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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

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PART I

Item 1. Business.

Wellsford Real Properties, Inc. (and subsidiaries, collectively, the “Company”) was formed as a Maryland corporation on January 8, 1997, as a corporate subsidiary of Wellsford Residential Property Trust (the “Trust”). On May 30, 1997, the Trust merged (the “Merger”) with Equity Residential Properties Trust (“EQR”). Immediately prior to the Merger, the Trust contributed certain of its assets to the Company and the Company assumed certain liabilities of the Trust. Immediately after the contribution of assets to the Company and immediately prior to the Merger, the Trust distributed to its common shareholders all of the outstanding shares of the Company owned by the Trust.

The Company is a real estate merchant banking firm headquartered in New York City which acquires, develops, finances and operates real properties, constructs for-sale single family home and condominium developments and organizes and invests in private and public real estate companies. The Company’s activities can be categorized into three strategic business units (“SBUs”) within which it executes its business plans. A brief description of the Company’s investments held in each SBU at December 31, 2004 follows.

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See the accompanying consolidated financial statements for certain financial information regarding the Company’s segments.

During March 2004, the Company retained an investment banking firm, Lazard Frères & Co. LLC, to advise the Company on various strategic financial and business alternatives available to it to maximize shareholder value. Such alternatives under consideration include: acquisitions of businesses or development assets, dispositions of assets, recapitalization, liquidation, returning excess cash to stockholders, privatization of the Company, sale or merger of the Company and other alternatives that would keep the Company independent.

During 2004 and into 2005, Wellsford/Whitehall has continued to sell assets and in the fourth quarter of 2004 the Company sold its ownership interest in a joint venture which purchased debt instruments (“Second Holding”). Simultaneously, the Company has been focusing its efforts on residential development opportunities. Developing for-sale housing could potentially allow for the Company to utilize a portion of its unused net operating loss carryforwards against income generated from the sale of these homes. The Company continues to seek additional ways to utilize its tax asset. Additionally, the Company is contemplating uses of its cash which could include retiring debt and returning cash to common stockholders.

On March 10, 2005, the Company notified EQR of its intent to redeem in cash its outstanding $25,000,000 of Convertible Trust Preferred Securities. The Company expects to complete the redemption during March 2005.

The Company’s executive offices are located at 535 Madison Avenue, New York, New York, 10022; telephone, (212) 838-3400; web address, www.wellsford.com; e-mail, wrpny@wellsford.com. To access the Company’s other documents filed with the Securities and Exchange Commission, visit www.wellsford.com. The Company has 16 employees as of December 31, 2004.

Commercial Property Activities

Since August 1997, the Company’s commercial property activities have primarily consisted of its interest in Wellsford/Whitehall, a joint venture by and among the Company, various entities affiliated with the Whitehall Funds (“Whitehall”) and private real estate funds sponsored by The Goldman Sachs Group, Inc. (“Goldman Sachs”). The Company’s interest in Wellsford/Whitehall was 35.21% and 32.59% at December 31, 2004 and 2003, respectively. The managing member (“WP Commercial”) is a Goldman Sachs and Whitehall affiliate.

Wellsford/Whitehall was originally organized as a private real estate operating company which would lease and re-lease space, perform construction for tenant improvements, expand buildings, re-develop properties and based on general and local economic conditions and specific conditions in the real estate industry, sell properties for an appropriate price.

At December 31, 2004, Wellsford/Whitehall owned and operated 17 properties (including 10 office properties, five net-leased retail properties and two land parcels), totaling approximately 1,773,000 square feet of improvements, primarily located in New Jersey. During January 2005, Wellsford/Whitehall sold 13 properties aggregating 1,285,000 square feet (seven office properties, one land parcel and five net-leased retail properties, see below). The remaining four properties (three office properties and one land parcel) are expected to be sold during 2005.

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The Company’s investment in Wellsford/Whitehall, which is accounted for on the equity method, was approximately $4,229,000 and $14,616,000 at December 31, 2004 and 2003, respectively. The Company’s share of (losses) from Wellsford/Whitehall was approximately $(10,437,000), $(36,473,000) and $(1,292,000) for the years ended December 31, 2004, 2003 and 2002, respectively.

On January 27, 2005, Wellsford/Whitehall completed the sale of a portfolio of seven office properties and a land parcel for approximately $72,000,000, after selling and other costs. The properties, which aggregate approximately 1,231,000 square feet, are all located in New Jersey. Substantially all of the net proceeds from the sale and unrestricted cash and certain related reserve funds aggregating approximately $5,000,000, were used to retire existing debt. In addition, Wellsford/Whitehall also closed on the sale of five retail stores for an aggregate sales price of $17,100,000, after selling costs on January 21, 2005. The net proceeds from the sale of the retail stores of approximately $1,300,000, after the payment of related debt, will be used by Wellsford/Whitehall for working capital purposes. Wellsford/Whitehall recorded an impairment charge of approximately $21,069,000 on the assets relating to both transactions during the fourth quarter of 2004, of which the Company’s share was approximately $7,419,000.

During July 2004, Wellsford/Whitehall completed a transaction whereby it transferred six of its Massachusetts properties (aggregating 891,000 square feet), which were subject to mortgage debt of approximately $64,200,000 (“Nomura Loan”), along with a land parcel, related restricted cash balances aggregating $6,428,000, cash and certain other consideration to a newly formed partnership which includes the New England family (the “Family”) that owned an aggregate 7.45% equity interest in Wellsford/Whitehall (the “Family Partnership”), in redemption of the Family’s equity interests in Wellsford/Whitehall (the “Redemption Transaction”). As a result of the Redemption Transaction, Wellsford/Whitehall recorded a loss of approximately $4,306,000 during the third quarter of 2004, of which the Company’s share was approximately $1,403,000. The Company’s equity interest in Wellsford/Whitehall was increased as a result of the Redemption Transaction in July 2004 to 35.21% from 32.59% at December 31, 2003.

At the time of the Redemption Transaction, there was an elimination of an existing tax indemnity which Wellsford/Whitehall had to the Family’s members. The economic effect of this tax indemnity restricted most future asset sales through 2007 and required a minimum amount of non-recourse debt on Wellsford/Whitehall’s balance sheet; such restrictions no longer remain.

Annually, after the preparation of budgets for the following year and as part of the financial statement closing process, Wellsford/Whitehall performs evaluations for impairment on all of its real estate assets. As part of the fiscal 2003 evaluation, Wellsford/Whitehall recorded an impairment charge of approximately $114,700,000 related to 12 assets in the portfolio during the fourth quarter of 2003. The provision was not the result of a change in the intended use of such assets. However, it was the result of several factors, including, but not limited to, a continued deterioration of and outlook for the suburban office submarkets where Wellsford/Whitehall’s properties are situated. Specifically, these included decreasing market rents, slower absorption trends and greater tenant concession costs. The Company’s share of this impairment charge was approximately $37,377,000 in 2003 and as a result, the Company wrote-off related unamortized warrant costs on the Company’s books of approximately $2,644,000.

At December 31, 2002, in anticipation of the sales of three properties, Wellsford/Whitehall recorded impairment provisions aggregating approximately $1,351,000 as the expected sale prices net of selling expenses were less than the carrying amount of such properties. The Company’s share of these impairments was approximately $440,000 in 2002 and as a result, the Company wrote-off related unamortized warrant costs on the Company’s books of approximately $284,000.

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During the years ended December 31, 2004, 2003 and 2002, Wellsford/Whitehall completed the following disposition transactions (there were no purchases of assets by Wellsford/Whitehall during these periods):

The following table summarizes the long-term debt at Wellsford/Whitehall:

In April 2004, Wellsford/Whitehall executed an amended agreement with General Electric Capital Corporation ("GECC"), to extend the loan maturity to December 31, 2006, adjust the interest rate to LIBOR plus 3.25% per annum and provide for a $16,000,000 line of credit to fund certain capital improvements, subject to certain conditions, through December 31, 2005 (the "GECC Facility"). Excess cash flow, as defined, from the properties collateralizing the GECC Facility can only be used for capital expenditures for such properties. The properties collateralizing the GECC Facility consisted of eight office properties in New Jersey and one in Massachusetts in April 2004. As a result of the sale of certain New Jersey properties in January 2005, the GECC Facility balance was reduced to $36,906,000 which is collateralized by the three remaining unsold office buildings.

From March 2004 to July 2004, the managing member of Wellsford/Whitehall withheld a portion of its scheduled monthly debt service payments on the Nomura Loan and met with the special servicer to present and discuss various potential debt term alternatives. The portion of the scheduled payments not being made related to the amount by which the debt service due each month exceeded the aggregate rent receipts of the six Massachusetts properties, which were payable directly into a lockbox with the lender and were insufficient as a result of low occupancy at these properties. The special servicer agreed to waive default interest in connection with the nonpayment and restructured the Nomura Loan with the Family Partnership which acquired the six properties as described above.

During March 2004, the Company and Whitehall agreed to provide up to $8,000,000 to Wellsford/Whitehall through March 31, 2005 (of which the Company's share is 35% or $2,800,000). The Company does not expect that it will be required to fund any amount under this commitment.

WP Commercial provides management, construction, development and leasing services to Wellsford/Whitehall based on an agreed upon fee schedule. WP Commercial receives an administrative management fee of 93 basis points on a predetermined value for each asset in the Wellsford/Whitehall portfolio. As Wellsford/Whitehall sells

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assets, the basis used to determine the fee is reduced by the respective asset's predetermined value six months after the completion of such sales. The fees earned by WP Commercial related to this service were approximately $3,715,000, $4,604,000 and $5,826,000 for the years ended December 31, 2004, 2003 and 2002, respectively.

WP Commercial also provides similar services (to those described above) to a separate venture formed by Whitehall as well as other affiliates of Whitehall and to third parties, including tenants of Wellsford/Whitehall and new owners of properties disposed of by Wellsford/Whitehall.

Whitehall pays the Company fees with respect to assets disposed of by Wellsford/Whitehall and for certain acquisitions of real estate made by certain other affiliates of Whitehall. Such fees aggregated $46,000, $430,000 and $29,000 for the years ended December 31, 2004, 2003 and 2002, respectively.

A buy/sell agreement of equity interests between the Company and Whitehall can be exercised by either partner after December 31, 2003 with respect to the Wellsford/Whitehall venture (the "Buy/Sell Agreement"). The nature of the Buy/Sell Agreement allows for either the Whitehall funds, as a group, or the Company to provide notice that it intends to purchase the non-initiating partner's interest at a specific price per unit. The non-initiating partner may either accept that offer or instead may reject that offer and become the purchaser at the initially offered price. The terms of the GECC Facility allow for the continuance of such debt as long as the Company or Whitehall has ultimate decision-making authority over the management and operations of Wellsford/Whitehall. As of the date of this report, neither partner has exercised its buy/sell right under the Buy/Sell Agreement.

Debt and Equity Activities

The Company, through the Debt and Equity Activities SBU, primarily makes debt investments directly, or through joint ventures, predominantly in real estate related assets and investments.

At December 31, 2004, the Company had the following investments in the Debt and Equity Activities SBU: (i) a debt investment of $1,032,000; (ii) an equity investment of approximately $2,190,000 in Clairborne Fordham, a company initially organized to provide $34,000,000 of mezzanine construction financing for a high-rise condominium project in Chicago, which currently owns and is selling the remaining unsold components of this project; (iii) approximately $6,790,000 invested in Reis, a real estate information and database company; and (iv) a $450,000 investment in Wellsford Mantua, a company organized to purchase land parcels for rezoning, subdivision and creation of environmental mitigation credits.

Debt Investments

Guggenheim Loan

In July and August 1998, the Company invested a total of approximately $2,100,000 for an approximate 4.20% equity interest in The Liberty Hampshire Company, L.L.C. ("Liberty Hampshire"), a venture which structures, establishes and provides management and services for special purpose finance companies formed to invest in financial assets, including Second Holding (see below). In December 2000, the Company sold this interest to the majority owner of Liberty Hampshire for $5,160,000 and recorded a gain of approximately $2,500,000. The Company received $1,032,000 of cash and a note for the remaining balance of $4,128,000 which bears interest at 8.25% per annum, is due in December 2005 and has scheduled annual principal and interest payments (the "Guggenheim Loan"). The balance of the Guggenheim Loan was $1,032,000 and $3,096,000 at December 31, 2004 and 2003, respectively. Interest revenue was approximately $173,000, $259,000 and $302,000 for the years ended December 31, 2004, 2003 and 2002, respectively.

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277 Park Loan

In April 1997, the Company and a predecessor of Bank of America originated an $80,000,000 loan (the "277 Park Loan") to entities which own substantially all of the equity interests (the "Equity Interests") in the entity which owns a 1,750,000 square foot office building located in New York City (the "277 Park Property"). The Company advanced $25,000,000 pursuant to the 277 Park Loan.

During September 2003, the 277 Park Loan was prepaid by the borrowers and pursuant to the terms of the loan, WRP received a yield maintenance penalty of $4,368,000 which is included in interest revenue for the year ended December 31, 2003. This note would have provided for $767,000 of interest revenue in the fourth quarter of 2003 and $3,042,000 for future annual periods to May 2006 for both the Debt and Equity Activities SBU and the Company's consolidated statement of operations. The 277 Park Loan bore interest at 12.00% per annum with a stated maturity of May 2007. The 277 Park Loan was secured primarily by a pledge of the Equity Interests owned by the borrowers and thus was junior to a first mortgage loan on the 277 Park Property. Interest revenue was approximately $6,643,000 and $3,042,000 for the years ended December 31, 2003 and 2002, respectively, with the 2003 period amount including the $4,368,000 yield maintenance penalty.

Equity Investments

Second Holding

Second Holding is a joint venture special purpose finance company, organized to purchase investment and non-investment grade rated real estate debt instruments and investment grade rated other asset-backed securities. The other asset-backed securities that Second Holding purchased may have been secured by, but not limited to, leases on aircraft, truck or car fleets, bank deposits, leases on equipment, fuel/oil receivables, consumer receivables, pools of corporate bonds and loans and sovereign debt. It was Second Holding's intent to hold all securities to maturity. Many of the securities owned by Second Holding were obtained through private placements.

The Company's initial net contribution to Second Holding was approximately $24,600,000 to obtain an approximate 51.09% non-controlling interest in Second Holding, with Liberty Hampshire owning 10% and an affiliate of a significant shareholder of the Company, the Caroline Hunt Trust Estate, (which owns 405,500 shares of the Company at December 31, 2004 and 2003 ("Hunt Trust")) together with other Hunt Trust related entities, owning the remaining approximate 39% interest.

During the latter part of 2000, an additional partner was admitted to the venture who committed to provide credit enhancement through April 2010 by issuing an insurance policy (through one of its affiliates) for the payment of principal and interest on the junior subordinated bond issue of $100,000,000. The parent company of this partner announced during 2003 that its subsidiary (the partner of Second Holding) will no longer write new credit enhancement business, however, it would continue to support its existing book of credit enhancement business. This partner was entitled to 35% of net income as defined by agreement, while the other partners, including the Company, shared in the remaining 65%. The Company's allocation of income was approximately 51.09% of the remaining 65%.

During the second quarter of 2004, the partner providing the credit enhancement requested that the management of Second Holding not purchase any further long-term investments and Second Holding accordingly suspended such acquisitions. During the third quarter of 2004, the partners evaluated alternatives available to Second Holding in addition to holding existing assets through respective maturities and then retiring related debt. As a consequence of not purchasing additional assets, operating income, fees earned and cash flows received by the Company from such fees declined during 2004.

In November 2004, the Company completed the sale of its interest in Second Holding for $15,000,000 in cash. Since the Company was willing to entertain and execute an agreement at this price, and based upon the

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evaluation of other alternatives, the Company determined it was appropriate, under the accounting literature for equity method investees, to record a $9,000,000 impairment charge to the carrying amount of its investment in Second Holding during the third quarter of 2004.

The Company accounted for its investment in Second Holding on the equity method of accounting as its interests were represented by two of eight board seats with one-quarter of the vote on any major business decisions. The Company's investment was approximately $29,167,000 at December 31, 2003. The Company's share of (loss) income from Second Holding's operations was approximately $(4,790,000), $1,640,000 and $723,000 for the eleven months ended November 30, 2004 (date of sale) and for the years ended December 31, 2003 and 2002, respectively. The loss in the year ended December 31, 2004 is the result of a$12,930,000 net impairment charge taken by Second Holding (of which the Company's share was $6,606,000) relatedto the write-down of one of its investments during the first quarter of 2004, offset by a partial recovery when the investment was sold in the second quarter of 2004. The net fees earned by the Company, which were based upon total assets of Second Holding, amounted to approximately $751,000, $930,000 and $646,000 for the years ended December 31, 2003 and 2002, respectively.

Clairborne Fordham

In October 2000, the Company and Prudential Real Estate Investors ("PREI"), an affiliate of Prudential Life Insurance Company, organized Clairborne Fordham, a venture in which the Company has a 10% interest. The Company's investment in Clairborne Fordham, which is accounted for on the equity method, was $2,190,000 and $3,186,000 at December 31, 2004 and 2003, respectively.

Upon its organization, Clairborne Fordham provided an aggregate of $34,000,000 of mezzanine construction financing (the "Mezzanine Loan") for the construction of Fordham Tower, a 50-story, 227 unit, luxury condominium apartment project to be built on Chicago's near northside ("Fordham Tower"). The Mezzanine Loan, which matured in October 2003, bore interest at a fixed rate of 10.50% per annum with provisions for additional interest to PREI and the Company and was secured by a lien on the equity interests of the owner of Fordham Tower. The Company could earn fees from PREI's additional interest based upon certain levels of returns on the project. Such additional interest had not been accrued by the Company or Clairborne Fordham through the maturity of the Mezzanine Loan, nor had any fees been accrued by the Company.

The Mezzanine Loan was not repaid at maturity and as of October 2003, an amended loan agreement was executed. The amended terms provided for extending the maturity to December 31, 2004, the placement of a first mortgage lien on the project, no interest to be accrued after September 30, 2003 and for the borrower to add to the existing principal amount the additional interest due Clairborne Fordham at September 30, 2003 of approximately $19,240,000. In lieu of interest after September 30, 2003, Clairborne Fordham was to participate in certain additional cash flows, as defined, if earned from net sales proceeds of the Fordham Tower project.

The amended loan agreement provided for a $3,000,000 additional capital contribution by the borrower and use of an existing cash collateral account to pay off an existing construction loan and any unpaid construction costs. Also, the amended loan agreement provided for an initial principal payment and all proceeds after project costs to be first applied to payment in full of the loan and the additional interest to Clairborne Fordham before any sharing of project cash flow with the borrower. Payments of $5,125,000 and $7,823,000 were made to Clairborne Fordham during the fourth quarter of 2003 and for the period January 1, 2004 to September 15, 2004, respectively, of which the Company's share was $510,000 and $782,000, respectively.

On September 15, 2004, Clairborne Fordham executed an agreement with the owners of Fordham Tower pursuant to which Clairborne Fordham obtained title to the remaining unsold components of the project (which included 18 unsold residential units, the 188 space parking garage and 12,000 square feet of retail space). Additionally, Clairborne Fordham agreed to distribute the first $2,000,000 of sale proceeds to the former owner. No gain or loss was recognized by Clairborne Fordham or the Company as a result of the transfer. During the period September 15, 2004 to December 31, 2004, Clairborne Fordham sold the retail space and three residential units and realized approximately $8,677,000 of net proceeds before the $2,000,000 payment to the former

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owner. Clairborne Fordham distributed approximately $5,655,000 to the venture members including approximately $566,000 to the Company during the period September 15, 2004 to December 31, 2004. Undistributed proceeds were retained by Clairborne Fordham for working capital purposes. It is the intention of Clairborne Fordham to complete the orderly sale of the remaining components.

The following table details the Company's share of income from Clairborne Fordham:

Other Investments

Reis, Inc.

The Company has direct and indirect equity investments in a real estate information and database company, Reis, a provider of real estate market information to institutional investors. At December 31, 2004 and 2003, the Company's aggregate investment in Reis, which is accounted for under the cost method, was approximately $6,790,000 (approximately 21.6% of Reis' equity on an as converted basis at December 31, 2004). The president and primary common shareholder of Reis is the brother of Mr. Lynford, the Chairman, President and Chief Executive Officer of the Company. Mr. Lowenthal, the Company's former President and Chief Executive Officer, who currently serves on the Company's Board of Directors, has served on the board of directors of Reis since the third quarter of 2000. Messrs. Lynford and Lowenthal have and will continue to recuse themselves from any investment decisions made by the Company pertaining to Reis.

Value Property Trust

During 2004 and 2003, the Company sold the remaining properties acquired as part of the February 1998 merger with Value Property Trust ("VLP"). In July 2003, the Salem, New Hampshire property was sold for a net sales price of approximately $4,200,000 and the Company utilized $22,000 of an existing impairment reserve recorded in 2000. During April 2004, the Company sold the Philadelphia, Pennsylvania property for net proceeds of approximately $2,700,000. As a result of the sale of the Philadelphia, Pennsylvania property, the Company reversed approximately $625,000 of impairment reserves recorded in 2000. During June 2004, the Company recognized approximately $184,000 of proceeds which had been placed in escrow from the sale of the Salem, New Hampshire property, as a result of the expiration of a contingency period. The contingent proceeds and the reversal of the impairment reserve were reflected in income from discontinued operations during the second quarter of 2004 and the year ended December 31, 2004. These transactions were the completion of the sales process of the VLP properties owned by the Company.

Wellsford Mantua

During November 2003, the Company made an initial $330,000 investment in the form of a loan, in a company organized to purchase land parcels for rezoning, subdivision and creation of environmental mitigation credits .. The loan is secured by a lien on a leasehold interest in a 154 acre parcel in West Deptford, New Jersey which includes at least 64.5 acres of wetlands and a maximum of 71 acres of developable land. During 2004, the Company made additional advances aggregating $120,000 to Wellsford Mantua. The balance of the Company's loan to Wellsford Mantua was $450,000 and $330,000 at December 31, 2004 and 2003, respectively. The Company consolidates Wellsford Mantua and its investment is primarily included in construction in process on

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the consolidated balance sheet at December 31, 2004 and 2003. The Company has committed $246,000 of capital in addition to the loan to Wellsford Mantua.

Residential Activities

Palomino Park

The Company has an 85.85% interest as managing owner in Palomino Park, a five phase, 1,707 unit multifamily residential development in Highlands Ranch, a southern suburb of Denver, Colorado. Three phases (Blue Ridge, Red Canyon and Green River) aggregating 1,184 units are operational as rental property. The 264 unit Silver Mesa phase has been converted into condominiums (sales commenced in February 2001 and through December 31, 2004, the Company sold 262 units). The 259 unit Gold Peak phase is being developed as for-sale condominiums on the remaining land. At December 31, 2004, a subsidiary of EQR owned the remaining 14.15% interest.

With respect to EQR's 14.15% interest in the corporation that owns Palomino Park, there exists a put/call option between the Company and EQR related to one-half of such interest (7.075%). In February 2005, the Company informed EQR of its intent to exercise this option at a purchase price of approximately $2,000,000. Any transaction for the remaining interest would be subject to negotiation between the Company and EQR. Additionally, EQR is the beneficiary of certain rights of first offer on the Blue Ridge and Red Canyon phases at Palomino Park.

In December 1995, the Trust marketed and sold $14,755,000 of tax-exempt bonds to fund construction at Palomino Park (the "Palomino Park Bonds"). Initially, all five phases of Palomino Park were collateral for the Palomino Park Bonds. The Palomino Park Bonds had an outstanding balance of $12,680,000 at December 31, 2004 and 2003 and were collateralized by four phases at Palomino Park. On January 3, 2005, the Palomino Park Bonds were paid down by $2,275,000 in order to release the Gold Peak phase from the bond collateral. In June 2000, the Company obtained a five-year letter of credit from Commerzbank AG to secure the Palomino Park Bonds. This letter of credit, which expires in May 2005, replaced an expiring letter of credit. A subsidiary of EQR has guaranteed Commerzbank AG's letter of credit; such guarantee also expires in May 2005. The Company expects to repay the balance of this obligation prior to the expiration of these enhancements.

In December 1997, Phase I, the 456 unit phase known as Blue Ridge, was completed at a cost of approximately $41,600,000. At that time, the Company obtained a $34,500,000 permanent loan (the "Blue Ridge Mortgage") secured by a first mortgage on Blue Ridge. The Blue Ridge Mortgage matures in December 2007 and bears interest at a fixed rate of 6.92% per annum. Principal payments are based on a 30-year amortization schedule.

In November 1998, Phase II, the 304 unit phase known as Red Canyon, was completed at a cost of approximately $33,900,000. At that time, the Company acquired the Red Canyon improvements and the related construction loan was repaid with the proceeds of a $27,000,000 permanent loan (the "Red Canyon Mortgage") secured by a first mortgage on Red Canyon. The Red Canyon Mortgage matures in December 2008 and bears interest at a fixed rate of 6.68% per annum. Principal payments are based on a 30-year amortization schedule.

In October 2000, Phase III, the 264 unit phase known as Silver Mesa, was completed at a cost of approximately $44,200,000. The Company made the strategic decision to convert Silver Mesa into condominium units and sell them to individual buyers. In conjunction with this decision, the Company prepared certain units to be sold and continued to rent certain of the remaining unsold units during the sell out period until the inventory available for sale had been significantly reduced and additional units were required to be prepared for sale. In conjunction with this decision, the Company made a payment of $2,075,000 to reduce the outstanding balance on the tax-exempt bonds in order to obtain the release of the Silver Mesa phase from the Palomino Park Bond collateral and obtained a $32,000,000 loan which was collateralized by the unsold Silver Mesa units and matured in December 2003 (the "Silver Mesa Conversion Loan"). During May 2003, the Company repaid the remaining unpaid principal balance of the Silver Mesa Conversion Loan with proceeds from Silver Mesa unit sales and available cash.

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Sales of condominium units at the Silver Mesa phase of Palomino Park commenced in February 2001 and 262 units have been sold through December 31, 2004. The following table provides information regarding sales of Silver Mesa units:

As the Company sold Silver Mesa units, rental revenue, the corresponding operating expenses and cash flow from the units being rented diminished. Rental revenue from the Silver Mesa phase was approximately $51,000, $702,000 and $1,462,000 for the years ended December 31, 2004, 2003 and 2002, respectively.

In December 2001, Phase IV, the 424 unit phase known as Green River, was completed at a cost of approximately $56,300,000. In February 2003, the Company obtained a $40,000,000 permanent loan secured by a first mortgage on Green River (the “Green River Mortgage”). The Green River Mortgage matures in March 2013 and bears interest at a fixed rate of 5.45% per annum. Principal payments are based on a 30-year amortization schedule. The proceeds of the Green River Mortgage were used to repay the construction loan for the Green River phase.

During 2004, the Company made the decision to commence the development of the fifth and final phase, known as Gold Peak. Gold Peak will be comprised of 259 condominium units to be built in sections on the remaining 29 acre land parcel at Palomino Park. The Company is in the process of obtaining construction financing from a financial institution. Initial unit deliveries and sales are expected to commence in the fall of 2005.

Other Developments

East Lyme

The Company has a 95% ownership interest as managing member of a venture to construct and sell 101 single family homes in East Lyme, Connecticut. After initially purchasing the land for $6,200,000 in June 2004, the Company executed an agreement with a homebuilder (the “Homebuilder”) who will construct and sell the homes for this project and will be a 5% partner in the project along with receiving other consideration. The Company extended a loan to the Homebuilder of $157,500 at a rate of 6% per annum which was used by the Homebuilder to finance one-half of his 5% investment in East Lyme. The loan matures upon the termination of the development agreement, which is expected to be in 2009.

The Company obtained construction financing in the aggregate amount of $21,177,000 (to be drawn upon as costs are expended) bearing interest at LIBOR + 2.15% per annum and maturing in December 2007 with two one-year extensions at the venture’s option (the “East Lyme Construction Loan”). The balance of the East Lyme Construction Loan was approximately $361,000 at December 31, 2004. The completion of the initial homes and sales are expected to occur in 2006.

The Company has a right of first refusal from the seller of the East Lyme land on an adjacent parcel of land which could be used to develop 60 single family homes.

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Claverack

During November 2004, the Company invested $2,250,000 for a 75% ownership interest in a joint venture that owns approximately 300 acres, currently zoned for 13 single family home lots, in Claverack, New York. Claverack is capitalized with $3,000,000 of capital, the Company’s share of which was contributed in cash and the 25% partner’s contribution was the land, subject to liabilities, at a net value of $750,000. The land is subject to a $484,000 mortgage which was assumed by the joint venture (the balance of this mortgage was $465,000 at December 31, 2004, bears interest at a rate of 7% per annum and matures in February 2010 (the “Claverack Mortgage”)). At the closing, an aggregate of approximately $866,000 owed to affiliates of the 25% partner was paid from the amount contributed by the Company. The intent is for Claverack to obtain an increase in the number of developable residential lots, improve the land, obtain construction financing and construct and sell single family homes. The Company expects that initial homes will be completed and sold during 2006.

Beekman

The Company has entered into contracts to purchase two contiguous land parcels in Beekman, New York. The acquisition of one 10 acre parcel closed on February 15, 2005 for a purchase price of $650,000. The purchase of the other 14 acre parcel is conditioned upon zoning approval to build a minimum of 60 residential condominium units. The current intent is to construct and sell a minimum of 125 residential condominium units on the parcels.

Segment Financial Information

See Footnote 13 to the Company’s consolidated financial statements for additional information regarding the Company’s segments.

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Item 2. Properties.

The following property information is presented by SBU.

Commercial Properties Activities

As of December 31, 2004, Wellsford/Whitehall owned and operated 17 properties, including 10 office properties, five net-leased retail properties and two land parcels, totaling approximately 1,773,000 square feet of improvements, of which 1,644,000 square feet is held for sale at December 31, 2004. The following table sets forth certain information related to all of these properties at December 31, 2004: