BOND PLEDGE AND SECURITY AGREEMENT

                                     Between

                  PALOMINO PARK PUBLIC IMPROVEMENTS CORPORATION
                         WELLSFORD REAL PROPERTIES INC.



                                 COMMERZBANK AG,
                                New York Branch,

                                       and

                     UNITED STATES TRUST COMPANY OF NEW YORK

                            Dated as of June 16, 2000

                      (Letter of Credit No. 150SBY00300064)

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                       BOND PLEDGE AND SECURITY AGREEMENT

     THIS BOND PLEDGE AND SECURITY AGREEMENT (the "Pledge Agreement"),  dated as
of June  16,  2000,  is made by and  among  Palomino  Park  Public  Improvements
Corporation,  a Colorado  nonprofit  corporation (the "Bond Issuer"),  Wellsford
Real Properties,  Inc., a Maryland corporation ("WRP" and, collectively with the
Bond Issuer, the "Pledgor"), Commerzbank AG, a banking corporation organized and
existing  under  the laws of The  Federal  Republic  of  Germany,  acting by and
through its New York Branch (the "Bank"), and United States Trust Company of New
York, as custodian for the Bank (the "Bond Trustee"),  pursuant to the Letter of
Credit  Reimbursement  Agreement dated as of June 16, 2000,  between the Pledgor
and the Bank  (hereinafter,  as the same may  from  time to time be  amended  or
supplemented, called the "Reimbursement Agreement").

                              W I T N E S S E T H:
                              - - - - - - - - - -

     WHEREAS,  the Bond  Issuer is issuing at the request of and for the benefit
of WRP and its Subsidiary,  The Park at Highlands,  L.L.C.,  a Colorado  limited
liability company  ("Highlands"),  its "Palomino Park Public  Improvements Corp.
Assessment Lien Revenue Bonds Series 1995," in the aggregate principal amount of
$14,755,000 (the "Bonds") pursuant to a Trust Indenture dated as of September 1,
1995,  (the "Bond  Indenture")  between the Bond Issuer and United  States Trust
Company of New York,  as trustee  (said  trustee,  together  with any  successor
trustee, hereinafter referred to as the "Bond Trustee");

     WHEREAS,  the Bond  Indenture  requires the purchase of Bonds under certain
circumstances  as set  forth  in  Section  4.04 of the Bond  Indenture  from the
holders thereof;

     WHEREAS, the Pledgor has entered into the Reimbursement  Agreement in order
to cause the Bank to issue its  Letter of Credit No.  150SBY00300064  dated June
16, 2000,  which may be used,  inter alia, to pay the purchase  price of certain
Bonds  (to the  extent  moneys  drawn  under the  Letter  of Credit  are used to
purchase such Bonds, such Bonds are hereinafter referred to as "Pledged Bonds");
and

     WHEREAS, it is a condition precedent to the obligation of the Bank to issue
the Letter of Credit that the Pledgor  shall have  executed and  delivered  this
Pledge Agreement to the Bank;

     NOW, THEREFORE, in consideration of the premises and in order to induce the
Bank to enter into the  Reimbursement  Agreement  and issue the Letter of Credit
thereunder  and for other good and valuable  consideration,  receipt of which is
hereby acknowledged, the Pledgor hereby agrees with the Bank as follows:

     1. Defined Terms.  Unless  otherwise  defined herein,  terms defined in the
Reimbursement Agreement shall have such defined meanings when used herein.

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     2. Pledge. The Pledgor hereby pledges,  assigns,  hypothecates,  transfers,
and  delivers  to the Bank all of its right,  title and  interest  in and to the
Pledged Bonds as the same may be from time to time delivered to the Bond Trustee
by the holders  thereof and the Pledgor  hereby  grants to the Bank a first lien
on,  and  security  interest  in, its right,  title and  interest  in and to the
Pledged  Bonds,  all interest or other income  thereon and all proceeds  thereof
(the  "Collateral"),  as collateral security for the prompt and complete payment
when due of all amounts due in respect of the  obligations  of the Pledgor under
the  Reimbursement  Agreement  and interest on such  amounts (all the  foregoing
being hereinafter called the "Obligations").  The Pledgor hereby consents to the
Bond  Trustee  acting  as the  agent  and  bailee  of the Bank for  purposes  of
perfecting  the Lien of this Pledge  Agreement and of holding the Collateral for
the benefit of the Bank.

     3.  Payments on the Pledged  Bonds.  If, while this Pledge  Agreement is in
effect,  the  Pledgor  shall  become  entitled  to receive or shall  receive any
principal  or  interest  payment in respect of the  Pledged  Bonds,  the Pledgor
agrees to accept the same as the  Bank's  agent and to hold the same in trust on
behalf  of the Bank and to  deliver  the same  forthwith  to the  Bank.  Pledgor
instructs and authorizes  the Bond Trustee to deliver  forthwith to the Bank any
payment  to be made on  Pledged  Bonds and  instructs  and  authorizes  the Bond
Trustee to hold and receive on behalf of the Bank and deliver  forthwith  to the
Bank any payments to be made or received in respect of Pledged Bonds  (including
all proceeds of any remarketing of the Pledged Bonds). All sums of money so paid
in respect of the Pledged  Bonds  which are  received by the Pledgor and paid to
the Bank shall be credited  against the  obligations  of the Pledgor to the Bank
first to any fees,  costs,  charges  or  expenses  payable to the Bank under the
Reimbursement  Agreement or the Letter of Credit, next to any accrued but unpaid
interest under Sections 2.1 or 2.2 of the Reimbursement  Agreement,  next to any
current interest due, and then to outstanding principal.

     4. Release of Pledged  Bonds.  Subject to and in accordance  with the terms
and conditions of Section 2.4 of the Reimbursement  Agreement, the Pledgor shall
have the right to effect  releases of Pledged  Bonds from the security  interest
created by this Agreement.

     5. Rights of the Bank.  The Bank shall not be liable for failure to collect
or  realize  upon  the  Obligations  or any  collateral  security  or  guarantee
therefor,  or any part  thereof,  or for any  delay in so doing  nor shall it be
under any obligation to take any action  whatsoever with regard  thereto.  If an
Event of  Default  has  occurred  and is  continuing,  the Bank may  thereafter,
without  notice,  exercise all rights,  privileges or options  pertaining to any
Pledged  Bonds as if it were the  absolute  owner  thereof,  upon such terms and
conditions  as it may  determine,  all without  liability  except to account for
property  actually  received  by it, but the Bank shall have no duty to exercise
any of the aforesaid rights,  privileges or options and shall not be responsible
for any failure to do so or delay in so doing.

     6. Remedies.  In the event of any Event of Default under the  Reimbursement
Agreement,   the  Bank,   without   demand  of   performance  or  other  demand,
advertisement  or notice of any kind (except the notice  specified below of time
and place of public or private  sale) to or upon the Pledgor or any other person
(all and each of which demands, advertisements and/or

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notices are hereby expressly waived) in its sole discretion (a) may exercise any
or all of its rights and remedies  under any or all of the Related  Documents or
any other  instrument  or  agreeing,  securing,  evidencing  or  relating to the
Obligations or under applicable law (including all of the rights and remedies of
a secured  creditor  under  the New York  Uniform  Commercial  Code or any other
applicable  law), (b) may forthwith  collect,  receive,  appropriate and realize
upon the Collateral, or any part thereof, and/or (c) may forthwith sell, assign,
give option or options to purchase, contract to sell or otherwise dispose of and
deliver said Collateral,  or any part thereof,  in one or more parcels at public
or  private  sale or sales,  at any  exchange,  broker's  board or at any of the
Bank's  offices  or  elsewhere  upon such  terms and  conditions  as it may deem
advisable  and at such prices as it may deem best,  for cash or on credit or for
future  delivery  without  assumption of any credit risk,  with the right to the
Bank upon any such sale or sales,  public or private,  to purchase  the whole or
any part of said  Collateral so sold,  free of any right or equity of redemption
in the Pledgor,  which right or equity is hereby  expressly  waived or released.
The Bank shall apply the net proceeds of any such collection, recovery, receipt,
appropriation,  realization or sale,  after  deducting all reasonable  costs and
expenses of every kind incurred  therein or incidental to the care,  safekeeping
or  otherwise  of any and all of the  Collateral  or in any way  relating to the
rights of the Bank  hereunder,  including  reasonable  attorney's fees and legal
expenses,  to the payment, in whole or in part, of the Obligations in such order
as the Bank may elect, the Pledgor remaining liable for any deficiency remaining
unpaid after such application,  and only after so applying such net proceeds and
after the  payment by the Bank of any other  amount  required  to be paid by any
provision of law, including, without limitation,  Section 9-504(l)(c) of the New
York Uniform Commercial Code, need the Bank account for the surplus,  if any, to
the Pledgor.  The Pledgor agrees that the Bank need not give more than ten days'
notice of the time and place of any  public  sale or of the time  after  which a
private sale or other intended disposition is to take place and that such notice
is reasonable notification of such matters. No notification need be given to the
Pledgor if it has signed after  default a statement  renouncing or modifying any
right to notification of sale or other intended disposition.  In addition to the
rights and  remedies  granted to it in this  Pledge  Agreement  and in any other
instrument  or  agreement  securing,  evidencing  or  relating  to  any  of  the
Obligations,  the Bank shall have all the rights and remedies of a secured party
under the Uniform  Commercial Code of the State of New York. The Pledgor further
agrees to waive and agrees not to assert any rights or  privileges  which it may
acquire  under  Section  9-112 of the New York Uniform  Commercial  Code and the
Pledgor shall be liable for the  deficiency if the proceeds of any sale or other
disposition of the Collateral are  insufficient  to pay all amounts to which the
Bank is entitled,  and the fees and costs of any attorneys  employed by the Bank
to collect such deficiency.  The Bond Trustee,  in its capacity as custodian for
the Bank,  agrees to take such  steps as Bank  reasonably  requests  in order to
effect or implement any of the foregoing remedies.

     7.  Representations,  Warranties and Covenants of the Pledgor.  The Pledgor
represents  and warrants  that:  (a) on the date that any Bonds  become  Pledged
Bonds, none of the Bond Issuer, WRP nor the Bond Trustee (except in its capacity
as the Bank's  designated  custodian  to hold the  Pledged  Bonds) will have any
right,  title or interest in and to the Pledged Bonds;  (b) the Pledgor has, and
on the date  that such  Bonds  become  Pledged  Bonds  will  have,  full  power,
authority and legal right to pledge all of its right,  title and interest in and
to the  Pledged  Bonds  pursuant  to this  Pledge  Agreement;  (c)  this  Pledge
Agreement has been duly

<PAGE>

authorized, executed and delivered by the Pledgor and constitutes a legal, valid
and binding obligation of the Pledgor  enforceable in accordance with its terms;
(d) no consent of any other party (including,  without limitation,  creditors of
the Pledgor) and no consent,  license,  permit,  approval or  authorization  of,
exemption by, notice or report to, or registration,  filing or declaration with,
any governmental  authority,  domestic or foreign, is required to be obtained by
the Pledgor in connection  with the  execution,  delivery or performance of this
Pledge  Agreement;  (e) the execution,  delivery and  performance of this Pledge
Agreement  will not  violate,  in any  material  respect,  any  provision of any
applicable law or regulation or of any order, judgment, writ, award or decree of
any court, arbitrator or governmental authority,  domestic or foreign, or of any
mortgage, indenture, lease, contract, or other agreement, instrument undertaking
to which the Pledgor is a party or which purports to be binding upon the Pledgor
or upon its assets  and will not result in the  creation  or  imposition  of any
lien,  charge or encumbrance on or security interest in any of the assets of the
Pledgor except as  contemplated  by this Pledge  Agreement;  and (f) the pledge,
assignment and delivery of such Pledged Bonds pursuant to this Pledge  Agreement
will create a valid first lien on and a first  perfected  security  interest in,
all right, title or interest of the Pledgor in or to such Pledged Bonds, and the
proceeds thereof,  subject to no prior pledge,  lien,  mortgage,  hypothecation,
security interest,  charge, option or encumbrance or to any agreement purporting
to grant to any third party a security interest in the property or assets of the
Pledgor which would include the Pledged Bonds. The Pledgor  covenants and agrees
that it will defend the Bank's right,  title and security interest in and to the
Pledged  Bonds and the  proceeds  thereof  against the claims and demands of all
persons whomsoever; and covenants and agrees that it will have like title to and
right to pledge any other property at any time hereafter  pledged to the Bank as
Collateral  hereunder  and will  likewise  defend the Bank's  right  thereto and
security interest therein.

     8. No Disposition,  etc. Without the prior written consent of the Bank, the
Pledgor  and the Bond  Trustee  each  agree  that they  will not  sell,  assign,
transfer,  exchange,  or otherwise  dispose of, or grant any option with respect
to, the Collateral,  nor will they create,  incur or permit to exist any pledge,
lien, mortgage,  hypothecation,  security interest,  charge, option or any other
encumbrance with respect to any of the Collateral,  or any interest therein,  or
any proceeds thereof,  except for the lien and security interest provided for by
this Pledge  Agreement and sale of the Pledged Bonds pursuant to Section 4.05 of
the Bond Indenture, subject to Section 4 of this Pledge Agreement.

     9. Sale of Collateral.

     (a) The Pledgor  recognizes  that the Bank may be unable to effect a public
sale of any or all of the  Pledged  Bonds  by  reason  of  certain  prohibitions
contained in the Securities Act of 1933, as amended (the "Securities  Act"), and
applicable  state securities laws, but may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers who will be obliged to
agree,  among other things,  to acquire such  securities for its own account for
investment  and not  with a view to the  distribution  or  resale  thereof.  The
Pledgor  acknowledges and agrees that any such private sale may result in prices
and other  terms less  favorable  to the seller  than if such sale were a public
sale and, notwithstanding such circumstances,  agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner.

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The Bank  shall be under  no  obligation  to delay a sale of any of the  Pledged
Bonds for the period of time  necessary to permit the issuer of such  securities
to register such  securities for public sale under the Securities  Act, or under
applicable state securities laws, even if the issuer would agree to do so.

     (b) The  Pledgor  further  agrees to do or cause to be done all such  other
acts and things as may be necessary to make such sale or sales of any portion or
all of the Pledged  Bonds valid and binding and in  compliance  with any and all
applicable laws, regulations,  orders, writs, injunctions,  decrees or awards of
any and all courts, arbitrators or governmental  instrumentalities,  domestic or
foreign,  having  jurisdiction over any such sale or sales, all at the Pledgor's
expense.  The  Pledgor  further  agrees  that a breach  of any of the  covenants
contained in this Pledge  Agreement will cause  irreparable  injury to the Bank,
that the Bank has no adequate  remedy at law in respect of such breach and, as a
consequence,  agrees  that  each and every  covenant  contained  in this  Pledge
Agreement shall be specifically  enforceable against the Pledgor and the Pledgor
hereby  waives  and  agrees  not to assert  any  defenses  against an action for
specific  performance  of such  covenants  except for a defense that no Event of
Default has occurred  under the  Reimbursement  Agreement.  The Pledgor  further
acknowledges the impossibility of ascertaining the amount of damages which would
be  suffered  by the Bank by reason of a breach  of any of such  covenants  and,
consequently,  agrees  that,  if the Bank shall sue for damages for breach,  the
Pledgor shall pay, as liquidated  damages and not as a penalty,  an amount equal
to the outstanding  principal  amount of, accrued  premium,  if any, and accrued
interest on the Pledged Bonds and all other amounts payable  pursuant to Article
2 of the  Reimbursement  Agreement on the date the Bank shall demand  compliance
with this Paragraph.

     (c) The Bond Trustee,  as custodian for the Bank,  agrees to cooperate with
the Bank and the  Pledgor and to do or cause to be done all such acts and things
as may be  necessary  to permit  the  Pledgor  to make such sale or sales of any
portion or all of the Pledged Bonds valid and binding and in compliance with any
and all applicable laws,  regulations,  orders, writs,  injunctions,  decrees or
awards of any and all courts,  arbitrators  or  governmental  instrumentalities,
domestic or foreign, having jurisdiction over any such sale or sales.

     10. Bond Trustee.

     (i) If a book-entry depository administered by the Depository Trust Company
or any successor or nominee thereto (the "Depository") is in use pursuant to the
Bond  Indenture,  the  Bond  Trustee  shall  notify  the  Depository  (in a form
acceptable to the Depository for such notice) of the principal  amount(s) of the
Bonds  which are to  become  Pledged  Bonds  prior to or  concurrently  with its
receipt from the Bank of a federal funds tracking  number for a wire transfer in
payment of a drawing  under the Letter of Credit to purchase  such  Bonds.  Said
notice  shall  further  instruct  the  Depository  to  record  in its  system  a
corresponding  increase  in the  principal  amount of the Bonds  credited to the
account  of the Bond  Trustee  as the agent and bailee of the Bank or such other
Person  identified  by the Bank  (through  notice  to the Bond  Trustee  and the
Pledgor) as the entity which should hold  Pledged  Bonds in a book-entry  system
(the  Bond  Trustee  or  such  other  Person,  the  "Bank's  DTC  Participant").
Concurrently  with the  delivery  of such  notice  to the  Depository,  the Bond
Trustee shall provide a copy of such notice to the Bank

<PAGE>

and the Pledgor.  The Bond Trustee and the Pledgor  shall  provide the Bank with
any  confirmation  or like notice  received  by any of them from the  Depository
evidencing the Depository's compliance with the instructions.

     (ii)  Whenever  a  book-entry  depository  is in use  pursuant  to the Bond
Indenture  and  Pledged  Bonds are held on behalf of the Bank by the  Bank's DTC
Participant, the Bank shall have the right to obtain a separate bond certificate
to evidence the Pledged  Bonds,  and upon request by the Bank,  the Pledgor will
cause the Bond Trustee to authenticate  and deliver such  certificate,  and such
certificate shall be deposited with the Depository or delivered to the Bank or a
Person designated by the Bank, as the Bank shall direct.

     (iii) If a book-entry  depository  ever ceases to be in use with respect to
the Bonds,  the Bond  Trustee  and the  Pledgor  each  hereby  agree to hold any
Pledged Bonds received by any of them as the Bank's agent and bailee and to make
a notation in its  respective  records with respect to the Pledged  Bonds.  Upon
request of the Bank,  each of the Bond  Trustee and the Pledgor will deliver all
or a portion of such Pledged Bonds to the Bank or to such Person as the Bank may
direct without termination of this Pledge Agreement.

     (iv) Except at the written  direction of the Bank,  the Bond Trustee  shall
not enter into any other agreement regarding  possession of the Pledged Bonds or
any other  Collateral  other than this Pledge  Agreement  without  prior written
consent of the Bank.  The Bond  Trustee  will not release any Pledged  Bonds for
remarketing  unless the Bank has  delivered to the Bond Trustee  written  notice
(which  may be by  telecopy)  pursuant  to  Section  2.4  of  the  Reimbursement
Agreement and Section 4.05(a) of the Bond Indenture.

     (v) Upon  appointment  of a successor  Bond Trustee under and in accordance
with the terms of the Bond  Indenture,  release and  delivery to the Bank or its
designee of any Collateral then held by the Bond Trustee pursuant to this Pledge
Agreement,  and the  assumption in writing by its  successor of its  obligations
hereunder,  the Bond Trustee  shall have the right to terminate  its position as
Bond Trustee for the Bonds and its obligations under this Pledge Agreement.

     (vi) In acting under this Pledge  Agreement,  the Bond Trustee shall not be
liable  to  the  Bank  except  for  negligence  or  willful  misconduct  in  the
performance of its obligations hereunder.

     11. Further  Assurances.  The Pledgor agrees that at any time and from time
to time upon the  written  request of the Bank,  the  Pledgor  will  execute and
deliver such further  documents  and do such further acts and things as the Bank
may reasonably request in order to effect the purposes of this Pledge Agreement.

     12.  Severability.   Any  provision  of  this  Pledge  Agreement  which  is
prohibited or unenforceable in any jurisdiction  shall, as to such  jurisdiction
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.

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     13. No Waiver;  Remedies Cumulative.  The Bank shall not by any act, delay,
omission  or  otherwise  be deemed to have  waived any of its rights or remedies
hereunder  and no waiver shall be valid  unless in writing,  signed by the Bank,
and then only to the extent therein set forth. A waiver by the Bank of any right
or remedy  hereunder on any one occasion  shall not be construed as a bar to any
right or remedy which the Bank would otherwise have on any future  occasion.  No
failure to exercise  nor any delay in  exercising  on the part of the Bank,  any
right,  power or privilege  hereunder,  shall operate as a waiver  thereof;  nor
shall any single or partial exercise of any right, power or privilege  hereunder
preclude  any other or further  exercise  thereof or the  exercise  of any other
right,  power  or  privilege.  The  rights  and  remedies  herein  provided  are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights or remedies provided by law.

     14. Waivers; Amendments; Applicable Law. None of the terms or provisions of
this Pledge Agreement may be waived,  altered,  modified or amended except by an
instrument in writing,  duly executed by the Bank. This Pledge Agreement and all
obligations of the Pledgor and the Bond Trustee  hereunder shall be binding upon
the successors and assigns of their respective successor and assigns, and shall,
together  with the  rights  and  remedies  of the Bank  hereunder,  inure to the
benefit of the Bank and its successors and assigns.  This Pledge Agreement shall
be governed by, and be construed and interpreted in accordance with, the laws of
the State of New York.

     15.  Designation of Custodian.  The Bank hereby designates the Bond Trustee
as the Bank's  custodian  and agent for the purpose of holding the Pledged Bonds
on behalf of the Bank and with such authority for taking actions with respect to
the Pledged  Bonds as set forth  herein and as may be directed by, and on behalf
of, the Bank.  The parties  hereto  acknowledge  that the Bank may designate any
successor Bond Trustee under the Bond Indenture,  or any substitute  Person that
the Bank may  elect to  designate,  as the  Bank's  custodian  and agent for the
purpose  of  holding  the  Pledged  Bonds on  behalf  of the Bank and with  such
authority  for taking  actions  with  respect to the Pledged  Bonds as set forth
herein and as may be directed by, and on behalf of, the Bank.

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     IN WITNESS WHEREOF,  the Pledgor, the Bank and the Bond Trustee have caused
this Bond Pledge and Security Agreement to be duly executed and delivered on the
day and year first above written.

         PLEDGOR:

           PALOMINO PARK PUBLIC IMPROVEMENTS CORPORATION, a Colorado
           nonprofit corporation

           By: /s/ David M. Strong
           -----------------------
              Name: David M. Strong
              Title: President

           WELLSFORD REAL PROPERTIES, INC.

           By: /s/ David M. Strong
           -----------------------
              Name: David M. Strong
              Title: Vice President


         BANK:

           COMMERZBANK AG, New York Branch

           By: /s/ Ralph C. Marra
           ----------------------
              Name: Ralph C. Marra
              Title: Vice President

           By: /s/ David Buettner
           ----------------------
              Name: David Buettner
              Title: Assistant Treasurer

           UNITED STATES TRUST COMPANY OF NEW YORK:

           By: /s/ Christopher J. Grell
           ----------------------------
              Name: Christopher J. Grell
              Title: Assistant Vice President


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