Document:

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                                                                    EXHIBIT 10.1

                        MANAGEMENT AND ADVISORY AGREEMENT

                  THIS MANAGEMENT AND ADVISORY AGREEMENT is made as of July 1,
2003 (the "Agreement") by and among ARBOR REALTY TRUST, INC., a Maryland
corporation ("Parent REIT"), ARBOR REALTY LIMITED PARTNERSHIP, a Delaware
limited partnership (the "Operating Partnership", and together with Parent REIT,
collectively, the "Company"), and ARBOR COMMERCIAL MORTGAGE, LLC, a New York
limited liability company (together with its permitted assigns, "Manager").

                              W I T N E S S E T H :

                  WHEREAS, Parent REIT expects to qualify for the tax benefits
available to a REIT (as defined below);

                  WHEREAS, Arbor Realty GPOP, Inc., a Delaware corporation and a
wholly owned subsidiary of the Parent REIT ("GPOP") is the sole general partner
of the Operating Partnership and Arbor Realty LPOP, Inc., a Delaware corporation
and a wholly owned subsidiary of the Parent REIT ("LPOP") is a limited partner
of the Operating Partnership, and Parent REIT has contributed (or will
contribute on the Closing Date (as defined below)) to GPOP and LPOP all of its
assets (including, without limitation, all of the proceeds of the initial 144A
securities offering of the Common Shares, as further described in that certain
Offering Memorandum, dated June 26, 2003 (the "Offering Memorandum"), and GPOP
and LPOP will in turn contribute such assets to the Operating Partnership, and
the Parent REIT will conduct substantially all of its operations through the
Operating Partnership;

                  WHEREAS, Parent REIT and the Operating Partnership desire to
avail themselves of the experience, sources of information, advice, assistance
and certain facilities of or available to Manager and to have Manager undertake
the duties and responsibilities hereinafter set forth on behalf of Parent REIT
and the Operating Partnership as provided in this Agreement; and

                  WHEREAS, Manager is willing to render such services on the
terms and conditions hereinafter set forth.

                  NOW THEREFORE, in consideration of the mutual agreements
herein set forth, the parties hereto agree as follows:

         1.       Definitions. The following terms have the meanings assigned
                  them:

                  (a)      "Agreement" has the meaning assigned in the first
paragraph.

                  (b)      "Board of Directors" means the Board of Directors of
Parent REIT first named herein, the provisions of Section 1(mm) to the contrary
notwithstanding.

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                  (c)      "Change of Control" means a change in the direct or
indirect (i) beneficial ownership of more than fifty percent (50%) of the
combined voting power (of any Person together with any affiliates of such Person
or Persons otherwise associated or acting in concert with such Person) of
Manager's then outstanding equity interests, or (ii) power to direct or control
the management policies of Manager, whether through the ownership of beneficial
equity interests, common directors or officers, by contract or otherwise. Change
of Control shall not include public offerings of the capital stock of Manager or
any assignment of this Agreement by Manager as permitted hereby and in
accordance with the terms hereof.

                  (d)      "Closing Date" means the date of this Agreement,
being the date of closing of Parent REIT's private placement of Common Shares as
identified in the Offering Memorandum.

                  (e)      "Code" means the Internal Revenue Code of 1986, as
amended.

                  (f)      "Common Share" means a share of capital stock of
Parent REIT now or hereafter authorized and issued as common voting stock of
Parent REIT.

                  (g)      "Company" has the meaning assigned in the first
paragraph.

                  (h)      "Company Account" has the meaning assigned in Section
5.

                  (i)      "Company Target Investments" means multifamily and
commercial mortgage loans and customized financing transactions, including
bridge loans, mezzanine loans, preferred equity investments, note acquisitions
and participation interests in owners of real properties.

                  (j)      "Company Termination Notice" has the meaning assigned
in Section 13(b).

                  (k)      "Deferred Interest" has the meaning assigned in
Section 8(c).

                  (l)      "Effective Termination Date" has the meaning assigned
in Section 13(b).

                  (m)      "Excess Funds" has the meaning assigned in Section
2(f).

                  (n)      "Exchange Act" means the Securities Exchange Act of
1934, as amended.

                  (o)      "Expenses" has the meaning assigned in Section 9.

                  (p)      "Funds from Operations" has the meaning assigned by
the National Association of Real Estate Investment Trusts and means net income
(computed in accordance with GAAP) excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation and amortization on real
estate assets, and after adjustments for unconsolidated partnerships and joint
ventures.

                  (q)      "GAAP" means generally accepted accounting principles
in effect in the U.S. on the date such principles are applied, consistently
applied.

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                  (r)      "Governing Instruments" means, with respect to any
Person, the articles of incorporation and bylaws in the case of a corporation,
the certificate of limited partnership (if applicable) and partnership agreement
in the case of a general or limited partnership or the articles of formation and
operating agreement in the case of a limited liability company.

                  (s)      "Guidelines" has the meaning assigned in Section
2(b)(i).

                  (t)      "Incentive Fee" has the meaning assigned in Section
8(d)(i).

                  (u)      "Incentive Fee Payment" has the meaning assigned in
Section 8(d)(ii).

                  (v)      "Independent Directors" means the members of the
Board of Directors who are not officers or employees of Manager and who are
otherwise "independent" in accordance with Parent REIT's Governing Instruments.

                  (w)      "Initial Assets" means the investments contributed to
the Company on the Closing Date described on pages 44 through 52 of the Offering
Memorandum.

                  (x)      "Invested Equity" has the meaning assigned in Section
8(a)(i).

                  (y)      "Investment Company Act" means the Investment Company
Act of 1940, as amended.

                  (z)      "Investments" means the investments of the Company.

                  (aa)     "Management Fee" has the meaning assigned in Section
8(a)(i).

                  (bb)     "Management Fee Payment" has the meaning assigned in
Section 8(a)(ii).

                  (cc)     "Manager" has the meaning assigned in the first
paragraph.

                  (dd)     "Manager Indemnified Party" has the meaning assigned
in Section 11(b).

                  (ee)     "Manager Parties" has the meaning assigned in Section
3(b).

                  (ff)     "Manager Target Investments" has the meaning assigned
in Section 3(c).

                  (gg)     "Manager Termination Notice" has the meaning assigned
in Section 13(d).

                  (hh)     "Notice of Proposal to Negotiate" has the meaning
assigned in Section 13(c).

                  (ii)     "Non-Competition Agreement" means that certain
Non-Competition Agreement, dated as of the date hereof, among Parent REIT, the
Operating Partnership and Principal.

                  (jj)     "Offering Memorandum" has the meaning assigned in the
recitals.

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                  (kk)     "OP Unit" means a unit of partnership interest in the
Operating Partnership now or hereafter authorized and issued as a unit of
partnership interest in the Operating Partnership.

                  (ll)     "Operating Partnership" has the meaning assigned in
the first paragraph.

                  (mm)     "Parent REIT" has the meaning assigned in the first
paragraph. All references herein to Parent REIT shall, except as otherwise
expressly provided herein, be deemed to include the Parent REIT first named
herein and the Subsidiaries of the Parent REIT; provided, that unless any such
Subsidiary seeks to qualify for the tax benefits available to a REIT, provisions
of this Agreement contemplating Parent REIT's status as a REIT shall apply only
to Parent REIT and not to such Subsidiary, other than to the extent the same
affect the Parent REIT first named herein.

                  (nn)     "Person" means any individual, corporation,
partnership, joint venture, limited liability company, estate, trust,
unincorporated association, any federal, state, county or municipal government
or any bureau, department or agency thereof and any fiduciary acting in such
capacity on behalf of any of the foregoing.

                  (oo)     "Principal" means Ivan Kaufman, an individual.

                  (pp)     "REIT" means a corporation or trust which qualifies
as a real estate investment trust in accordance with Sections 856 through 860 of
the Code.

                  (qq)     "Services Agreement" means that certain Services
Agreement, dated as of the date hereof, among the parties hereto.

                  (rr)     "Subsidiary" means any subsidiary of Parent REIT, any
partnership, the general partner of which is Parent REIT or any subsidiary of
Parent REIT and any limited liability company, the managing member of which is
Parent REIT or any subsidiary of Parent REIT.

                  (ss)     "Ten Year U.S. Treasury Rate" means the arithmetic
average of the weekly average yield to maturity for actively traded current
coupon U.S. Treasury fixed interest rate securities (adjusted to constant
maturities of ten (10) years) published by the Federal Reserve Board during a
fiscal year, or, if such rate is not published by the Federal Reserve Board, any
Federal Reserve Bank or agency or department of the federal government selected
by the Company. If the Company determines in good faith that the Ten Year U.S.
Treasury Rate cannot be calculated as provided above, then the rate will be the
arithmetic average of the per annum average yields to maturities, based upon
closing asked prices on each business day during a quarter, for each actively
traded marketable U.S. Treasury fixed interest rate security with a final
maturity date not less than eight (8) and not more than twelve (12) years from
the date of the closing asked prices as chosen and quoted for each business day
in each such quarter in New York City by at least three (3) recognized dealers
in U.S. government securities selected by the Company.

                  (tt)     "U.S." means United States of America.

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         2.       Appointment and Duties of Manager.

                  (a)      Appointment. The Company hereby appoints Manager to
manage the assets of the Company subject to the further terms and conditions set
forth in this Agreement, and Manager hereby agrees to use its commercially
reasonable efforts to perform each of the duties set forth herein. The
appointment of Manager shall be exclusive to Manager except to the extent that
Manager otherwise agrees, in its sole and absolute discretion, and except to the
extent that Manager elects pursuant to the terms of this Agreement to cause the
duties of Manager hereunder to be provided by third parties.

                  (b)      Duties. Manager, in its capacity as manager of the
assets and the day-to-day operations of the Company, at all times will be
subject to the supervision of the Board of Directors and will have only such
functions and authority as the Company may delegate to it, including, without
limitation, the functions and authority identified herein and delegated to
Manager hereby. Manager will be responsible for the day-to-day operations of the
Company and will perform (or cause to be performed) such services and activities
relating to the assets and operations of the Company as may be appropriate,
including, without limitation:

                           (i)      serving as the Company's consultant with
         respect to the periodic review of the investment criteria and
         parameters for Investments, borrowings and operations, any
         modifications to which shall be approved by a majority of the
         Independent Directors (such policy guidelines as are in effect on the
         date hereof, as the same may be modified with such approval, the
         "Guidelines"), and other policies for approval by the Board of
         Directors;

                           (ii)     investigation, analysis and selection of
         investment opportunities;

                           (iii)    with respect to prospective investments by
         the Company and dispositions of Investments, conducting negotiations
         with real estate brokers, sellers and purchasers, and their respective
         agents and representatives, investment bankers, mortgage bankers and
         owners of privately and publicly held real estate companies;

                           (iv)     coordinating and managing operations of any
         joint venture or co-investment interests held by the Company and
         conducting all matters with the joint venture or co-investment
         partners;

                           (v)      providing executive and administrative
         personnel, office space and office services required in rendering
         services to the Company;

                           (vi)     administering the day-to-day operations of
         the Company and performing and supervising the performance of such
         other administrative functions necessary in the management of the
         Company as may be agreed upon by Manager and the Board of Directors,
         including, without limitation, collection of interest, fee and other
         income, payment of the Company's debts and obligations, payment of
         dividends or distributions to the holders of the Common Shares and
         maintenance of appropriate back-office infrastructure to perform such
         administrative functions;

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                           (vii)    communicating on behalf of the Company with
         the holders of any equity or debt securities of the Company as required
         to satisfy the reporting and other requirements of any governmental
         entities or agencies or trading markets and to maintain effective
         relations with such holders;

                           (viii)   counseling Parent REIT in connection with
         policy decisions to be made by the Board of Directors;

                           (ix)     evaluating and recommending to the Board of
         Directors hedging strategies and, as the Board of Directors shall
         request or Manager shall deem appropriate, engaging in hedging
         activities on behalf of the Company, in a manner consistent with such
         strategies, as so modified from time to time, Parent REIT's status as a
         REIT and the Guidelines;

                           (x)      counseling Parent REIT regarding the
         maintenance of its status as a REIT and monitoring compliance with the
         various REIT qualification tests and other rules set out in the Code
         and the Treasury Regulations promulgated thereunder;

                           (xi)     counseling the Company regarding the
         maintenance of its exemption from the Investment Company Act and
         monitoring compliance with the requirements for maintaining such
         exemption;

                           (xii)    assisting the Company in developing criteria
         for debt and equity financing that is specifically tailored to the
         Company's investment objectives, making available to the Company its
         knowledge and experience with respect to Company Target Investments and
         other real estate and real estate-related transactions and serving as
         the originating lender of such investments comprising Company Target
         Investments;

                           (xiii)   representing and making recommendations to
         the Company in connection with its investment in a diversified
         portfolio of Company Target Investments and other real estate
         transactions with select borrowers and principals;

                           (xiv)    investing and re-investing any moneys and
         securities of Parent REIT or the Operating Partnership (including
         investing in short-term investments pending investment in Investments,
         payment of fees, costs and expenses or payments of dividends or
         distributions to stockholders and partners of Parent REIT and the
         Operating Partnership) and advising Parent REIT and the Operating
         Partnership with respect to its capital structure and capital raising;

                           (xv)     causing Parent REIT and the Operating
         Partnership to retain qualified accountants and legal counsel, as
         applicable, to assist in developing appropriate accounting and
         compliance procedures and testing systems with respect to financial
         reporting obligations, as applicable, and the Parent REIT's compliance
         with the provisions of the Code applicable to REITs and the Treasury
         Regulations promulgated thereunder and to conduct quarterly compliance
         reviews with respect thereto;

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                           (xvi)    causing Parent REIT and the Operating
         Partnership to qualify to do business in all applicable jurisdictions
         and to obtain and maintain all appropriate licenses;

                           (xvii)   assisting Parent REIT and the Operating
         Partnership in complying with all regulatory requirements applicable to
         Parent REIT and the Operating Partnership in respect of its business
         activities, including preparing or causing to be prepared all financial
         statements required under applicable regulations and contractual
         undertakings and all reports and documents required under the Exchange
         Act;

                           (xviii)  taking all necessary actions to enable the
         Parent REIT and the Operating Partnership to make required tax filings
         and reports, including, with respect to the Parent REIT, soliciting
         stockholders for required information to the extent provided by the
         provisions of the Code applicable to REITs and the Treasury Regulations
         promulgated thereunder;

                           (xix)    handling and resolving all claims, disputes
         or controversies (including all litigation, arbitration, settlement or
         other proceedings or negotiations) in which the Company may be involved
         or to which the Company may be subject arising out of the Company's
         day-to-day operations, subject to such limitations or parameters as may
         be imposed from time to time by the Board of Directors;

                           (xx)     using commercially reasonable efforts to
         cause expenses incurred by or on behalf of the Company to be
         reasonable, customary and within any budgeted parameters or expense
         guidelines set by the Board of Directors from time to time;

                           (xxi)    using commercially reasonable efforts to
         cause Parent REIT and the Operating Partnership to comply with all
         applicable laws; and

                           (xxii)   performing such other services as may be
         required from time to time for management and other activities relating
         to the assets of the Company as the Board of Directors shall reasonably
         request or Manager shall deem appropriate under particular
         circumstances.

                  (c)      Subcontracts. Manager may enter into agreements with
other parties, including its affiliates, for the purpose of engaging one or more
property and/or asset managers for and on behalf, and at the sole cost and
expense, of the Company to provide property management, asset management,
leasing, development and/or similar services to the Company with respect to the
Investments, pursuant to property management agreement(s) and/or asset
management agreement(s) with terms which are then customary for agreements
regarding the management of assets similar in type, quality and value to the
assets of the Company; provided, that any such agreements entered into with
affiliates of Manager shall be (i) on terms no more favorable to such affiliate
then would be obtained from a third party on an arm's-length basis, and (ii) to
the extent the same do not fall within the provisions of the Guidelines,
approved by a majority of the Independent Directors.

                  (d)      Service Providers. Manager may retain for and on
behalf of the Company such services of accountants, legal counsel, appraisers,
insurers, brokers, transfer agents,

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registrars, developers, investment banks, financial advisors, banks, other
lenders and other Persons, including Manager's affiliates, as Manager deems
necessary or advisable in connection with the management and operations of the
Company; provided, that any agreements entered into with affiliates of Manager
to perform any such services shall be (i) on terms no more favorable to such
affiliate then would be obtained from a third party on an arm's-length basis,
and (ii) to the extent the same do not fall within the provisions of the
Guidelines, approved by a majority of the Independent Directors. The Company
shall pay all expenses, and reimburse Manager for Manager's expenses incurred on
its behalf, in connection with any such services to the extent such expenses are
reimbursable by the Company to Manager pursuant to Section 9.

                  (e)      Reporting Requirements.

                           (i)      As frequently as Manager may deem necessary
         or advisable, or at the direction of the Board of Directors, Manager
         shall prepare, or cause to be prepared, with respect to any Investment
         (i) at the Company's sole cost and expense, an appraisal prepared by an
         independent real estate appraiser, (ii) reports and information on the
         Company's operations and asset performance, and (iii) such other
         information reasonably requested by the Company. The Company shall pay
         all expenses, and reimburse Manager for Manager's expenses incurred on
         its behalf, in connection with the foregoing clauses (ii) and (iii) to
         the extent such expenses are reimbursable by the Company to Manager
         pursuant to Section 9.

                           (ii)     Manager shall prepare, or cause to be
         prepared, at the sole cost and expense of the Company, all reports,
         financial or otherwise, with respect to Parent REIT and the Operating
         Partnership reasonably required by the Board of Directors in order for
         Parent REIT and the Operating Partnership to comply with their
         Governing Instruments or any other materials required to be filed with
         any governmental entity or agency, and shall prepare, or cause to be
         prepared, all materials and data necessary to complete such reports and
         other materials including, without limitation, an annual audit of the
         Company's books of account by a nationally recognized independent
         accounting firm of good reputation.

                           (iii)    Manager shall prepare regular reports for
         the Board of Directors to enable the Board of Directors to review the
         Company's acquisitions, portfolio composition and characteristics,
         credit quality, performance and compliance with the Guidelines and
         policies approved by the Board of Directors.

                  (f)      Excess Funds. Notwithstanding anything contained in
this Agreement to the contrary, except to the extent that the payment of
additional moneys is proven by the Company to have been required as a direct
result of Manager's acts or omissions which result in the right of the Company
to terminate this Agreement pursuant to Section 15 and except as expressly
provided in Section 11(c), Manager shall not be required to expend money
("Excess Funds") in excess of that contained in any applicable Company Account
or otherwise made available by the Company to be expended by Manager hereunder.

                  (g)      Reliance by Manager. In performing its duties under
this Section 2, Manager shall be entitled to rely reasonably on qualified
experts and professionals (including,

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without limitation, accountants, legal counsel and other professional service
providers) hired by Manager.

         3.       Dedication; Right of First Refusal; Exclusivity; Survival.

                  (a)      Devotion of Time. Manager will provide a dedicated
management team, including the Chief Executive Officer, the Chief Financial
Officer and the Chief Operating Officer of Manager, to provide the management
services to be provided by Manager to the Company hereunder, the members of
which team shall devote such of their time to the management of the Company as
the Independent Directors deem necessary and appropriate, commensurate with the
level of activity of the Company from time to time. The Company shall have the
benefit of Manager's best judgment and effort in rendering services and, in
furtherance of the foregoing, Manager shall not undertake activities which, in
its reasonable judgment, will substantially adversely affect the performance of
its obligations under this Agreement.

                  (b)      Additional Activities; Right of First Refusal. Except
to the extent set forth in Section 3(a) and subject to the provisions of this
Section 3(b), Manager and any of its affiliates, and any of the officers and
employees of any of the foregoing (the "Manager Parties"), may engage in other
businesses and render services of any kind to any other Person, including
investment in, or advisory service to others investing in, Company Target
Investments and other real estate and real estate-related transactions;
provided, however, prior to any Manager Party engaging in transactions involving
or rendering services relating to Company Target Investments other than on
behalf of or to the Company, if (i) such transaction is consistent with the
Company's investment objectives and within the Guidelines, and (ii) the
parameters of the transaction are of a character which would not adversely
affect the status of Parent REIT as a REIT, Manager shall offer such investment
opportunity to the Company by delivering to the Company's credit committee a
written description thereof containing the economic and other material terms of
the transaction. The credit committee shall have five (5) days to accept or
reject the offer by a majority vote of the members of the credit committee. If
the credit committee rejects the offer, Manager shall present the investment
opportunity to the Independent Directors who shall have five (5) days to accept
or reject the offer by majority vote. If the Independent Directors reject the
offer and allow Manager to pursue the investment opportunity, any Manager Party
may pursue the same provided the economic and other material terms thereof are
not materially more beneficial to the applicable Manager Party than the economic
and other material terms to the Company would have been under the transaction
described in the original offer. If the economic and other material terms of the
transaction to be engaged in by the applicable Manager Party are modified so
that the benefits thereof to the applicable Manager Party are materially more
beneficial to the applicable Manager Party than such terms to the Company would
have been under the transaction described in the original offer, then Manager
must offer the revised transaction opportunity to the Company and the provisions
of this Section 3(b) shall apply to the revised offer as though it were an
original offer. If the Company accepts, either by majority vote of the credit
committee or the Independent Directors, an investment opportunity offered by
Manager hereunder, the Company must reimburse Manager for its expenses relating
thereto to the extent the same would be reimbursable by the Company to Manager
pursuant to Section 9. For the avoidance of doubt, the Manager Parties may not
pursue

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an investment opportunity offered to the Company hereunder without the
Independent Directors' permission to do so as otherwise contemplated in this
Section 3(b).

                  (c)      Manager Exclusivity Rights. Manager and any other
Manager Party may, and the Company agrees not to, pursue any investment
opportunities consisting of multifamily and commercial mortgage loans that meet
the underwriting and approval guidelines of (i) Fannie Mae, (ii) the Federal
Housing Administration, and (iii) conduit commercial lending programs secured by
first liens on real property (collectively, "Manager Target Investments").

                  (d)      Officers, Employees, Etc. Manager, members, partners,
officers, employees and agents of Manager or affiliates of Manager may serve as
directors, officers, employees, agents, nominees or signatories for Parent REIT,
the Operating Partnership or any other Subsidiary, to the extent permitted by
their Governing Instruments, as may be amended from time to time, or by any
resolutions duly adopted by the Board of Directors pursuant to Parent REIT's
Governing Instruments. When executing documents or otherwise acting in such
capacities for Parent REIT, the Operating Partnership or such other Subsidiary,
such Persons shall use their respective titles with respect to Parent REIT, the
Operating Partnership or such Subsidiary.

                  (e)      Survival; Origination Period. For a period of one (1)
year following the expiration or earlier termination of this Agreement, Manager
shall continue (and have the exclusive right, if (i) the Company did not
terminate this Agreement for cause, or (ii) Manager terminated this Agreement
for cause, as cause for each party is determined in accordance with Section 15)
to serve as the originating lender of investments comprising Company Target
Investments as contemplated under Section 2(b)(xii), and the provisions and
terms of Sections 3(b), 3(c) and 8(b) shall continue to apply. For the avoidance
of doubt, Manager will not earn the Management Fee or the Incentive Fee during
this one (1) year period.

         4.       Agency. Manager shall act as agent of Parent REIT and the
Operating Partnership in making, acquiring, financing and disposing of
Investments, disbursing and collecting the Company's funds, paying the debts and
fulfilling the obligations of the Company, supervising the performance of
professionals engaged by or on behalf of Parent REIT or the Operating
Partnership and handling, prosecuting and settling any claims of or against the
Company, the Board of Directors, holders of Parent REIT's or the Operating
Partnership's securities or the Company's representatives or properties.

         5.       Bank Accounts. At the direction of the Board of Directors,
Manager may establish and maintain one or more bank accounts in the name of
Parent REIT, the Operating Partnership or any other Subsidiary (any such
account, a "Company Account"), collect and deposit funds into any such Company
Account or Company Accounts and disburse funds from any such Company Account or
Company Accounts, under such terms and conditions as the Board of Directors may
approve. Manager shall from time-to-time render appropriate accountings of such
collections and payments to the Board of Directors and, upon request, to the
auditors of Parent REIT, the Operating Partnership or any other Subsidiary.

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         6.       Records; Confidentiality.

                  (a)      Records. Manager shall maintain appropriate books of
account and records relating to services performed under this Agreement, and
such books of account and records shall be accessible for inspection by
representatives of Parent REIT, the Operating Partnership or any other
Subsidiary at any time during normal business hours upon one (1) business day's
advance written notice.

                  (b)      Confidentiality. Manager shall keep confidential any
nonpublic information obtained in connection with the services rendered under
this Agreement and shall not disclose any such information (or use the same
except in furtherance of its duties under this Agreement), except: (i) with the
prior written consent of the Board of Directors; (ii) to legal counsel,
accountants and other professional advisors, so long as Manager informs such
Persons of the confidential nature of such information and directs them to treat
such information confidentially; (iii) to appraisers in the ordinary course of
business; (iv) to governmental officials having jurisdiction over Manager; (v)
as required by law or legal process to which Manager or any Person to whom
disclosure is permitted hereunder is a party or in connection with Manager's
assertion in any judicial or nonjudicial proceeding of any claim, counterclaim
or defense against the Company; or (vi) information which has previously become
available through the actions of a Person other than Manager not resulting from
Manager's violation of this Section 6(b). The provisions of this Section 6(b)
shall survive the expiration or earlier termination of this Agreement.

         7.       Obligations of Manager; Restrictions.

                  (a)      Asset Representations and Warranties. Manager shall
require each seller or transferor of investment assets to the Company to make
such representations and warranties regarding such assets as may, in the
judgment of Manager, be necessary and appropriate. In addition, Manager shall
take such other action as it deems necessary or appropriate with regard to the
protection of the Investments.

                  (b)      Restrictions. Manager shall refrain from any action
that, in its sole judgment made in good faith, (i) is not in compliance with the
Guidelines, (ii) would adversely affect the status of Parent REIT as a REIT, or
(iii) would violate any law, rule or regulation of any governmental body or
agency having jurisdiction over Parent REIT, the Operating Partnership or any
other Subsidiary or that would otherwise not be permitted by such Person's
Governing Instruments. If Manager is ordered to take any such action by the
Board of Directors, Manager shall promptly notify the Board of Directors of
Manager's judgment that such action would adversely affect such status or
violate any such law, rule or regulation or Governing Instruments.
Notwithstanding the foregoing, Manager, its directors, officers, stockholders
and employees shall not be liable to Parent REIT, the Operating Partnership or
any other Subsidiary, the Board of Directors or Parent REIT's or the Operating
Partnership's stockholders or partners for any act or omission by Manager, its
directors, officers, stockholders or employees except as provided in Section 11.

                  (c)      Interested Party Transaction. Manager shall not (i)
consummate any transaction which would involve the acquisition by the Company of
property in which Manager

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or any of its affiliates has an ownership interest or the sale by the Company of
property to Manager or any of its affiliates, or (ii) under circumstances where
Manager is subject to an actual or potential conflict of interest because it
manages both the Company and another Person (not an affiliate of the Company)
with which the Company has a contractual relationship, take any action
constituting the granting to such other Person of a waiver, forebearance or
other relief, or the enforcement against such other Person of remedies, under or
with respect to the applicable contract, unless such transaction or action, as
the case may be and in each case, is approved by a majority of the Independent
Directors.

                  (d)      Joint Ventures. The Company shall not invest in joint
ventures with Manager or any of its affiliates, unless such Investment is (i)
made in accordance with the Guidelines, and (ii) approved in advance by a
majority of the Independent Directors.

                  (e)      Board of Director Review. The Board of Directors
periodically reviews the Guidelines and the Company's portfolio of Investments.
If a majority of the Independent Directors determine in their periodic review of
transactions that a particular transaction does not comply with the Guidelines,
then a majority of the Independent Directors will consider what corrective
action, if any, can be taken.

                  (f)      Insurance. Manager shall at all times during the term
of this Agreement (including the initial term and any renewal term) maintain a
tangible net worth equal to or greater than $1,000,000. In addition, Manager
shall maintain "errors and omissions" insurance coverage and such other
insurance coverage which is customarily carried by property, asset and
investment managers performing functions similar to those of Manager under this
Agreement with respect to assets similar to the assets of the Company, in an
amount which is comparable to that customarily maintained by other managers or
servicers of similar assets.

         8.       Compensation.

                  (a)      Management Fee.

                           (i)      During the term of this Agreement, the
         Company shall pay Manager an annual management fee (the "Management
         Fee") based on Equity, as follows:

                                    (A)      0.75% per annum of Equity up to
                  $400,000,000 of Equity;

                                    (B)      in the event that Equity is greater
                  than $400,000,000, the amount set forth in clause (A) above
                  plus 0.625% per annum of Equity in excess of $400,000,000 and
                  up to $800,000,000; and

                                    (C)      in the event that Equity is greater
                  than $800,000,000, the amounts set forth in clauses (A) and
                  (B) above plus 0.5% per annum of Equity in excess of
                  $800,000,000.

         "Equity" means, computed in accordance with GAAP as of the end of each
         calendar month, (1) the total equity of Parent REIT and all limited
         partners of the Operating

                                       12
<PAGE>

         Partnership, plus or minus, as applicable (2) any unrealized gains,
         losses or other items that do not affect realized net income of the
         Operating Partnership.

                           (ii)     The Management Fee shall be payable in
         arrears in cash, in monthly installments, and Manager shall calculate
         each installment thereof (taking into account any reductions of the
         Management Fee pursuant to Section 8(c) and Section 1(c) of the
         Services Agreement), and deliver such calculation to the Board of
         Directors, within fifteen (15) days following the last day of each
         calendar month. The Company shall pay Manager each installment of the
         Management Fee (each, a "Management Fee Payment") within twenty (20)
         days following the last day of the calendar month with respect to which
         such Management Fee Payment is payable.

                           (iii)    The provisions of this Section 8(a) shall
         survive the expiration or earlier termination of this Agreement;
         provided, however, the Management Fee is subject to adjustment pursuant
         to and in accordance with the provisions of Section 13(c).

                  (b)      Origination Fees. With respect to Manager's
origination of Company Target Investments consisting of bridge and mezzanine
loans pursuant to Section 2(b)(xii), the Company shall pay Manager an amount
equal to the origination fee paid by the borrower thereunder, up to a maximum
amount of one percent (1.0%) of the original principal amount of such loan. Any
remaining portion of the origination fee shall be retained by the Company. The
provisions of this Section 8(b) shall survive the expiration or earlier
termination of this Agreement and the one-year origination period described in
Section 3(e).

                  (c)      Waiver of Deferred Interest. Manager agrees to
cooperate with the Company with respect to the characterization of exit fees
payable by the applicable borrower under any of the Initial Assets or the other
Investments as interest or deferred interest pursuant to the terms of the
applicable loan documents ("Deferred Interest") in such a manner that the
characterization thereof as interest or deferred interest is reasonably likely
to be accepted for U.S. federal income tax purposes. With respect to Investments
other than the Initial Assets, Manager shall use commercially reasonable efforts
to structure the applicable loan documents in a manner intended to achieve such
characterization of exit fees. With respect to the Initial Assets and any other
Investments whose terms provide for the payment of Deferred Interest, the
Company agrees to waive any or all Deferred Interest payable in accordance with
the terms of the applicable loan documents or if such borrowers refinance their
respective loans with permanent financing consisting of Manager Target
Investments. To the extent that any such Deferred Interest is so waived, the
Management Fee Payment due to Manager for the month in which such waiver is made
shall be reduced by an amount equal to fifty percent (50%) of the amount of the
Deferred Interest waived. In the event the aggregate of any such debits then
available and unapplied against a Management Fee Payment exceeds the amount of
the Management Fee Payment payable for any given calendar month, the excess
unapplied debit shall be carried over and applied as a credit against the
Management Fee Payment otherwise payable in the next succeeding calendar month
or months until fully applied. In the event, upon the expiration or earlier
termination of this Agreement, any excess debits remain to be applied against
the Management Fee Payments, Manager shall pay to the Company the amount of such
excess unapplied debits.

                                       13
<PAGE>

                  (d)      Incentive Fee.

                           (i)      In addition to the Management Fee, the
         Company shall pay Manager an annual incentive fee (the "Incentive Fee")
         on a cumulative, but not compounding, basis, equal to the product of
         (A) twenty-five percent (25%) of the dollar amount by which (1)(a) the
         Operating Partnership's Funds from Operations (before giving effect to
         payment of the Incentive Fee) per OP Unit (based on the weighted
         average number of OP Units outstanding, including OP Units issued to
         Parent REIT corresponding to outstanding Common Shares), plus (b) gains
         (or losses) from debt restructuring and sales of property per OP Unit
         (based on the weighted average number of OP Units outstanding,
         including OP Units issued to Parent REIT corresponding to outstanding
         Common Shares), exceed (2) the product of (a) the weighted average
         (based on Common Shares and OP Units) of (i) the book value per OP Unit
         of the net assets contributed by Manager to the Company at its
         inception, (ii) the offering price per Common Share at the initial 144A
         securities offering of Parent REIT described in the Offering
         Memorandum, (iii) the offering price per Common Share (including Common
         Shares issued upon the exercise of warrants or options) at any
         secondary Common Share offerings by Parent REIT (adjusted for any prior
         capital dividends or distributions), and (iv) the issue price per OP
         Unit for subsequent contributions to the Operating Partnership, and (b)
         the greater of (i) nine and one-half percent (9.5%) per annum, and (ii)
         the Ten Year U.S. Treasury Rate plus three and one-half percent (3.5%)
         per annum, and (B) the weighted average number of OP Units outstanding,
         including OP Units issued to Parent REIT corresponding to outstanding
         Common Shares.

                           (ii)     The Incentive Fee shall be payable annually
         in arrears; provided, however, Manager shall receive quarterly
         installments thereof in advance, and Manager shall calculate each such
         installment based on the period of twelve (12) months ending on the
         last day of the fiscal quarter with respect to which such installment
         is payable (provided, for calendar year 2003, such calculations shall
         be based on the period of three (3) or six (6) months, as applicable,
         ending on the last day of the fiscal quarter with respect to which such
         installment is payable), and deliver such calculation to the Board of
         Directors, within forty-five (45) days following the last day of each
         fiscal quarter. The Company shall pay Manager each installment of the
         Incentive Fee (each, an "Incentive Fee Payment") within sixty (60) days
         following the last day of the fiscal quarter with respect to which such
         Incentive Fee Payment is payable.

                           (iii)    Twenty-five percent (25%) of the Incentive
         Fee shall (subject to the remaining provisions of this Section
         8(d)(iii)) be payable to Manager in Common Shares, and the remainder
         thereof shall be paid in cash; provided, Manager may (subject to the
         remaining provisions of this Section 8(d)(iii)) elect, by so indicating
         in the installment calculation delivered to Board of Directors, to
         receive more than twenty-five percent (25%) of the Incentive Fee in the
         form of Common Shares; provided, however, Manager may not receive
         payment of any portion of the Incentive Fee in the form of Common
         Shares, either automatically or by election, if such payment would
         result a violation of the Common Share ownership restrictions set forth
         in Parent REIT's Governing Instruments. For purposes of determining the
         Common Share equivalent of

                                       14
<PAGE>

         the amount of the Incentive Fee payable in Common Shares, (A) prior to
         the date the Common Shares are publicly traded, each Common Share shall
         have a value equal to the book value per Common Share on the last day
         of the fiscal quarter with respect to which the Incentive Fee is being
         paid, and (B) from and after the date the Common Shares are publicly
         traded, each Common Share shall have a value equal to the average
         closing price per Common Share based on the period of (20) days ending
         on and including the last trading day of the fiscal quarter with
         respect to which the Incentive Fee is being paid. Manager's receipt of
         Common Shares in accordance herewith shall be subject to all applicable
         securities exchange rules and securities laws (including, without
         limitation, prohibitions on insider trading).

                           (iv)     Each Incentive Fee Payment shall be deemed
         to be an advance of a portion of the Incentive Fee payable for the
         subject fiscal year. Manager shall calculate the Incentive Fee payable
         during the immediately preceding fiscal year (or partial fiscal year,
         if applicable, following the expiration or earlier termination of this
         Agreement), and deliver such calculation to the Board of Directors,
         within seventy-five (75) days following (A) the last day of each fiscal
         year during the term, and (B) the date of expiration or earlier
         termination of this Agreement. If the amount of the Incentive Fee for
         such fiscal year (or partial fiscal year, if applicable) exceeds the
         sum of the Incentive Fee Payments made during such fiscal year (or
         partial fiscal year, if applicable), the Company shall pay Manager the
         amount of such underpayment, subject to the provisions of Section
         8(d)(iii), within fifteen (15) days after the date Manager delivers
         such calculation to the Board of Directors. If the amount of the
         Incentive Fee for such fiscal year (or partial fiscal year, if
         applicable) is less than the sum of the Incentive Fee Payments made
         during such fiscal year (or partial fiscal year, if applicable),
         Manager shall refund to the Company the amount of such overpayment, in
         cash, within fifteen (15) days after the date Manager delivers such
         calculation to the Board of Directors.

                           (v)      The provisions of this Section 8(d) shall
         survive the expiration or earlier termination of this Agreement.

         9.       Expenses. The Company shall pay all of its expenses and shall
reimburse Manager for documented expenses of Manager incurred on its behalf in
accordance with this Agreement (collectively, the "Expenses"). Expenses include
all costs and expenses which are expressly designated elsewhere in this
Agreement as the Company's expenses, together with the following:

                  (a)      expenses in connection with the issuance and
transaction costs incident to the acquisition, disposition and financing of
Investments;

                  (b)      legal, accounting, tax and auditing fees and expenses
of third parties for services rendered for Parent REIT and the Operating
Partnership by providers retained by Manager;

                  (c)      compensation, benefits and expenses of the
Independent Directors and Parent REIT's and the Operating Partnership's
employees;

                                       15
<PAGE>

                  (d)      travel and other out-of-pocket expenses incurred by
Parent REIT's and the Operating Partnership's employees in connection with the
purchase, financing, refinancing, sale or other disposition of Investments;

                  (e)      compensation and expenses of the Company's custodian
and transfer agent, if any;

                  (f)      the cost of liability insurance to indemnify (i) the
Company's directors and officers, (ii) Manager and its directors and employees,
and (iii) the underwriters in connection with any securities offerings of Parent
REIT or the Operating Partnership;

                  (g)      any litigation, arbitration or similar costs incurred
by Manager on behalf of the Company relating to or arising from any claim,
dispute or action brought by or against the Company;

                  (h)      costs associated with the establishment and
maintenance of any credit facilities or other indebtedness of the Company
(including, without limitation, commitment and origination fees, legal fees,
closing and other costs) or any securities offerings of Parent REIT or the
Operating Partnership;

                  (i)      costs incurred in raising capital for Parent REIT and
the Operating Partnership, including fees and expenses of investment banks,
financial advisors, banks and other lenders;

                  (j)      key man life insurance costs for the Chief Executive
Officer of Parent REIT;

                  (k)      expenses relating to interest payments, dividends or
distributions in cash or any other form made or caused to be made by the Board
of Directors to or on account of the holders of securities or units of Parent
REIT, the Operating Partnership or any other Subsidiary, including, without
limitation, in connection with any dividend reinvestment plan;

                  (l)      expenses relating to the production and distribution
of communications to holders of securities or units of Parent REIT, the
Operating Partnership or any other Subsidiary and other bookkeeping and clerical
work necessary to maintain relations with the holders of such securities or
units and to comply with the continuous reporting and other requirements of
governmental entities or agencies, including, without limitation, (i) costs of
preparing and filing required reports with the Securities and Exchange
Commission, (ii) costs payable by Parent REIT to any transfer agent or registrar
in connection with the listing and/or trading of the Common Shares on any
exchange, (iii) fees payable by Parent REIT to any such exchange in connection
with its listing, and (iv) costs of preparing, printing and mailing Parent
REIT's annual report to its shareholders and proxy materials with respect to any
meeting of Parent REIT's shareholders;

                  (m)      other costs and expenses relating to the Company's
business and investment operations, including, without limitation, the costs and
expenses of acquiring,

                                       16
<PAGE>

owning, protecting, maintaining, developing and disposing of Investments,
including taxes, license fees and appraisal, reporting, audit and legal fees;
and

                  (n)      such other extraordinary or non-recurring expenses as
are incurred by Manager in connection with the performance of its services
hereunder, provided, to the extent the same are incurred with respect to matters
that do not fall within the provisions of the Guidelines, such expenses are
approved by a majority of the Independent Directors.

                  Without regard to the amount of compensation received under
this Agreement by Manager, Manager shall bear the following expenses: (i) the
wages and salaries of Manager's officers and employees; (ii) rent attributable
to the offices occupied by Manager separate from the office maintained for the
Company; and (iii) all other "overhead" expenses of Manager. The foregoing
notwithstanding, Manager agrees that it shall provide, at its expense, office
space to the Company's employees.

         10.      Expense Reports and Reimbursements. Manager shall prepare a
statement documenting the Expenses incurred during, and deliver the same to the
Company within forty-five (45) days following, each fiscal quarter. Expenses
incurred by Manager on behalf of the Company shall be reimbursed by the Company
within sixty (60) days following each fiscal quarter. The provisions of this
Section 10 shall survive the expiration or earlier termination of this Agreement
and the one-year origination period described in Section 3(e).

         11.      Limits of Manager Responsibility; Indemnification.

                  (a)      Limits of Manager Responsibility. Manager assumes no
responsibility under this Agreement other than to render the services set forth
herein in good faith and shall not be responsible for any action of the Board of
Directors in following or declining to follow any advice or recommendations of
Manager, including as set forth in Section 7(b). Manager, its members, managers,
officers and employees will not be liable to Parent REIT, the Operating
Partnership, any other Subsidiary, the Board of Directors or Parent REIT's, the
Operating Partnership's or any other Subsidiary's stockholders or partners for
any acts or omissions by Manager, its members, managers, officers or employees
pursuant to or in accordance with this Agreement, except as otherwise expressly
provided in Section 11(c).

                  (b)      Indemnification by Company. Parent REIT and/or the
Operating Partnership shall, to the full extent lawful, reimburse, indemnify and
hold Manager, its members, managers, officers and employees and each other
Person, if any, controlling Manager (each, a "Manager Indemnified Party")
harmless for and from any and all expenses, losses, damages, liabilities,
demands, charges and claims of any nature whatsoever (including reasonable
attorneys' fees and disbursements), excluding any claims by Manager's employees
relating to the terms and conditions of their employment by Manager, in respect
of or arising out of (i) any acts or omissions of such Manager Indemnified Party
made in good faith in the performance of Manager's duties hereunder and not
constituting such Manager Indemnified Party's bad faith, willful misconduct,
gross negligence or material breach (beyond any applicable cure period) of
Manager's duties under this Agreement, and (ii) the Company's or any of its
shareholder's, director's, officer's or employee's bad faith, willful
misconduct, gross negligence or material breach (beyond any applicable cure
period) of the Company's obligations under this Agreement.

                                       17
<PAGE>

                  (c)      Indemnification by Manager. Manager shall, to the
full extent lawful, reimburse, indemnify and hold each of Parent REIT and the
Operating Partnership, its shareholders, directors, officers and employees and
each other Person, if any, controlling Parent REIT or the Operating Partnership
harmless for and from any and all expenses, losses, damages, liabilities,
demands, charges and claims of any nature whatsoever (including reasonable
attorneys' fees and disbursements) in respect of or arising out of (i) Manager's
or any of its member's, manager's, officer's or employee's bad faith, willful
misconduct, gross negligence or material breach (beyond any applicable cure
period) of Manager's duties under this Agreement, and (ii) any claims by
Manager's employees relating to the terms and conditions of their employment by
Manager.

                  (d)      Survival. The provisions of this Section 11 shall
survive the expiration or earlier termination of this Agreement and the one-year
origination period described in Section 3(e).

         12.      No Joint Venture. Nothing in this Agreement shall be construed
to make the Company and Manager partners or joint venturers or impose any
liability as such on either of them.

         13.      Term; Termination.

                  (a)      Term. This Agreement shall remain in full force and
effect for a period of two (2) years following the date hereof and, unless
terminated by the Company or Manager as set forth below, shall be renewed
automatically for successive one (1) year periods thereafter, until this
Agreement is terminated in accordance with the terms hereof.

                  (b)      Non-Renewal/Termination Without Cause by Company. If
the Company elects not to renew this Agreement at the expiration of the initial
term or any renewal term thereafter as set forth in Section 13(a), or otherwise
desires at any time after the expiration of the initial term to terminate this
Agreement without cause, the Company shall deliver to Manager at least six (6)
months' prior written notice thereof (the "Company Termination Notice"). In the
Company Termination Notice, the Company shall specify the date, not less than
six (6) months from the date of the Company Termination Notice, on which this
Agreement shall terminate (the "Effective Termination Date"). For the avoidance
of doubt, the Company shall not have the right to terminate this Agreement
without cause during the initial term hereof.

                  (c)      Unfair Manager Compensation. The Company may
terminate this Agreement in accordance with the terms and provisions of Section
13(b), effective upon six (6) months' prior written notice to Manager and
payment to Manager of a termination fee equal to two (2) times the amount of the
Management Fee and the Incentive Fee earned by Manager during the period of
twelve (12) full calendar months most recently ended prior to such termination,
for any reason. If such reason arises from a decision made by majority vote of
the Independent Directors that the Management Fee payable to Manager is unfair,
the Company shall not have the foregoing termination right in the event Manager
agrees to continue to perform its duties hereunder at a fee that the Independent
Directors determine to be fair; provided, however, Manager shall have the right
to renegotiate the Management Fee by delivering to the Company, not less than
three (3) months prior to the pending Effective Termination Date, written

                                       18
<PAGE>

notice (a "Notice of Proposal to Negotiate") of its intention to renegotiate the
Management Fee. Thereupon, the Company and Manager shall endeavor to negotiate
the Management Fee in good faith. Provided that the Company and Manager agree to
a revised Management Fee (or other compensation structure) within three (3)
months following the Company's receipt of the Notice of Proposal to Negotiate,
the Company Termination Notice shall be deemed of no force and effect, and this
Agreement shall continue in full force and effect on the terms stated herein,
except that the Management Fee shall be the revised Management Fee (or other
compensation structure) then agreed upon by the Company and Manager. The Company
and Manager agree to execute and deliver an amendment to this Agreement setting
forth such revised Management Fee promptly upon reaching an agreement regarding
same. In the event that the Company and Manager are unable to agree to a revised
Management Fee during such three (3) month period, this Agreement shall
terminate on the Effective Termination Date. The Company's obligation to pay the
termination fee set forth in this Section 13(c) shall survive the termination of
this Agreement.

                  (d)      Non-Renewal/Termination Without Cause by Manager. If
Manager elects not to renew this Agreement at the expiration of the initial term
or any renewal term thereafter as set forth in Section 13(a), or otherwise
desires at any time after the expiration of the initial term to terminate this
Agreement without cause, Manager shall deliver to the Company at least six (6)
months' prior written notice thereof (the "Manager Termination Notice"). In the
Manager Termination Notice, Manager shall specify the date, not less than six
(6) months from the date of the Manager Termination Notice, on which this
Agreement shall terminate. This Agreement shall terminate on the date specified
in the Manager Termination Notice. For the avoidance of doubt, Manager shall not
have the right to terminate this Agreement without cause during the initial term
hereof.

                  (e)      Termination Fees.

                           (i)      Payable by Company. In the event the Company
         elects not to renew or terminates this Agreement without cause as
         permitted under Section 13(b) as a result of its decision to manage its
         assets internally, the Company shall pay to Manager, on the effective
         date of such termination, a termination fee equal to the amount of the
         Management Fee and the Incentive Fee earned by Manager during the
         period of twelve (12) full calendar months most recently ended prior to
         such termination. In the event the Company elects not to renew or
         terminates this Agreement without cause for any reason other than a
         decision to manage its assets internally, the termination fee payable
         by the Company to Manager shall be equal to two (2) times the amount of
         the Management Fee and the Incentive Fee earned by Manager during the
         period of twelve (12) full calendar months most recently ended prior to
         such termination. The Company's obligation to pay a termination fee
         shall survive the termination of this Agreement.

                           (ii)     Payable by Manager. Prior to the third (3rd)
         anniversary of the date hereof, in the event Manager: (A) elects not to
         renew or terminates this Agreement without cause (but only as permitted
         under Section 13(d)) within two (2) years after a Change of Control
         occurred or within two (2) years after Manager executed an agreement
         that would result in a Change of Control; or (B) delivered a Manager
         Termination Notice indicating its election not to renew or to terminate
         this Agreement (but only as permitted

                                       19
<PAGE>

         under Section 13(d)), then a Change of Control occurs or Manager
         executes an agreement that will result in a Change of Control within
         one (1) year thereafter, Manager shall pay to the Company, on the
         effective date of termination of this Agreement, a termination fee
         equal to two (2) times the amount of the Management Fee and the
         Incentive Fee earned by Manager during the period of twelve (12) full
         calendar months most recently ended prior to such termination.
         Manager's obligation to pay such termination fee shall survive the
         termination of this Agreement.

                  (f)      Survival. If this Agreement is terminated pursuant to
this Section 13, such termination shall be without any further liability or
obligation of either party to the other, except as otherwise expressly provided
herein.

         14.      Assignment.

                  (a)      Manager Assignment. Except as set forth in Section
14(c), this Agreement shall terminate at the Company's election and without
payment of any termination fee, and any such assignment shall be null and void,
in the event of its assignment, in whole or in part, by Manager, unless Manager
obtains the prior written consent of Parent REIT and a majority of the
Independent Directors; provided, however, no such consent shall be required in
the case of an assignment by Manager to any affiliate whose day-to-day business
and operations are managed and supervised by Principal. Any permitted assignment
by Manager shall bind the assignee in the same manner as Manager is bound by the
terms of this Agreement, and Manager shall be liable to the Company for all
errors or omissions of the assignee under any such assignment. In addition, the
assignee shall execute and deliver to the Company a counterpart of this
Agreement naming such assignee as Manager. For purposes of this Section 14(a)
and Section 14(c), "affiliate" means any Person controlling, controlled by or
under common control with Manager, and "control" means the direct or indirect
ownership of at least fifty-one percent (51%) of the beneficial equity interests
in and voting power of such Person (and "controlling" and "under common control
with" have meanings correlative to the foregoing).

                  (b)      Parent REIT Assignment. This Agreement shall not be
assigned by Parent REIT without Manager's prior written consent; provided,
however, no such consent shall be required in the case of an assignment by
Parent REIT to (i) a Subsidiary to which Parent REIT is also assigning its
general partnership interest in the Operating Partnership, or (ii) a REIT or
other organization which is a successor (by merger, consolidation or purchase of
assets) to Parent REIT, in which case such successor organization shall be bound
under this Agreement and by the terms of such assignment in the same manner as
Parent REIT is bound by the terms of this Agreement.

                  (c)      Manager Affiliate Subcontract and Partial Assignment.
Notwithstanding any provision of this Agreement, Manager may subcontract and
assign any or all of its responsibilities under Sections 2(b), (c) and (d) to
any of its affiliates whose day-to-day business and operations are managed and
supervised by Principal in accordance with the terms of this Agreement
applicable to any such subcontract or assignment, and the Company hereby
consents to any such subcontract and assignment. In addition, provided that
Manager provides prior written notice to the Company for informational purposes
only, nothing contained in this

                                       20
<PAGE>

Agreement shall preclude any pledge, hypothecation or other transfer of any
amounts payable to Manager under this Agreement.

         15.      Termination for Cause.

                  (a)      By Company. The Company may terminate this Agreement,
by a majority vote of the Independent Directors and without payment of a
termination fee, if:

                           (i)      Manager commits fraud or acts or fails to
         act in a manner that constitutes gross negligence in the performance of
         its duties hereunder;

                           (ii)     Manager misappropriates or embezzles Company
         funds;

                           (iii)    Manager commits some other willful violation
         of this Agreement in its corporate capacity (as distinguished from the
         acts of any employees of Manager which are taken without the complicity
         of Principal);

                           (iv)     Parent REIT removes Principal from the
         position of Chief Executive Officer of Parent REIT for cause (as cause
         is defined in and interpreted in accordance with the Non-Competition
         Agreement);

                           (v)      a Change of Control occurs;

                           (vi)     Principal is no longer Chief Executive
         Officer of Manager (provided such condition is not a result of
         Principal's death, disability or incapacity); or

                           (vii)    Manager defaults in the performance or
         observance of any material term, condition or covenant contained in
         this Agreement to be performed or observed on its part, and such
         default continues for a period of thirty (30) days after written notice
         thereof from the Company specifying such default and requesting that
         the same be remedied within such thirty (30) day period; provided,
         however, Manager shall have an additional sixty (60) days to cure such
         default if (A) such default cannot reasonably be cured with in thirty
         (30) days but can be cured within ninety (90) days, and (B) Manager
         shall have commenced to cure such default within the initial thirty
         (30) day period and thereafter diligently proceeds to cure the same
         within ninety (90) days of the date of the Company's original notice of
         the default.

Termination of this Agreement pursuant to this Section 15(a) shall become
effective, in case of the foregoing (A) clauses (i) through (iv), upon seven (7)
days' prior written notice to Manager, (B) clauses (v) and (vi), upon thirty
(30) days' prior written notice to Manager, and (C) clause (vii), in the event
of Manager's failure to cure and provided the Company has delivered to Manager a
termination notice, upon the expiration of the applicable cure period.

                  (b)      By Manager. Manager may terminate this Agreement,
without payment of a termination fee, if the Company defaults in the performance
or observance of any material term, condition or covenant contained in this
Agreement to be performed or observed on its part, and such default continues
for a period of thirty (30) days after written notice thereof from Manager
specifying such default and requesting that the same be remedied within such
thirty

                                       21
<PAGE>

(30) day period. This Agreement shall terminate, in the event of the Company's
failure to cure and provided Manager has delivered to the Company a termination
notice, upon the expiration of such thirty (30) day cure period.

         16.      Action Upon Termination or Expiration of Origination Period.
From and after the effective date of termination of this Agreement pursuant to
Sections 13, 14 or 15 or the expiration of the origination period described in
Section 3(e), as applicable, Manager shall not be entitled to compensation for
further services under this Agreement but shall be paid all compensation
accruing to the date of termination or expiration of the origination period, as
applicable, and a termination fee, if applicable. Upon such termination or
expiration, Manager shall forthwith:

                  (a)      after deducting any accrued compensation and
reimbursement for Expenses to which it is then entitled, pay over to the Company
all money collected and held for the account of the Company pursuant to this
Agreement;

                  (b)      deliver to the Board of Directors a full accounting,
including a statement showing all payments collected and all money held by it,
covering the period following the date of the last accounting furnished to the
Board of Directors with respect to the Company; and

                  (c)      deliver to the Board of Directors all property and
documents of the Company provided to or obtained by Manager pursuant to or in
connection with this Agreement, including all copies and extracts thereof in
whatever form, then in Manager's possession or under its control.

         17.      Release of Money or other Property Upon Written Request.
Manager agrees that any money or other property of the Company held by Manager
under this Agreement shall be held by Manager as custodian for the Company, and
Manager's records shall be clearly and appropriately marked to reflect the
ownership of such money or other property by the Company. Upon the receipt by
Manager of a written request signed by a duly authorized officer of the Company
requesting Manager to release to the Company any money or other property then
held by Manager for the account of the Company under this Agreement, Manager
shall release such money or other property to the Company within a reasonable
period of time, but in no event later than sixty (60) days following such
request. Manager shall not be liable to the Company, the Independent Directors
or Parent REIT's or the Operating Partnership's stockholders or partners for any
acts or omissions by the Company in connection with the money or other property
released to the Company in accordance with the terms hereof. The Company shall
indemnify Manager and its members, managers, officers and employees against any
and all expenses, losses, damages, liabilities, demands, charges and claims of
any nature whatsoever which arise in connection with Manager's release of such
money or other property to the Company in accordance with the terms of this
Section 17. Indemnification pursuant to this Section 17 shall be in addition to
any right of Manager to indemnification under Section 11.

         18.      Notices. Unless expressly provided otherwise in this
Agreement, all notices, requests, demands and other communications required or
permitted under this Agreement shall be in writing and shall be deemed to have
been duly given, made and received when delivered against receipt or upon actual
receipt of (a) personal delivery, (b) delivery by a reputable

                                       22
<PAGE>

overnight courier, (c) delivery by facsimile transmission against answerback, or
(d) delivery by registered or certified mail, postage prepaid, return receipt
requested, addressed as set forth below:

If to Parent REIT
or the Operating Partnership:      Arbor Realty Trust, Inc.
                                   333 Earle Ovington Boulevard, Suite 900
                                   Uniondale, New York 11553
                                   Attention: Chairman of the Board of Directors
                                   Facsimile: 516-832-8043

If to Manager:                     Arbor Commercial Mortgage, LLC
                                   333 Earle Ovington Boulevard
                                   Uniondale, New York 11553
                                   Attention: Frederick C. Herbst
                                   Facsimile: 516-832-8043

                  Any party may alter the address to which communications or
copies are to be sent by giving notice of such change of address in conformity
with the provisions of this Section 18 for the giving of notice.

         19.      Binding Nature of Agreement; Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors and permitted
assigns as provided in this Agreement.

         20.      Entire Agreement. This Agreement contains the entire agreement
and understanding among the parties hereto with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements, understandings,
inducements and conditions, express or implied, oral or written, of any nature
whatsoever with respect to the subject matter of this Agreement. The express
terms of this Agreement control and supersede any course of performance and/or
usage of the trade inconsistent with any of the terms of this Agreement. This
Agreement may not be modified or amended other than by an agreement in writing
signed by the parties hereto.

         21.      Governing Law. This Agreement and all questions relating to
its validity, interpretation, performance and enforcement shall be governed by
and construed, interpreted and enforced in accordance with the laws of the State
of New York, notwithstanding any New York or other conflict-of-law provisions to
the contrary.

         22.      Indulgences, Not Waivers. Neither the failure nor any delay on
the part of a party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.

                                       23
<PAGE>

         23.      Titles Not to Affect Interpretation. The titles of sections,
paragraphs and subparagraphs contained in this Agreement are for convenience
only, and they neither form a part of this Agreement nor are they to be used in
the construction or interpretation of this Agreement.

         24.      Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts of this Agreement, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories.

         25.      Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.

         26.      Principles of Construction. Words used herein regardless of
the number and gender specifically used, shall be deemed and construed to
include any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context requires. All references to recitals,
sections, paragraphs and schedules are to the recitals, sections, paragraphs and
schedules in or to this Agreement unless otherwise specified.

         27.      Amendments. This Agreement may be amended only in a writing
signed by the parties hereto; provided the same has been approved by a majority
of the Independent Directors. The approval of the holders of the Common Shares
shall not be required for any amendments to this Agreement.

                         [NO FURTHER TEXT ON THIS PAGE]

                                       24
<PAGE>

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

                                         Manager:

                                         ARBOR COMMERCIAL MORTGAGE, LLC,
                                         a New York limited liability company

                                             By: /s/ Frederick C. Herbst
                                                 -----------------------------
                                             Name: Frederick C. Herbst
                                             Title: Chief Financial Officer

                                         Parent REIT:

                                         ARBOR REALTY TRUST, INC.,
                                         a Maryland corporation

                                         By: /s/ Frederick C. Herbst
                                             ----------------------------------
                                         Name: Frederick C. Herbst
                                         Title: Chief Financial Officer

                                         Operating Partnership:

                                         ARBOR REALTY LIMITED PARTNERSHIP,
                                         a Delaware limited partnership

                                         By: Arbor Realty GPOP, Inc.,
                                             a Delaware corporation,
                                             its general partner

                                             By: /s/ Frederick C. Herbst
                                                 ------------------------------
                                             Name: Frederick C. Herbst
                                             Title: Secretary and Treasurer<PAGE>

                                                                    EXHIBIT 10.2

                               SERVICES AGREEMENT

                  THIS SERVICES AGREEMENT (this "Agreement"), dated as of July
1, 2003, is made by and among ARBOR REALTY TRUST, INC., a Maryland corporation
("Parent REIT"), ARBOR REALTY LIMITED PARTNERSHIP, a Delaware limited
partnership ("Arbor OP", and together with Parent REIT, collectively, the
"Company"), and ARBOR COMMERCIAL MORTGAGE, LLC, a New York limited liability
company ("ACM").

                  WHEREAS, ACM provides certain management and advisory services
to Parent REIT and Arbor OP pursuant to that certain Management and Advisory
Agreement, dated as of July 1, 2003 (the "Management Agreement"), by and among
the parties hereto;

                  WHEREAS, ACM desires to avail itself of the experience, advice
and assistance of the asset management group of the Company to manage and
service certain of ACM's assets consisting of sub- and non-performing mortgage
loans (the "Serviced Assets"); and

                  WHEREAS, the Company is willing to perform the Services (as
defined below) on the terms and conditions hereinafter set forth.

                  NOW THEREFORE, in consideration of the mutual agreements
herein set forth and intending to be legally bound, the parties hereto hereby
agree as follows:

         1.       Services.

                  (a)      In exchange for ACM's agreement with respect to the
Management Fee, as defined in and payable by the Company pursuant to the terms
of the Management Agreement, the Company agrees to provide the following asset
management services (the "Services") to ACM with respect to the Serviced Assets:

                           (i)      reviewing loan files of the Serviced Assets
         to: (A) assess ACM's rights in and to collateral securing the subject
         loans, including bank accounts, letters of credit and funds held in
         escrow; and (B) identify guarantees, other credit support and
         additional sources of equity, if any;

                           (ii)     conducting due diligence with respect to the
         Serviced Assets with an emphasis on exit strategies and exploring,
         developing and implementing strategic opportunities and plans to
         restructure debt and equity positions;

                           (iii)    reviewing current operating statements of
         profit and loss and past and current rent rolls to assess operating and
         financial performance and the impact of existing and potential
         financial and operational issues relating to the collateral for the
         Serviced Assets;

                                        1
<PAGE>

                           (iv)     recommending short- and long-term strategic
         alternatives for the management and disposition of the Serviced Assets
         based on the relevant market and market trends;

                           (v)      overseeing rehabilitation projects and
         assessing whether new appraisals or environmental assessment or
         physical needs reports are necessary with respect to the collateral for
         the Serviced Assets;

                           (vi)     formulating appropriate courses of action
         and conducting negotiations among all concerned parties regarding the
         workout of Serviced Assets;

                           (vii)    structuring workout proposals and preparing
         analyses indicating the viability thereof;

                           (viii)   evaluating liquidity concerns and capital
         adequacy and reserve requirements and performing liquidity analyses of
         properties and ownership entities with respect to the collateral for
         the Serviced Assets; and

                           (ix)     performing such other services as may be
         required from time to time for management and other activities relating
         to the Serviced Assets as ACM shall reasonably request.

                  (b)      The Company, for and on behalf of the asset
management group, makes no, and shall not be deemed to have made, any warranty
regarding the quality of, and shall not be subject to any other standards or
requirements of quality with respect to the performance of the Services;
provided, however, the Company shall perform the Services (i) with the same
degree of care and skill as it uses or would use in the performance of similar
services relating to the management of the Company's assets, and (ii) in
accordance with all applicable foreign, federal, state and local laws and
regulations.

                  (c)      The Board of Directors will periodically review the
scope of the Services being provided to ACM and the time required of the asset
management group of the Company to perform the same. If the Board of Directors
determine by a majority vote that the nature of the Services and the asset
management group's devotion of time with respect thereto have exceeded the Board
of Directors' anticipated levels, as factored into the calculation of the
Management Fee, by more than fifteen percent (15%) of such anticipated levels
per fiscal quarter, then the Company shall deliver to ACM written notice thereof
describing its findings in reasonable detail and indicating its desire to
renegotiate the Management Fee or to reduce the scope of the Services, the
quantity of the Serviced Assets or the time required to be devoted to the
Services by the asset management group. Thereupon, the Company and ACM shall
endeavor to renegotiate such matters in good faith. The Company and ACM agree to
execute and deliver an amendment to the Management Agreement, if applicable,
setting forth any revised Management Fee promptly upon reaching an agreement
regarding same.

2.       Term. This Agreement shall become effective on the date hereof, remain
in full force and effect throughout the term of the Management Agreement as
extended in accordance

                                        2
<PAGE>

therewith and terminate simultaneously with the expiration or earlier
termination of the Management Agreement; provided, however, that this Agreement
shall remain in full force and effect during the origination period described in
Section 3(e) of the Management Agreement.

3.       Indemnification.

                  (a)      By the Company. The Company shall, to the full extent
lawful, reimburse, indemnify and hold ACM, its members, managers, officers and
employees and each other Person, if any, controlling ACM harmless for and from
any and all expenses, losses, damages, liabilities, demands, charges and claims
of any nature whatsoever (including reasonable attorneys' fees and
disbursements) in respect of or arising out of (i) the Company's or any of its
partner's, shareholder's, director's, officer's or employee's bad faith, willful
misconduct, gross negligence or material breach of the Company's duties under
this Agreement, and (ii) any claims by the Company's employees relating to the
terms and conditions of their employment by the Company.

                  (b)      By ACM. ACM shall, to the full extent lawful,
reimburse, indemnify and hold the Company, its partners, shareholders,
directors, officers and employees and each other Person, if any, controlling the
Company (each, a "Company Indemnified Party") harmless for and from any and all
expenses, losses, damages, liabilities, demands, charges and claims of any
nature whatsoever (including reasonable attorneys' fees and disbursements),
excluding any claims by the Company's employees relating to the terms and
conditions of their employment by the Company, in respect of or arising out of
(i) any acts or omissions of such Company Indemnified Party made in good faith
in the performance of the Company's duties hereunder and not constituting such
Company Indemnified Party's bad faith, willful misconduct, gross negligence or
material breach of the Company's duties under this Agreement, and (ii) ACM's or
any of its member's, manager's, officer's or employee's bad faith, willful
misconduct, gross negligence or material breach of ACM's obligations under this
Agreement.

4.       Confidentiality.

                  (a)      The Company shall keep confidential any nonpublic
information obtained relating to the Serviced Assets and its performance of the
Services and shall not disclose any such information (or use the same except in
furtherance of its duties under this Agreement), except: (i) with ACM's prior
written consent; (ii) to legal counsel, accountants and other professional
advisors, so long as the Company informs such Persons of the confidential nature
of such information and directs them to treat such information confidentially;
(iii) to appraisers in the ordinary course of business; (iv) to governmental
officials having jurisdiction over the Company; (v) as required by law or legal
process to which the Company or any Person to whom disclosure is permitted
hereunder is a party or in connection with the Company's assertion in any
judicial or nonjudicial proceeding of any claim, counterclaim or defense against
ACM; or (vi) information which has previously become available through the
actions of a Person other than the Company not resulting from the Company's
violation of this Section 4(a). The provisions of this Section 4(a) shall
survive the expiration or earlier termination of this Agreement.

                                        3
<PAGE>

                  (b)      Promptly after the expiration or earlier termination
of this Agreement, the Company shall return to ACM all confidential and
proprietary information provided to or obtained by the Company pursuant to or in
connection with this Agreement and the performance of the Services hereunder,
including all copies and extracts thereof in whatever form, in its possession or
under its control.

5.       Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and mailed, faxed or
delivered by hand or courier service:

         (a)      if to Parent REIT or Arbor OP, to:

                  Arbor Realty Trust, Inc.
                  333 Earle Ovington Blvd., Suite 900
                  Uniondale, New York 11553
                  Attention: Chairman of the Board of Directors

         (b)      If to ACM:

                  Arbor Commercial Mortgage, LLC
                  333 Earle Ovington Blvd., Suite 900
                  Uniondale, New York 11553
                  Attention: Frederick C. Herbst

6.       Cooperation; Further Assurances. Each party hereto shall cooperate with
and provide assistance to the other parties consistent with the terms and
conditions hereof to enable (a) the full performance of all obligations
hereunder, and (b) the review and audit of books and records as they relate to
the provision of the Services; such cooperation and assistance to include,
without limitation, providing the other parties and their respective
representatives and agents (including, without limitation, outside auditors)
with reasonable access, during normal business hours and upon reasonable advance
notice, to its employees, representatives and agents and its books, records,
offices and properties relating to the Services.

7.       Entire Agreement. Except for the terms of the Management Agreement
relating to the calculation of the Management Fee, this Agreement shall
constitute the entire agreement among the parties relating to the subject matter
hereof and shall supersede all other prior or contemporary agreements,
understandings, negotiations and discussions whether oral or written.

8.       Amendment and Modification; Assignment. Neither this Agreement nor any
of the terms or provisions hereof may be changed, supplemented, waived, modified
or assigned except by a written instrument executed by the parties hereto (or in
the case of a waiver, by the party granting such waiver); provided, however, (a)
ACM may assign this Agreement to any Person to whom ACM assigns the Management
Agreement (pursuant to the terms thereof) and who acquires the Serviced Assets,
and (b) Parent REIT may assign this Agreement to any Person to whom Parent REIT
assigns the Management Agreement (pursuant to the terms thereof).

                                        4
<PAGE>

9.       Counterparts. This Agreement may be executed in two or more
counterparts, each of which may be signed by any of the parties hereto, each of
which shall be deemed an original and all of which together shall constitute one
and the same instrument.

10.      Governing Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement shall be governed by,
construed, interpreted and enforced in accordance with the laws of the State of
New York, notwithstanding any New York or other conflict-of-law provisions to
the contrary.

11.      Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, such provision
shall be fully severable, this Agreement shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part of
hereof and the remaining provisions of this Agreement shall remain in full force
and effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom.

12.      Definitions and Interpretation.

(a)      Defined Terms. Capitalized terms used but not defined herein shall have
the meanings ascribed thereto in the Management Agreement.

(b)      Singular and Plural Forms. The use herein of the singular form shall
also denote the plural form, and the use herein of the plural form shall denote
the singular form, as in each case the context may require.

                         [NO FURTHER TEXT ON THIS PAGE]

                                        5
<PAGE>

                  IN WITNESS WHEREOF, the parties to hereto have duly executed
this Agreement as of the day and year first written above.

                                    Parent REIT:

                                    ARBOR REALTY TRUST, INC.,
                                    a Maryland corporation

                                    By: /s/ Frederick C. Herbst
                                        ----------------------------------
                                    Name: Frederick C. Herbst
                                    Title: Chief Financial Officer

                                    Arbor OP:

                                    ARBOR REALTY LIMITED PARTNERSHIP,
                                    a Delaware limited partnership

                                    By:  Arbor Realty GPOP, Inc.,
                                         a Delaware corporation,
                                         its general partner

                                         By: /s/ Frederick C. Herbst
                                             -----------------------------
                                         Name: Frederick C. Herbst
                                         Title: Secretary and Treasurer

                                    ACM:

                                    ARBOR COMMERCIAL MORTGAGE, LLC,
                                    a New York limited liability company

                                         By: /s/ Frederick C. Herbst
                                             -----------------------------
                                         Name: Frederick C. Herbst
                                         Title: Chief Financial Officer

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