$8,352,921.00

As of December 23, 2004

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

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

Borrower promises to pay to the order of Bank, in lawful money of the United States of America, at its office indicated above or wherever else Bank may specify, the sum of Eight Million Three Hundred Fifty-Two Thousand Nine Hundred Twenty-One and No/100 Dollars ($8,352,921.00) or such sum as may be advanced and outstanding from time to time, with interest on the unpaid principal balance at the rate and on the terms provided in this Revolving Promissory Note (including all renewals, extensions or modifications hereof, this “ Note ”).

LOAN AGREEMENT. This Note is subject to the provisions of that certain Commercial Revolving and Construction Loan Agreement between Bank and Borrower of even date herewith, as modified from time to time (the “ Loan Agreement ”) and evidences the “Revolving Loan” as defined therein. Pursuant to the Loan Agreement, the Revolving Loan is available to pay for certain budgeted construction costs relating to the Project (as defined in the Loan Agreement).

COMMERCIAL REVOLVING CONSTRUCTION LOAN. Borrower may borrow, repay and reborrow, and, upon the request of Borrower, Bank shall advance and readvance under this Note from time to time until the maturity hereof (each an “Advance ” and together the “ Advances ”), so long as the total principal balance outstanding under this Note at any one time does not exceed the principal amount stated on the face of this Note, subject to the limitations described in the Loan Agreement. The aggregate amount that may be advanced hereunder shall not exceed $28,652,847.00. Bank’s obligation to make Advances under this Note shall terminate if Borrower is in Default. As of the date of each proposed Advance, Borrower shall be deemed to represent that each representation made in the Loan Documents is true as of such date.

USE OF PROCEEDS. Borrower shall use the proceeds of the loan(s) evidenced by this Note for the commercial purposes of Borrower, as follows: Commercial Revolving Construction Loan.

INTEREST RATE. Interest shall accrue on the unpaid principal balance of this Note from the date hereof at the LIBOR Market Index Rate plus 2.15%, as that rate may change from day to day in accordance with changes in the LIBOR Market Index Rate (“ Interest Rate ”). “ LIBOR Market Index Rate ”, for any day, means the rate for 1 month U.S. dollar deposits as reported on Telerate page 3750 as of 11:00 a.m., London time, on such day, or if such day is not a London business day, then the immediately preceding London business day (or if not so reported, then as determined by Bank from another recognized source or interbank quotation). Provided no Default (defined below) has occurred, upon the conveyance of the forty-seventh (47 ^th ) residential home/unit (a “ Unit ”) at the project known as The Orchards at East Lyme that has been mortgaged by Borrower to Bank as security for this Note, the Interest Rate shall be reduced to the LIBOR Market Index Rate plus 2.0%, as that rate may change from day to day in accordance with changes in the LIBOR Market Index Rate.

DEFAULT RATE. In addition to all other rights contained in this Note, if a Default (as defined herein) occurs and as long as a Default continues, all outstanding Obligations, other than Obligations under any swap agreements (as defined in 11 U.S.C. § 101) between Borrower and Bank or its affiliates, shall bear interest at the Interest Rate plus 4% (“ Default Rate ”). The Default Rate shall also apply from acceleration until the Obligations or any judgment thereon is paid in full.

INTEREST AND FEES COMPUTATION. Interest and fees, if any, shall be computed on the basis of a 360-day year for the actual number of days in the applicable period (“ Actual/360 Computation ”). The Actual/360 Computation determines the annual effective interest yield by taking the stated (nominal) rate for a year’s period and then dividing said rate by 360 to determine the daily periodic rate to be applied for each day in the applicable period. Application of the Actual/360 Computation produces an annualized effective rate exceeding the nominal rate.

REPAYMENT TERMS. This Note shall be due and payable in consecutive monthly payments of accrued interest only, commencing on January 1, 2005, and continuing on the same day of each month thereafter until fully paid. In any event, all principal and accrued interest shall be due and payable on December 11, 2007. The term of this Note may be extended for one (1) year, to December 1, 2008, if (1) there is no Default then occurring, (2) at least 42 Units have been conveyed to third party purchasers, (3) an additional five (5) Qualifying Agreements (as defined in the Loan Agreement) have been executed for Units, and (4) Borrower pays Bank an extension fee equal to 0.15% of the outstanding principal balance of the Loan plus any unadvanced principal. A second one (1) year extension, to December 1, 2009, shall be granted if (i) there is no Default hereunder, (ii) at least 70 Units have been sold to third party purchasers, and (iii) Borrower pays Bank an extension fee equal to 0.25% of the outstanding principal balance of the Loan plus any unadvanced principal.

PREPAYMENT . This Note may be prepaid in whole or in part at any time without penalty.

APPLICATION OF PAYMENTS. Monies received by Bank from any source for application toward payment of the Obligations shall be applied to accrued interest and then to principal, subject to the allocation provisions (Partial Releases and Sales Benchmarks) in the Loan Agreement relating to the sale of Units (as defined therein); provided, however, that, except as otherwise directed by the payer of such amounts, any such monies shall be applied to principal unless the funds in the interest reserve are not sufficient to pay any interest that is due and payable. If a Default occurs, monies may be applied to the Obligations in any manner or order deemed appropriate by Bank.

If any payment received by Bank under this Note or other Loan Documents is rescinded, avoided or for any reason returned by Bank because of any adverse claim or threatened action, the returned payment shall remain payable as an obligation of all persons liable under this Note or other Loan Documents as though such payment had not been made.

DEFINITIONS. Loan Documents. The term “ Loan Documents ”, as used in this Note, refers to all documents executed in connection with or related to the loan evidenced by this Note and any prior notes which evidence all or any portion of the loan evidenced by this Note, and any letters of credit issued pursuant to any loan agreement to which this Note is subject, any applications for such letters of credit and any other documents executed in connection therewith or related thereto, and may include, without limitation, a commitment letter that survives closing, a loan agreement, this Note, guaranty agreements, security agreements, security instruments, financing statements, mortgage instruments, any renewals or modifications, whenever any of the foregoing are executed, but does not include swap agreements (as defined in 11 U.S.C. § 101). Obligations. The term “ Obligations ”, as used in this Note, refers to any and all indebtedness and other obligations under this Note, all other obligations under any other Loan Document(s), and all obligations under any swap agreements (as defined in 11 U.S.C. § 101) between Borrower and Bank, or its affiliates, whenever executed. Certain Other Terms. All terms that are used but not otherwise defined in any of the Loan Documents shall have the definitions provided in the Uniform Commercial Code in effect in the State of Connecticut.

LATE CHARGE. If any payments are not timely made, Borrower shall also pay to Bank a late charge equal to 5% of each payment past due for 10 or more days.

Acceptance by Bank of any late payment without an accompanying late charge shall not be deemed a waiver of Bank’s right to collect such late charge or to collect a late charge for any subsequent late payment received.

ATTORNEYS’ FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank’s reasonable expenses incurred to enforce or collect any of the Obligations including, without limitation, reasonable arbitration, paralegals’, attorneys’ and experts’ fees and expenses, whether incurred without the commencement of a suit, in any trial, arbitration, or administrative proceeding, or in any appellate or bankruptcy proceeding.

USURY. If at any time the effective interest rate under this Note would, but for this paragraph, exceed the maximum lawful rate, the effectiv