EMPLOYMENT SEPARATION AGREEMENT

     EMPLOYMENT SEPARATION AGREEMENT (the "Agreement") is made as of December 7,
2001, by and between Wellsford Real Properties,  Inc. (the "Company") and Edward
Lowenthal (the "Executive").

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

     WHEREAS,  the Executive is employed by the Company pursuant to that certain
Employment Agreement dated as of May 30, 1997 (the "Employment Agreement");

     WHEREAS,  the Employment  Agreement  provides for, among other things,  the
payment of significant sums to the Executive in certain events;

     WHEREAS,  the Company and Executive have mutually agreed to the termination
of Executive's  Employment  Agreement prior to the expiration of its term and to
the payment to Executive of certain sums which are in a lesser amount than those
payable to Executive under the Employment Agreement;

     WHEREAS, the Company and Executive have agreed to modify certain provisions
of the Employment Agreement from and after the date hereof; and

     WHEREAS,  the Company  desires to retain  Executive  to provide  consulting
services to the Company upon the termination of his employment by the Company.

     NOW,  THEREFORE,  in  consideration  of the foregoing and of the respective
covenants and agreements of the parties herein  contained,  the parties  hereto,
intending to be legally bound hereby, agree as follows:

     1. Employment Term. Section 2 of the Employment Agreement is hereby deleted
and the following is substituted in lieu thereof:

     "The Company and Executive agree that the term of the Employment  Agreement
shall terminate at 11:59 p.m. on March 31, 2002."

     2. Bonus.  The following is hereby added to Section 3(b) of the  Employment
Agreement:

     "In no event shall  Executive's  cash bonus be less than (i)  $325,000  for
2001 and (ii) $81,250 for that portion of the term of the  Employment  Agreement
in 2002. The 2001 bonus shall be payable on or prior to January 31, 2002 and the
2002 bonus shall be payable on or prior to April 30, 2002."

<PAGE>

     3.  Compensation  Upon  Executive's  Death.  Section 9(c) of the Employment
Agreement is hereby deleted and the following is substituted in lieu thereof:

     "If the  Executive's  employment  shall  be  terminated  by  reason  of the
Executive's  death,  the base salary at the annual rate then in effect  shall be
paid to the person designated from time to time in writing by the Executive and,
if not so designated,  to the Executive's  estate for the remaining term of this
Agreement.  If the  Executive  dies  during  the  year  2001 his  estate  shall,
nevertheless,  receive from the Company the entire bonus payable to him for such
year pursuant to Section 3(b) hereof. If the Executive dies on or after January,
2002 and on or prior to March 31,  2002,  the Company  shall pay to his estate a
prorated  portion of the annual bonus  payable to Executive  pursuant to Section
3(b) hereof for the year 2002,  which shall be an amount equal to the product of
the amount of such annual  bonus and a fraction,  the  numerator of which is the
number  of days  elapsed  in the year  2002  prior to such  termination  and the
denominator of which is 90."

     4. Survival and Modification of Employment Agreement.

     (a) The  Employment  Agreement  shall remain in full force and effect until
March 31, 2002 without  modification  except as  specifically  set forth in this
Agreement.

     (b) The following  Sections of the Employment  Agreement are hereby deleted
therefrom  and shall be of no  further  force or effect  from and after the date
hereof: Section 9(d), Section 10, Section 11 and Section 12.

     5. Assignment of Life Insurance Policies

     The  Company  and  Executive  agree that  within 30 days after  Executive's
employment is terminated  for any reason,  including by reason of the expiration
of this  Agreement,  the Company  shall  assign to  Executive  or his  designee,
without the payment of any consideration by the Executive,  all of the Company's
right,  title and  interest in and to that certain  Split Dollar Life  Insurance
Agreement dated November 18, 1993 between Wellsford  Residential  Property Trust
and Edward Lowenthal,  as modified by the Split Dollar Life Insurance  Agreement
dated December 11, 1995 and the related insurance  policies referred to therein,
and in connection  therewith  the Company shall be deemed to have  automatically
waived repayment of any paid or accrued premiums with respect to such policy.

     6. Payments to Executive Upon Termination.

     (a) Executive  shall be entitled to the following  additional  compensation
and benefits:

          (i) The  Company  will pay  Executive  in cash,  by wire  transfer  of
     available funds, the sum of $1,650,000 on March 31, 2002, or within 30 days
     after such  earlier time as  Executive's  employment  under the  Employment
     Agreement shall terminate for any reason whatsoever; and

<PAGE>

          (ii) On the date hereof,  Executive  holds 569,102  options to acquire
     the Company's common stock, as set forth on Schedule A hereto.  The Company
     agrees to acquire  such  options (to the extent such  options have not been
     exercised or otherwise  disposed of by Executive prior to the time they are
     to be acquired),  for $2.3827 per option or an aggregate  purchase price of
     $1,355,999.34,  such amount being equal to Executive's aggregate investment
     in such options.  The Company will acquire from Executive  284,551 of those
     options as  designated  on  Schedule A on March 31,  2002 or within 30 days
     after such  earlier time as  Executive's  employment  under the  Employment
     Agreement shall terminate for any reason whatsoever for $2.3827 per option,
     or an aggregate of $677,999.67. Executive shall have the option on or after
     January  2, 2003,  on 10 days prior  written  notice,  to have the  Company
     acquire the  remaining  284,551  options then held by Executive for $2.3827
     per option,  or an aggregate of $677,999.67.  Executive's  option hereunder
     shall  expire on  February  15,  2003.  To the extent any of the  foregoing
     options have been  exercised  prior to the date of purchase by the Company,
     the aggregate purchase price shall be reduced by an amount equal to $2.3827
     multiplied by the number of options exercised prior to such purchase.

     (b)  Executive  shall have the right to defer receipt of all payments to be
made pursuant to subsection a(i) above, and to have such amounts placed into the
trust under the Company's non-qualified deferred compensation plan.

     (c) The Company and  Executive  agree that on March 31, 2002,  or within 30
days after such  earlier time as  Executive's  employment  under the  Employment
Agreement shall  terminate for any reason  whatsoever,  all unvested  restricted
stock and other awards issued to Executive  pursuant to the Company's  Incentive
Plans shall immediately vest.

     (d) Section  9(f) of the  Employment  Agreement  is hereby  deleted and the
following is substituted in lieu thereof:

     "In  addition  to all other  amounts  payable to the  Executive  under this
Section 6, the  Executive  shall be entitled to receive all benefits  payable to
him under the Company's  pension  plans  applicable to him and any other plan or
agreement relating to retirement benefits,  including,  without limitation,  any
deferred  compensation  arrangements,  but subject to any then existing deferral
elections of Executive."

     (e) The  Executive  shall not be  required  to  mitigate  the amount of any
payment provided for in this Section 6 or elsewhere in this Agreement by seeking
other  employment or  otherwise,  nor shall the amount of any payment or benefit
provided for in this Section 6 or elsewhere in this  Agreement be reduced by any
compensation earned by him as the result of employment by another employer or by
retirement benefits after the termination of his employment hereunder.

<PAGE>

     (f) The Company and Executive  agree that from and after March 31, 2002, or
such earlier time as Executive's employment under the Employment Agreement shall
terminate for any reason  whatsoever (i), the Company will continue,  at its own
cost and expense,  to provide  Executive with health,  dental and life insurance
benefits  through  December 31, 2004 (ii) Executive will be entitled to continue
to participate in the Company's  cafeteria plan through December 31, 2004 to the
extent  he  remains  eligible  thereunder  and (iii) to the  extent  he  remains
eligible  (provided  Executive may at any time  supplement any cost necessary to
allow for continued  eligibility  as provided  under the terms of the applicable
policy),  Executive  may  continue  participation  in  the  Company's  long-term
disability  plan on the same  basis as  provided  prior  to his  termination  of
employment, at his own cost and expense, through December 31, 2004.

     7. Services  Arrangement  and Other Matters.  (a) The Company and Executive
agree that from and after March 31, 2002,  or such  earlier time as  Executive's
employment  under  the  Employment  Agreement  shall  terminate  for any  reason
whatsoever,  and through  December 31, 2004 (the "Services  Period"),  Executive
shall,  at the  request of the  Chairman  of the Board of the  Company,  perform
certain  services for the Company as set forth in  subsection  (b) below at such
times as are mutually  agreeable to Executive  and the Company.  However,  in no
event shall  Executive  be  required  to spend more than 30 hours each  calendar
quarter in performing such services.

     (b) The services  requested by the Company pursuant to this Section 7 shall
relate to the  business  and  activities  of the  Company  and be of the type of
services that would normally be performed by a senior executive officer.

     (c) For any and all services  rendered by Executive to the Company pursuant
to this  Section 7 and whether or not the Company  requests  Executive to render
services,  the  Company  shall  pay to  Executive  compensation  at the  rate of
$100,000 per year payable in quarterly installments of $25,000 each on the first
day of  each  calendar  quarter  during  the  term of the  services  arrangement
commencing  on April 1,  2002 or such  earlier  date as  Executive's  employment
terminates)  to and  including  October 1,  2004.  The  compensation  payable to
Executive shall be payable to him notwithstanding his death or disability or the
termination of his services arrangement for any reason whatsoever.

     (d) Executive  shall not be required to perform  services  pursuant to this
Section 7 outside  the New York,  New York area but shall  undertake  reasonable
business travel as agreed to by Executive and the Company.

     (e) (i) Executive  shall be reimbursed for all costs and expenses  incurred
by him in the performance of services pursuant to this Section 7 upon reasonable
substantiation thereof.

     (ii) The  Company  shall  reimburse  the  Executive  for all legal fees and
related expenses (including the costs of experts,  evidence and counsel) paid by
the Executive as a

<PAGE>

result of: (A) the termination of Executive's  services  arrangement  under this
Section 7 (including all such fees and expenses,  if any, incurred in contesting
or  disputing  any such  termination),  (B) the  Executive  seeking to obtain or
enforce any right or benefit provided anywhere in this Agreement or by any other
plan or  arrangement  maintained  by the Company under which the Executive is or
may  be  entitled  to  receive  benefits,  including,  without  limitation,  the
Company's  deferred  compensation  plan or (C) any action  taken by the  Company
against the  Executive;  unless and until a final  judgment has been rendered in
favor of the  Company  and all  appeals  related  to any such  action  have been
exhausted or the time within which to appeal has expired.

     (f) During the Services  Period,  the Company shall indemnify the Executive
in the  performance  of his services to the fullest extent  permitted  under the
Company's  charter or by-laws as in effect on the day  immediately  prior to the
first day of the Services  Period.  In addition,  Executive  shall continue as a
named  beneficiary  under  any  liability   insurance  policies  maintained  for
directors  and/or  officers of the  Company as in effect on the day  immediately
prior to the first day of the Services  Period,  for so long as Executive  shall
remain a director of the  Company.  Furthermore,  Executive  shall  become,  and
continue  as,  a  named  beneficiary  under  any  liability  insurance  policies
maintained  by the Company  after a change in control of the Company for persons
who were  directors  or officers  prior to a change in control of the Company to
the extent they  provide  coverage  for events prior to the change in control of
the Company.  The Company agrees to maintain the coverage  provided in the first
three sentences of this subsection (f) unless, in each case, any modification in
indemnification  and insurance coverage applies uniformly to all consultants and
to officers and directors of the Company, as the case may be.

     (g)  Nothing  contained  herein  shall be deemed to  prohibit  or  restrict
Executive, during the term of the services arrangement set forth in this Section
7, from performing  services,  or engaging in activities,  of any kind or nature
for any person or entity even if such services,  activities, person or entity is
competitive to the business and activities of the Company.

     8.  Governing  Law. THIS  AGREEMENT  SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE  WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,  WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES.

     9. 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.

     10. Successors;  Binding  Agreement.  (a) This Agreement shall inure to the
benefit  of  and  be   enforceable   by  the   Executive's   personal  or  legal
representatives,  executors,  administrators,  successors,  heirs, distributees,
devisees and legatees.  If the Executive should die while any amount would still
be payable to him hereunder if he had  continued to live or otherwise,  all such
amounts,  unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the  Executive's  devisee,  legatee or other designee
or, if there is no such designee, to the Executive's estate.

<PAGE>

     (b) The Company will require any successor (whether direct or indirect,  by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business  and/or assets of the Company to expressly  assume and agree in writing
to perform  this  Agreement  in the same  manner and to the same extent that the
Company would be required to perform it if no such  succession  had taken place.
Failure of the Company to obtain and deliver to Executive  such  assumption  and
agreement prior to (but effective only upon) such  succession  shall be a breach
of this Agreement,  except that for purposes of implementing the foregoing,  the
date on which any such succession  becomes effective shall be deemed the Date of
Termination.  As used in this  Agreement,  "Company"  shall mean the  Company as
hereinbefore  defined  and  any  successor  to its  business  and/or  assets  as
aforesaid  which  assumes and agrees to perform this  Agreement,  expressly,  by
operation of law, or otherwise.

     11.  Notices.  All  notices  provided  for in this  Agreement  shall  be in
writing,  and shall be deemed to have been duly given when delivered  personally
to the party to receive the same, when given by telex,  telegram or mailgram, or
when mailed first class postage prepaid, by registered or certified mail, return
receipt  requested,  addressed  to the party to  receive  the same at his or its
address above set forth,  or such other address as the party to receive the same
shall have specified by written notice given in the manner  provided for in this
Section  10.  All  notices  shall be deemed to have been given as of the date of
personal delivery, transmittal or mailing thereof.

     12.  Severability.  If any provision in this  Agreement is determined to be
invalid,  it shall not affect the validity or enforceability of any of the other
remaining provisions hereof.

     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                    WELLSFORD REAL PROPERTIES, INC.


                       By: /s/ Jeffrey H. Lynford
                           ----------------------
                           Name: Jeffrey H. Lynford
                           Title: Chairman of the Board


                         EXECUTIVE:

                              /s/ Edward Lowenthal
                              --------------------
                              Edward Lowenthal


<PAGE>

<TABLE>
<CAPTION>


                                   SCHEDULE A
                                   ----------

Number of Options                    Options to be Acquired     Options to be Acquired
 Granted (Date)    Exercise Price       March 31, 2002      on or After January 2, 2003
 --------------    --------------       --------------      ---------------------------
<S>                  <C>                 <C>                       <C>
12,585 (5/30/97)     $   15.84             6,292                     6,293
213,767 (5/30/97)    $   20.60           106,884                   106,883
4,884 (5/30/97)      $   20.60             2,442                     2,442
37,865 (5/30/97)     $   20.60            18,932                    18,933
6,350 (12/05/97)     $   31.50             3,175                     3,175
193,651 (12/05/97)   $   31.50            96,826                    96,825
2,857 (03/11/98)     $   35.00             1,429                     1,428
47,143 (03/11/98)    $   35.00            23,571                    23,572
25,000 (03/11/98)    $   40.00            12,500                    12,500
20,000 (12/10/99)    $   16.30            10,000                    10,000
5,000 (12/10/99)     $   16.30             2,500                     2,500
</TABLE>
<PAGE>