AGREEMENT AND PLAN OF MERGER

Exhibit 99.1

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

DATED AS OF DECEMBER 22, 2005

BY AND AMONG

ACADIA REALTY ACQUISITION I, LLC,

ARA BTC LLC, ARA MS LLC, ARA BS LLC,

ARA BC LLC and ARA BH LLC,

ACADIA INVESTORS, INC.,

AII BTC LLC, AII MS LLC, AII BS LLC,

AII BC LLC and AII BH LLC,

SAMUEL GINSBURG 2000 TRUST AGREEMENT #1, MARTIN GINSBURG 2000
TRUST AGREEMENT #1, MARTIN GINSBURG, SAMUEL GINSBURG AND ADAM
GINSBURG,

AND

GDC SMG, LLC, GDC BEECHWOOD, LLC, ASPEN COVE APARTMENTS, LLC and

SMG CELEBRATION, LLC

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (“Agreement”) is dated as of December 22, 2005, and is by and among among ACADIA REALTY ACQUISITION I, LLC, a Delaware limited liability company (“ARA”), ARA BTC LLC, a Delaware limited liability company (“ARA BTC”), ARA MS LLC, a Delaware limited liability company (“ARA MS”), ARA BS LLC, a Delaware limited liability company (“ARA BS”), ARA BC LLC, a Delaware limited liability company (“ARA BC”), and ARA BH LLC, a Delaware limited liability company (“ARA BH”, and together with ARA BTC, ARA MS, ARA BS and ARA BC, the “ARA Companies”), and ACADIA INVESTORS, INC., a Delaware corporation (“AII”), AII BTC LLC, a Delaware limited liability company (“AII BTC”), AII MS LLC, a Delaware limited liability company (“AII MS”), AII BS LLC, a Delaware limited liability company (“AII BS”), AII BC LLC, a Delaware limited liability company (“AII BC”), and AII BH LLC, a Delaware limited liability company (“AII BH”, and together with AII BTC, AII MS, AII BS and AII BC, the “AII Companies”), and SAMUEL GINSBURG 2000 TRUST AGREEMENT #1, a New York irrevocable trust u/t/a/d April 12, 2000, MARTIN GINSBURG 2000 TRUST AGREEMENT #1, a New York irrevocable trust u/t/a/d April 12, 2000, MARTIN GINSBURG, an individual, SAMUEL GINSBURG, an individual, AND ADAM GINSBURG, an individual (collectively, the “GDC Owners”), GDC SMG, LLC, a New York limited liability company (“GDC SMG”), GDC BEECHWOOD, LLC, a New York limited liability company (“GDC Beechwood”), ASPEN COVE APARTMENTS, LLC, a New York limited liability company (“Aspen”), and SMG CELEBRATION, LLC, a New York limited liability company (“Celebration” and together with GDC SMG, GDC Beechwood and Aspen, the “GDC Companies”, and from and after the First Step Mergers (as defined herein, the “First Step Survivor Entities”) and from and after the Second Step Mergers (as defined herein, the “Survivor Entities”) .

RECITALS

WHEREAS, the respective managers and members of the ARA Companies, the GDC Companies and the AII Companies have approved this Agreement and have approved and declared advisable the merger transactions provided for herein; and

WHEREAS, the parties hereto desire to make certain representations, warranties, covenants and agreements in connection with the merger transactions provided for herein and to prescribe various conditions to such transactions.

NOW THEREFORE, in consideration of the representations, warranties, covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties to this Agreement hereby agree as follows:

ARTICLE I

THE FIRST STEP MERGERS

1.01        The First Step Mergers. Upon the terms and subject to the conditions of this Agreement and the ARA Certificates of Merger in such form as is required by the relevant provisions of the Delaware Limited Liability Company Act (the “Delaware LLC Act”) and the Limited Liability Company Law of the State of New York (the “New York LLC Law”, together with the Delaware LLC Act, the “LLC Statutes”), at the First Step Effective Time, (a) ARA BTC will be merged with and into GDC SMG and the separate and limited liability company existence of ARA BTC shall thereupon cease (the “First BTC/SMG Merger”), (b) ARA MS will be merged with and into GDC Beechwood and the separate and limited liability company existence of ARA MS shall thereupon cease (the “First MS/Beechwood Merger”), (c) ARA BC will be merged with and into Aspen and the separate and limited liability company existence of ARA BC shall thereupon cease (the “First BC/Aspen Merger”) and (d) each of ARA BS and ARA BH will be merged with and into Celebration and the separate and limited liability company existence of each of ARA BS and ARA BH shall thereupon cease (the “First BS/BH/Celebration Merger” and together with the First BTC/SMG Merger, the First MS/Beechwood Merger and the First BC/Aspen Merger, the “First Step Mergers”), in each case with GDC SMG, GDC Beechwood, Aspen and Celebration being the surviving limited liability companies in the First Step Mergers. As a result of the First Step Mergers, the outstanding limited liability company interests of each of the ARA Companies and the GDC Companies shall be converted or canceled in the manner provided in Article II, the separate limited liability company existence of each of the ARA Companies shall cease and the First Step Survivor Entities shall be the surviving limited liability companies following the First Step Mergers as provided herein.

(a)           At and after the First Step Effective Time, the First Step Mergers shall have the effects specified in the LLC Statutes and herein.

(b)           At the First Step Effective Time, the Certificate of Formation of each of the First Step Survivor Entities (the “Surviving Certificates of Formation”) shall be in the forms attached hereto as Exhibits A-1 through A-4. As so amended and restated, each Surviving Certificate of Formation of a First Step Survivor Entity shall be the Certificate of Formation thereof until amended thereafter in accordance with the Surviving Company Agreement thereof, the New York LLC Law and other applicable statutes, laws, ordinances, rules or regulations of any Governmental Entities (“Laws”).

(c)           At the First Step Effective Time, the limited liability company operating agreement of each of the First Step Survivor Entities (the “Surviving Company Agreements”) shall be in substantially the forms attached hereto as Exhibits B-1 through B-4, until amended thereafter in accordance with the terms thereof, the New York LLC Law and other applicable Law.

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(d)           At the First Step Effective Time, each of the officers of each of the ARA Companies immediately prior to the First Step Effective Time (which officers of each ARA Company are set forth on Schedule 1.02(d)) shall be the officers of the First Step Survivor Entity into which such ARA Company(s) was merged, each to hold office until their respective death, permanent disability, resignation or removal or until his or her successor is duly elected and qualified, all in accordance with the Surviving Company Agreement of such First Step Survivor Entity and applicable Law.

(e)           Without limiting the generality of Section 1.02(a), by virtue of the First Step Mergers, at the First Step Effective Time, pursuant to 6 Del. Code Section 18-209 and Section 1004 of the NY LLC Law, all properties, assets, rights, privileges, immunities, powers and causes of action of each of ARA BTC, ARA MS, ARA BC, and ARA BS and ARA BH shall automatically vest by operation of law in each of GDC SMG, GDC Beechwood, Aspen and Celebration, respectively.

(f)            At the First Step Effective Time, all respective liabilities and debts of the ARA Companies and the First Step Survivor Entities, except to the extent set forth in the terms of such liabilities and debts, shall remain unaffected by the First Step Mergers.

1.03        Further Assurances. If, at any time after the First Step Effective Time, any Survivor Entity shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or things are necessary, desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in such Survivor Entity its right, title and interest in, to or under any of the rights, privileges, powers, franchises, immunities, causes of action, properties or assets of either the ARA Company(s) merged into it by virtue of the First Step Mergers or such Survivor Entity, or (b) otherwise to carry out the purposes of this Agreement, any Survivor Entity and its proper officers or their designees shall be authorized to execute and deliver, in the name and on behalf of either such ARA Company(s) or such Survivor Entity, all such deeds, bills of sale, assignments and assurances and to do, in the name and on behalf of either such ARA Company(s) or such Survivor Entity, all such other acts and things as may be necessary, desirable or proper to vest, perfect or confirm such Survivor Entity’s right, title and interest in, to and under any of the rights, privileges, powers, franchises, immunities, causes of action, properties or assets of such ARA Company(s) or such Survivor Entity and otherwise to carry out the purposes of this Agreement.

ARTICLE II

CONVERSION OF ARA COMPANY LIMITED LIABILITY COMPANY INTERESTS

2.01        Conversion of Membership Interests. At the First Step Effective Time, the following shall occur or result by virtue of the First Step Mergers and without any action on the part of the ARA Companies, the First Step Survivor Entities or their respective members:

(a)           ARA BTC and GDC SMG. All of the limited liability company interests of ARA BTC issued and outstanding immediately prior to the First Step Effective Time shall be converted into and become 22.22% of the outstanding limited liability company interests of GDC SMG (the “22.22% GDC SMG Interest”). All of the limited liability company interests of

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GDC SMG issued and outstanding immediately prior to the First Step Effective Time shall remain outstanding and shall represent 77.78% of the outstanding limited liability company interests of GDC SMG.

(b)           ARA MS and GDC Beechwood. All of the limited liability company interests of ARA MS issued and outstanding immediately prior to the First Step Effective Time shall be converted into and become 22.22% of the outstanding limited liability company interests of GDC Beechwood (the “22.22% GDC Beechwood Interest”). All of the limited liability company interests of GDC Beechwood issued and outstanding immediately prior to the First Step Effective Time shall remain outstanding and shall represent 77.78% of the outstanding limited liability company interests of GDC Beechwood.

(c)           ARA BC and Aspen. All of the limited liability company interests of ARA BC issued and outstanding immediately prior to the First Step Effective Time shall be converted into and become 22.22% of the outstanding limited liability company interests of Aspen (the “22.22% Aspen Interest”). All of the limited liability company interests of Aspen issued and outstanding immediately prior to the First Step Effective Time shall remain outstanding and shall represent 77.78% of the outstanding limited liability company interests of Aspen.

(d)           ARA BS, ARA BH and Celebration. All of the limited liability company interests of ARA BS issued and outstanding immediately prior to the First Step Effective Time shall be converted into and become 11.92% of the outstanding limited liability company interests of Celebration (the “11.92% Celebration Interest”). All of the limited liability company interests of ARA BH issued and outstanding immediately prior to the First Step Effective Time shall be converted into and become 10.39% of the outstanding limited liability company interests of Celebration (the “10.30% Celebration Interest”, together with the 11.92% Celebtation Interest, the “22.22% Celebration Interest”). All of the limited liability company interests of Celebration issued and outstanding immediately prior to the First Step Effective Time shall remain outstanding and shall represent 77.78% of the outstanding limited liability company interests of Celebration. The 22.22% GDC SMG Interest, the 22.22% GDC Beechwood Interest, the 22.22% Aspen Interest and the 22.22% Celebration Interest are collectively referred to herein as the “First Step Merger Consideration”.

(e)           Calculation of 22.22% Interest. The 22.22% GDC SMG Interest, the 22.22% GDC Beechwood Interest, the 22.22% Aspen Interest and the 22.22% Celebration Interest shall each equal 22.22% of the limited liability company interests of GDC SMG, GDC Beechwood, Aspen and Celebration, respectively, outstanding on a Fully Diluted Basis immediately following the First Step Effective Time after giving effect to the limited liability company interest conversions set forth in Sections 2.01(a), 2.01(b), 2.01(c) and 2.01(d). “Fully Diluted Basis” means, with respect to the number of any Person’s limited liability company interests, (x) the amount of limited liability company interests of such Person issued and outstanding immediately prior to the First Step Effective Time, plus (y) the amount of limited liability company interests of such Person issuable upon the exercise, conversion or exchange of all outstanding securities exercisable, convertible or exchangeable for or into such limited liability company interests immediately prior to the First Step Effective Time. “Person” means an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated

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association, a Governmental Entity or any agency, instrumentality or political subdivision of a Governmental Entity, or any other entity or body.

2.02        Cancellation of All Interests. From and after the First Step Effective Time, all limited liability interests of each of the ARA Companies that were issued and outstanding immediately prior to the First Step Effective Time shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder thereof shall cease to have any rights with respect thereto, except the right to receive the First Step Merger Consideration set forth in Section 2.01 in accordance with the terms of this Agreement. At the First Step Effective Time, the limited liability interest transfer books of each of the ARA Companies shall be closed, and there shall be no further transfers on the limited liability company interest transfer books of the ARA Companies. Without limiting the generality of the foregoing, notwithstanding any other provision hereof, no Survivor Entity shall be liable to any holder of limited liability company interests of any ARA Company delivered to a public official pursuant to any applicable abandoned property, escheat or similar Laws for any limited liability company interests of such Survivor Entity or any distributions made with respect thereof.

ARTICLE III

THE SECOND STEP MERGERS

3.01        The Second Step Mergers. Upon the terms and subject to the conditions of this Agreement and the AII Certificates of Merger in such form as is required by the relevant provisions of the LLC Statutes, at the Second Step Effective Time, (a) AII BTC will be merged with and into GDC SMG and the separate and limited liability company existence of AII BTC shall thereupon cease (the “Second BTC/SMG Merger”), (b) AII MS will be merged with and into GDC Beechwood and the separate and limited liability company existence of AII MS shall thereupon cease (the “Second MS/Beechwood Merger”), (c) AII BC will be merged with and into Aspen and the separate and limited liability company existence of AII BC shall thereupon cease (the “Second BC/Aspen Merger”) and (d) each of AII BS and AII BH will be merged with and into Celebration and the separate and limited liability company existence of each of AII BS and AII BH shall thereupon cease (the “Second BS/BH/Celebration Merger” and together with the Second BTC/SMG Merger, the Second MS/Beechwood Merger and the Second BC/Aspen Merger, the “Second Step Mergers”), in each case with GDC SMG, GDC Beechwood, Aspen and Celebration being the surviving limited liability companies in the Second Step Mergers. As a result of the Second Step Mergers, the outstanding limited liability company interests of each of the AII Companies and the First Step Survivor Entities shall be converted or canceled in the manner provided in Article IV, the separate limited liability company existence of each of the AII Companies shall cease and the Survivor Entities shall be the surviving limited liability companies following the Second Step Mergers as provided herein.

(a)           At and after the Second Step Effective Time, the Second Step Mergers shall have the effects specified in the LLC Statutes and herein.

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(b)           At the Second Step Effective Time, the Certificate of Formation of each of the Survivor Entities shall be in the form in effect immediately prior to the Second Step Effective Time (but after the First Step Effective Time), until amended thereafter in accordance with the Surviving Company Agreement thereof, the New York LLC Law and other applicable Law.

(c)           At the Second Step Effective Time, the limited liability company operating agreement of each of the Survivor Entities shall be in the forms in effect immediately prior to the Second Step Effective Time (but after the First Step Effective Time), until amended thereafter in accordance with the terms thereof, the New York LLC Law and other applicable Law.

(d)           At the Second Step Effective Time, each of the officers of a Survivor Entity immediately prior to the Second Step Effective Time (but after the First Step Effective Time) shall be the officers of such Survivor Entity, each to hold office until their respective death, permanent disability, resignation or removal or until his or her successor is duly elected and qualified, all in accordance with the Surviving Company Agreement of such Survivor Entity and applicable Law.

(e)           Without limiting the generality of Section 3.02(a), by virtue of the Second Step Mergers, at the Second Step Effective Time, pursuant to 6 Del. Code Section 18-209 and Section 1004 of the NY LLC Law, all properties, assets, rights, privileges, immunities, powers and causes of action of each of AII BTC, AII MS, AII BC, AII BS and AII BH shall automatically vest by operation of law in each of GDC SMG, GDC Beechwood, Aspen and Celebration, respectively.

(f)            At the Second Step Effective Time, all respective liabilities and debts of the AII Companies and the Survivor Entities, except to the extent set forth in the terms of such liabilities and debts, shall remain unaffected by the Second Step Mergers.

3.03        Further Assurances. If, at any time after the Second Step Effective Time, any Survivor Entity shall consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or things are necessary, desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in such Survivor Entity its right, title and interest in, to or under any of the rights, privileges, powers, franchises, immunities, causes of action, properties or assets of either the AII Company(s) merged into it by virtue of the Second Step Mergers or such Survivor Entity, or (b) otherwise to carry out the purposes of this Agreement, any Survivor Entity and its proper officers or their designees shall be authorized to execute and deliver, in the name and on behalf of either the AII Companies or the Survivor Entities, all such deeds, bills of sale, assignments and assurances and to do, in the name and on behalf of either such AII Company(s) or such Survivor Entity, all such other acts and things as may be necessary, desirable or proper to vest, perfect or confirm such Survivor Entity’s right, title and interest in, to and under any of the rights, privileges, powers, franchises, immunities, causes of action, properties or assets of such AII Company(s) or such Survivor Entity and otherwise to carry out the purposes of this Agreement.

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ARTICLE IV

CONVERSION OF AII COMPANY LIMITED LIABILITY COMPANY INTERESTS

4.01        Conversion of Limited Liability Company Interests. At the Second Step Effective Time, the following shall occur or result by virtue of the Second Step Mergers and without any action on the part of the AII Companies, the Survivor Entities or their respective members:

(a)           AII BTC and GDC SMG. The limited liability company interests of AII BTC issued and outstanding immediately prior to the Second Step Effective Time shall be converted into the right to receive an amount of cash equal to $22,538,000 (the “GDC SMG Merger Consideration”). Cash from the Fund in the amount of $1,779,000 shall be applied towards the GDC SMG Merger Consideration in accordance with the terms of the Escrow Agreement and the remaining $20,759,000 shall be paid, or caused to be paid, by GDC SMG. All of the limited liability company interests of GDC SMG issued and outstanding immediately prior to the Second Step Effective Time shall remain outstanding.

(b)           AII MS and GDC Beechwood. The limited liability company interests of AII MS issued and outstanding immediately prior to the Second Step Effective Time shall be converted into the right to receive an amount of cash equal to $13,876,000 (the “GDC Beechwood Merger Consideration”). Cash from the Fund in the amount of $1,219,000 shall be applied towards the GDC Beechwood Merger Consideration in accordance with the terms of the Escrow Agreement and the remaining $12,657,000 shall be paid, or caused to be paid, by GDC Beechwood. All of the limited liability company interests of GDC Beechwood issued and outstanding immediately prior to the Second Step Effective Time shall remain outstanding.

(c)           AII BC and Aspen. The limited liability company interests of AII BC issued and outstanding immediately prior to the Second Step Effective Time shall be converted into the right to receive an amount of cash equal to $9,175,000 (the “Aspen Merger Consideration”). Cash from the Fund in the amount of $1,019,000 shall be applied towards the Aspen Merger Consideration in accordance with the terms of the Escrow Agreement and the remaining $8,156,000 shall be paid, or caused to be paid, by Aspen. All of the limited liability company interests of Aspen issued and outstanding immediately prior to the Second Step Effective Time shall remain outstanding.

(d)           AII BS, AII BH and Celebration. The limited liability company interests of AII BS issued and outstanding immediately prior to the Second Step Effective Time shall be converted into the right to receive an amount of cash equal to $28,435,000 (the “AII BS/Celebration Merger Consideration”). Cash from the Fund in the amount of $2,362,000 shall be applied towards the AII BS/Celebration Merger Consideration in accordance with the terms of the Escrow Agreement and the remaining $26,073,000 shall be paid, or caused to be paid, by Celebration. The limited liability company interests of AII BH issued and outstanding immediately prior to the Second Step Effective Time shall be converted into the right to receive an amount of cash equal to $24,571,000 (the “AII BH/Celebration Merger Consideration”, together with the AII BS/Celebration Merger Consideration, the “Celebration Merger Consideration”). Cash from the Fund in the amount of $1,121,000 shall be applied towards the AII BH/Celebration Merger Consideration in accordance with the terms of the Escrow

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Agreement and the remaining $23,450,000 shall be paid, or caused to be paid, by Celebration . All of the limited liability company interests of Celebration issued and outstanding immediately prior to the Second Step Effective Time shall remain outstanding. The GDC SMG Merger Consideration, the GDC Beechwood Merger Consideration, the Aspen Merger Consideration and the Celebration Merger Consideration are collectively referred to herein as the “Second Step Merger Consideration”. The First Step Merger Consideration and Second Step Merger Consideration are collectively referred to herein as the “Merger Consideration”.

4.02        Cancellation of All Interests. From and after the Second Step Effective Time, all limited liability interests of each of the AII Companies that were issued and outstanding immediately prior to the Second Step Effective Time shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder thereof shall cease to have any rights with respect thereto, except the right to receive the Second Step Merger Consideration set forth in Section 4.01 in accordance with the terms of this Agreement. At the Second Step Effective Time, the limited liability interest transfer books of each of the AII Companies shall be closed, and there shall be no further transfers on the limited liability company interest transfer books of the AII Companies. Without limiting the generality of the foregoing, notwithstanding any other provision hereof, no Survivor Entity shall be liable to any holder of limited liability company interests of any AII Company delivered to a public official pursuant to any applicable abandoned property, escheat or similar Laws for any limited liability company interests of such Survivor Entity or any distributions made with respect thereof.

4.03        Fund. Simultaneously with the execution of this Agreement, the GDC Companies in accordance with Schedule 4.03 shall deliver, or cause to be delivered, to LandAmerica Financial Group (the “Escrow Agent”) an aggregate amount of $7,500,000 (the “Initial Deposit”) by wire transfer of immediately available funds to the account designated by the Escrow Agent in accordance with the terms of the escrow agreement to be entered into by and among the parties hereto and the Escrow Agent substantially in the form attached hereto as Exhibit C (“Escrow Agreement”). The Initial Deposit shall be held by the Escrow Agent in an interest-bearing account in accordance with the terms of the Escrow Agreement. The Initial Deposit and all interest accrued thereon while held by the Escrow Agent shall hereinafter collectively be referred to as the “Fund”. At the Closing, the Initial Deposit shall be paid to the members of the AII Companies as part of the Second Step Merger Consideration in accordance with the terms hereof and the terms of the Escrow Agreement.

ARTICLE V

CLOSING

(a)           Date, Place and Time. The closing of the First Step Mergers, the Second Step Mergers and the other transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of the ARA Companies identified in Section 21.02 on January 5, 2005 (the “Closing Date”); provided, however, that any of ARA, AII or the GDC Owners may extend the Closing Date up to and including January 12, 2005, by delivering written notice of such change to the other two parties prior to 5:00 P.M. (Eastern Standard Time) on Janaury 5, 2005;

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provided, further, that ARA, AII and the GDC Owners may change the time, date or place of the Closing by mutual written agreement. Unless otherwise expressly provided herein or in any Trasnaction Document, whenever any action is required under this Agreement or any Transaction Document by any GDC Owner or all of the GDC Owners, it may be effected or taken by the approval of Martin Ginsburg and Samuel Ginsburg (or their respective attorneys in fact), or as otherwise agreed in writing by all of the GDC Owners, and any action by Martin Ginsburg and Samuel Ginsburg on behalf of the GDC Owners shall be binding on all of the GDC Owners.

(b)           Mergers. At the Closing, (a) first, (i) the GDC Companies and the ARA Companies shall duly execute or cause to be duly executed appropriate certificates of merger prepared by the GDC Companies (the “ARA Certificates of Merger”) with respect to the First Step Mergers, and (ii) the GDC Companies, as the surviving limited liability companies, shall cause the ARA Certificates of Merger to be filed with the Secretary of State of the State of Delaware and the Secretary of State of the State of New York, as appropriate, all in accordance with the LLC Statutes and the terms hereof, and (b) second, after the ARA Certificates of Merger have been so filed, (i) the First Step Survivor Entities and the AII Companies shall duly execute or cause to be duly executed appropriate certificates of merger prepared by the GDC Companies (the “AII Certificates of Merger”) with respect to the Second Step Mergers and (ii) the First Step Survivor Entities, as the limited liability companies that will survive the Second Step Mergers, shall cause the AII Certificates of Merger to be filed with the Secretary of State of the State of Delaware and the Secretary of State of the State of New York, as appropriate, all in accordance with the LLC Statutes and the terms hereof. “Business Day” means a day other than a Saturday, Sunday or other day on which banks located in New York City are authorized or required by law to close.

(i)             In the event that on the Closing Date the Property Owners have not secured a loan from a third party institutional lender in the amount equal to at least the Defeasance Amount (herein defined) then on the Closing Date immediately after the Second Step Effective Time, (A) AII shall make loans (the “AII Bridge Loans”) to one or more of the Property Owners as determined by the GDC Owners and ARA (the “AII Bridge Borrowers”) in the aggregate amount of the Defeasance Amount (the “AII Loan Amount”) and each of the AII Bridge Borrowers shall deliver a promissory note in the principal amount of the portion of the AII Loan Amount made to such Property Owner (which portions shall be determined by the GDC Owners and ARA), in the form attached hereto as Exhibit D1 (each, a “AII Bridge Note”), which AII Bridge Note shall bear interest at a rate per annum of 9% and require payment in full of the principal of, and all accrued and unpaid interest on, such AII Bridge Note on or prior to one hundred eighty (180) days after the Closing Date, to AII (it being understood that the proceeds of the AII Bridge Loans shall be used by the AII Bridge Borrowers only for the purposes of purchasing non-callable obligations of the United States of America (“Treasury Bills”) in the amount of the Defeasance Amount, which Treasury Bills shall be used to pay the Defeasance Amount to the Mortgagee, and reasonable expenses related thereto), and (B) (1) the AII Bridge Borrowers shall grant AII exclusive control and dominion over the timing and manner of the purchase and disposition of the Treasury Bills purchased with

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the proceeds of the AII Bridge Loans pursuant to an agreement(s) with the securities intermediary(s) that execute such transactions, on terms reasonably satisfactory to AII, and, upon the payment of the Defeasance Amount, a first mortgage on the Properties owned by the AII Bridge Borrowers pursuant to a mortgage in the form attached hereto as Exhibit F (the “AII Bridge Mortgages”) and (2) Samuel Ginsburg and Martin Ginsburg shall, jointly and severally, guaranty the obligations of none or one or more of the AII Bridge Borrowers (as determined by the GDC Owners) under the AII Bridge Notes issued thereby pursuant to guaranty(s) in the form of Exhibit D2 in such amounts as determined by the GDC Owners. The “Defeasance Amount” shall equal the amount which is sufficient to purchase direct, non-callable obligations of the United States of America that provide for payments (1) on or prior to, but as close as possible to, all successive scheduled Payment Dates (as defined in the Notes) after the Release Date through the Maturity Dates (as defined in the Notes), and (2) in amounts equal to or greater than the Monthly Debt Service Payment Amounts (as defined in the Notes) required under the Notes through the Maturity Dates of such Notes together with payment in full of the unpaid principal balance of the Notes as of such Maturity Dates. It is acknowledged that ARA may be the lender of all or a portion of the AII Bridge Loans as determined by ARA, AII and the GDC Owners on or prior to the Closing Date and in such event “AII” as used herein with respect to the AII Bridge Loans shall also mean ARA to the extent of such loans that are so made by ARA.

(ii)            In the event that on the Closing Date the Property Owners have not secured a loan from a third party institutional lender in the amount equal to at least $441,000 (the “Requested Amount”) then on the Closing Date immediately following the Second Step Effective Time, (A) ARA shall make a loan (the “ARA Bridge Loan”) to Market Square in the principal amount equal to the Requested Amount and the ARA Borrower (as hereinafter defined) shall deliver to ARA a promissory note in the principal amount of the Requested Amount, in the form attached hereto as Exhibit G1 (the “ARA Bridge Note”), which ARA Bridge Note shall be in the original principal amount of the Requested Amount, bear interest at a rate per annum of 9% and require payment in full of the principal of, and all accrued and unpaid interest on, such ARA Bridge Note on or prior to one hundred eighty (180) days after the Closing Date, to ARA (it being understood that the proceeds of the ARA Bridge Loan shall be used by the ARA Borrower only for the purposes of payment of the Merger Consideration hereunder, expenses of the transactions contemplated hereby and expenses of the Property Owners), and (B) (1) the ARA Borrower shall grant ARA a mortgage on the Property owned by the ARA Borrower pursuant to a mortgage in the form attached hereto as Exhibit H (the “ARA Bridge Mortgage”) and (2) Samuel Ginsburg and Martin Ginsburg shall, jointly and severally, guaranty the obligations of none or one or more of the ARA Borrowers (as determined by the GDC Owners) under the ARA Bridge Notes issued thereby pursuant to a guaranty(s) in the form of Exhibit G2 in such amounts as determined by the GDC Owners. Notwithstanding any other provision hereof, prior to the Closing Date, ARA shall have made an ARA Bridge Loan in the aggregate principal amount of $16,915,000 to Brandywine Condominium, pursuant to an ARA Bridge Note, which obligations thereunder shall be secured by an ARA Bridge Mortgage. For purposes hereof, “ARA Borrower” shall mean Market Square or Brandywine Condominium as to the ARA Bridge Note and the ARA Mortgage issued thereby. It is acknowledged that AII may be

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the lender of all or a portion of the ARA Bridge Loans as determined by ARA, AII and the GDC Owners on or prior to the Closing Date and in such event “ARA” as used herein with respect to the ARA Bridge Loans shall also mean AII to the extent of such loans that are so made by AII.

(iii)           On the Business Day immediately after the Closing Date, but conditioned on AII making the AII Bridge Loans pursuant to Section 5.01(c)(i), the Property Owners shall pay to the Mortgagee the Defeasance Amount.

(d)           GDC Payments. At the Closing, the GDC Owners and the GDC Companies shall make, or caused to be made, the following payments, in immediately available funds to such account(s) as AII may direct by written notice prior to the Closing:

(i)             GDC SMG Merger Consideration. GDC SMG shall pay, or cause to be paid, $20,759,00 to AII;

(ii)            GDC Beechwood Merger Consideration. GDC Beechwood shall pay, or cause to be paid, $12,657,000 to AII;

(iii)           Aspen Merger Consideration. Aspen shall pay, or cause to be paid, $8,156,000 to AII; and

(iv)          AII BS and AII BH/Celebration Merger Consideration. Celebration shall pay, or cause to be paid, $49,523,000 to AII.

5.02        Effective Times. The First Step Mergers shall become effective as of the date and time of filing of the ARA Certificates of Merger or at such later time as is set forth in the ARA Certificates of Merger, if different, all in accordance with the relevant provisions of the LLC Statutes, which time is hereinafter referred to as the “First Step Effective Time” provided, however, that the First Step Effective Time shall be prior to the Second Step Effective Time. The Second Step Mergers shall become effective as of the date and time of filing of the AII Certificates of Merger or at such later time as is set forth in the ARA Certificates of Merger, if different, all in accordance with the relevant provisions of the LLC Statutes, which time is hereinafter referred to as the “Second Step Effective Time” provided, however, that the Second Step Effective Time shall be after the First Step Effective Time. The First Step Mergers and the Second Step Mergers are collectively referred to herein as the “Mergers”.

ARTICLE VI

TITLE TO PROPERTIES

Each of ARA and the ARA Companies hereby represents and warrants, jointly and severally, to the Survivor Entities, the GDC Companies and the GDC Owners, as of the date hereof, as follows:

6.01        Ownership. Each of Acadia Brandywine Town Center, LLC, a Delaware limited liability company (“Town Center”), Acadia Market Square, LLC, a Delaware limited liability company (“Market Square”), Acadia Brandywine Subsidiary, LLC, a Delaware limited liability

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company (“Brandywine Subsidiary”), Acadia Brandywine Condominium, LLC, a Delaware limited liability company (“Brandywine Condominium”), and Acadia Brandywine Holdings, LLC, a Delaware limited liability company (“Brandywine Holdings” and together with Town Center, Market Square, Brandywine Subsidiary and Brandywine Condominium, the “Property Owners”), own all of those Properties described on Schedule 6.01(a), which legal descriptions shall be in such form as to be insurable by the Title Company. Schedule 6.01(a) sets forth a complete and accurate description of all real property owned by each Property Owner, which real property is referred to herein as the “Land”. The term “Buildings” means all buildings, improvements and other structures situated on the Land. “Appurtenant Easements” means all easements, rights of way, reservations, privileges, licenses, appurtenances, and other estates and rights of the applicable Property Owner to the Land and the Buildings, and all other intangible property owned or held by the applicable Property Owner in connection therewith, including but not limited to all guarantees, warranties, building permits, sewage and utility agreements, approvals, certificates and all other governmental permits relating thereto. The “Personal Property” refers to all right, title and interest of the applicable Property Owner in and to all fixtures, pumps, machinery, generators, equipment, supplies and other articles of personal property attached or appurtenant to the Land or the Buildings, or located thereon or used in connection therewith more particularly described on Schedule 6.01(b). “Appurtenant Interests” means all right, title and interest of the applicable Property Owner, if any, in and to all strips and gores, all alleys adjoining the Land, and the land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Land to the center line thereof, and all right, title and interest of the applicable Property Owner, if any, in and to any award made or to be made in lieu thereof and in and to any unpaid award for any taking by condemnation or any damages to the Land or the Buildings by reason of a change of grade of any street, road or avenue, and all oil, gas, storage and mineral rights of the applicable Property Owner, if any, in and to the Land. The “Fee Properties” consist of the Land, together with all of the applicable Property Owner’s right, title and interest in and to the Buildings, the Appurtenant Easements, the Personal Property, the Appurtenant Interests, and all right, title and interest of the applicable Survivor Entity or Property Owner, if any, in and to the trade names of the Buildings. The “Condominium” consists of all of the right, title and interest of the applicable Property Owner in, and to the property described in Schedule 6.01(c), and in and to the Buildings located on the Land described therein, the Personal Property with respect to such Land and Buildings, and in and to the Appurtenant Easements and Appurtenant Interests, and all rights, title and interest of the applicable Survivor Entity or Property Owner, if any, in and to the trade names of the Buildings. The “Properties” consist of the Fee Properties and the Condominium.

6.02        Title; Encumbrances. Each Property Owner solely owns and has good, valid, marketable and insurable title to the Properties as set forth on Schedule 6.01(a), subject only to those matters set forth on Exhibit I annexed hereto and made a part hereof (collectively, the “Permitted Encumbrances”); provided, however, the Permitted Encumbrances (other than (a) those Permitted Encumbrances arising under the Loan Documents and described in Schedule 6.02, (b) taxes not yet due and payable and that may hereafter be paid without penalty, (c) the Leases, (d) utility easements that do not materially adversely affect any of the Properties or the ability of the Property Owners to own, hold, use or operate the Properties in the manner currently owned, held, utilized and operated, and (e) covenants, restrictions and rights that do not materially adversely affect any of the Properties or the ability of the Property Owners to own, hold, use or operate the Properties in the manner currently owned, held, utilized and operated,

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collectively, “Acceptable Encumbrances”) shall be subject to the review and approval of the GDC Owners subsequent to the date hereof in accordance with Section 12.04 (the “Conditional Permitted Encumbrances”). Subject to the Leases, the Property Owners are in peaceful and undisturbed possession of each parcel of each Property, and there are no contractual or legal restrictions that preclude or restrict the ability to use the Property for the purposes for which it is currently being used.

6.03        Improvements. All improvements on the Properties were constructed in material compliance with all applicable Laws (including any building, planning or zoning Laws) affecting such Properties. To the actual knowledge, without inquiry, of Joseph Hogan, SVP and Robert Scholem, SVP of Acadia Realty Trust, there are no material latent structural defects affecting any Property.

6.04        Certificates of Occupancy. All the Property is occupied under a valid and current certificate of occupancy or similar Permit.

6.05        Sufficiency of Assets. With the exception of the ARA Company Contracts and the AII Company Contracts, as among the Property Owners, ARA, AII, the ARA Companies, the AII Companies and the respective Affiliates of the foregoing, all tangible and intangible assets required to own and operate the Properties consistent with past practice are owned or leased by the Property Owners.

ARTICLE VII

THE LOAN

7.01        Loan Documents. The $21,750,000 Mortgage Note dated July 9, 2002 issued by B.T. Center Arc, LLC, a Delaware limited liability company, to UBS Warburg Real Estate Investments Inc., a Delaware corporation (the “Lender” or “Mortgagee”), the $16,500,000 Mortgage Note dated May 31, 2002 issued by Market Square at the Town Center, LLC, a Delaware limited liability company, to Mortgagee and the $30,000,000 Mortgage Note dated February 3, 2003 issued by Brandywine Subsidiary to Mortgagee are sometimes hereinafter collectively referred to as the “Notes”, all documents or instruments executed or delivered in connection with the delivery of the Notes are sometimes hereinafter individually referred to as a “Loan Document” and collectively referred to as the “Loan Documents” and the amount advanced under the Notes is referred to as the “Loan”. The Mortgage, Assignment of Leases and Rents and Security Agreement, dated as of July 9, 2002, by B.T. Center Arc, LLC to Mortgagee, the Mortgage, Assignment of Leases and Rents and Security Agreement, dated as of May 31, 2002, by Market Square at the Town Center, LLC to Mortgagee and the Mortgage, Assignment of Leases and Rents and Security Agreement, dated as of February 3, 2003, by Brandywine Subsidiary to Morgagee are sometimes hereinafter collectively referred to as the “Mortgages”. Each of ARA and each ARA Company hereby represents and warrants, jointly and severally, to the Surivivor Entities, the GDC Companies and the GDC Owners as follows: (a) a true, correct and complete list of all of the Loan Documents is set forth on Schedule 7.01; (b) none of the Loan Documents have been amended or modified except as set forth in Schedule 7.01; (c) true, correct and complete copies of the Loan Documents, as same may have been amended or otherwise modified, have been delivered to the GDC Owners prior to the date

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hereof; (d) as of the date hereof, there is no Default (as defined in the Mortgages) or Event of Default (as defined in the Loan Documents) existing under any of the Loan Documents, and no condition exists or event has occurred that with notice or lapse of time, or both, would constitute such a Default or Event of Default, result in the loss of any right of any party thereunder or create a right of termination in favor of any party thereto and (e) as of the date hereof, all amounts due and payable to the Lender under the Loan Documents have been paid in full. Each reference to a Loan Document shall refer to each such document as modified or amended (i) prior to the date hereof and (ii) on or following the date hereof but prior to the Closing to the extent permitted herein with the prior written consent of the GDC Owners. Each of the GDC Owners and the GDC Companies acknowledge that the transactions contemplated hereby may result in a Default or Event of Default under the Loan Documents.

7.02        Defeasance. Prior to the Closing, the ARA Companies and the AII Companies shall, and, from and after the Closing, the Survivor Entities shall, cause the Property Owners to use all commercially reasonable and good faith efforts to cause the release of the Properties from the Lien of the Mortgages and the other Loan Documents (the “Defeasance”) in accordance with the terms of the Loan Documents, including taking the following actions:

(a)           as soon as practicable after the date hereof, the Property Owners shall deliver written notice to Mortgagee specifying a date, which shall be on or after the Closing Date (the “Release Date”), on which the Defeasance Amount is to be delivered, such Release Date only to occur on a Payment Date (as defined in the Notes);

(b)           on or prior to the Release Date (but after the Closing), the Property Owners shall pay all accrued and unpaid interest and all other sums due under the Notes and under the other Loan Documents up to the Release Date, including all costs and expenses incurred by Mortgagee or its agents in connection with such release (including the fees and expenses incurred by attorneys and accountants in connection with the review of the proposed Defeasance Collateral (as defined in the Mortgages) and the preparation of the Defeasance Security Agreement and related documentation); and

(c)           on or prior to the Release Date (but after the Closing), the Property Owners shall deliver to Mortgagee:

(i)             a pledge and security agreement, in form and substance satisfactory to Mortgagee in its sole discretion, creating a first priority security interest in favor of Mortgagee in the Defeasance Collateral (the “Defeasance Security Agreement”), which shall provide, among other things, that any excess received by Mortgagee from the Defeasance Collateral over the amounts payable by the Property Owners under the Loan Documents shall be refunded to the Property Owners promptly after each Payment Date;

(ii)            a certificate of the Property Owners certifying that all of the requirements set forth in this Section 7.02 have been satisfied;

(iii)           an opinion of counsel for the Property Owners in form and substance and delivered by counsel satisfactory to Mortgagee in its sole discretion stating, among other things, that (1) Mortgagee has a perfected first priority security

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interest in the Defeasance Collateral and that the Defeasance Security Agreement is enforceable against the Property Owners in accordance with its terms and (2) that any REMIC Trust formed pursuant to a Securitization (as defined in the Mortgages) will not fail to maintain its status as a "real estate mortgage investment conduit" within the meaning of Section 860D of the Code as a result of the Defeasance;

(iv)          the Property Owners shall deliver evidence in writing from the applicable Rating Agencies (as defined in the Loan Documents) to the effect that the collateral substitution effected as part of the Defeasance will not result in a downgrading, withdrawal or qualification of the respective ratings in effect immediately prior to the Defeasance for any securities issued in connection with the Securitization which are then outstanding;

(v)         a certificate from a firm of independent public accountants acceptable to Mortgagee certifying that the Defeasance Collateral is sufficient to provide for payments (A) on or prior to, but as close as possible to, all successive scheduled Payment Dates after the Release Date through the Maturity Dates (as defined in the Loan Documents), and (B) in amounts equal to or greater than the Monthly Debt Service Payment Amounts (as defined in the Loan Documents) required under the Notes through the Maturity Dates together with payment in full of the unpaid principal balance of the Notes as of the respective Maturity Dates; and

(vi)        such other certificates, documents or instruments as Mortgagee may reasonably require.

The Surviving Entities shall pay all reasonable and customary costs, expenses or fees imposed by the Lender to effect the Defeasance. Each party hereto agrees to use all commercially reasonable efforts to reasonably cooperate with the Property Owners in their efforts to effect the Defeasance. The ARA Companies and the AII Companies shall not permit the Property Owners to modify any of the Loan Documents prior to the Closing without the GDC Owners’ prior written consent, which consent may be granted in their sole discretion.

ARTICLE VIII

REPRESENTATIONS AND WARRANTIES REGARDING THE PROPERTY OWNERS

ARA and the ARA Companies hereby, jointly and severally, represent and warrant to the GDC Owners, the GDC Companies and the Survivor Entities, as of the date hereof, as follows:

8.01        Organization and Qualification. All of the Property Owners are duly formed and validly existing limited liability companies organized under the laws of the State of Delaware and are in good standing and qualified to conduct business therein. The Property Owners do not own any equity interest, directly or indirectly, in any Person. Each Property Owner has all requisite power and authority to own, lease and operate its properties (including the Properties owned thereby) and to carry on its business as now being conducted.

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8.02        Leases. There are no leases, subleases, licenses, sublicenses, other occupancy agreements or other Contracts to which any of the Property Owners is a party affecting any portion of the Properties, except for the leases (including all amendments and/or modifications thereto) listed in Schedule 8.02(a) and made a part hereof (collectively the “Leases”), true, correct and complete copies of which (including all amendments and/or modifications thereto) have been delivered to the GDC Owners prior to the date hereof. Except as provided in the Leases, no Property Owner has granted any option or right of first offer or right of first refusal to purchase any Property or any portion thereof. Annexed hereto as Schedule 8.02(b) is a true, correct and complete rent roll for each of the Properties as of November 24, 2005. There are no rents more than thirty (30) days past-due owing under the Leases except as set forth in Schedule 8.02(c) hereto. For purposes hereof, “Knowledge” means (a) with respect to ARA or any ARA Company on any matter in question, (i) all facts actually known by Robert Scholem, SVP, Joseph Povinelli, SVP and Carol Smrek, VP on the subject date and (ii) all facts that any such individual should have known with respect to such matter if such individual had made a reasonable inquiry into such matter, (b) with respect to AII or any AII Company on any matter in question, (i) all facts actually known by Robert Masters, Esq., on the subject date and (ii) all facts that any such individual should have known with respect to such matter if such individual had made a reasonable inquiry into such matter, and (c) with respect to t