WELLSFORD REAL PROPERTIES, INC.
                         535 Madison Avenue, 26th Floor
                            New York, New York 10022

                               As of July 1, 2001

Mr. William H. Darrow II
7 Hunt Road
Darien, CT 06820

Dear Mr. Darrow:

     We are pleased to offer you employment with Wellsford Real Properties, Inc.
(the  "Company").  This  letter  agreement  (this  "Agreement")  sets  forth our
understanding regarding your employment.

     1. Duties.  The Company hereby employs you as Managing  Director to perform
such services for the Company and its affiliated entities commensurate with your
position as Managing  Director as may be assigned to you from time to time.  You
shall devote your full business time,  attention and energies to the performance
of your duties hereunder as requested by the Company from time to time.

     2. Term.  The term of this  Agreement  shall commence as of the date hereof
and,  unless  sooner  terminated  in  accordance  with  the  provisions  of this
Agreement,  shall continue up to and including,  June 30, 2003. The term of this
Agreement may be extended by the written agreement of you and the Company.

     3. Salary. For all services rendered by you pursuant to this Agreement, you
shall receive a salary at a rate per annum at least equal to $200,000 to be paid
at such regular intervals,  not less frequently than monthly, as the Company may
establish from time to time with respect to its employees generally.

     4. Bonuses.  You shall also be eligible for bonuses in the sole  discretion
of the Company.

     5. Health Insurance & Benefits. The Company shall provide you with the same
standard health and other insurance coverages as is afforded to all employees of
the Company  pursuant to the  contributory  coverages  maintained by the Company
from time to time.  You shall also be entitled to  participate  in the Company's
401(k) Plan consistent with, and subject to, the terms of such plan. The Company
may also provide you with other benefits in accordance  with the policies of the
Company in effect from time to time.

<PAGE>

     6. Expenses.  You shall be reimbursed for all reasonable  business  related
expenses  incurred  by you at the  request  of or on  behalf of the  Company  in
connection with the performance of your duties and  responsibilities  hereunder,
consistent   with,   and  subject  to,  the   Company's   policies  for  expense
reimbursement.

     7. Termination.

     (a) Your  employment  hereunder  may be  terminated  by the Company (i) for
Cause (as defined below) or (ii) for any reason other than Cause,

     (b) "Cause" shall mean (i) you have committed fraud,  willful misconduct or
gross  negligence in the  performance of your  obligations  hereunder,  (ii) you
shall be  convicted  of a felony or (iii) you shall  violate  any of the  terms,
covenants or conditions of this Agreement.

     8. Results of Termination.

     (a) If your employment under this Agreement is terminated by the Company by
reason  of  Cause  or as a  result  of your  disability  (as  determined  in the
reasonable discretion of the Company) or as a result of your death or by you for
any reason  (other than as provided for in  subparagraph  8 (c) below) you shall
not be entitled to receive salary for periods following termination.

     (b) If your  employment  under this  Agreement is terminated by the Company
other than by reason of Cause or your death or disability, you shall be entitled
to  receive a lump sum  payment  equal to twice the  amount of your then  annual
salary  in lieu of any  salary,  bonus or other  compensation  which  you  would
otherwise be entitled to under this Agreement.  Such amount shall be paid within
60 days of the effective date of termination.

     (c) If you  terminate  your  employment  hereunder  following  a "change in
control of the  Company"  (as  described  below) and  provided you have not been
offered  "comparable  employment"  (as defined  below)  within 60 days after the
event resulting in the change in control of the Company you shall be entitled to
receive a lump sum payment  equal to twice the amount of your annual  salary for
the calendar  year in which the event  resulting in the change in control of the
Company occurs in lieu of any salary,  bonus or other  compensation to which you
would otherwise be entitled to under this  Agreement.  Such amount shall be paid
within 60 days of the effective date of termination.

     (d) For  purposes of this  Agreement,  a "change in control of the Company"
shall be deemed to occur if:

<PAGE>

     (i) the Company merges or consolidates  with, or sells all or substantially
all of its  assets  to,  another  company  (each,  a  "Transaction"),  provided,
however,  that a  Transaction  shall not be  deemed  to  result in a "change  in
control of the Company" if (A)  immediately  prior thereto (1) you are the other
party to the transaction  that would otherwise result in a "change in control of
the Company" or (2) you are an executive officer, trustee, director or more than
5%  equity  holder  of the  other  party to the  transaction  or of any  entity,
directly or indirectly,  controlling such other party or (B)(1) the shareholders
of the Company  immediately before such Transaction own, directly or indirectly,
immediately  following such Transaction in excess of sixty-nine percent (69%) of
the  combined  voting  power  of  the  outstanding   voting  securities  of  the
corporation or other entity  resulting  from such  Transaction  (the  "Surviving
Corporation")  in  substantially  the same  proportion as their ownership of the
voting securities of the Company immediately before such Transaction and (2) the
individuals  who were members of the  Company's  Board of Directors  immediately
prior  to  the  execution  of  the  agreement  providing  for  such  Transaction
constitute  at least a majority of the members of the board of  directors or the
board of trustees,  as the case may be, of the  Surviving  Corporation,  or of a
corporation  or  other  entity  beneficially  directly  or  indirectly  owning a
majority of the outstanding voting securities of the Surviving Corporation,

     (ii) the Company  acquires assets of another company or a subsidiary of the
Company  merges  or   consolidates   with  another   company  (each,  an  "Other
Transaction") and (i) the shareholders of the Company,  immediately  before such
Other Transaction own, directly or indirectly,  immediately following such Other
Transaction 69% or less of the combined  voting power of the outstanding  voting
securities  of the  corporation  or  other  entity  resulting  from  such  Other
Transaction  (the  "Other  Surviving  Corporation")  in  substantially  the same
proportion  as  their  ownership  of  the  voting   securities  of  the  Company
immediately  before  such Other  Transaction  or (ii) the  individuals  who were
members of the Company's Board of Directors  immediately  prior to the execution
of the agreement  providing for such Other  Transaction  constitute  less than a
majority of the members of the board of directors  or the board of trustees,  as
the case may be, of the Other  Surviving  Corporation,  or of a  corporation  or
other  entity  beneficially  directly  or  indirectly  owning a majority  of the
outstanding  voting  securities of the Other  Surviving  Corporation,  provided,
however, that an Other Transaction shall not be deemed to result in a "change in
control of the  Company"  if  immediately  prior  thereto the  circumstances  in
(i)(A)(1) or (i)(A)(2) above exist, or

     (iii) any person or entity or group of affiliated  persons or entities owns
at any time 30% or more of the  outstanding  voting  securities  of the Company,
provided  that such  person,  entity or group  shall not be deemed to own 30% or
more of the  outstanding  voting  securities of the Company if the last event or
transaction  which  results  in  such  ownership  is (a)  the  issuance  of such
securities  in  connection  with the  sale by the  Company  of less  than all or
substantially  all of its assets or (b) the  acquisition  by the  Company of any
such voting securities.

<PAGE>

     (e) For purposes of this Agreement, you shall be deemed to have received an
offer of  "comparable  employment"  if you  receive  an offer to  continue  your
employment for at least the balance of the term covered by this Agreement,  with
the same  title set forth in  Paragraph  1 hereof,  pursuant  to which you would
perform the same type of duties you had been performing under this Agreement and
at a salary not less than that provided for in Paragraph 3 hereof.

     9.  Governing  Law;  Severability.  This  Agreement  shall be governed  and
construed in accordance with the laws of the State of New York. If any provision
of this Agreement is determined to be invalid,  it shall not affect the validity
or enforceability of any of the other remaining provisions hereof.

     10. Entire Agreement. This Agreement sets forth the entire agreement of the
parties  and  is  intended  to  supersede  all  prior  employment  negotiations,
understandings  and agreements.  No provision of this Agreement may be waived or
changed,  except by a writing signed by the party to be charged with such waiver
or change.  Notwithstanding  the  foregoing,  this  Agreement  is subject to the
policies of the Company in effect from time to time with respect to the terms of
the employment of the Company's employees.

     11. Counterparts.  This Agreement may be executed in counterparts,  each of
which shall  constitute an original but all of which when taken  together  shall
constitute but one and the same agreement.

<PAGE>

     Please  acknowledge  your  agreement  to  the  foregoing  by  signing  this
Agreement in the space indicated and returning it to the Company.

                                            Very truly yours,

                                            WELLSFORD REAL PROPERTIES, INC.


                                            By: /s/ Edward Lowenthal
                                                ------------------------
                                                Name:    Edward Lowenthal
                                                Title:   President

ACCEPTED AND AGREED TO:

/s/ William H. Darrow II
------------------------------
William H. Darrow II