Gramercy Capital Corp. : Announces Formation of Joint Venture with Garrison Investment Group to Purchase a Portfolio of Office Buildings Primarily Leased to Bank of America, N.A.
08/21/2012| 07:35am US/Eastern
Gramercy Capital Corp. (NYSE: GKK) today announced that it has
formed a joint venture with an affiliate of Garrison Investment Group
("Garrison") and executed a definitive agreement to acquire 100% of the
membership interests in entities owning 115 office buildings from an
affiliate of KBS Real Estate Investment Trust, Inc. ("KBS"). The
purchase price for the portfolio is $470 million in cash plus the
issuance to KBS at closing of 6 million shares of the Company's common
stock, valued at $15.0 million. Buyer's obligations under the purchase
agreement are subject to the satisfaction of certain conditions,
including obtaining mortgage financing on terms satisfactory to buyer.
The acquisition is expected to close in the fourth quarter of 2012;
however, there can be no assurances that the acquisition will close on
the terms described herein or at all. Each partner owns a 50% membership
interest in the joint venture.
The portfolio totals 5.6 million square feet of which approximately 81%
is leased to Bank of America, N.A. for a term ending in June 2023. Total
portfolio occupancy equals approximately 88%. The projected 2012 net
operating income for the portfolio is approximately $41.5 million. The
portfolio was previously part of the Company's Gramercy Realty division,
beneficial ownership of which was transferred to KBS pursuant to a
collateral transfer and settlement agreement dated September 1, 2011.
Bank of America, N.A. senior unsecured debt is currently rated A by
Standard & Poor's and Fitch and A3 by Moody's.
The Company expects the joint venture to leverage the portfolio with
approximately 55% to 60% mortgage financing. The Company also expects
the joint venture to identify and market for sale certain non-core
assets with the objective of arriving at a core portfolio of primarily
single tenant properties subject to a long-term lease with Bank of
Simultaneously with the execution of the purchase agreement, a Company
affiliate and a Garrison affiliate funded as co-lenders an approximately
$39.0 million mezzanine loan to certain affiliates of KBS. The loan is
secured by cash collateral of $6.0 million and pledges of borrowers'
equity interests in certain entities owning various real estate assets
and is guaranteed by KBS. The proceeds of the loan were used by KBS to
extinguish certain loans held by third party lenders that were secured
by, among other things, pledges of the membership interests being
acquired by the joint venture.
The loan had a 1% origination fee, bears interest at 10% per annum and
has a stated maturity of April 1, 2013. The loan is deemed matured upon
the joint venture's purchase of the portfolio, and any outstanding loan
balance will be applied as a credit against the purchase price at
closing. The Company has also agreed that, effective upon the joint
venture's acquisition of the portfolio, the base management fee paid by
KBS to a Company affiliate to manage the former Gramercy Realty
portfolio will be reduced from $12.0 million to $9.0 million per year.
Gordon F. DuGan, Chief Executive Officer of the Company, commented:
"This transaction presents Gramercy with an opportunity to buy a high
quality office portfolio primarily leased to Bank of America for $87 per
square foot with a 10.9-year remaining lease term and an initial
capitalization rate of approximately 8.5%. This agreement begins the
implementation of our strategy to create durable, recurring cash flows
through the ownership of long-term leased properties. We are very
excited to enter into this venture with Garrison Investment Group and
will be working diligently with our partner to close the transaction
during the fourth quarter of this year."
Gramercy Capital Corp. is a self-managed, integrated commercial real
estate investment and asset management company whose Gramercy Finance
division manages approximately $2.0 billion of whole loans, bridge
loans, subordinate interests in whole loans, mezzanine loans, preferred
equity, commercial mortgage-backed securities and other real estate
securities which are financed through three non-recourse collateralized
debt obligations, and whose Gramercy Realty division currently manages
approximately $2.0 billion of commercial properties leased primarily to
regulated financial institutions and affiliated users throughout the
United States. The Company is headquartered in New York City and has
regional investment and portfolio management offices in Jenkintown,
Pennsylvania, Charlotte, North Carolina, and St. Louis, Missouri.
To review the Company's latest news releases and other corporate
documents, please visit the Company's website at www.gkk.com
or contact Investor Relations at 212-297-1000.
Garrison Investment Group is a leading middle market credit and asset
based investor. Garrison's investment strategy focuses on unique middle
market transactions across real estate, corporate credit, commercial &
industrial and consumer loans. The firm is based in New York, has 63
employees (37 investment professionals) and manages in excess of $3
billion in assets under management.
This press release contains forward-looking information based upon the
Company's current best judgment and expectations. Actual results could
vary from those presented herein. The risks and uncertainties associated
with forward-looking information in this release include, but are not
limited to, factors that are beyond the Company's control, including
those listed in the Company's Annual Report on Form 10-K and in the
Company's Quarterly Reports on Form 10-Q. The Company undertakes no
obligation to update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. For further
information, please refer to the Company's filings with the SEC.
Gramercy Capital Corp.
Julia M. Rivera, 212-297-1000
© Business Wire 2012