1293200--3/14/2008--GMH_Communities

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Risks Related to the Proposed Company Sale Transaction The Military Housing Transaction and the Merger are each subject to a number of conditions which if not satisfied or waived would adversely impact our ability to complete the sales transactions. Failure to complete the Military Housing Transaction and/or the Merger could negatively impact our operations and business and financial results. Provisions of the Securities Purchase Agreement with Balfour Beatty and the Merger Agreement with ACC may deter alternative business combinations and could negatively impact our business and operations if the agreements are terminated in certain circumstances. Uncertainty regarding the Military Housing Transaction and the Merger may cause our clients, vendors, business partners and others to delay or defer decisions concerning their business with our Company, which may harm our results of operations in the future if the Military Housing Transaction and/or the Merger are not completed. Risks Relating to Our Business and Growth Strategy If the Military Housing Transaction and/or the Merger are not consummated and we continue our operations, any defaults on our mortgage or other indebtedness or the loss of any of our assets securing such debt could adversely affect our business or result in the secured indebtedness under our current note facility being immediately due and payable. Pending material litigation or the commencement of an investigation by the SEC could adversely affect the Company's financial condition and results of operations. We have reported net losses in the past and, if the Military Housing Transaction and/or the Merger are not consummated and we continue our operations, we may continue to do so in the future. Since our initial public offering, our cash flow from operations has been insufficient to fund our dividend distributions to our shareholders, and it could continue to be so in the future. If the Military Housing Transaction and/or the Merger are not consummated and we continue our operations, and to the extent our cash flow from operations is insufficient to fund our dividend distributions, we expect to borrow funds or to lower our dividend distributions. Our internal control over financial reporting may not be sufficient to ensure timely and reliable financial information. We commenced operations through our operating partnership in 2004, have a limited history of operating and owning our student housing properties and investments in military housing privatization projects, and therefore may have difficulty successfully and profitably operating our business. Historically, we have experienced rapid growth in our student housing and military housing businesses and may not be able to adapt our management and operational systems to respond to the acquisition and integration of these properties and investments in privatization projects, or to the extent the pending sale of the Company is not consummated and we continue our operations, to respond to new properties and projects that we may acquire in the future, without unanticipated disruption or expense. If the Military Housing Transaction and/or the Merger are not consummated and we continue our operations, we expect our real estate investments to continue to be concentrated in student housing and military housing, making us more vulnerable to economic downturns in these housing markets than if our investments were diversified across several industry or property types. If the Military Housing Transaction and/or the Merger are not consummated and we continue our operations, we may be unable to successfully perform our obligations under our current student housing property management agreements and current military housing privatization projects, and our ability to execute our business plan and our operating results could be adversely affected. We have agreed with Vornado Realty L.P. that our activities will satisfy certain requirements. If we are unable to satisfy these requirements we could be liable for substantial amounts. If the Military Housing Transaction and/or the Merger are not consummated and we continue our operations, we are subject to risks associated with the general development of housing properties, including those associated with construction, lease-up, financing, real estate tax exemptions, cost overruns and delays in obtaining necessary approvals, and the risk that we may be unable to meet schedule or performance requirements of our contracts. Our management has limited prior experience operating a REIT or a public company. If the Military Housing Transaction and/or the Merger are not consummated and we continue our operations, these limitations may impede the ability of our management to execute our business plan successfully and operate our business profitably. Specific Risks Related to Our Student Housing Business Virtually all of our student housing leases, which typically have a 12-month lease term, become subject to renewal with existing student residents or lease-up with new student residents prior to the start of the academic year at colleges and universities. If we are unable to renew or lease-up our student housing properties prior to the start of the academic year, our chances of leasing these properties during subsequent months is reduced, and correspondingly, our rents and operating results will be adversely affected. We face significant competition from university-owned on-campus student housing, from other off-campus student housing properties and from traditional multi-family housing located near colleges and universities. Our student housing operations may be adversely affected by changing university admission and housing policies and our inability to maintain relationships with local colleges and universities. We may be unable to successfully acquire, develop and manage student housing properties on favorable terms. The lenders of certain non-recourse mortgage indebtedness that we assume or place on our properties could have recourse against us for the full amounts of their loans under certain circumstances. Specific Risks Related to our Military Housing Business The joint ventures that own our military housing privatization projects have high leverage ratios which could cause us to lose cash flows and our investments in those projects if the joint ventures are unable to pay their debt service obligations. Our ability to earn development, construction/renovation and management fees, including related incentive fees, depends on the joint ventures that own our military housing privatization projects achieving specified operating milestones and thresholds. We rely on key partners and contractors in connection with the construction and development of our military housing privatization projects, and our inability to maintain these relationships or to engage new partners or subcontractors under commercially acceptable terms to us could impair our ability to successfully complete the construction and development of our military housing privatization projects and to obtain new military housing privatization projects. Certain military bases for which we own and operate a military housing privatization project have been approved for reduction of troops or closure under the BRAC regulations. Our operating revenues from these projects and the value of our equity interest in the projects may be reduced, and our overall military housing segment revenues could be adversely affected with respect to the military bases under any of these military housing privatization projects. We are subject to the risks associated with conducting business with the federal government, such as the government's discontinuation of federal funding for some or all of its military housing privatization projects and the need to win new military housing privatization projects through a competitive bidding process. If Congress does not approve appropriations each year relating to the provision of the BAH paid to members of the U.S. military, which is the primary source of rental revenues under our military housing privatization projects, or if BAH were eliminated, our operating revenues and projected returns on investments from our military housing privatization projects would be significantly reduced. If we are unable to reach definitive agreements regarding the military housing privatization projects that are under exclusive negotiations with the U.S. military or as to which we are participating in a solicitation process, we would be unable to recover any costs incurred during the period of exclusivity or solicitation. Risks Relating to Our Organization and Structure Our Board of Trustees may authorize the issuance of additional shares that may cause dilution. Our Board of Trustees may approve the issuance of a class or series of common or preferred shares with terms that may discourage a third party from acquiring us. Our rights and the rights of our shareholders to take action against our trustees and officers are limited, which could limit your recourse in the event of actions taken that are not in your best interests. Our ownership limitations may restrict business combination opportunities. Our executive officers and certain of our trustees may experience conflicts of interest in connection with their ownership interests in our operating partnership. Gary M. Holloway, Sr. may have conflicts of interest as a result of his ownership of an entity that provides services to us and leases space from us. Because Gary M. Holloway, Sr. owns a significant number of units in our limited partnership, he may be able to exert substantial influence on our management and operations, which may prevent us from taking actions that may be favorable to our shareholders. One of our trustees may have a conflict of interest as a result of his affiliation with Vornado Realty Trust, one of our largest shareholders on a fully-diluted basis. Some of our executive officers and trustees have other business interests that may hinder their ability to allocate sufficient time to the management of our operations, and could jeopardize our ability to execute our business plan. Maryland law may discourage a third party from acquiring us. We depend on the business relationships and experience of Gary M. Holloway, Sr. and our other executive officers, the loss of whom could threaten our ability to execute our strategies. Certain of our executive officers have agreements that provide them with benefits in the event their employment is terminated by us without cause, by the executive for good reason, or under certain circumstances following a change of control of our company. Our Board of Trustees may alter our investment policies at any time without shareholder approval, and the alteration of these policies may adversely affect our financial performance. Through a wholly-owned subsidiary, we are the sole general partner of our operating partnership, and, should the subsidiary be disregarded, we could become liable for the debts and other obligations of our operating partnership beyond the amount of our investment. Risks Relating to Real Estate Investments Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our targeted properties and harm our financial condition. Our acquisition properties may not achieve forecasted results or we may be limited in our ability to finance future acquisitions, which may harm our financial condition and operating results, and we may not be able to make the distributions required to maintain our REIT status. If we suffer losses that are not covered by insurance or that are in excess of our insurance coverage limits, we could lose investment capital and anticipated profits. Capital expenditures for property renovations may be greater than forecasted and may adversely impact rental payments by our residents and our ability to make distributions to shareholders. All of our student housing properties are subject to property taxes, and some of our military housing properties may be subject to property taxes. If these taxes were to be significantly increased by applicable authorities in the future, our operating results and ability to make distributions to our shareholders would be adversely affected. Our performance and the value of our common shares will be affected by risks associated with the real estate industry. As the owner and lessor of real estate, we are subject to risks under environmental laws, the cost of compliance with which, and any violation of which, could materially adversely affect us. Future terrorist attacks in the U.S. could harm the demand for and the value of our properties. We may incur significant costs complying with the Americans with Disabilities Act and similar laws. We may incur significant costs complying with other regulations. Risks Relating to Our Common Shares The market price and trading volume of our common shares may be volatile in the future. Common shares eligible for future sale may have adverse effects on our share price. The market value of our common shares could decrease based on our performance and market perception and conditions. Tax Risks Associated with Our Status as a REIT In the event that we complete the Military Housing Transaction and not the Merger, we may be unable to comply with the REIT gross income requirements, which could subject us to additional taxes on our gross income and reduce our cash available for distributions to shareholders. If we fail to qualify for or lose our tax status as a REIT, we would be subject to significant adverse consequences and the value of our common shares may decline. To maintain our REIT status, we may be forced to borrow funds on a short-term basis during unfavorable market conditions. Failure to make required distributions would subject us to tax. Complying with REIT requirements may cause us to forgo otherwise attractive opportunities. We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common shares. The income earned by our taxable REIT subsidiaries will be subject to federal income tax. We may not conduct all of our third-party student housing management business through a taxable REIT subsidiary, which could jeopardize our ability to comply with one of the REIT gross income requirements. To maintain our REIT status, we will be required to comply with a number of requirements relating to the relative values of our assets, and we may be required to limit activities conducted through a taxable REIT subsidiary. We may be subject to tax if our taxable REIT subsidiaries provide services to our tenants other than on an arm's-length basis.

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1293200--3/14/2008--GMH_Communities_Trust