leases that provide current cash flow for the term of the lease and that, if correctly identified, have the potential upon lease expiration for a higher and better use that may provide capital appreciation over the long-run.
Focus on Risk Management
Underwrite and Structure Investments to Protect Downside and Preserve Cash Flows - We seek to invest in properties that have steady, predictable cash flow through: (a) long-term, well-structured leases, (b) high leasehold value for tenants, and (c) a high likelihood of renewal. We further seek to protect our investment by purchasing properties at prices at or below estimated replacement cost.
Utilize Portfolio Diversification - We seek to diversify our portfolio by property type, tenant credit, geography and tenant industry. As of December 31, 2017, our largest tenant was FedEx Corp. and subsidiaries, which accounted for 5.6% of our ABR as of that date. As we continue to grow, we expect to further diversify our portfolio.
Investment Process
We utilize relationships with various real estate owners, real estate advisors and intermediaries, developers, investment and commercial banks, private equity sponsors, and other potential deal sources to identify a broad pipeline of investment opportunities. Our review includes an evaluation of the creditworthiness of the tenant(s), the criticality of the property to the tenant(s), an evaluation of the market and submarket where the property is located, the location, age, functionality and marketability of the property, the lease structure and how contract rents relate to rents for similar buildings in the submarket, the replacement cost for a similar asset, the expected returns and pricing, and other factors that go into the overall evaluation of the investment opportunity. We also perform a due diligence review with respect to each potential acquisition, including evaluation of physical condition and structural soundness, zoning and site requirement compliance and environmental assessments. Our management team actively looks to source proprietary investment opportunities that are not being generally marketed for sale.
Investment Policy
All real estate investments, dispositions and financings must be approved by a committee consisting of our most senior officers, including the affirmative approval of our Chief Executive Officer. Real estate investments and dispositions having a transaction value greater than $50.0 million must also be approved by the investment committee of our board of trustees. Our board of trustees must approve all such transactions having a value of $100.0 million or more. Additionally, the investment committee of the board must approve non-recourse financings greater than $50.0 million and our board of trustees must approve all recourse financings, regardless of amount, non-recourse financings of $100.0 million or more, and all related-party transactions, regardless of amount. For purposes of approval thresholds, unconsolidated equity investments are calculated using our allocated portion of the price of the asset or amount of the financing.
We generally intend to hold our properties for an extended period. However, circumstances might arise which could result in the early sale of some properties. We also may acquire a portfolio of properties with the intention of holding only a core group of properties and disposing of the remainder of the portfolio in single or multiple sales. The determination

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of whether a particular property should be sold or otherwise disposed of will be made with the view of achieving maximum capital appreciation.
We may use TRSs to acquire, hold, or dispose of properties, including assets that may not be deemed to be REIT-qualified assets. Taxes paid by such entity will reduce the cash available to us to fund our continuing operations and cash available for distributions to our shareholders.
Some of our investments have been made and may continue to be made through unconsolidated equity investments, which permit us to own interests in larger properties or portfolios without restricting the diversity of our portfolio. As of December 31, 2017, our unconsolidated equity investments consisted of the following: (1) 25.0% interest in the Strategic Office Partners unconsolidated equity investment, which invests in single-tenant office assets in high-growth metropolitan areas in the United States and owns a portfolio of 13 properties, (2) 51.0% interest in an e-commerce joint venture formed in November 2017, (3) 80.0% interest in one industrial property in the United Kingdom, (4) 25.0% interest in an office property located in Somerset, New Jersey, and (5) 50.0% interest in an office property located in Morristown, New Jersey. Additionally, in late 2017 we formed a new European investment fund, in which we have a 19.9% interest, and which will begin acquiring properties in 2018.
Capital Strategy
In addition to cash on hand and cash from operations, we anticipate using funds from various sources to finance our acquisitions and operations, including public and private debt and equity issuances, unsecured bank credit facilities and term loans, property-level mortgage debt, common units of limited partnership in the Operating Partnership ("OP Units") and other sources that may become available from time to time. We believe that moderate leverage is prudent and we consider all capital-related decisions with the intention to maintain our investment grade ratings of Baa3 from Moody’s Investors Services, BBB from Fitch Ratings, and BBB- from Standard and Poor’s Rating Service.
Significant 2017 Activities
During the year ended December 31, 2017, we acquired 79 properties aggregating approximately 19.6 million square feet for approximately $1.5 billion and also acquired seven land parcels for approximately $10.2 million, on which we have committed to construct industrial facilities for an estimated $95.5 million. During the year ended December 31, 2017, we sold 34 properties as well as two offices that were part of another asset aggregating 3.2 million square feet for gross proceeds of $412.6 million. As a result of the transactions during the year, we have continued the repositioning strategy that we commenced in 2016 following the Merger, which is focused on reducing our office exposure and forming a real estate portfolio that primarily consists of institutional quality income oriented industrial properties throughout the United States. As of December 31, 2017, our portfolio was 78.0% industrial, based on ABR.
In July 2017, our European investment fund in which we owned a 14.2% interest (the “Gramercy European Property Fund”), sold 100.0% of its assets and, concurrently, we sold our 5.1% interest in another European investment in real estate assets (the “Goodman Europe JV”). The transactions resulted in net distributions to us of approximately $102.8 million (€90.1 million), inclusive of a promoted interest distribution of approximately $8.8 million (€7.7 million). As of December 31, 2017, we had no remaining interest in the Gramercy European Property Fund or the Goodman Europe JV.
In October 2017, we formed a new European investment fund with several other equity investment partners, (the “Gramercy European Property Fund III”), which has total initial capital commitment of $315.3 million (€262.6 million) from all investors, of which our initial capital commitment is $62.7 million (€52.2 million), representing an interest of

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approximately 19.9%. We provide asset and property management and accounting services to the Gramercy European Property Fund III, for which we are entitled to management fees and a promoted interest. During the year ended December 31, 2017, we contributed $3.0 million (€2.5 million) to the Gramercy European Property Fund III, of which $2.3 million (€1.9 million) was accrued as of December 31, 2017.
In November 2017, we formed a new 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 country, (the "E-Commerce JV"). We provide asset and property management and accounting services to the E-Commerce JV, for which we earn management fees. We have a 51.0% interest in the E-Commerce JV and have 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. Our pro rata funding commitment for the initial six properties is estimated at approximately $110.0 million, which will be funded using a combination of OP Units and cash.
Development
We have a development practice that focuses primarily on build-to-suit transactions where a tenant has signed a lease in advance of construction and a developer or builder bears the risk of completion on-time and on-budget, as well as performing property improvements specified in leases. We also invest opportunistically in speculative development projects where we bear the risk of leasing the property. We pursue these developments in markets where we have competitive advantages, such as an existing footprint of industrial properties.
During the year ended December 31, 2017, we completed one industrial build-to-suit property located in Spartanburg, South Carolina for 432,100 square feet and a total investment of approximately $25.8 million. As of December 31, 2017, we had seven industrial developments in progress located in Charleston, South Carolina, Phoenix, Arizona, Charlotte, North Carolina, and Memphis, Tennessee for a total of approximately 1,383,262 square feet and an estimated investment of approximately $100.9 million.
During the year ended December 31, 2017, we entered into a mezzanine lending facility to provide development capital to a leading industrial developer for up to 85.0% loan-to-cost on new industrial developments in select markets. We believe that this allows us the opportunity to participate in strong industrial market fundamentals with a risk exposure more appropriate to our strategy. As of December 31, 2017, the carrying value of our loan investments was $22.2 million and the loan investments had an aggregate weighted average interest rate of 10.47%.
Other General Business Information
Operating Segments
Accounting Standards Codification, or ASC, 280, Segment Reporting, establishes standards for the manner in which public enterprises report information about operating segments. In prior periods, we viewed and presented our operations as two segments, Investments/Corporate and Asset Management. However, based upon the significant reduction in our third-party asset management operations following the expiration of the KBS management contract as of March 31, 2017, we view our operations as one segment, which consists of net leasing operations. As of December 31, 2017, we had no other reportable segments.
Employees
As of December 31, 2017, we had 109 employees. None of our employees are represented by a collective bargaining agreement.

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Environmental Matters
We are exposed to various environmental risks that may result in unanticipated losses and affect our operating results and financial condition. We generally conduct environmental assessments of the properties we acquire, including land. While some of these assessments have led to further investigation and sampling, none of the environmental assessments has revealed an environmental liability that we believe would have a material adverse effect on our business, financial condition or results of operations.
Compliance With The Americans With Disabilities Act of 1990
Many of the properties underlying our investments are required to meet federal requirements related to access and use by disabled persons as a result of the Americans with Disabilities Act of 1990. In addition, a number of additional federal, state and local laws may require modifications to any properties we purchase, or may restrict further renovations of our properties, with respect to access by disabled persons. Noncompliance with these laws or regulations could result in the imposition of fines or an award of damages to private litigants.
Insurance
We carry commercial liability and all risk property insurance, including where required, flood, earthquake, wind and terrorism coverage, on substantially all of the properties that we own. For certain net leased properties, however, we may rely on our tenant’s insurance and not maintain separate coverage. We continue to monitor the state of the insurance market and the scope and costs of specialty coverage, including flood, earthquake, wind and terrorism. We cannot anticipate what coverage will be available on commercially reasonable terms in future policy years. We believe that the insured limits are appropriate given the relative risk of loss, the cost of the coverage and industry practice.
Substantially all of our properties are covered by an environmental insurance policy that expires in October 2019, and several of our properties are separately covered by individual insurance policies that have 10-year terms. These policies are subject to exclusions and limitations and do not cover all of the properties owned by us, and for those properties covered under the policies, insurance may not fully compensate us for any environmental liability. We may not desire to renew an environmental insurance policy in place upon expiration or a replacement policy may not be available at a reasonable cost, if at all.
Corporate Governance and Other Information
Our corporate office is located in midtown Manhattan at 90 Park Avenue, 32nd Floor, New York, New York 10016. We also have regional offices located in Horsham, Pennsylvania, London, United Kingdom, and several other locations across the United States and Europe. We can be contacted at (212) 297-1000. We maintain a website at www.gptreit.com. Our reference to our website is intended to be an inactive textual reference only. We make available free of charge through our internet site our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and Forms 3, 4 and 5 filed on behalf of trustees and executive officers and any amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the "SEC").
We emphasize the importance of professional business conduct and ethics through our corporate governance initiatives. Our board of trustees consists of a majority of independent trustees; the Audit, Nominating and Corporate Governance, and Compensation Committees of our board of trustees are composed exclusively of independent trustees. We have adopted corporate governance guidelines, a whistleblowing and whistle blower protection policy, and a code

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of business conduct and ethics. We have made available on our website copies of our board committee charters, declaration of trust and by-laws and various corporate governance policies and guidelines. Information on, or accessible through, our website is not part of, and is not incorporated into, this report. You can also read and copy materials we file with the SEC at its Public Reference Room at 100 F Street, NE, Washington, DC 20549 (1-800-SEC-0330). The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding the issuers that file electronically with the SEC.
Availability of SEC Reports
We file annual, quarterly and current reports, proxy statements and other information required by the Exchange Act with the SEC. Readers may read and copy any document that we file at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. Our SEC filings are also available to the public from the SEC’s internet site at www.sec.gov. Copies of these reports, proxy statements and other information can also be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.

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ITEM 1A.    RISK FACTORS 
Cautionary Note Regarding Forward-Looking Information
This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. You can identify forward-looking statements by the use of forward-looking expressions such as “may,” “will,” “should,” “expect,” “believe,” “anticipate,” “estimate,” “intend,” “plan,” “project,” “continue,” or any negative or other variations on such expressions. Forward-looking statements include information concerning possible or assumed future results of our operations, including any forecasts, projections, plans and objectives for future operations. Although we believe that our plans, intentions and expectations as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that the plans, intentions or expectations will be achieved.
The forward-looking statements contained in this Annual Report on Form 10-K are based on historical performance and management’s current plans, estimates and expectations in light of information currently available to us and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors described in “Risk Factors,” many of which are beyond our control. We believe that these factors include those described in “Risk Factors” but the risks included here are not exhaustive. Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove to be incorrect, our actual results may vary in material respects from what we may have expressed or implied by these forward-looking statements. In evaluating forward-looking statements, you should consider these risks and uncertainties, together with the other risks described from time-to-time in our reports and documents which are filed with the SEC, and you should not place undue reliance on those statements. Any forward-looking statement made by us in this Annual Report on Form 10-K speaks only as of the date of this Annual Report on Form 10-K. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We assume no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required by applicable securities laws.
Risks Related to Our Business and Investments
Our future growth will depend upon our ability to acquire and lease properties in a competitive real estate marketplace.
Our future growth will depend, in large part, upon our ability to acquire and lease properties. In order to grow we need to continue to acquire and finance investment properties and sell non-core properties. We face significant competition with respect to our acquisition and origination of assets from many other companies, including other REITs, insurance companies, private investment funds, hedge funds, specialty finance companies and other investors. Some of our competitors may have greater financial and operational resources, lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different

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risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than we can. Further, some of our competitors have larger customer bases and more established relationships with their customers and suppliers than we do. The competitive pressures we face, if not effectively managed, may have a material adverse effect on our business, financial condition, liquidity and results of operations.
Also, as a result of this competition, we may not be able to take advantage of attractive origination and investment opportunities and therefore may not be able to identify and pursue opportunities that are consistent with our objectives. Competition may limit the number of suitable investment opportunities offered to us. It may also result in higher prices, lower yields and a narrower spread of yields over our borrowing costs, making it more difficult for us to acquire new investments on attractive terms. In addition, competition for desirable investments could delay our investment in desirable assets, which may in turn reduce our earnings per share and negatively affect our ability to declare and make distributions to our shareholders.
A concentration of our investments in a limited number of property classes may leave our profitability vulnerable to a downturn in such sectors.
At any one time, a significant portion of our property investments may be in a limited number of property classes. As a result, we are subject to risks inherent in investments in these classes and downturns in the businesses conducted at these properties could adversely impact our revenues and financial condition if tenants are unable to renew their leases or meet their payment obligations under existing leases.
Adverse economic conditions affecting the particular industries of our tenants may adversely affect our income and our ability to pay distributions to our shareholders.
We are subject to certain industry concentrations with respect to our properties, including among others financial services, pharmaceutical and healthcare, consumer products and internet retail. Adverse economic conditions affecting a particular industry could affect the financial ability of one or more of our tenants to make payments under their leases, which could cause delays in our receipt of rental revenues or a vacancy in one or more of our properties for a period of time, and could lead to an even greater risk to the extent that the makeup of our tenants becomes even less diversified by industry as a result of adverse conditions affecting any one particular industry. Therefore, changes in economic conditions of the particular industry of one or more of our tenants could reduce our ability to pay dividends and the value of one or more of our properties at the time of sale of such properties.
We are dependent on external sources of capital for growth.
To qualify as a REIT, we are required each year to distribute at least 90.0% of our taxable income (determined without regard to the dividends-paid-deduction and by excluding any net capital gain) to our shareholders and we may be subject to tax to the extent our taxable income is not fully distributed. Historically, we have satisfied these distribution requirements by making cash distributions to our shareholders, but we may choose to satisfy these requirements by making distributions of cash or other property, including, in certain circumstances, our own shares. Assuming we continue to satisfy these distribution requirements with cash, we may not be able to fund all future capital needs, including acquisition and development activities, from cash retained from operations and may have to rely on third-party sources of capital. Furthermore, to maintain our REIT status and not have to pay federal income and excise taxes, we may need to borrow funds on a short-term basis to meet the REIT distribution requirements even if the then-prevailing market conditions are not favorable for these borrowings. These short-term borrowing needs could result from differences in timing between the actual receipt of cash and inclusion of income for federal income tax purposes, or the effect of nondeductible capital expenditures, the creation of reserves or required debt or amortization payments.

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If we cannot generate or obtain additional capital, our ability to make acquisitions and lease properties will be limited. We are subject to risks associated with debt and capital share issuances, and such issuances may have consequences to holders of our common and preferred shares.
Our ability to make acquisitions and lease properties will depend, in large part, upon our ability to raise additional capital or generate funds from the sale of properties. If we were to raise additional capital through the issuance of equity securities, we could dilute the interests of holders of our common shares. Our board of trustees may authorize the issuance of additional classes or series of preferred shares which may have rights that could dilute, or otherwise adversely affect, the interest of holders of our common shares.
We intend to incur additional indebtedness in the future, which may include an additional corporate credit facility. Such indebtedness could also have other important consequences to holders of the notes and holders of our common and preferred shares, including subjecting us to covenants restricting our operating flexibility, increasing our vulnerability to general adverse economic and industry conditions, limiting our ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements, requiring the use of a portion of our cash flow from operations for the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund working capital, acquisitions, capital expenditures and general corporate requirements, and limiting our flexibility in planning for, or reacting to, changes in our business and our industry.
Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.
Changing or new laws, regulations and standards relating to corporate governance and public disclosure, including SEC regulations and NYSE rules, can create uncertainty for companies such as ours. These new or changed laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity. As a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We are committed to maintaining high standards of corporate governance and public disclosure and our efforts to comply with evolving laws, regulations, and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies, we may incur additional expenses to comply with standards set by regulatory authorities or governing bodies which could have a material adverse effect on our business and results of operations.
Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to pay dividends to our shareholders.
We currently have debt outstanding and expect that we will incur additional indebtedness in the future. Interest we pay on our outstanding debt reduces cash available for distributions. Additionally, if we incur variable rate debt, increases in interest rates would increase our interest costs, which would reduce our cash flows and our ability to service indebtedness and, therefore, our ability to pay dividends to our shareholders. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments in properties at times which may not permit realization of the maximum return on such investments.
We are dependent on key personnel whose continued service is not guaranteed.

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We rely on a small number of persons who comprise our existing senior management team and our board of trustees to implement our business and investment strategies. While we have entered into employment and/or retention agreements with certain members of our senior management team, they may nevertheless cease to provide services to us at any time. The loss of services of any of our key management personnel or trustees or significant numbers of other employees, or our inability to recruit and retain qualified personnel or trustees in the future, could have an adverse effect on our business.
Our reputation, ability to do business, and results of operations may be harmed by improper or inappropriate conduct of our employees, agents or business partners.
We cannot provide assurance that our internal controls and compliance systems will always protect us from acts committed by our employees, agents, or business partners that would violate U.S. and/or non-U.S. laws or fail to protect our confidential information, including the laws governing payments to government officials, bribery, fraud, anti-kickback and false claims rules, competition, money laundering, and data privacy laws, as well as the improper use of proprietary information or social media. Any such allegations, violations of law or improper actions could subject us to civil or criminal investigations in the United States and in other jurisdictions, could lead to substantial civil or criminal, monetary and non-monetary penalties, and related shareholder lawsuits, could lead to increased costs of compliance, could damage our reputation and could have a material effect on our financial statements.
We are required to make a number of judgments in applying accounting policies, and different estimates and assumptions in the application of these policies could result in changes to our reporting of financial condition and results of operations.
Various estimates are used in the preparation of our financial statements, including estimates related to asset and liability valuations (or potential impairments), various receivables and the dilutive effect of participating instruments including our convertible notes. Often these estimates require the use of market data values which may be difficult to assess, as well as estimates of future performance or receivables collectability which may be difficult to accurately predict. While we have identified those accounting policies that are considered critical and have procedures in place to facilitate the associated judgments, different assumptions in the application of these policies could result in material changes to our financial condition and results of operations.
We utilize, and intend to continue to utilize, leverage which may limit our financial flexibility in the future.
We make acquisitions and operate our business in part through the utilization of leverage pursuant to loan agreements with various financial institutions. These loan agreements contain financial covenants that restrict our operations. These financial covenants, as well as any future financial covenants we may enter into through further loan agreements, could inhibit our financial flexibility in the future and prevent distributions to shareholders.
We may incur losses as a result of ineffective risk management processes and strategies.
We have established and maintain risk management policies and procedures designed to identify, monitor and mitigate our risk exposure through a risk and control framework encompassing a variety of separate but complementary financial, credit, operational, compliance and legal reporting systems, internal controls, management review processes and other mechanisms. While we employ a broad and diversified set of risk monitoring and risk mitigation techniques, those techniques and the judgments that accompany their application cannot anticipate every economic and financial outcome or the specifics and timing of such outcomes. Expansion of our business activities may also result in our being exposed to risks to which we have not previously been exposed or may increase our exposure to certain types of risks, and we may not effectively identify, monitor, and mitigate these risks as our business activity changes or increases. Any

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failure to effectively identify and mitigate the risks to which we are exposed could have an adverse effect on our business, results of operations and financial condition.
We are highly dependent on information systems and third parties, and systems failures could significantly disrupt our business, which may, in turn, negatively affect our operating results.
Our business is highly dependent on communications and information systems, many of which are provided by third parties. Any failure or interruption of our systems could cause delays in our collection of rents or significant increases in our expenses, which could have a material adverse effect on our operating results.
We may not be able to relet or renew leases at the properties held by us on terms favorable to us or at all.
We are subject to risks that upon expiration or earlier termination of the leases for space located at our properties the space may not be relet or, if relet, the terms of the renewal or reletting (including the costs of required renovations or concessions to tenants) may be less favorable than current lease terms. Any of these situations may result in extended periods where there is a significant decline in revenues or no revenues generated by a property. If we are unable to relet or renew leases for all or substantially all of the spaces at these properties, if the rental rates upon such renewal or reletting are significantly lower than expected, if our reserves for these purposes prove inadequate, or if we are required to make significant renovations or concessions to tenants as part of the renewal or reletting process, we will experience a reduction in net income and may be required to reduce or eliminate distributions to our shareholders. In addition, certain of our properties are currently leased at above-market rents, so our shareholders may also suffer a loss (and a reduction in distributions) after the expiration of the lease terms if we are not able to relet such spaces on favorable terms.
Our results of operations rely on certain major tenants and geographic concentrations which make us more susceptible to adverse events with respect to those tenants and geographic areas.
For the year ended December 31, 2017, there were no tenants that accounted for more than 10.0% of our revenue, as our largest tenant generated approximately 5.8% of our rental revenue, and 11.2%, 11.1%, and 10.6% of our rental revenue came from tenants in California, Texas, and Florida, respectively. Adverse changes in the financial condition of a tenant with whom we have a significant credit concentration now or in the future could potentially result in their failure to make rental payments and/or lead to a default under their leases. Additionally, declining conditions (including business layoffs, downsizing, industry slowdowns, changing demographics and other factors) in the areas where our properties are located and/or concentrated, and local real estate conditions (such as oversupply of, or reduced demand for, office, industrial or retail properties) may have an adverse effect on the value of our properties or the ability of tenants to pay rent for our properties in these geographic areas. Such adverse circumstances could adversely affect our results of operations, our cash available for distribution to our shareholders, and our business.

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We lease a significant portion of our real estate to tenants who do not have investment grade credit ratings, which may result in our leasing to tenants that are more likely to default in their obligations to us.
A significant portion of the leases at our properties are with tenants that do not have investment grade credit ratings. While all of our tenants face potential exposure to adverse business or economic conditions which could lead to an inability to meet their obligations to us, tenants that do not have an investment grade rating may have a greater risk of default. Non-investment grade tenants may not have the financial capacity or liquidity to adapt to these conditions or may have less diversified businesses, which may exacerbate the effects of adverse conditions on their businesses. Moreover, the fact that a substantial majority of our tenants are not investment grade may cause investors or lenders to view our cash flows as potentially less stable, which may increase our cost of capital, limit our financing options or adversely affect the trading price of our common shares.
The insolvency, bankruptcy or receivership of our tenants could lead to lease defaults or terminations which could adversely affect our results of operations.
At any time, our tenants may experience a material business downturn, weakening their financial condition and potentially resulting in their insolvency or bankruptcy. As a result, our tenants may fail to make timely rental payments and/or default under their leases which may reduce our revenues unless a default is cured or a suitable replacement tenant is found promptly. In many cases, we have made substantial up front investments in the applicable leases, through tenant improvement allowances and other concessions, as well as typical transaction costs (including professional fees and commissions) that we may not be able to recover. In the event of any tenant default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment.
The bankruptcy or insolvency of a tenant may also adversely affect the income produced by our properties. If any tenant becomes a debtor in a case under the U.S. Bankruptcy Code, we cannot evict the tenant solely because of the bankruptcy. In addition, the bankruptcy court might authorize the tenant to reject and terminate their lease with us. The bankruptcy of a tenant or lease guarantor could delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude collection of these sums. If a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages. Any unsecured claim we hold may be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims, and there are restrictions under bankruptcy laws that limit the amount of the claim we can make if a lease is rejected.
Our revenue and cash flow could be materially adversely affected if any of our significant tenants were to become bankrupt or insolvent, suffer a downturn in their business, fail to abide by the terms of their leases, fail to renew their leases at all or renew on terms less favorable to us than their current terms.
Inflation may adversely affect our financial condition and results of operations.
Although inflation has not materially impacted our results of operations in the recent past, increased inflation could have a more pronounced negative impact on any variable rate debt we incur in the future and on our results of operations. During times when inflation is greater than increases in rent, the contracted rent increases called for under our leases may be unable to keep pace with the rate of inflation. Likewise, even though our triple-net leases generally reduce our exposure to rising property expenses resulting from inflation, substantial inflationary pressures and increased costs may have an adverse impact on our tenants, which may adversely affect the tenants’ ability to pay rent.

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Our leases may require us to pay property-related expenses that are not the obligations of our tenants.
Under the terms of the majority of our leases, in addition to satisfying their rent obligations, our tenants are responsible for the payment of real estate taxes, insurance and ordinary maintenance and repairs. However, pursuant to certain of our current leases and leases we may assume or enter into in the future, we may be required to pay certain expenses, such as the costs of environmental liabilities, roof and structural repairs, insurance, certain non-structural repairs and maintenance and other costs and expenses for which insurance proceeds or other means of recovery are not available. If one or more of our properties incur significant expenses under the terms of the leases, such property, our business, financial condition and results of operations will be adversely affected and the amount of cash available to meet expenses and to make distributions to our shareholders may be reduced.
We may be required to reimburse tenants for overpayments of estimated operating expenses.
Under certain of our leases, tenants pay us as additional rent their proportionate share of the costs we incur to manage, operate and maintain the buildings and properties where they rent space. These leases often limit the types and amounts of expenses we can pass through to our tenants and allow the tenants to audit and contest our determination of the operating expenses they are required to pay. Given the complexity of certain additional rent calculations, tenant audit rights under large portfolio leases can remain unresolved for several years. If as a result of a tenant audit it is determined that we have collected more additional rent than we are permitted to collect under a lease, we must refund the excess amount back to the tenant and, sometimes, also reimburse the tenant for its audit costs. Such unexpected reimbursement payments could materially adversely affect our financial condition and results of operations.
Certain of our properties are special use and/or build-to-suit and may be difficult to sell or relet upon tenant defaults or lease terminations.
We focus our investments on commercial and industrial properties, a number of which may include special use and/or build-to-suit properties. These types of properties are relatively illiquid compared to other types of real estate and financial assets and this illiquidity will limit our ability to quickly change our portfolio in response to changes in economic or other conditions. With these properties, if the current lease is terminated or not renewed, we may be required to renovate the property or to make rent concessions in order to lease the property to another tenant, finance the property or sell the property. In addition, in the event we are forced to sell the property, we may have difficulty selling it to a party other than the tenant or borrower due to the special purpose for which the property may have been designed. These and other limitations may affect our ability to sell or relet properties and adversely affect our income and distributions to our shareholders.
Actions of our joint venture partners could negatively impact our performance.
We may, from time to time and as we have done in the past, co-invest with third parties, including foreign sovereigns, through various arrangements. With such investments, we may not be in a position to exercise sole decision-making authority regarding that property, partnership, joint venture or other entity because our partners may share certain approval rights over major decisions. Investments in partnerships, joint ventures, or other entities may involve risks not present were a third party not involved, including the possibility that our partners, co-tenants or co-venturers might become bankrupt or otherwise fail to fund their share of required capital contributions. Additionally, our partners or co-venturers might at any time have economic or other business interests or goals which are inconsistent with our business interests or goals. These investments may also have the potential risk of impasses on decisions such as a sale, because neither we nor the partner, co-tenant or co-venturer would have full control over the partnership or joint venture. Consequently, actions by such partner, co-tenant or co-venturer might result in subjecting properties owned by the

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partnership or joint venture to additional risk. In addition, we may in specific circumstances be liable for the actions of our third-party partners, co-tenants or co-venturers.
Potential losses, including from adverse weather conditions and natural disasters, may not be covered by insurance and could subject us to lost capital or revenue.
Certain of our properties are located in states where natural disasters such as tornadoes, hurricanes and earthquakes are more common than in other states. Given recent extreme weather events across parts of the United States, it is possible that our properties could incur significant damage due to natural disasters. While we carry insurance to cover a substantial portion of the cost of such events, such as draughts or flooding, our insurance includes deductible amounts and certain items may not be covered by insurance. To the extent that losses are uninsured or underinsured, we could be subject to lost capital and revenue on those properties. Future natural disasters may significantly affect our operations and properties and, more specifically, may cause us to experience reduced rental revenue (including from increased vacancy), incur clean-up costs or otherwise incur costs in connection with such events. Although we believe that our insurance programs are adequate, we cannot assure you that we will not incur losses in excess of our insurance coverage, or that we will be able to obtain insurance in the future at acceptable levels and reasonable costs. Any of these events may have a material adverse effect on our business, cash flows, financial condition, results of operations and ability to make distributions to our shareholders.
Our investments in interest rate hedge contracts are subject to changes to market interest rates and also could expose us to contingent liabilities and certain risks and costs in the future.
Part of our investment strategy involves entering into interest rate hedging contracts. If interest rates decrease, the fair market value of any existing interest rate hedge contracts would decline. Our efforts to manage exposures under these hedge contracts may not be successful. Our use of interest rate hedge contracts to manage risk associated with interest rate volatility may expose us to additional risks, including the risk that a counterparty to a hedge contract may fail to honor its obligations. Developing an effective interest rate risk strategy is complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. There can be no assurance that our hedging activities will have the desired beneficial impact on our results of operations or financial condition. Termination of interest rate hedge contracts typically involves costs, such as transaction fees or breakage costs.
Further, the cost of using derivative or hedging instruments increases as the period covered by the instrument increases and during periods of rising and volatile interest rates. We may increase our derivative or hedging activity and thus increase our related costs during periods when interest rates are volatile or rising and hedging costs have increased.
In addition, hedging instruments involve risk since they often are not traded on regulated exchanges, guaranteed by an exchange or its clearing house, or regulated by any U.S. or foreign governmental authorities. Furthermore, the enforceability of agreements underlying derivative transactions may depend on compliance with applicable statutory and commodity and other regulatory requirements and, depending on the identity of the counterparty, applicable international requirements. The business failure of a hedging counterparty with whom we enter into a hedging transaction will most likely result in a default. Default by a party with whom we enter into a hedging transaction may result in the loss of unrealized profits and force us to cover our resale commitments, if any, at the then current market price. Although generally we will seek to reserve the right to terminate our hedging positions, it may not always be possible to dispose of or close out a hedging position without the consent of the hedging counterparty, and we may not be able to enter into an offsetting contract in order to cover our risk. We cannot be assured that a liquid secondary market will exist for hedging instruments purchased or sold, and we may be required to maintain a position until exercise or expiration, which could result in losses.

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We face risks relating to information systems failures and cybersecurity breaches that could cause loss of confidential information and other business disruptions.
We maintain sensitive data, including our proprietary business information and the confidential information of our employees, tenants and business partners, in our data centers and on our networks. The systems containing this data are vulnerable to a number of risks, including energy blackouts, natural disasters, terrorism, war, telecommunication failures and cyber-attacks and intrusions, such as computer viruses, malware, attachments to e-mails, intrusion and unauthorized access. Attacks can be both individual and/or highly organized attempts by very sophisticated hacking organizations. We employ a number of security measures to prevent and detect these threats, which include password protection, frequent password change events, firewall detection systems, frequent backups, a redundant data system for core applications and annual penetration testing; however, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. If they occur, system failures and data and security breaches could (i) disrupt the proper functioning of our networks and systems and therefore our operations and/or those of our client tenants; (ii) result in misstated financial reports, violations of loan covenants, missed reporting deadlines, and/or missed permitting deadlines; (iii) result in the unauthorized access to, and destruction, loss, theft, misappropriation, or release of proprietary, confidential, sensitive, or otherwise valuable information of ours or others, which others could use to compete against us or for disruptive, destructive, or otherwise harmful purposes and outcomes; (iv) require significant management attention and resources to remedy any damages that result; (v) subject us to claims for breach of contract, damages, credits, penalties, or termination of leases or other agreements and/or (vi) damage our reputation among our client tenants and investors generally.
Liability relating to environmental matters may impact the value of the properties that we may acquire or underlying our investments.
Under various U.S. federal, state and local laws, an owner or operator of real property may become liable for the costs of removal of certain hazardous substances released on its property. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances. If we fail to disclose environmental issues, we could also be liable to a buyer or lessee of a property.
There may be environmental problems associated with our properties which we were unaware of at the time of acquisition. The presence of hazardous substances may adversely affect our ability to sell real estate, including the affected property, or borrow using real estate as collateral. The presence of hazardous substances, if any, on our properties may cause us to incur substantial remediation costs, thus harming our financial condition. In addition, although our leases will generally require our tenants to operate in compliance with all applicable laws and to indemnify us against any environmental liabilities arising from a tenant’s activities on the property, we nonetheless would be subject to strict liability by virtue of our ownership interest for environmental liabilities created by such tenants, and we cannot ensure the shareholders that any tenants we might have would satisfy their indemnification obligations under the applicable sales agreement or lease. To the extent we have environmental insurance to mitigate any of these risks, our coverage may be insufficient. The discovery of material environmental liabilities attached to such properties could have a material adverse effect on our results of operations and financial condition and our ability to make distributions to our shareholders.
Discovery of previously undetected environmentally hazardous conditions, including mold or asbestos, may lead to liability for adverse health effects and costs of remediating the problem could adversely affect our operating results.
Under various U.S. federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the cost of removal or remediation of hazardous or toxic substances

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on, under or in such property. The costs of removal or remediation could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated, and these restrictions may require substantial expenditures. Environmental laws provide for sanctions in the event of noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for release of and exposure to hazardous substances, including asbestos-containing materials into the air, and third parties may seek recovery from owners or operators of real properties for personal injury or property damage associated with exposure to released hazardous substances. To the extent we have environmental insurance to mitigate any of these risks, our coverage may be insufficient. The cost of defending against claims of liability, of compliance with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims related to any contaminated property could materially adversely affect our business, assets or results of operations and, consequently, amounts available for distribution to our security holders.
Risks Related to Our European Operations
Our European Operations expose us to additional risk.
We have made capital commitments to joint ventures that target net leased assets across Europe. These investments may be affected by factors particular to the laws of the jurisdiction in which the property is located. These investments expose us to risks that are different from and in addition to those commonly found in the U.S., including:
changing governmental laws, rules and policies, including more stringent environmental and zoning laws, the enactment of laws relating to the foreign ownership of property and the ability of foreign entities to remove invested capital or profits earned from activities within the country to the U.S.;
legal systems under which our ability to enforce contractual rights and remedies may be more limited than would be the case under U.S. law;
difficulty in conforming obligations in other countries and the burden of complying with a wide variety of foreign laws, rules and regulations, which may be more stringent than U.S. laws, rules and regulations, including tax requirements and land use, zoning, and environmental laws;
adverse changes in market conditions, including in the availability, cost and terms of mortgage funds, resulting from varying national economic and political policies or conditions;
changes in real estate and other tax rates and requirements and increased operating expenses in particular countries; and
restrictions and/or significant costs in repatriating cash and cash equivalents held in foreign bank accounts.
In addition, the lack of publicly available information in certain jurisdictions in accordance with accounting principles generally accepted in the U.S., or GAAP, could impair our ability to analyze transactions and may cause us to forgo an investment opportunity. It may also impair our ability to receive timely and accurate financial information from tenants necessary to meet our reporting obligations to financial institutions or governmental or regulatory agencies. Also, we may engage third-party asset managers in international jurisdictions to monitor compliance with legal requirements and lending agreements with respect to properties we own or manage. Failure to comply with applicable requirements may expose us or our operating subsidiaries to additional liabilities.

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Moreover, we are subject to changes in foreign exchange rates due to potential fluctuations in exchange rates between foreign currencies and the U.S. dollar. Our principal currency exposure is to the euro. We will attempt to mitigate a portion of the risk of currency fluctuation by financing our properties in the local currency denominations, although there can be no assurance that this will be effective. Because we intend to place both our debt obligation to the lender and the tenant’s rental obligation to us in the same currency, our results of foreign operations benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar relative to foreign currencies; that is, absent other considerations, a weaker U.S. dollar will tend to increase both our revenues and our expenses, while a stronger U.S. dollar will tend to reduce both our revenues and our expenses.
Risks Related to Our Organization and Structure
Maryland takeover statutes could restrict a change of control, which could have the effect of inhibiting a change in control even if a change in control were in our shareholders' interests.
Under the Maryland General Corporation Law (the "MGCL") as applicable to REITs, certain "business combinations" between a Maryland REIT and an interested shareholder or an affiliate of an interested shareholder are prohibited for five years after the most recent date on which the interested shareholder becomes an interested shareholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested shareholder is defined as:
any person who beneficially owns, directly or indirectly, 10.0% or more of the voting power of our outstanding voting shares; or
an affiliate or associate of the Company who, at any time within the two-year period prior to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our then outstanding shares.
A person is not an interested shareholder under the statute if our board of trustees approves in advance the transaction by which the person otherwise would have become an interested shareholder.
After the five-year prohibition, any business combination between the Maryland REIT and an interested shareholder generally must be recommended by our board of trustees and approved by the affirmative vote of at least:
80.0% of the votes entitled to be cast by holders of our outstanding voting shares, voting together as a single voting group; and
two-thirds of the votes entitled to be cast by holders of our outstanding voting shares other than shares held by the interested shareholder with whom or with whose affiliate the business combination is to be affected or held by an affiliate or associate of the interested shareholder, voting together as a single voting group.
The business combination statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer, including potential acquisitions that might involve a premium price for our common shares or otherwise be in the best interests of our shareholders.
Our board of trustees has adopted a resolution exempting the Company from the provisions of the MGCL relating to business combinations with interested shareholders or affiliates of interested shareholders. However, such resolution can be altered or repealed, in whole or in part, at any time by our board of trustees. If such resolution is repealed, the business combination statute could have the effect of discouraging offers to acquire us and of increasing the difficulty of consummating these offers, even if our acquisition would be in our shareholders' best interests.

21



Certain provisions of the MGCL applicable to Maryland real estate investment trusts permit our board of trustees, without shareholder approval and regardless of what is currently provided in our declaration of trust or bylaws, to adopt certain mechanisms, two of which (a classified board and a two-thirds requirement for removing a trustee) we do not have. These provisions may have the effect of limiting or precluding a third party from making an acquisition proposal for us or of delaying, deferring or preventing a change in our control under circumstances that otherwise could provide the holders of our common shares with the opportunity to realize a premium over the then current market price.
The MGCL also limits the ability of a third-party to buy a large stake in us and exercise voting power in electing trustees.
The MGCL, as applicable to REITs, provides that "control shares" of a Maryland REIT acquired in a "control share acquisition" have no voting rights except to the extent approved by a vote of shareholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter, excluding shares owned by the acquiror, by officers or by employees who are trustees of the REIT. "Control shares" are voting shares that would entitle the acquirer to exercise voting power in electing trustees within specified ranges of voting power. Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained shareholder approval or shares issued directly by the REIT. A "control share acquisition" means the acquisition, directly or indirectly, of issued and outstanding control shares, subject to certain exceptions. The control share acquisition statute does not apply (i) to shares acquired in a merger, consolidation or share exchange if we are a party to the transaction or (ii) to acquisitions approved or exempted by our declaration of trust or bylaws. Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of our shares. We cannot assure you that such provision will not be amended or eliminated at any time in the future. If such provision is eliminated, the control share acquisition statute could have the effect of discouraging offers to acquire us and increasing the difficulty of consummating any such offers, even if our acquisition would be in our shareholders' best interests.
Our failure to qualify as a REIT would result in higher taxes and reduced cash available for shareholders.
We intend to continue to operate in a manner to qualify as a REIT for U.S. federal income tax purposes. Our continued qualification as a REIT depends on our satisfaction of certain asset, income, organizational, distribution and shareholder ownership requirements on a continuing basis. Our ability to satisfy some of the asset tests depends upon the fair market values of our assets, some of which are not able to be precisely determined and for which we will not obtain independent appraisals. If we were to fail to qualify as a REIT in any taxable year, and certain statutory relief provisions were not available, we would be subject to U.S. federal income tax at regular corporate tax rates and distributions to shareholders would not be deductible by us in computing our taxable income. Any such corporate tax liability could be substantial and would reduce the amount of cash available for distribution. Unless entitled to relief under certain Internal Revenue Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT. In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions. As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it would adversely affect the value of our common shares.
Changes to the U.S. federal, state, and local income tax laws, including the enactment of certain tax reform measures, could have a material and adverse effect on us.
The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Changes to federal, state, and local tax laws (which changes may have retroactive application) could adversely affect our shareholders or us. We cannot predict, when, or if any new federal, state and local tax law, regulation or administrative interpretation,

22



or amendment to any existing tax law, regulation or administrative interpretation will be adopted, promulgated or become effective. If such changes occur, we may be required to pay additional taxes on our assets or income or be subject to additional restrictions. These increased tax costs could, among other things, adversely affect our financial condition, our results of operations and the amount of cash available for the payment of dividends.
The Tax Cuts and Jobs Act (the “Tax Reform Bill”) was recently enacted into law. The Tax Reform Bill will make significant changes to the United States income tax rules applicable to both individuals and corporations. It is not possible to state with certainty the effect of the legislation on us and on an investment in our shares. In particular, the Tax Reform Bill reduced the corporate tax rate and the effective tax rate for individuals with respect to their receipt of ordinary REIT dividends. By reducing the corporate tax rate, it is possible that the Tax Reform Bill will reduce the relative attractiveness to investors (as compared with potential alternative investments) of the generally single level of taxation on REIT distributions.
The tax on prohibited transactions will limit our ability to engage in transactions, including how we sell our real estate properties, which may inhibit our ability to sell non-core properties pursuant to our desired asset disposition plan.
A REIT’s gain from prohibited transactions is subject to a 100.0% tax. In general, prohibited transactions are sales or other dispositions of property, other than foreclosure property, held primarily for sale to customers in the ordinary course of business.
Whether property is held as inventory or primarily for sale to customers in the ordinary course of a trade or business is a question of fact that depends on all the facts and circumstances surrounding the particular transaction. There can be no assurance as to whether or not the Internal Revenue Service might successfully assert that one or more of our dispositions is subject to the 100.0% penalty tax. The Internal Revenue Code provides a safe-harbor pursuant to which limited sales of real property held for at least two years and meeting specified additional requirements will not be treated as prohibited transactions, but fitting within the safe harbor rules limits our operational flexibility.
We will attempt to comply with the terms of the safe-harbor provisions in the Internal Revenue Code prescribing when a property sale will not be characterized as a prohibited transaction. We cannot make any assurances, however, that we can comply with the safe-harbor provisions or that we will avoid owning property that may be characterized as property that we hold primarily for sale to customers in the ordinary course of a trade or business.
Although our use of TRSs may be able to partially mitigate the impact of meeting the requirements necessary to maintain our qualification as a REIT, our ownership of and relationship with our TRSs will be limited, and a failure to comply with the limits would jeopardize our REIT qualification and may result in the application of a 100.0% excise tax.
A REIT may own up to 100.0% of the shares of one or more TRSs. A TRS generally may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35.0% of the voting power or value of the shares will automatically be treated as a TRS. Overall, no more than 25.0% (and starting in 2018 no more than 20.0%) of the value of a REIT’s assets may consist of shares or securities of one or more TRSs. In addition, the TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100.0% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis.

23



We own certain investments and conduct certain operations through TRSs, which pay U.S. federal, state and local income tax on their taxable income, and their after-tax net income will be available for distribution to us but will not be required to be distributed to us. We anticipate that the aggregate value of TRS securities owned by us will be less than 25.0% of the value of our total assets (including such TRS securities). Furthermore, we will monitor the value of our respective investments in our TRSs for the purpose of ensuring compliance with the rule that no more than 25.0% (or 20.0% starting in 2018) of the value of a REIT’s assets may consist of TRS securities (which is applied at the end of each calendar quarter). In addition, we will scrutinize all of our transactions with our TRSs for the purpose of ensuring that they are entered into on arm’s-length terms in order to avoid incurring the 100.0% excise tax described above. The value of the securities that we hold in our TRSs may not be subject to precise valuation. Accordingly, there can be no complete assurance that we will be able to comply with the 25.0% limitation discussed above or avoid application of the 100.0% excise tax discussed above.
Our authorized but unissued preferred shares may prevent a change in our control which could be in the shareholders’ best interests.
Our declaration of trust authorizes us to issue additional authorized but unissued common or preferred shares. Any such issuance could dilute our existing shareholders’ interests. In addition, the board of trustees, may amend our declaration of trust from time to time and without any action by our shareholders to increase or decrease the aggregate number of shares or the number of shares of any class or series that we have authority to issue, may classify or reclassify any unissued common or preferred shares into other classes or series of shares and may set the preferences, rights and other terms of the classified or reclassified shares. As a result, the board of trustees may establish a class or series of preferred shares that could delay or prevent a transaction or a change in control that might be in the best interest of our shareholders.
We may change our investment and operational policies without shareholder consent.
We may change our investment and operational policies, including our policies with respect to investments, acquisitions, growth, operations, indebtedness, capitalization and distributions, at any time without the consent of our shareholders, which could result in our making investments that are different from, and possibly riskier than, the types of investments described in this filing. A change in our investment strategy may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect our ability to make distributions.
We may in the future choose to pay dividends in our own shares, in which case you may be required to pay income taxes in excess of the cash dividends you receive.
We may in the future distribute taxable dividends that are payable in cash and common shares at the election of each shareholder. Taxable shareholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for United States federal income tax purposes. As a result, a U.S. shareholder may be required to pay income taxes with respect to such dividends in excess of the cash dividends received. If a U.S. shareholder sells the shares it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our shares at the time of the sale. Furthermore, with respect to non-U.S. shareholders, we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in shares. In addition, if a significant number of our shareholders determine to sell common shares in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our common shares.

24



Risks Related to Ownership of Common Shares
Future sales of common shares in the public market or the issuance of other equity may adversely affect the market price of our common shares.
Sales of a substantial number of common shares or other equity-related securities in the public market could depress the market price of our common shares, and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect that future sales of common shares or other equity-related securities would have on the market price of our common shares.
The price of our common shares may fluctuate significantly.
The trading price of our common shares may fluctuate significantly in response to many factors, including:
actual or anticipated variations in our operating results, funds from operations, or FFO, cash flows, liquidity or distributions;
changes in our earnings estimates or those of analysts;
publication of research reports about it or the real estate industry or sector in which we operate;
increases in market interest rates that lead purchasers of our shares to demand a higher dividend yield;
changes in market valuations of companies similar to us;
adverse market reaction to any securities we may issue or additional debt it incurs in the future;
additions or departures of key management personnel;
actions by institutional shareholders;
speculation in the press or investment community;
continuing high levels of volatility in the credit markets;
the realization of any of the other risk factors included herein; and
general market and economic conditions.
The availability and timing of cash distributions is uncertain.
We are generally required to distribute to our shareholders at least 90.0% of our REIT taxable income, determined without regard to the dividends-paid-deduction and excluding any net capital gain, each year in order for us to qualify as a REIT under the Code, which we intend to satisfy through quarterly cash distributions of all or substantially all of our REIT taxable income in such year, subject to certain adjustments.
Our board of trustees will determine the amount and timing of any distributions. In making such determinations, our trustees will consider all relevant factors, including the amount of cash available for distribution, capital expenditures, general operational requirements and applicable law. We intend over time to make regular quarterly distributions to holders of our common shares. However, we bear all expenses incurred by our operations, and the funds generated by operations, after deducting these expenses, may not be sufficient to cover desired levels of distributions to shareholders. In addition, our board of trustees, in its discretion, may retain any portion of such cash in excess of our REIT taxable income for working capital. We cannot predict the amount of distributions we may make, maintain or increase over time.

25



There are many factors that can affect the availability and timing of cash distributions to shareholders. Because we may receive rents and income from our properties at various times during our fiscal year, distributions paid may not reflect our income earned in that particular distribution period. The amount of cash available for distribution will be affected by many factors, including without limitation, the amount of income we will earn from investments in target assets, the amount of its operating expenses and many other variables. Actual cash available for distribution may vary substantially from our expectations.
While we intend to fund the payment of quarterly distributions to holders of common shares entirely from distributable cash flows, we may fund quarterly distributions to its shareholders from a combination of available net cash flows, equity capital and proceeds from borrowings. In the event we are unable to consistently fund future quarterly distributions to shareholders entirely from distributable cash flows, the value of our common shares may be negatively impacted.
An increase in market interest rates may have an adverse effect on the market price of our common shares and our ability to make distributions to our shareholders.
One of the factors that investors may consider in deciding whether to buy or sell common shares is our distribution rate as a percentage of our share price, relative to market interest rates. If market interest rates increase, prospective investors may demand a higher distribution rate on common shares or seek alternative investments paying higher distributions or interest. As a result, interest rate fluctuations and capital market conditions can affect the market price of common shares. For instance, if interest rates rise without an increase in our distribution rate, the market price of common shares could decrease because potential investors may require a higher distribution yield on common shares as market rates on interest-bearing instruments such as bonds rise. In addition, to the extent we have variable rate debt, rising interest rates would result in increased interest expense on our variable rate debt, thereby adversely affecting our cash flow and its ability to service our indebtedness and make distributions to our shareholders.
Risks Related to Our Other Business Operations
We engage in other business operations, including asset management services and a retained interest in our collateralized debt obligations, or CDOs, that are subject to unique risks and which could adversely impact our results of operations.
We receive revenue from third parties pursuant to asset management contracts under which we provide services including property management, operations, project management, and leasing services. In the event we achieve certain target valuations, we may also receive incentive fees in connection with such asset management services. However, such incentive fees are not guaranteed and are subject to risks that may be out of our control. We also retain interests in certain subordinate bonds, preferred shares and ordinary shares in our 2005, 2006 and 2007 collateralized debt obligations. These retained interests (the “Retained CDO Bonds”) are highly speculative and subject to high fluctuations in purported value. The fair value of the Retained CDO Bonds, which are not publicly traded, may not be readily determinable. We value the Retained CDO Bonds quarterly. Because such valuations are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for the Retained CDO Bonds existed. There is no guarantee that we will realize any proceeds from our Retained CDO Bonds, or what the timing of those proceeds might be, and the value of our common shares could be adversely affected if our determinations regarding the fair value of the Retained CDO Bonds were materially higher than the values that we ultimately realize upon their disposal.

26



SPECIAL NOTE REGARDING EXHIBITS
In reviewing the agreements included as exhibits to this Annual Report on Form 10-K, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about our company or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk tone of the parties if those statements prove to be inaccurate;
have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about our company may be found elsewhere in this Annual Report on Form 10-K and our other public filings, which are available without charge through the SEC’s website at http://www.sec.gov. See Item 1, “Business - Corporate Governance and Internet Address; Where Readers Can Find Additional Information” for further information.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
As of the date of this filing, we do not have any unresolved comments with the staff of the SEC.

27



ITEM 2.
PROPERTIES
(Dollar amounts in thousands, except per square foot amounts)
Current Property Portfolio
As of December 31, 2017, our consolidated property portfolio was comprised of industrial, office, and specialty retail properties containing an aggregate of approximately 82,146,063 rentable square feet. The following table presents the geographic diversification of our consolidated properties as of December 31, 2017.

28



GPT PORTFOLIO:
Markets
Number of Properties
Rentable SF
Occupancy Percentage
Annualized Base Rent
ABR / Leased SF
% of Total ABR by Property Type
WALT1
Industrial
 
 
 
 
 
 
 
NORTHEAST U.S.
 
 
 
 
 
 
 
 
Baltimore/Washington
12

3,226,480

100.0
%
$
17,574

$
5.45

4.9
%
5.0

 
Boston
3

972,277

100.0
%
6,086

6.26

1.7
%
8.0

 
Central PA
7

2,392,875

99.2
%
12,052

5.08

3.4
%
4.3

 
New York/New Jersey
6

350,286

100.0
%
4,401

12.56

1.2
%
6.6

 
Philadelphia
6

1,240,663

100.0
%
7,802

6.29

2.2
%
11.0

 
Other
4

854,377

100.0
%
6,612

7.74

1.8
%
8.8

 
Northeast U.S. Subtotal
38

9,036,958

99.8
%
$
54,527

$
6.05

15.2
%
6.6

SOUTHEAST U.S.
 
 
 
 
 
 
 
 
Atlanta
30

7,515,479

89.5
%
$
26,916

$
4.00

7.5
%
5.9

 
Charleston
9

2,838,066

84.1
%
8,605

3.61

2.4
%
5.8

 
Charlotte
5

1,170,310

100.0
%
4,351

3.72

1.2
%
4.9

 
Jacksonville
3

1,843,540

100.0
%
7,551

4.10

2.1
%
5.7

 
Memphis
10

5,226,391

92.8
%
15,231

3.14

4.3
%
4.5

 
Nashville
2

377,600

100.0
%
1,080

2.86

0.3
%
18.0

 
Raleigh/Durham
2

247,500

100.0
%
1,398

5.65

0.4
%
8.5

 
Savannah
3

1,419,784

100.0
%
5,077

3.58

1.4
%
3.7

 
South Florida
13

2,903,531

100.0
%
15,634

5.38

4.4
%
9.1

 
Spartanburg
21

3,229,108

96.8
%
13,547

4.33

3.8
%
5.6

 
Tampa/Orlando
8

1,014,646

100.0
%
5,180

5.11

1.4
%
7.5

 
Other
9

2,301,188

100.0
%
9,101

3.95

2.5
%
5.5

 
Southeast U.S. Subtotal
115

30,087,143

94.3
%
$
113,671

$
4.01

31.7
%
6.2

MIDWEST U.S.
 
 
 
 
 
 
 
 
Chicago
38

8,684,787

97.9
%
$
46,451

$
5.47

13.0
%
9.7

 
Cincinnati
5

1,813,378

100.0
%
6,472

3.57

1.8
%
3.9

 
Columbus
6

3,368,402

100.0
%
11,268

3.35

3.1
%
5.0

 
Indianapolis
8

4,256,883

100.0
%
18,696

4.39

5.2
%
8.2

 
Kansas City
1

1,107,000

100.0
%
4,915

4.44

1.4
%
2.1

 
Milwaukee
3

452,752

33.2
%
593

3.95

0.2
%
1.7

 
Minneapolis
4

1,355,994

100.0
%
7,553

5.57

2.1
%
7.1

 
Other
8

2,626,596

92.3
%
10,148

4.19

2.8
%
6.3

 
Midwest U.S. Subtotal
73

23,665,792

97.1
%
$
106,096

$
4.62

29.6
%
7.7

WESTERN U.S.
 
 
 
 
 
 
 
 
Austin
3

428,217

78.7
%
$
3,114

$
9.24

0.9
%
12.9

 
Bay Area
5

945,193

100.0
%
8,642

9.14

2.4
%
7.2

 
Dallas
16

5,546,430

98.8
%
24,658

4.50

6.9
%
7.1

 
Denver
3

632,562

100.0
%
3,266

5.16

0.9
%
5.2

 
Houston
7

1,166,578

95.7
%
8,378

7.51

2.3
%
11.0

 
Las Vegas
1

232,856

100.0
%
1,397

6.00

0.4
%
13.9

 
Los Angeles/Inland Empire
17

2,044,290

100.0
%
23,267

11.38

6.5
%
9.3

 
Phoenix
1

217,422

81.3
%
627

3.55

0.2
%
3.7

 
Seattle
3

433,199

100.0
%
2,902

6.70

0.8
%
4.9

 
Other
7

1,384,584

100.0
%
7,547

5.45

2.1
%
9.2

 
Western U.S. Subtotal
63

13,031,331

98.1
%
$
83,798

$
6.56

23.4
%
8.5

 
U.S. Industrial Total
289

75,821,224

96.5
%
$
358,092

$
4.90

100.0
%
7.2

1.
Weighted average lease term ("WALT") is based on leases executed as of December 31, 2017.


29



Markets
Number of Properties
Rentable SF
Occupancy Percentage
Annualized Base Rent
ABR / Leased SF
% of Total ABR by Property Type
WALT1
Office
 
 
 
 
 
 
 
NORTHEAST U.S.
 
 
 
 
 
 
 
 
Baltimore/Washington
2

89,939

100.0
%
$
1,996

$
22.20

2.4
%
1.1

 
New York/New Jersey
4

652,676

100.0
%
15,296

23.44

18.3
%
3.8

 
Philadelphia
1

299,809

100.0
%
6,112

20.39

7.3
%
7.0

 
Northeast U.S. Subtotal
7

1,042,424

100.0
%
$
23,404

$
22.45

28.0
%
4.4

SOUTHEAST U.S.
 
 
 
 
 
 
 
 
Charlotte
1

113,600

100.0
%
$
1,278

$
11.25

1.5
%
8.5

 
Jacksonville
5

420,127

78.3
%
6,153

18.70

7.4
%
8.8

 
Nashville
1

88,958

100.0
%
1,245

14.00

1.5
%
11.5

 
Raleigh/Durham
3

264,728

95.0
%
5,192

20.65

6.2
%
5.9

 
Savannah
1

21,625

100.0
%
192

8.87

0.2
%
5.5

 
South Florida
4

577,965

100.0
%
10,203

17.65

12.2
%
6.0

 
Tampa/Orlando
1

19,201

100.0
%
165

8.57

0.2
%
5.5

 
Other
1

13,072

75.1
%
87

8.87

0.1
%
5.5

 
Southeast U.S. Subtotal
17

1,519,276

92.9
%
$
24,515

$
17.37

29.3
%
7.1

MIDWEST U.S.
 
 
 
 
 
 
 
 
Chicago
2

199,104

99.4
%
$
4,210

$
21.28

5.0
%
2.3

 
Columbus
1

315,102

100.0
%
4,041

12.82

4.8
%
1.0

 
Kansas City
1

23,527

51.7
%
108

8.87

0.1
%
5.5

 
Other
2

38,800

100.0
%
424

10.94

0.5
%
4.6

 
Midwest U.S. Subtotal
6

576,533

97.8
%
$
8,783

$
15.57

10.4
%
1.8

WESTERN U.S.
 
 
 
 
 
 
 
 
Bay Area
1

31,691

100.0
%
$
281

$
8.87

0.3
%
5.5

 
Dallas
2

309,997

99.6
%
5,569

18.03

6.7
%
1.5

 
Houston
3

345,810

100.0
%
6,347

18.35

7.6
%
5.7

 
Los Angeles/Inland Empire
3

205,762

93.1
%
3,012

15.73

3.6
%
2.9

 
Phoenix
8

956,989

100.0
%
11,644

12.17

13.9
%
7.8

 
Other
2

28,915

45.3
%
115

8.64

0.1
%
5.4

 
Western U.S. Subtotal
19

1,879,164

98.3
%
$
26,968

$
14.59

32.2
%
5.4

 
U.S. Office Total
49

5,017,397

97.0
%
$
83,670

$
17.19

100.0
%
5.2

1.
WALT is based on leases executed as of December 31, 2017.


30



Markets
Number of Properties
Rentable SF
Occupancy Percentage
Annualized Base Rent
ABR / Leased SF
% of Total ABR by Property Type
WALT1
Specialty Retail
 
 
 
 
 
 
 
NORTHEAST U.S.
 
 
 
 
 
 
 
 
Baltimore/Washington
2

132,458

100.0
%
$
2,305

$
17.40

13.2
%
16.7

 
Central PA
1

4,800

100.0
%
171

35.56

1.0
%
1.2

 
Northeast U.S. Subtotal
3

137,258

100.0
%
$
2,476

$
18.04

14.2
%
15.6

SOUTHEAST U.S.
 
 
 
 
 
 
 
 
Jacksonville
1

6,658

100.0
%
$
59

$
8.87

0.3
%
5.5

 
Memphis
1

112,110

100.0
%
1,787

15.94

10.2
%
17.5

 
Tampa/Orlando
1

16,992

100.0
%
162

9.55

0.9
%
4.9

 
Other
1

2,048

100.0
%
83

40.28

0.5
%
6.0

 
Southeast U.S. Subtotal
4

137,808

100.0
%
$
2,091

$
15.18

11.9
%
15.7

MIDWEST U.S.
 
 
 
 
 
 
 
 
Chicago
1

22,872

100.0
%
$
637

$
27.86

3.6
%
3.3

 
Cincinnati
1

127,040

100.0
%
1,612

12.69

9.2
%
17.5

 
Minneapolis
1

176,704

100.0
%
1,508

8.53

8.6
%
17.5

 
Other
4

243,913

100.0
%
3,571

14.64

20.4
%
16.7

 
Midwest U.S. Subtotal
7

570,529

100.0
%
$
7,328

$
12.85

41.8
%
15.9

WESTERN U.S.
 
 
 
 
 
 
 
 
Dallas
1

129,155

100.0
%
$
1,755

$
13.59

10.0
%
17.5

 
Denver
1

129,182

100.0
%
2,080

16.10

11.9
%
17.5

 
Los Angeles/Inland Empire
8

146,638

94.5
%
1,262

9.11

7.2
%
5.3

 
Other
3

56,872

100.0
%
505

8.87

2.9
%
5.5

 
Western U.S. Subtotal
13

461,847

98.3
%
$
5,602

$
12.34

32.0
%
13.7

 
U.S. Specialty Retail Total
27

1,307,442

99.4
%
$
17,497

$
13.47

100.0
%
15.1

1.
WALT is based on leases executed as of December 31, 2017.
Development Plans
As of December 31, 2017, our plans for development are primarily focused on pursuing build-to-suit transactions where a tenant has signed a lease in advance of construction and a developer or builder bears the risk of completion on-time and on-budget, as well as performing property improvements specified in leases. We may renovate, improve, expand or repair existing properties where we believe the incremental investment increases the value of the property and the incremental capital can be invested at attractive risk-adjusted returns. We will, from time to time, acquire adjacent land parcels to properties in our portfolio in order to accommodate expansions of existing properties or acquire undeveloped land parcels with the intention to develop industrial buildings on them in the future. As of December 31, 2017, we had seven industrial developments in progress for a total estimated investment of approximately $100.9 million.
During the year ended December 31, 2017, we entered into a mezzanine lending facility with a leading industrial developer to provide up to 85.0% loan-to-cost mezzanine debt capital on new industrial developments in select markets. We believe that this allows us the opportunity to participate in strong industrial market fundamentals with a risk exposure more appropriate to our investment strategy. As of December 31, 2017, the carrying value of our loan investments was $22,154 and the loan investments had an aggregate weighted average interest rate of 10.47%.

31



The following table presents the geographic diversification of our consolidated properties in development as of December 31, 2017:
Markets
Number of Properties
Rentable SF
Occupancy Percentage
Annualized Base Rent
ABR / Leased SF
% of Total ABR by Property Type
Draws to Date
Estimated Investment
% Funded
Estimated/Actual Delivery
Industrial Development1
 
 
 
 
 
 
 
 
 
Charleston2
1

240,800

%
$

$

%
$
17,255

$
31,215

55.3
%
Q1 2018
Phoenix
1

126,722

100.0
%
2,055

16.22

41.4
%
11,584

23,272

49.8
%
Q1 2018
Charlotte
4


%


%
4,548

TBD

TBD

Various
Memphis
1

1,015,740

100.0
%
2,905

2.86

58.6
%
7,017

46,434

15.1
%
Q4 2018
Industrial Development Total
7

1,383,262

70.1
%
$
4,960

$
4.34

100.0
%
$
40,404

$
100,921

40.0
%
 
1.
Square footage, occupancy and ABR represent estimated size, occupancy and starting ABR upon building delivery and completion.
2.
Property is reflected was substantially completed in October 2017, however the property is included in the development table because there is substantial remaining improvement work, which was in process as of December 31, 2017. Due to substantial completion, the property has been included in wholly owned portfolio data as of December 31, 2017.
Unconsolidated Equity Investments
Strategic Office Partners - We have a 25.0% interest in Strategic Office Partners, an unconsolidated equity investment that we created with our venture partner TPG Real Estate, which invests in single-tenant office properties located in high-growth metropolitan areas in the United States. We provide asset and property management services for the properties held in Strategic Office Partners. There were 13 properties in the portfolio as of December 31, 2017.
E-Commerce JV - In November 2017, we formed a new joint venture with an investment partner, in which we have a 51.0% interest, and 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. We provide asset and property management services to the E-Commerce JV. The E-Commerce JV did not own any properties as of December 31, 2017.
European Investment Funds - In October 2017, we formed a new European investment fund with several other equity investment partners, in which we have an interest of approximately 19.9% and for which we provide asset and property management services, or the Gramercy European Property Fund III. The Gramercy European Property Fund III did not own any properties as of December 31, 2017. In July 2017, the Gramercy European Property Fund, a European investment fund in which we owned a 14.2% interest, was dissolved and, concurrently, we sold our 5.1% interest in the Goodman Europe JV. As of December 31, 2017, we did not have any remaining interest in the Gramercy European Property Fund or the Goodman Europe JV.
Goodman UK JV - We have an 80.0% ownership interest in the Goodman UK JV, a joint venture that invests in industrial properties in the United Kingdom, which are managed by the Goodman Group, our joint venture partner. There was one property in the portfolio as of December 31, 2017.
Morristown JV - We have a 50.0% interest in an office property located in Morristown, New Jersey. In October 2015, the Morristown JV entered into a leasing and construction management agreement to complete specific improvements at the property.

32



Philips JV - We have a 25.0% interest in the Philips JV, a joint venture that owns one office building located in Somerset, New Jersey which is 100.0% net leased through December 2021 and financed by a $38,662 fixed-rate mortgage note with maturity in September 2035. As of December 31, 2017, our carrying value in the Philips JV was $0 and we are not recognizing any income from the Philips JV.
CBRE Strategic Partners Asia - We have a 5.07% ownership interest in CBRE Strategic Partners Asia, a real estate investment fund in China that has a third-party investment manager. The fund’s term ended in January 2017, it commenced liquidation in February 2017, and it will wind up over the next 12 months. There was one property in the fund as of December 31, 2017.
The following table presents the geographic diversification of our investments in unconsolidated properties as of December 31, 2017:
Unconsolidated Entities1
 
 
 
 
 
 
 
 
Markets
Number of Properties
% Owned
Rentable SF
Occupancy Percentage
Annualized Base Rent (Gramercy Attributable)
ABR / Leased SF
% of Total ABR
WALT2
United States
 
 
 
 
 
 
 
 
 
Strategic Office Partners3
13

25.0
%
1,848,887

98.5
%
$
8,726

$
19.17

88.6
%
3.7
 
Morristown JV
1

50.0
%
41,861

29.4
%
137

22.29

1.4
%
0.8
 
Philips JV
1

25.0
%
199,900

100.0
%
987

19.75

10.0
%
4.0
 
United States Subtotal
15


2,090,648

97.3
%
$
9,850

$
19.24

100.0
%
3.7
Europe
 
 
 
 
 
 
 
 
Goodman UK JV
1

80.0
%
186,618

%
$

$

%
N/A
 
Europe Subtotal
1

 
186,618

%
$

$

%
N/A
1.
Table does not include the one property held in our investment in CBRE Strategic Partners Asia.
2.
Weighted by Gramercy attributable ABR as of December 31, 2017.
3.
Metrics include an executed lease which commenced on January 1, 2018.

33



Lease Expirations
Our properties are leased to tenants for terms generally ranging from five to 20 years with a weighted average remaining term of approximately 7.2 years as of December 31, 2017. Following is a schedule of expiring leases for our consolidated properties by square feet and by annualized minimum base rent as of December 31, 2017, assuming no exercises of lease renewal options, if any:
Wholly Owned Portfolio Lease Expirations
 
 
Expiry Year
SF Related to Expiring Leases1
% of Total Occupied SF
ABR of Expiring Leases
% of Total ABR
2018
4,554,395

5.7
%
$
22,603

4.9
%
2019
6,279,711

7.9
%
35,438

7.7
%
2020
5,587,996

7.0
%
31,360

6.8
%
2021
11,573,471

14.6
%
59,742

13.0
%
2022
8,669,716

10.9
%
39,064

8.5
%
2023
6,810,541

8.6
%
46,351

10.1
%
2024
6,860,118

8.6
%
34,435

7.5
%
2025
4,127,548

5.2
%
26,534

5.8
%
2026
4,843,206

6.1
%
22,703

4.9
%
2027
2,225,944

2.8
%
15,967

3.5
%
Thereafter
17,776,391

22.4
%
125,062

27.2
%
Total Occupied
79,309,037

100.0
%
$
459,259

100.0
%
Vacant SF
2,837,026

 
 
 
Total Rentable SF
82,146,063

 
 
 
1.
Square feet related to expiring leases reflects leases that were executed prior to December 31, 2017.
Tenant Diversification
As of December 31, 2017, there were no tenants that occupied more than 3.2% of our consolidated properties based on total leased square feet or that occupied more than 5.6% of our consolidated properties based on ABR.

34



The following tables present our 15 largest tenants and 15 largest industries, based on total ABR as of December 31, 2017.
Tenant Diversification by ABR (Wholly Owned Portfolio)
Tenant1
ABR
% of Total ABR
FedEx Corp & Subsidiaries
$
25,539

5.6
%
Life Time Fitness
14,235

3.1
%
Bank of America, N.A.
11,552

2.5
%
Amazon & Subsidiaries
8,943

1.9
%
The Clorox International Company
8,822

1.9
%
Preferred Freezer Services
8,724

1.9
%
JPMorgan Chase Bank, National Association
6,352

1.4
%
Endo Pharmaceuticals Inc.
6,112

1.3
%
Whirlpool Corporation
5,812

1.3
%
Eisai, Inc.
5,607

1.2
%
Nokia of America Corporation
5,437

1.2
%
XPO Logistics
5,377

1.2
%
Conopco, Inc.
5,313

1.2
%
Adesa Texas, Inc.
5,256

1.1
%
PPD Development
5,192

1.1
%
Remaining 340+ Tenants
330,987

72.1
%
Total
$
459,260

100.0
%
1.
For simplification, certain tenants have been listed in the above tables as the parent entity of the named lease entities. This simplification has been made where we have multiple leases across different properties leased to the same family of companies in order to show our true exposure to the larger organization.
Tenant Industry Diversification (Wholly Owned Portfolio)
Industry
ABR
% of Total ABR
Food & Beverage
$
69,538

15.1
%
Consumer Goods
58,496

12.7
%
Logistics, Transportation & Trucking
53,748

11.7
%
Financial Services
32,569

7.1
%
Automotives
29,098

6.3
%
Paper, Plastics & Glass
27,370

6.0
%
Industrial Manufacturing
26,887

5.9
%
Healthcare
25,643

5.6
%
Technology, Media & Telecom
19,668

4.3
%
Distributors
19,048

4.1
%
Retail
16,667

3.6
%
Business Services
14,977

3.3
%
Aerospace & Defense
11,987

2.6
%
E-Commerce
10,976

2.4
%
Oil & Gas
6,042

1.3
%
Warehouse Services
2,358

0.5
%
Advertising
204

%
Other
33,984

7.5
%
Total
$
459,260

100.0
%

35



ITEM 3.
LEGAL PROCEEDINGS
Legacy Gramercy, its board of directors, and Chambers were named as defendants in various putative class action lawsuits brought by purported Legacy Gramercy stockholders challenging the Merger. The lawsuits were consolidated into a New York state court action, or the New York Action, and a Maryland state court action, or the Maryland Action. On March 1, 2017, the court entered a Final Order and Judgment approving the settlement, awarding plaintiffs’ attorney fees and expenses, and dismissing the New York Action with prejudice. On March 22, 2017, pursuant to the stipulation of settlement, plaintiffs in the Maryland Action filed a notice of dismissal with prejudice with the Circuit Court for Baltimore County, Maryland, which the court entered on April 11, 2017.
In connection with our property acquisitions and the Merger, we identified a risk that we may have to pay future amounts to tenants related to continuing operating expense reimbursement audits. In 2017, we settled the majority of our operating expense reimbursement audits and paid $3.5 million pursuant to a settlement in February 2017.
In addition, we and/or one or more of our subsidiaries are party to various litigation matters that are considered routine litigation incidental to our or their business, none of which are considered material.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.

36



Part II 
ITEM 5.
MARKET FOR REGISTRANTS' COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
(Dollar amounts in thousands, except per share data)
Market Information
Gramercy Property Trust
Our common shares are listed on the NYSE under the trading symbol “GPT.” The table below sets forth the quarterly high and low closing sales prices of our common shares on the NYSE for the years ended December 31, 2017 and 2016 and the dividends paid by us with respect to the periods indicated. All share and per share data has been adjusted for the 1-for-3 reverse share split that was effective after the close of trading on December 30, 2016.
 
 
2017
 
2016
Quarter Ended
 
High
 
Low
 
Dividends
 
High
 
Low
 
Dividends
March 31
 
$
28.25

 
$
25.37

 
$
0.375

 
$
25.47

 
$
20.40

 
$
0.330

June 30
 
$
30.96

 
$
26.52

 
$
0.375

 
$
27.66

 
$
24.90

 
$
0.330

September 30
 
$
30.92

 
$
28.74

 
$
0.375

 
$
29.97

 
$
27.39

 
$
0.330

December 31
 
$
31.10

 
$
26.66

 
$
0.375

 
$
28.59

 
$
24.15

 
$
0.375

On February 23, 2018, the reported closing sale price per share on the NYSE was $22.35 and there were approximately 1,537 holders of record. This number does not include shareholders’ shares held in nominee or street name.
Units
At December 31, 2017, there were 4,398,935 OP Units outstanding and held by persons other than the Company, which received distributions per unit in the same manner as dividends per share were distributed to common shareholders.
GPT Operating Partnership LP
There is no established public trading market for the OP Units. On February 23, 2018, there were 39 holders of record and 166,178,007 common units outstanding, 160,782,974 of which were held by Gramercy Property Trust. The table below sets forth the quarterly distributions paid by the Operating Partnership to holders of its common units with respect to the periods indicated.
Quarter Ended
 
2017
 
2016
March 31
 
$
0.375

 
$
0.330

June 30
 
$
0.375

 
$
0.330

September 30
 
$
0.375

 
$
0.330

December 31
 
$
0.375

 
$
0.375

To maintain our qualification as a REIT under the Internal Revenue Code we must distribute annually at least 90.0% of our taxable income. In accordance with the provisions of our declaration of trust, we may not pay any dividends on our common shares until all accrued dividends and the dividend for the then current quarter on the Series A Preferred Shares are paid in full. We expect to continue our policy of distributing our taxable income through dividends to maintain REIT status, although there is no assurance as to future dividends because they depend on future earnings, capital

37



requirements, estimated taxable income, and financial condition and these dividends, if and when declared, are subject to approval of our Board.
Each time we issue Gramercy common shares, other than in exchange for OP Units when such OP Units are presented for redemption, we contribute the proceeds of such issuance to the Operating Partnership in return for an equivalent number of OP Units with rights and preferences analogous to the shares issued.
We have 3,500,000 shares of 7.125% Series A Preferred Shares, or Series A Preferred Shares, outstanding. Holders of our Series A Preferred Shares are entitled to receive annual dividends of $1.78125 per share on a quarterly basis and dividends are cumulative, subject to certain provisions.
Share Performance Graph
This graph compares the performance of our shares with the Standard & Poor’s 500 Composite Index and the NAREIT All REIT Index. This graph assumes $100 invested on December 31, 2012 and assumes the reinvestment of dividends.
392398165_a2017gptstockgraph.jpg

38



Equity Compensation Plan Information
The following table summarizes information, as of December 31, 2017, relating to our equity compensation plans pursuant to which our common shares or other equity securities may be granted from time to time.
 
(a)
 
(b)
 
(c)
Plan Category
Number of securities to be issued upon exercise of outstanding options, warrants and rights
 
Weighted average exercise price of outstanding options, warrants and rights
 
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders 1
70,971

 
$
23.19

 
2,732,649

Total
70,971

 
$
23.19

 
2,732,649

1.
Includes the 2004 Equity Incentive Plan, 2015 Equity Incentive Plan, and 2016 Equity Incentive Plan. For more information on our equity compensation plans, refer to Note 11 in the accompanying financial statements.
 

39



ITEM 6.
SELECTED FINANCIAL DATA
(Dollar amounts in thousands, except per share and per unit data)
The following tables set forth our selected financial data and should be read in conjunction with our financial statements and notes thereto included in Item 8, “Financial Statements and Supplementary Data,” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in this Form 10-K.

40



Gramercy Property Trust
Operating Data
 
Year Ended December 31,
 
2017
 
2016
 
2015
 
2014
 
2013
Total revenues
$
545,220

 
$
517,264

 
$
237,272

 
$
107,940

 
$
56,704

Property operating expenses
(96,981
)
 
(93,123
)
 
(42,076
)
 
(21,120
)
 
(1,411
)
Property management expenses
(10,948
)
 
(20,118
)
 
(19,446
)
 
(17,500
)
 
(20,868
)
Depreciation and amortization
(263,666
)
 
(241,527
)
 
(97,654
)
 
(36,408
)
 
(5,675
)
General and administrative expenses
(36,887
)
 
(33,237
)
 
(19,794
)
 
(18,416
)
 
(18,210
)
Acquisition and merger-related expenses

 
(9,558
)
 
(61,340
)
 
(6,171
)
 
(2,808
)
Total operating expenses
(408,482
)
 
(397,563
)
 
(240,310
)
 
(99,615
)
 
(48,972
)
Operating income (loss)
136,738

 
119,701

 
(3,038
)
 
8,325

 
7,732

Other income (expense)
 
 
 
 
 
 
 
 
 
Interest expense
(96,852
)
 
(75,434
)
 
(34,663
)
 
(16,586
)
 
(1,732
)
Net impairment recognized in earnings
(4,890
)
 

 

 
(4,816
)
 
(2,002
)
Loss on derivative instruments

 

 

 
(3,300
)
 
(115
)
Equity in net income (loss) of unconsolidated equity investments
48,248

 
2,409

 
(1,107
)
 
1,959

 
(5,662
)
Gain on dissolution of previously held U.S. unconsolidated equity investment interests

 
7,229

 

 

 

Gain on remeasurement of previously held unconsolidated equity investment interests

 

 

 
72,345

 

Loss on extinguishment of debt
(6,702
)
 
(20,890
)
 
(9,472
)
 
(1,925
)
 

Impairment of real estate investments
(37,822
)
 
(11,107
)
 

 

 

Income (loss) from continuing operations before provision for taxes
38,720

 
21,908

 
(48,280
)
 
56,002

 
(1,779
)
Provision for taxes
644

 
(3,160
)
 
(2,153
)
 
(809
)
 
(6,393
)
Income (loss) from continuing operations
39,364

 
18,748

 
(50,433
)
 
55,193

 
(8,172
)
Income (loss) from discontinued operations
(89
)
 
5,399

 
875

 
(524
)
 
392,999

Income (loss) before net gain on disposals
39,275

 
24,147

 
(49,558
)
 
54,669

 
384,827

Net gain on disposals
46,808

 
3,877

 
839

 

 

Gain on sale of European unconsolidated equity investment interests held with a related party

 
5,341

 

 

 

Net Income (loss)
86,083

 
33,365

 
(48,719
)
 
54,669

 
384,827

Net (income) loss attributable to noncontrolling interest
(820
)
 
(7
)
 
791

 
236

 

Net income (loss) attributable to Gramercy Property Trust
85,263

 
33,358

 
(47,928
)
 
54,905

 
384,827

Preferred share redemption costs

 

 

 
(2,912
)
 

Preferred share dividends
(6,234
)
 
(6,234
)
 
(6,234
)
 
(7,349
)
 
(7,162
)
Net Income (loss) available to common shareholders
$
79,029

 
$
27,124

 
$
(54,162
)
 
$
44,644

 
$
377,665

Net income (loss) per common share - Basic
$
0.52

 
$
0.19

 
$
(0.89
)
 
$
1.60

 
$
23.10

Net income (loss) per common share - Diluted
$
0.52

 
$
0.19

 
$
(0.89
)
 
$
1.56

 
$
23.10

Basic weighted average shares outstanding
150,660,964

 
140,192,424

 
60,698,716

 
27,860,728

 
16,347,951

Diluted weighted average shares outstanding
150,679,909

 
141,009,021

 
60,698,716

 
28,641,836

 
16,347,951



41



Balance Sheet Data
 
As of December 31,
 
2017
 
2016
 
2015
 
2014
 
2013
Total real estate investments, net
$
5,554,673

 
$
4,656,864

 
$
3,931,677

 
$
1,040,022

 
$
333,465

Investment in unconsolidated equity investments
70,214

 
101,807

 
580,000

 

 
39,385

Total assets
6,456,036

 
5,603,527

 
5,834,518

 
1,500,000

 
491,663

Secured debt, net
563,521

 
558,642

 
530,222

 
161,642

 
167,180

Unsecured debt, net
2,302,099

 
1,896,133

 
1,727,429

 
307,836

 

Total liabilities
3,203,703

 
2,842,493

 
2,912,549

 
577,090

 
225,190

Noncontrolling interest in the Operating Partnership
113,530

 
8,643

 
10,892

 
16,129

 

Shareholders' equity
3,138,803


2,752,391

 
2,911,077

 
906,781

 
266,473

Other Data
 
Year Ended December 31,
 
2017
 
2016
 
2015
 
2014
 
2013
Funds from operations - diluted1
$
305,329

 
$
274,509

 
$
42,136

 
$
12,297

 
$
1,267

Cash flows provided by operating activities
290,318

 
229,252

 
37,359

 
32,787

 
29,403

Cash flows provided by (used in) investing activities
(824,463
)
 
89,541

 
(832,790
)
 
(471,174
)
 
(216,092
)
Cash flows provided by (used in) financing activities
496,666

 
(393,006
)
 
748,908

 
595,171

 
124,620

 
1.
We present FFO because we consider it an important supplemental measure of our operating performance and believe that it is frequently used by securities analysts, investors and other interested parties in the evaluation of REITS. The revised White Paper on FFO approved by the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, defines FFO as net income (loss) (determined in accordance with GAAP), excluding impairment write-downs of investments in depreciable real estate and investments in in-substance real estate investments, and sales of depreciable operating properties, plus real estate-related depreciation and amortization (excluding amortization of deferred financing costs), less distributions to noncontrolling interests and gains/losses from discontinued operations and after adjustments for unconsolidated partnerships, joint ventures, and equity investments. FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of our financial performance, or to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it entirely indicative of funds available to fund our cash needs, including our ability to make cash distributions. Our calculation of FFO may be different from the calculation used by other companies and, therefore, comparability may be limited. A reconciliation of FFO to net income computed in accordance with GAAP is provided in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," under the heading "Non-GAAP Financial Measures."

42



GPT Operating Partnership LP
Operating Data
 
Year Ended December 31,
 
2017
 
2016
 
2015
 
2014
 
2013
Total revenues