Wachovia Bank, National Association
300 Main Street
Stamford, Connecticut 06901
(Hereinafter referred to as the “ Bank ”)

East Lyme Housing Ventures, LLC
c/o Wellsford Real Properties, Inc.
535 Madison Avenue
New York, New York 10022
(Hereinafter referred to as the “ Borrower ”)

This Commercial Revolving and Construction Loan Agreement (“ Agreement ”) is entered into as of December 23, 2004, by and between Bank and Borrower.

This Agreement applies to the loan or loans (individually and collectively, the “ Loan ”) evidenced by one or more promissory notes of even date herewith or other notes or letters of credit subject hereto, as modified from time to time (whether one or more, the “ Note ”) and all Loan Documents. The terms “ Loan Documents ” and “ Obligations ,” as used in this Agreement, are defined in the Note. The term “ Security Instrument ” means the mortgage encumbering the Property and securing the Loan.

Relying upon the covenants, agreements, representations and warranties contained in this Agreement, Bank is willing to extend credit to Borrower upon the terms and subject to the conditions set forth herein, and Bank and Borrower agree as follows:

LOAN.      Bank will make a loan in the principal amount of up to $21,176,995.00, consisting of two (2) components. The first component is a development loan (the “ Development Loan ”) in the amount of $12,824,074.00. The second component is a revolving construction loan (the “ Revolving Loan ”) in the amount of $8,352,921.00. The Development Loan proceeds will be used to reimburse Borrower certain budgeted site development costs relating to the Project (defined below). The Revolving Loan proceeds will be used to fund construction of the Units (defined below). The maximum amount outstanding under the Revolving Loan at any time shall be $8,352,921.00, but such amounts may be advanced, repaid and readvanced up to the maximum amount of $8,352,921.00, so long as the total principal balance outstanding at any one time does not exceed said amount. In addition, the aggregate amount that may be advanced under the Revolving Loan during its term shall not exceed $28,652,847.00 (which aggregate, for purposes of clarification, does not include amounts advanced under the Development Loan). The Loan proceeds are to be used by Borrower solely in connection with the development of 100 residential units (each, a “ Unit ”, collectively, the “ Units ”) to be constructed upon the 100 lots owned by Borrower located on Scott Road and Boston Post Road in East Lyme, Connecticut (the “ Project ”), more particularly described in the Security Instrument (the “Property ”) in accordance with the plans and specifications approved by Bank (as same may be modified from time to time with the written approval of Bank, the “ Plans and Specifications ”).

LOAN ADVANCE TERMS. Advances. Subject to compliance by Borrower with the terms and conditions of this Agreement, Bank shall make advances of the Loan to Borrower for hard construction costs incurred by Borrower in connection with the construction of the Project (“ Hard Costs ”) and for all other costs, other than Hard Costs, incurred by Borrower in connection with the Loan or the construction of the Project (“ Soft Costs ”), in accordance with the budget provided to Bank a copy of which is attached hereto as Schedule A (as same may be revised from time to time with the reasonable prior written approval of Bank or to reflect change orders as permitted pursuant to the terms hereof, the “ Construction Budget ”); provided , however , that Bank’s approval shall not be required if revisions (a) to a particular line item do not result in an increase of the amount allocated to such line item by more than $100,000 (except that savings in one line item that are allocated to a different line item shall not be considered for purposes of

determining the amount of any such increase) and (b) do not, in the aggregate, result in an increase of the total amount of the Construction Budget by more than $500,000; provided , however , that Borrower shall pay for any increase in the Construction Budget resulting from the foregoing and in no event shall Bank be obligated to make disbursements of the Loan in excess of Verified Project Costs (as hereafter defined). All advances made hereunder shall be: (i) recorded in an account on Bank’s books, in which shall also be recorded accrued interest on such advances, payments on such advances, and other appropriate debits and credits in connection with this Agreement, and such account, absent manifest error, shall constitute prima facie evidence of the information contained therein; (ii) secured by the Security Instrument; (iii) deemed to be a loan to Borrower which is repayable together with interest from the date each said advance is made by Bank until the date of repayment at the interest rate set forth in the Note; and (iv) subject to all the terms and conditions contained herein. Verified Project Costs. As used in this Agreement, “ Verified Project Costs ” means the aggregate, from time to time, of (i) Soft Costs actually incurred by Borrower and approved for funding by Bank (which costs, for purposes of clarification, do not have to be paid first by Borrower, but may be paid with the proceeds from advances), and (ii) Hard Costs actually incurred by Borrower for work in place as part of the Project, as certified by Bank’s Inspector (as hereinafter defined) pursuant to the provisions of this Agreement (which costs, for purposes of clarification, do not have to be paid first by Borrower, but may be paid with the proceeds from advances), minus a sum equal to the aggregate of (i) the portion of the Equity Requirement which Borrower is required to have invested in the Project pursuant to this Agreement, and (ii) the Retainage, if any. Limitation on Loan Advances. In no event will the maximum principal amount of the Loan exceed the lesser of (a) 75% of the projected “as-built” fair market value of the Project, as determined by Bank’s appraisal, or (b) 76.5% of the total Project development costs approved by Bank. The maximum amount outstanding at any one time under the Revolving Loan will be limited to $8,352,921.00, itemized as follows:

1.

$4,579,000.00 for base Hard Costs and upgrades (15 homes) (revolving)

2.

$1,133,455.00 for interest carry on the Development Loan and the Revolving Loan (non-revolving and revolving)

3.

$1,060,782.00 for G&A/Developer's Fee, as set forth in the Budget (non-revolving)

4.

$1,579,684.00 for Contingency (non-revolving)

Equity Requirement. Prior to the initial loan advance, Borrower shall invest $6,318,302.00 (" Equity Requirement ") from Borrower's own funds for acquisition and development of the Project. Borrower shall invest an additional $7,785,607.00 from Borrower's own funds for Hard Costs associated with Units 81-100 at the Project, for a total investment of $14,103,909.00. The Equity Requirement shall remain invested in the Project during the term of the Loan and Borrower agrees that, except for funds paid to Borrower from the sale of Units, no portion of the Equity Requirement will be reimbursed directly or indirectly without Bank's prior written consent. Retainage. Bank shall retain from each advance of Loan proceeds an amount equal to the greater of (i) 5% of Hard Costs actually incurred by Borrower for work in place as part of the Project, as certified from time to time by Bank's Inspector, or (ii) the amount actually held back by Borrower from the general contractor and each subcontractor and supplier engaged in the construction of the Project (the " Retainage "). The Retainage shall be released on a per contract basis at such time as the applicable subcontractor's or supplier's work is completed as per their respective contract. Deficiency in Loan Amount. If at any time it appears that the actual cost to complete construction of the Project, in the sole opinion of Bank or Bank's Inspector, exceeds the undisbursed balance of the Loan plus the unfunded Equity Requirement (the amount by which such cost exceeds the undisbursed Loan balance plus the unfunded Equity Requirement is hereinafter referred to as the " Deficiency "), as a condition to any further advances, Bank may require Borrower to deposit with Bank (and Borrower shall deposit within 7 days after written notice from Bank) funds in the amount of the Deficiency (" Deficiency Deposit "). At Bank's option, no Loan advances shall be made until Borrower has fully complied with this requirement. All such deposited funds shall be additional security for the Obligations. Bank may, at its option, use the Deficiency Deposit to pay costs to complete construction of the Project before any further Loan advances. Contingency Reserve. Advances from that portion of the Loan proceeds allocated to Contingency (the " Contingency Reserve ") on the Construction Budget may be disbursed in Bank's sole and absolute discretion for payment of Hard Costs or Soft Costs as documented by invoices or paid receipts and otherwise as provided herein. Interest Reserve. Borrower

acknowledges that the Loan amount includes a reserve for interest due on the Loan (the " Interest Reserve ") in the amount set forth on the Construction Budget. Subject to the limitations below, Bank shall disburse and charge the Interest Reserve for interest due under the Note as advances are requested from Borrower. Bank shall also have the right, but not the obligation, to fund such interest from the Interest Reserve even if no draw request has been submitted to or approved by Bank, and in such case, Bank shall endeavor to give notice to Borrower, but failure to give such notice shall not impair Bank's right to fund such interest. It is understood and agreed that Bank shall not be obligated to disburse any portion of the Interest Reserve at any time when all conditions to disbursement are not satisfied. In the event Bank is not obligated to disburse out of the Interest Reserve as aforesaid, Borrower shall be responsible for the current payment of interest on the Loan from Borrower's own funds. Developer's Fees. Intentionally Omitted. Unit Construction Limits. Intentionally Omitted. Qualifying Agreements. No advances of the Revolving Loan shall be made for the construction of any Unit until Borrower has delivered to Wachovia a Qualifying Agreement for such Unit, other than with respect to up to 10 speculative Units at any given time. As used herein, " Qualifying Agreements " means an agreement of sale to purchase a Unit, which agreement of sale shall: (i) have been signed by an unrelated third-party purchaser, (ii) be on a standard form previously approved in writing by Wachovia, (iii) provide for a minimum purchase price for such Unit of at least $190 per square foot, any downward deviation from which must be approved in advance by Bank, (iv) require the purchaser to deposit not less than 10% of the purchase price thereunder, which deposit shall be placed in escrow with Wachovia, and (v) not be subject to any contingencies on the part of the buyer other than a mortgage contingency (as to which Borrower shall have established that the purchaser thereunder will qualify for such financing) and an appraisal contingency. A contract will still be considered to be a Qualifying Agreement even if, at the time the contract is executed, it is cancelable by the purchaser because the Unit to be conveyed is not "substantially complete" within the meaning of the Common Interest Ownership Act, Section 47-200 et. seq. of the Connecticut General Statutes, Revision of 1958, as amended. Funding for Stored Materials. Bank shall not be required to make disbursements of the Loan for costs incurred by Borrower with respect to materials stored on or off the Property unless (i) Borrower has bought and paid for such materials and (ii) Bank shall, in its sole discretion, deem it advisable to do so. If Bank elects to make a disbursement for stored materials, all stored materials must be incorporated into the Project within 45 days of Borrower's Request for Advance (as hereinafter defined) regarding such materials. Bank may impose such additional conditions and requirements as it deems appropriate in its sole discretion. Bank's Inspector. Bank shall have the right to retain, at Borrower's expense an inspector (" Bank's Inspector ") to review and advise Bank with respect to all Plans and Specifications, construction, architectural and other design professional contracts, change orders, governmental permits and approvals, and other matters related to the design, construction, operation and use of the Project, to monitor the progress of construction and to review on behalf of Bank all requests for Loan advances submitted by Borrower. The fees and expenses of Bank's Inspector, whether internal or external, including all such fees and expenses incurred and unpaid to the date hereof, shall be due and payable by Borrower as a Soft Cost as provided for herein or otherwise on demand. Borrower acknowledges that (i) Bank's Inspector has been retained by Bank to act as a consultant, and only as a consultant, to Bank in connection with the construction of the Project, and Bank's Inspector may be an employee of the Bank, (ii) Bank's Inspector shall in no event have any power or authority to make any decision or to give any approval or consent or to do any other thing which is binding upon Bank, and any such purported decision, approval, consent or act by Bank's Inspector on behalf of Bank shall be void and of no force or effect; provided, however that if Bank's Inspector is also the loan officer for the Project, Bank may agree to such power or authority acting solely in the employee's capacity as loan officer for the Bank, (iii) Bank reserves the right to make any and all decisions required to be made by Bank under this Agreement, in its sole and absolute discretion, and without in any instance being bound or limited in any manner whatsoever by any opinion expressed or not expressed by Bank's Inspector to Bank or any other person with respect thereto, and (iv) Bank reserves the right in its sole and absolute discretion to replace Bank's Inspector with another inspector at any time and without prior approval by Borrower. Bank shall endeavor to give Borrower prior notice of such replacement, but failure to do so shall not impair Bank's right to make such replacement. All inspections by or on behalf of Bank shall be solely for the benefit of Bank, and Borrower shall have no right to claim any loss or damage against Bank or Bank's Inspector (whether or not an employee of the Bank) arising from any alleged (i) negligence or failure to perform such inspections, (ii) failure to monitor loan disbursements or the progress or quality of construction, or (iii) failure to otherwise properly administer the construction aspects

of the Loan. Bank shall endeavor to provide Borrower copies of any written reports prepared by Bank's inspector. Initial Closing Conditions. Bank will have no obligation to Close (as hereinafter defined) the Loan unless it has received the following from Borrower or any guarantors, as applicable (if not expressly waived by Bank), all in form and substance satisfactory to Bank; (a) each of the Loan Documents duly executed by Borrower or any guarantors, as the case may be; (b) evidence of compliance with any applicable title, survey, environmental, soils tests or insurance requirements as set forth in the Loan Documents or otherwise requested by Bank, which shall be, unless expressly waived by Bank, in accordance with Bank's minimum standards in effect at closing (copies of such standards shall be provided to Borrower upon request); and (c) each of the other documents, certificates, affidavits, releases, agreements, counsel opinions, or other closing items required by Bank as a condition to making the Loan. "Close" shall mean Bank's agreement to the terms and conditions of the Loan by execution of the Loan Documents and the initial funding of the Loan (which may occur later than the effective date of the Loan Documents).

PROCEDURES AND CONDITIONS FOR ADVANCES. Frequency of Advances. Unless otherwise agreed, Bank shall not be obligated to make advances of the Loan more frequently than once every 30 days. Request for Advance. For each request for an advance of the Loan, Borrower shall submit to Bank, at least 5 business days prior to the requested date of disbursement, a completed written disbursement request (each, a " Request for Advance ") in such form and detail as reasonably required by Bank. Each Request for Advance shall certify and contain in detail acceptable to Bank: (i) the cost of the labor that has been performed, (ii) the materials that have been incorporated into the Project, and (iii) as required by Bank, invoices for Soft Costs in excess of $5,000.00 incurred since the date of the previous advance. The labor, materials and Soft Costs for which the advance is requested need not have been paid first by Borrower, but may be paid with the proceeds of such advance. Accompanying Materials. The Request for Advance shall be accompanied by such supporting data as Bank may require, including, without limitation, invoices, waivers of mechanic's and materialmen's liens, and AIA Forms G702 and G703 certified by the general contractor and architect and/or engineer for the Project, as applicable. Conditions To Advance. Bank will have no obligation to make any advance if a Default (as defined in the Loan Documents) or event which, with the giving of notice or the passage of time, or both, would constitute a Default under any of the Loan Documents has occurred and is continuing, and unless it has received from the Borrower (if not expressly waived by Bank), in form and substance satisfactory to Bank: (i) evidence of any updated title search and/or endorsement to the title policy required by Bank, as applicable, which shall be, unless expressly waived by Bank, in compliance with Bank's minimum standards in effect at the t