Gramercy Capital Corp. Reports Operating Results (10-Q)

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Nov 08, 2010
Gramercy Capital Corp. (GKK, Financial) filed Quarterly Report for the period ended 2010-09-30.

Gramercy Capital Corp. has a market cap of $111.83 million; its shares were traded at around $2.24 with and P/S ratio of 0.18. Gramercy Capital Corp. had an annual average earning growth of 74.2% over the past 5 years.GKK is in the portfolios of David Tepper of APPALOOSA MANAGEMENT LP, Steven Cohen of SAC Capital Advisors, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

In March 2010, we amended our $240,523 mortgage loan with Goldman Sachs Commercial Mortgage Capital, L.P., or GSCMC, Citicorp North America, Inc., or Citicorp, and SL Green, or the Goldman Mortgage Loan, and our $550,731 senior and junior mezzanine loans with KBS Real Estate Investment Trust, Inc., or KBS, GSCMC, Citicorp and SL Green, or the Goldman Mezzanine Loans, to extend the maturity date to March 11, 2011. The Goldman Mortgage Loan is collateralized by approximately 195 properties held by Gramercy Realty and the Goldman Mezzanine Loans are collateralized by the equity interest in substantially all of the entities comprising our Gramercy Realty division, including its cash and cash equivalents totaling $32,428 of our unrestricted cash as of September 30, 2010. We do not expect that we will be able to refinance the entire amount of indebtedness under the Goldman Mortgage Loan and the Goldman Mezzanine Loans prior to their final maturity, and we likely will not have sufficient capital to satisfy any shortfall. Failure to refinance or restructure the Goldman Mortgage Loan and the Goldman Mezzanine Loans prior to their March 2011 maturity dates will result in a default and could result in the foreclosure of the underlying Gramercy Realty properties and/or our equity interests in substantially all of the entities that comprise our Gramercy Realty division. Such default would materially and adversely affect our business, financial condition and results of operations. A loss of our Gramercy Realty portfolio or the lack of resolution of the Goldman Mortgage Loan and the Goldman Mezzanine Loans at or prior to maturity would trigger a substantial book loss and would likely result in our company having negative book value. We continue to negotiate with our lenders to further extend or modify the Goldman Mortgage Loan and the Goldman Mezzanine Loans, and we have retained EdgeRock Realty Advisors LLC, an FTI Company, to assist in evaluating strategic alternatives for Gramercy Realty and the potential restructure of such debt. However, we and our lenders have made no significant progress in these negotiations to date. There can be no assurance of when or if we will be able to accomplish such restructuring or on what terms such restructuring would be.

On October 1, 2010, we commenced a tender offer to purchase up to 4,000,000 shares of our Series A preferred stock, at a price of $15.00 per share, net to seller in cash. We conducted the tender offer because we believe a significant reduction of the outstanding Series A preferred stock may create significant additional financial flexibility for us, potentially including enhanced access to the capital markets and other sources of capital and additional flexibility to implement potential strategic initiatives. The tender offer expired on November 4, 2010 and 1,074,178 shares of the Series A preferred stock had been tendered and not withdrawn. At settlement, which is expected to occur on November 9, 2010, we will pay an aggregate of approximately $16,113 to acquire the tendered Series A preferred stock. Under the terms of the tender offer, no dividends will be paid on either the tendered or untendered shares of our Series A preferred stock. At the expiration of the tender offer, the accrued and unpaid dividends of $4,364, or $4.0625 per share of the Series A preferred stock, was eliminated for those shares validly tendered and not withdrawn.

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