Gramercy Capital Corp. (NYSE: GKK):
FOURTH QUARTER
HIGHLIGHTS
- For the quarter, generated funds from
operations (“FFO”) of $175.5 million, an increase of $179.5 million
from FFO of $(4.0) million generated in the same quarter of the
previous year. On a fully diluted per common share basis, FFO was
$3.42 for the fourth quarter of 2011 as compared to FFO of $(0.08)
in the same quarter of the previous year. For the year, FFO
increased to $395.3 million, or $7.75 per diluted common share,
from $53.3 million in the previous year, or $1.07 per diluted
common share.
- For the quarter, net income to common
stockholders was $165.6 million, or $3.23 per common diluted share,
an increase from net loss of $(955.5) million, or $(19.12) per
diluted common share, for the same quarter in the previous year.
For the year, net income to common stockholders was $330.3 million,
or $6.48 per diluted common share, as compared to net loss of
$(968.8) million, or $(19.40) per diluted common share in the
previous year.
- On September 1, 2011 and December 1,
2011, transferred to KBS Real Estate Investment Trust, Inc. or KBS,
or its affiliates, interests in entities owning 317 and 116,
respectively, of the 867 Gramercy Realty properties that the
Company agreed to transfer pursuant to a collateral transfer and
settlement agreement, or the Settlement Agreement. The remaining
ownership interests were transferred to KBS by December 15, 2011.
The aggregate carrying value for the interests transferred to KBS
was approximately $2.63 billion.
- Maintained approximately $163.7 million
of unrestricted corporate cash at quarter end, as compared to
approximately $154.5 million reported in the prior quarter. In
addition, as of December 31, 2011, the Company holds an aggregate
of $51.4 million of par value Class A-1, A-2 and B CDO securities
previously issued by the Company’s CDOs with an aggregate fair
value of $38.2 million.
- In January 2012, sold a three-building
commercial office complex for $34.0 million generating
approximately $16.1 million in incremental unrestricted corporate
cash.
- Robert R. Foley announced that he will
be stepping down as Chief Operating Officer and Secretary effective
March 16, 2012.
SUMMARY
Gramercy Capital Corp. (NYSE: GKK) today reported funds from
operations (“FFO”) of $175.5 million, or $3.42 per diluted common
share, and net income available to common stockholders of $165.6
million, or $3.23 per diluted common share for the quarter ended
December 31, 2011. The Company also reported FFO of $395.3 million,
or $7.75 per diluted common share, and net income available to
common stockholders of $330.3 million, or $6.48 per diluted common
share for the year ended December 31, 2011. The Company’s results
included a gain on extinguishment and settlement of debt of $157.4
million for the quarter ended December 31, 2011, or $3.07 on a
fully diluted per common share basis, and $300.9 million for the
year ended December 31, 2011, or $5.91 on a fully diluted per
common share basis. The Company generated total revenues of $49.5
million during the fourth quarter, an increase of $4.5 million from
$45.0 million generated during the same quarter of the previous
year. The increase in revenues is primarily attributable to fee
revenue generated from the Company’s continued management of
transferred assets pursuant to a collateral transfer and
settlement, or the Settlement Agreement, on behalf of KBS.
At December 31, 2011, the Company owned commercial real estate
with an aggregate book value of approximately $121.1 million, in
addition to approximately $1.1 billion of loan investments, $775.8
million of commercial mortgage real estate securities, and $279.5
million in other assets. As of December 31, 2011, approximately
5.4% of the Company’s assets were comprised of commercial property,
47.9% of debt investments, 34.4% of commercial mortgage real estate
securities and 12.4% of other assets.
In September 2011, the Company entered into the Settlement
Agreement, for an orderly transition of substantially all of
Gramercy Realty’s assets to KBS, Gramercy Realty’s senior mezzanine
lender, in full satisfaction of Gramercy Realty’s obligations with
respect to the Gramercy Realty’s $240.5 million mortgage loan with
Goldman Sachs Mortgage Company, or GSMC, Citicorp North America,
Inc., or Citicorp, and SL Green Realty Corp., or SL Green, or the
Goldman Mortgage Loan, and Gramercy Realty’s $549.7 million senior
and junior mezzanine loans with KBS Real Estate Investment Trust,
Inc., or KBS, GSMC, Citicorp and SL Green, or the Goldman Mezzanine
Loans, in exchange for a mutual release of claims among the Company
and the mortgage and mezzanine lenders and, subject to certain
termination provisions, the Company’s continued management of the
transferred assets on behalf of KBS for a fixed fee plus incentive
fees. On September 1, 2011 and December 1, 2011, the Company
transferred to KBS or its affiliates, interests in entities owning
317 and 116, respectively, of the 867 Gramercy Realty properties
that the Company agreed to transfer pursuant to the Settlement
Agreement. The remaining ownership interests were transferred to
KBS by December 15, 2011. The aggregate carrying value for the
interests transferred to KBS was approximately $2.63 billion. The
Company retained a portfolio of 56 buildings comprising 752,816
rentable square feet with an aggregate carrying value of
approximately $40.0 million.
During 2010, the Company recorded in continuing operations,
impairment charges totaling $912.1 million to reduce the carrying
value of 692 properties to estimated fair value. All the impaired
properties were part of the Gramercy Realty portfolio and served as
collateral for the Goldman Mezzanine Loans. As a result of
recording these impairments, the Company’s total stockholders’
equity, or book equity, was negative $493.9 million as of December
31, 2010. Subsequent to the impairment, the liabilities of the
impaired properties exceed the carrying value of the assets and
accordingly, the subsequent transfer of assets and liabilities
pursuant to the Settlement Agreement generated gains on settlement
of debt of $285.6 million for the year ended December 31, 2011 and
reduced the Company’s negative stockholders’ equity.
In June 2011, the Company’s Board of Directors established a
special committee to direct and oversee an exploration of strategic
alternatives available to the Company subsequent to the execution
of the Settlement Agreement for Gramercy Realty’s assets. The
special committee is considering the feasibility of raising debt or
equity capital, the possibility of a strategic combination of the
Company, a strategic sale of its assets, or modifying its business
plan, including making additional debt repurchases or investing its
available capital outside of the Company’s CDOs. At the direction
of the special committee, the Company engaged Wells Fargo
Securities, LLC to act as its financial advisor to assist in the
process.
The Company’s business is organized into two complementary
business segments, supported by a corporate balance sheet with a
strong liquidity position and, subsequent to the consummation of
the Settlement Agreement, no recourse debt obligations.
The Company’s CDO investment and management business, which
operates under the name Gramercy Finance, focuses on the direct
origination, acquisition and portfolio management of whole loans,
bridge loans, subordinate interests in whole loans, mezzanine
loans, preferred equity, CMBS and other real estate related
securities.
The Company’s property management and investment business, which
operates under the name Gramercy Realty, focuses on third party
property management of, and to a lesser extent, ownership and
management of, commercial properties leased primarily to regulated
financial institutions and affiliated users throughout the United
States.
CORPORATE
As of December 31, 2011, the Company maintained $163.7 million
of unrestricted cash as compared to $154.5 million reported as of
September 30, 2011. In addition, as of December 31, 2011, the
Company held an aggregate of $51.4 million of par value Class A-1,
A-2 and B CDO securities previously issued by the Company’s CDOs
that were available for re-issuance. The aggregate fair value of
the repurchased CDO bonds was $38.2 million as of December 31,
2011.
Substantially all of the Company’s cash flow is generated from
distributions from its CDOs within its Gramercy Finance division.
The Company's CDOs contain minimum interest coverage and asset
overcollateralization covenants that must be satisfied for the
Company to receive cash flow on certain of the interests in its
CDOs retained by the Company and to receive the subordinate
collateral management fees. During periods when these covenants are
not satisfied for a particular CDO, cash flows from that CDO that
would otherwise be paid to the Company as a subordinate bondholder,
holder of the preferred shares and in respect of the subordinate
collateral management fee are diverted from the Company to repay
principal and interest on the senior-most outstanding CDO bonds. As
of January 2012, the most recent distribution date, the Company’s
2005 CDO and 2006 CDO were in compliance with interest coverage and
asset overcollateralization covenants, however the compliance
margins, particularly with respect to the 2005 CDO, were narrow and
relatively small declines in collateral performance and credit
metrics could cause the CDOs to fall out of compliance. The
Company’s 2005 CDO failed its overcollateralization test at the
October 2011, April 2011 and January 2011 distribution dates and,
with a compliance margin of only 0.12% at the January test date,
the Company’s 2005 CDO may again fail its overcollateralization
test at the April 2012 test date. The Company’s 2007 CDO failed its
overcollateralization test beginning with the November 2009
distribution date. The following chart summarizes the CDO
compliance tests as of the most recent distribution dates (January
25, 2012 for the Company’s 2005 CDO and 2006 CDO and February 19,
2012 for the Company’s 2007 CDO):
Cash Flow Triggers CDO 2005-1
CDO 2006-1 CDO 2007-1
Overcollateralization (1) Current 117.97% 106.95% 84.11% Limit
117.85% 105.15% 102.05% Compliance margin 0.12% 1.80% -17.94%
Pass/Fail Pass Pass Fail Interest Coverage (2) Current 447.36%
672.02% N/A Limit 132.85% 105.15% N/A Compliance margin 314.51%
566.87% N/A Pass/Fail Pass Pass N/A (1) The
overcollateralization ratio divides the total principal balance of
all collateral in the CDO by the total bonds outstanding for the
classes senior to those retained by the Company. To the extent an
asset is considered a defaulted security, the asset’s principal
balance is multiplied by the asset’s recovery rate which is
determined by the rating agencies. For a defaulted security with a
CUSIP that is actively traded, the lower of market value or the
product of the security’s principal balance multiplied by the
asset’s recovery rate as determined by the rating agencies, is used
for the overcollateralization ratio.
(2)
The interest coverage ratio divides
interest income by interest expense for the classes senior to those
retained by the Company.
In 2011, the Company completed CDO note cancellations
aggregating approximately $15.5 million of face value with respect
to the 2005 CDO and 2006 CDO in accordance with the operative
documents of each CDO. These cancellations were undertaken by
contributing junior CDO bonds previously repurchased by the Company
to the respective CDO trusts in order to reduce the total
outstanding bonds of the 2005 CDO and the 2006 CDO and otherwise
improve their compliance with overcollateralization tests.
On March 14, 2012, the 2007 CDO fell below the Class A/B
overcollateralization threshold of 89%, which constitutes an event
of default under the operative documents for the 2007
CDO. Upon such an event of default, the reinvestment period of
the 2007 CDO, which was scheduled to expire in August 2012,
immediately ended and the Company may not reinvest restricted cash
held by the 2007 CDO during any periods when the event of default
is continuing. An event of default entitles the controlling class
to direct the Trustee to accelerate the notes of the 2007 CDO and,
depending on the circumstances, force the prompt liquidation of the
collateral. Notwithstanding the foregoing, to the extent the
controlling class of senior note holders acts to waive such event
of default, the event of default will cease to exist.
Cash flows generated from the Company’s CDOs to date in 2012 and
for the year ended December 31, 2011 are summarized as follows
(dollar amounts in thousands):
Collateral Manager Fees and CDO
Distributions CDO 2005-1 CDO 2006-1
CDO 2007-1 Fees
Distributions Fees Distributions
Fees Distributions Total
1Q 2012 $ 2,399 $ 3,495 $ 1,027 $ 9,160 $ 172 $ - $
16,253
Total 2012 $ 2,399 $ 3,495 $ 1,027 $ 9,160 $ 172 $ -
$ 16,253
1Q 2011 $ 434 $ - $ 1,119 $ 7,615 $ 178 $ -
$ 9,346
2Q 2011 - - 1,124 7,463 173 - 8,761
3Q 2011 -
5,477 1,124 6,634 180 - 13,415
4Q 2011 - -
1,086 7,816 180 - 9,081
Total
2011 $ 434 $ 5,477 $ 4,452 $ 29,528 $ 711 $ - $ 40,603
Interest expense was $81.6 million for the year ended December
31, 2011 compared to $85.5 million for the year ended December 31,
2010. Interest expense includes costs related to $2.5 billion of
non-recourse long-term notes issued by the three CDOs that are
consolidated on the Company’s balance sheet. The decline in
interest expense is primarily attributable to the overall decline
of the Company’s outstanding debt obligations in connection with
the liabilities transferred and released as part of the Settlement
Agreement.
Management, general and administrative expenses were $12.5
million for the quarter ended December 31, 2011, as compared to
$9.2 million for the same quarter of the prior year. The increase
in management, general and administrative expenses is primarily
attributable to professional fees related to loan enforcement costs
and legal fees paid on debt investments within the Company’s CDOs.
Loan enforcement costs for assets financed in our CDOs are
typically reimbursed as servicing advances once the loan is
resolved.
GRAMERCY FINANCE
Investment income is generated on the Company’s whole loans,
subordinate interests in whole loans, mezzanine loans, preferred
equity interests and CMBS within the Company’s Gramercy Finance
division. For the quarter ended December 31, 2011, $27.3 million
was earned on fixed rate investments and $12.0 million was earned
on floating rate investments. For the year ended December 31, 2011,
$106.2 million was earned on fixed rate investments and $52.6
million was earned on floating rate investments.
The Company recorded a net provision for loan losses of
approximately $48.2 million, or $0.94 per diluted common share, for
the year ended December 31, 2011. By comparison, the Company’s
provision for loan loss was approximately $84.4 million for the
year ended December 31, 2010. The Company’s reserve for loan losses
at December 31, 2011 was approximately $244.8 million, or
approximately 45.7% of the unpaid principal balance, in connection
with 15 separate loans with an aggregate carrying value of
approximately $294.1 million. In addition, the Company recorded
non-cash impairment charges of approximately $18.4 million for the
year ended December 31, 2011, related to CMBS investments deemed to
be other-than-temporarily impaired.
Substantially all of the Company’s debt investments and CMBS
investments are owned in one or more of the Company’s three CDOs.
As of December 31, 2011, debt investments owned by Gramercy Finance
had a carrying value of approximately $1.1 billion, net of loan
loss reserves, impairments, unamortized fees and discounts totaling
approximately $300.7 million. As of December 31, 2011 CMBS
investments are carried at fair value of approximately $775.8
million, net of mark-to-market adjustments, impairments,
unamortized fees and discounts of approximately $463.5 million.
Changes in fair value are not necessarily indicative of current or
future changes in cash flow, which are based on actual
delinquencies, defaults and sales of the underlying collateral, and
therefore are not recognized in earnings. Changes in fair value are
reflected in the Statement of Stockholders’ Equity and
Non-controlling Interests. The Company continues to monitor all of
its CMBS investments for other-than-temporary impairments. The fair
value adjustment for the Company’s CMBS as of December 31, 2011 was
approximately $258.8 million. As of December 31, 2010, a majority
of the Company’s CMBS were designated as held to maturity
investments and, accordingly, such investments were primarily
carried at amortized cost.
Loan prepayments, partial repayments, and scheduled amortization
payments in Gramercy Finance’s portfolio aggregated $343.9 million
for the year ended December 31, 2011. As of December 31, 2011,
there are no unfunded commitments associated with existing
loans.
First mortgage loans remain the majority of Gramercy Finance’s
debt portfolio, increasing to 82.5% at December 31, 2011, as
compared to 77.3% as of September 30, 2011. The weighted average
remaining term of Gramercy Finance's debt investment portfolio as
of December 31, 2011 was 2.3 years compared to 2.4 years as of
September 30, 2011 and the weighted average remaining term of
Gramercy Finance's combined debt and CMBS portfolio remained
unchanged as of December 31, 2011 at 3.3 years.
The aggregate carrying values, allocated by investment type, and
weighted average yields of Gramercy Finance’s debt and CMBS
investments including debt investments held for sale, as of
December 31, 2011 were (dollar amounts in thousands):
Allocation by Fixed Rate
Average
Floating Rate Average
Carrying Value (1)
Investment Type Yield
Spread over LIBOR (2)
2011 2010 2011
2010 2011 2010 2011
2010 Whole loans, floating rate $ 689,685 $ 659,095 63.8%
58.7% - - 331 bps 330 bps Whole loans, fixed rate 202,209 132,268
18.7% 11.8% 8.35% 7.16% - - Subordinate interests in whole loans,
floating rate 25,352 75,066 2.3% 6.7% - - 575 bps 297 bps
Subordinate interests in whole loans, fixed rate 89,914 46,468 8.3%
4.1% 10.50% 6.01% - - Mezzanine loans, floating rate 46,002 152,349
4.3% 13.5% - - 860 bps 754 bps Mezzanine loans, fixed rate 23,847
48,828 2.2% 4.3% 10.34% 12.69% - - Preferred equity, floating rate
3,615 5,224 0.3% 0.5% - - 234 bps 350 bps Preferred equity, fixed
rate 1,295 4,230 0.1% 0.4% - 7.25% - - Subtotal/
Weighted average 1,081,919 1,123,528 100.0% 100.0%
9.08% 8.09% 370 bps 400 bps CMBS, floating rate 47,855 50,798 6.2%
5.1% - - 96 bps 394 bps CMBS, fixed rate 727,957
954,369 93.8% 94.9% 8.22% 8.37% - - Subtotal/ Weighted average
775,812 1,005,167 100.0% 100.0% 8.22% 8.37% 96 bps
394 bps Total $ 1,857,731 $ 2,128,695 100.0% 100.0% 8.48% 8.32% 354
bps 400 bps (1) Loans and other lending investments and CMBS
investments are presented net of unamortized fees, discounts,
unfunded commitments, reserves for loan losses, impairments and
other adjustments.
(2)
Spreads over an index other than 30
day-LIBOR have been adjusted to a LIBOR based equivalent. In some
cases, LIBOR is floored, giving rise to higher current effective
spreads.
At December 31, 2011, Gramercy Finance had three non-performing
loans with an aggregate carrying value of $51.4 million, net of
associated valuation allowances. At December 31, 2011, the Company
had two whole loans with an aggregate carrying value of $44.6
million and one preferred equity investment with a carrying value
of $1.3 million classified as sub-performing. At December 31, 2010,
one first mortgage loan with a carrying value of $13.2 million and
two mezzanine loans with an aggregate carrying value of $9.8
million were classified as sub-performing.
During the quarter ended December 31, 2011 the Company purchased
approximately $56.6 million of fixed rate CMBS at an aggregate
effective yield of 5.65%. All of the CMBS purchases were made
within the Company’s CDOs.
GRAMERCY REALTY
Gramercy Realty’s portfolio consists of 56 office buildings and
bank branches, Gramercy Realty’s operating property portfolio as of
December 31, 2011 and 2010 is summarized below:
Number of Properties Rentable
Square Feet Occupancy Properties
December 31, December 31,
December 31, December 31, December
31, December 31, 2011
2010 2011 2010
2011 2010 Branches 41 571 261,732 3,689,190
28.9% 84.4% Office Buildings 15 321 491,084 21,613,441 44.7% 82.3%
Land - 2 - - - - Total 56 894 752,816 25,302,631 39.2% 82.6%
During 2011, the Company sought to extend or restructure the
Goldman Mortgage Loan, which was collateralized by approximately
195 properties held by Gramercy Realty, and the Goldman Mezzanine
Loans, which were collateralized by the equity interest in
substantially all of the entities comprising the Company’s Gramercy
Realty division, including its cash and cash equivalents.
Subsequent to the final maturity of the Goldman Mortgage Loan and
the Goldman Mezzanine Loans, the Company entered into a series of
short term extensions to provide additional time to exchange and
consider proposals for an extension, modification, restructuring or
refinancing of the Goldman Mortgage Loan and the Goldman Mezzanine
Loans and to explore an orderly transition of the collateral to the
lenders if such discussions failed. On May 9, 2011, the Company
announced that the scheduled maturity of the Goldman Mortgage Loan
and the Goldman Mezzanine Loans occurred without repayment and
without an extension or restructuring of the loans by the
lenders.
In September 2011, the Company entered into the Settlement
Agreement for an orderly transition of substantially all of
Gramercy Realty’s assets to KBS, Gramercy Realty’s senior mezzanine
lender, in full satisfaction of Gramercy Realty’s obligations with
respect to the Goldman Mortgage Loan and the Goldman Mezzanine
Loans, in exchange for a mutual release of claims among the Company
and the mortgage and mezzanine lenders and, subject to certain
termination provisions, the Company’s continued management of
Gramercy Realty’s assets on behalf of KBS for a fixed fee plus
incentive fees. On September 1, 2011 and December 1, 2011, the
Company transferred to KBS or its affiliates, interests in entities
owning 317 and 116, respectively, of the 867 Gramercy Realty
properties that the Company agreed to transfer pursuant to the
Settlement Agreement. The remaining ownership interests were
transferred to KBS by December 15, 2011. The aggregate carrying
value for the interests transferred to KBS was approximately $2.63
billion. The Company retained a portfolio of 56 buildings
comprising 752,816 rentable square feet with an aggregate carrying
value of approximately $40.0 million. In July 2011, the Company’s
Dana portfolio, which consisted of 15 properties totaling
approximately 3.8 million rentable square feet, was transferred to
its mortgage lender through a deed in lieu of foreclosure.
In September 2011, the Company entered into an asset management
arrangement upon the terms and conditions set forth in the
Settlement Agreement, or the Interim Management Agreement, to
provide for the Company’s continued management of Gramercy Realty’s
assets through December 31, 2013 for a fixed fee of $10.0 million
annually, the reimbursement of certain costs and incentive fees
equal to 10.0% of the excess of the equity value, if any, of the
transferred collateral over $375.0 million plus all new capital
invested into the transferred collateral by KBS, its affiliates
and/or joint venture partners, or the Threshold Value
Participation, and 12.5% of the excess equity value, if any, of the
transferred collateral over $468.5 million plus all new capital
invested into the transferred collateral by KBS, its affiliates
and/or joint venture partners, or the Excess Value Participation.
The minimum amount of the Threshold Value Participation equals $3.5
million. The Threshold Value Participation and the Excess Value
Participation will be valued and paid following the earlier of
December 31, 2013, subject to extension to no later than December
31, 2015, or the sale by KBS of at least 90% (by value) of the
transferred collateral. Under the terms of the Interim Management
Agreement, the Company does not forfeit its incentive fee rights
unless the Company resigns as manager or is terminated as manager
for cause and, with respect to the Excess Value Participation, in
the event of a Failure to Agree Termination (as defined below). The
Settlement Agreement obligates the parties to negotiate in good
faith to replace the Interim Management Agreement with a more
complete and definitive management services agreement on or before
March 31, 2012 and provides that if the parties fail to complete a
definitive agreement, the Interim Management Agreement will
terminate by its terms on June 30, 2012, or a Failure to Agree
Termination. The Company promptly commenced and continues to seek
to negotiate a more complete and definitive agreement with KBS not
later than March 31, 2012, but there can be no assurance a Failure
to Agree Termination will not occur notwithstanding the Company’s
efforts.
Subsequent to the execution of the Settlement Agreement, the
business of Gramercy Realty has changed from being primarily an
owner of commercial properties to being primarily a third-party
manager of commercial properties. The scale of Gramercy Realty’s
revenues has declined as a substantial portion of net revenues from
property operations have been replaced with fee revenues of a
substantially smaller scale. Additionally, as assets were
transferred to KBS, the Company’s total assets and liabilities
declined substantially.
Fee revenue for the Interim Management Agreement is included in
other income on the Company’s Statement of Operations.
Gramercy Realty sold two properties for an aggregate sales price
of approximately $1.48 million during the quarter, the proceeds of
which were used to repay intercompany borrowings with the Company’s
CDOs. Gramercy Realty made no acquisitions during the quarter.
DIVIDENDS
Beginning with the third quarter of 2008, the Company’s board of
directors elected not to pay a dividend on the Company’s common
stock. The Company’s board of directors also elected not to pay the
Series A preferred stock dividend of $0.50781 per share beginning
with the fourth quarter of 2008. As a result, the Company has
accrued preferred stock dividends for over six quarters which
pursuant to the terms of the Company’s charter, permitted the
Series A preferred stockholders to elect an additional director to
the board of directors. A special meeting of holders of the Series
A Preferred Stock was held on January 17, 2012, at which the
holders of the Series A Preferred Stock elected William H. Lenehan
to serve on the Company's Board of Directors until the 2012 annual
meeting of stockholders; provided, however, that his term will
automatically terminate if and when all dividends in arrears and
the then current quarterly dividend on the Series A Preferred Stock
then outstanding are paid in full. The Company may not pay any
dividends on its common stock until all accrued dividends and the
dividend for the then current quarter on the Series A preferred
stock are paid in full. The Company expects that it will continue
to elect to retain capital for liquidity purposes until the
requirement to make a cash distribution to satisfy its REIT
requirements arise.
MANAGEMENT
Robert R. Foley announced that he will be stepping down as Chief
Operating Officer and Secretary effective March 16, 2012.
“Mr. Foley joined the Company at its inception, has held several
senior management positions and has been instrumental in Gramercy’s
evolution,” said Chief Executive Officer Roger M. Cozzi. “On behalf
of the board of directors and the entire organization, I thank Bob
for his contributions and commitment to Gramercy. We wish him all
the best in his future endeavors. Mr. Foley’s responsibilities will
be distributed among the Company’s senior management team.”
COMPANY PROFILE
Gramercy Capital Corp. is a self-managed integrated commercial
real estate finance and property management and investment company
whose Gramercy Finance division focuses on the direct origination,
acquisition and portfolio management of whole loans, bridge loans,
subordinate interests in whole loans, mezzanine loans, preferred
equity, commercial mortgage-backed securities and other real estate
securities, and whose Gramercy Realty division focuses on third
party property management of, and to a lesser extent, ownership and
management of, commercial properties leased primarily to 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.
DISCLAIMER
Non-GAAP Financial Measures
The Company has used non-GAAP financial measures as defined by
SEC Regulation G in this press release. A reconciliation of each
non-GAAP financial measure and the comparable GAAP financial
measure can be found on page 15 of this release.
(GKK-EN)
FORWARD-LOOKING
INFORMATION
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.
Selected Financial Data Gramercy Capital Corp.
Consolidated Statements of Operations (Dollar amounts in
thousands, except share and per share data)
Three months ended December 31,
Year ended
December 31,
2011 2010
2011 2010 Revenues Rental
revenue $ 1,463 $ 1,783 $ 5,819 $ 4,986 Investment income 39,305
37,810 158,750 166,642 Operating expense reimbursements 650 524
2,180 2,077 Other income 8,090 4,840
44,461 9,892 Total revenues
49,508 44,957 211,210
183,597
Expenses Property operating expenses
Real estate taxes 471 197 1,782 1,390 Utilities 544 523 2,164 1,673
Ground rent and leasehold obligations 231 813 800 778 Property and
leasehold impairments - 1,331 - 1,331 Direct billable expenses 5 2
8 21 Other property operating expenses 8,804
2,801 16,526 13,048 Total
property operating expenses 10,055 5,667
21,280 18,241
Other-than-temporary impairment 21,181 18,120 52,679 37,453 Portion
of impairment recognized in other comprehensive loss (14,447 ) -
(34,256 ) - Impairment on loans held for sale -
- 2,000 Net impairment
recognized in earnings 6,734 18,120 18,423 39,453 Interest expense
20,713 21,151 81,643 85,545 Depreciation and amortization 318 539
1,271 1,694 Management, general and administrative 12,451 9,203
35,987 33,293 Management fees - - - - Impairment on business
acquisition, net - - - 2,722 Provision for loan loss 1,698
20,002 48,180 84,392
Total expenses 51,969 74,682
206,784 265,340
Income (loss) from continuing operations
before equity in income (loss) from joint ventures, provisions for
taxes and non-controlling interest
(2,461 ) (29,725 ) 4,426 (81,743 ) Equity in net income
(loss) of joint ventures 31 32
121 (1,255 )
Income (loss) from continuing operations
before provision for taxes, gain on extinguishment of debt and
discontinued operations
(2,430 ) (29,693 ) 4,547 (82,998 ) Gain on extinguishment of
debt 750 - 15,275 19,443 Provision for taxes (490 )
(842 ) (563 ) (966 ) Net income (loss) from
continuing operations (2,170 ) (30,535 ) 19,259 (64,521 ) Net
income (loss) from discontinued operations 12,695 (899,951 ) 29,872
(874,629 ) Net loss from discontinued operations with a related
party - (9,759 ) - (9,759 ) Loss on sale of joint venture interests
to a related party - (27,292 ) - (27,292 ) Gain on settlement of
debt 156,682 - 285,634 - Net gains from disposals 176
140 2,712 2,658 Net
income (loss) from discontinued operations 169,553
(936,862 ) 318,218 (909,022 ) Net
income (loss) 167,383 (967,397 ) 337,477 (973,543 ) Net income
attributable to non-controlling interest - (61
) - (145 ) Net income (loss) attributable to
Gramercy Capital Corp. 167,383 (967,458 ) 337,477 (973,688 )
Accrued preferred stock dividends (1,792 ) (1,790 ) (7,162 ) (8,798
) Excess of carrying amount of exchanged preferred stock over
consideration paid - 13,713 -
13,713
Net income (loss) available to common
stockholders
$ 165,591 $ (955,535 ) $ 330,315 $ (968,773 )
Basic earnings per share: Net income (loss) from continuing
operations, net of non-controlling
interest and after preferred dividends
$ (0.08 ) $ (0.37 ) $ 0.24 $ (1.19 ) Net income (loss) from
discontinued operations 3.36 (18.75 )
6.34 (18.21 ) Net income (loss) available to common
stockholders $ 3.28 $ (19.12 ) $ 6.58 $ (19.40 )
Diluted earnings per share: Net income (loss) from
continuing operations, net of non-controlling
interest and after preferred dividends
$ (0.08 ) $ (0.37 ) $ 0.24 $ (1.19 ) Net income (loss) from
discontinued operations 3.31 (18.75 )
6.24 (18.21 ) Net income (loss) available to common
stockholders $ 3.23 $ (19.12 ) $ 6.48 $ (19.40 )
Basic weighted average common shares outstanding 50,532,836
49,976,237 50,229,102
49,923,930
Diluted weighted average common shares and
common share equivalents outstanding
51,281,689 49,976,237 50,990,163
49,923,930
Gramercy Capital
Corp. Consolidated Balance Sheets (Dollar amounts in
thousands, except share and per share data)
December 31, December 31, 2011 2010
Assets: Real estate investments, at cost: Land $ 11,915 $
608,455 Building and improvements 30,603 1,818,012 Other real
estate investments 20,318 20,318 Less: accumulated depreciation
(2,722 ) (168,333 )
Total real estate investments, net
60,114 2,278,452 Cash and cash equivalents 163,629 220,777
Restricted cash 93 128,806 Pledged government securities, net -
92,918 Loans and other lending investments, net 828 1,512
Investment in joint ventures 496 3,650 Assets held for sale, net
32,834 Tenant and other receivables, net 2,829 44,788 Derivative
instruments, at fair value 6 4 Acquired lease assets, net of
accumulated amortization of $342 and $147,366 477 310,207 Deferred
costs, net of accumulated amortization of $4,899 and $29,929 1,961
8,156 Other assets 4,141 15,210
Subtotal 267,408 3,104,480
Assets of Consolidated Variable Interest Entities ("VIEs"):
Real estate investments, at cost: Land 21,967 26,486 Building and
improvements 4,205 18,970 Less: accumulated depreciation
(261 ) (208 ) Total real estate investments directly owned
25,911 45,248 Cash and cash equivalents 96 68 Restricted
cash 34,122 116,591 Loans and other lending investments, net
1,081,091 1,122,016 Commercial mortgage-backed securities -
available for sale 775,812 31,889 Commercial mortgage-backed
securities - held to maturity - 973,278 Assets held for sale, net
10,131 28,660 Derivative instruments, at fair value 913 1,632
Accrued interest 28,660 29,784 Acquired lease assets, net of
accumulated amortization of $0 and $153 - 5,546 Deferred costs, net
of accumulated amortization of $31,498 and $25,760 9,086 14,744
Other assets 25,100 18,057 Subtotal
1,990,922 2,387,513 Total assets
$ 2,258,330 $ 5,491,993
Gramercy
Capital Corp. Consolidated Balance Sheets (Dollar
amounts in thousands, except share and per share data)
December 31, December 31, 2011
2010 Liabilities and Equity: Liabilities:
Mortgage notes payable $ - $ 1,640,671 Mezzanine notes payable
- 549,713 Total secured and other debt
- 2,190,384 Accounts payable and accrued expenses 14,992
57,688 Dividends payable 23,276 16,114 Accrued interest payable -
6,934 Deferred revenue 2,392 152,601 Below market lease
liabilities, net of accumulated amortization of $1,189 and $223,256
1,905 691,592 Leasehold interests, net of accumulated amortization
of $62 and $7,770 - 17,027 Liabilities related to assets held for
sale 1,459 - Other liabilities 627 734
Subtotal 44,651 3,133,074
Non-Recourse Liabilities of Consolidated VIEs:
Collateralized debt obligations 2,468,810
2,682,321 Total secured and other debt 2,468,810 2,682,321
Accounts payable and accrued expenses 4,554 1,438 Accrued
interest payable 3,729 4,818 Deferred revenue 88 188 Below market
lease liabilities, net of accumulated amortization of $0 and $26 -
1,556 Liabilities related to assets held for sale 249 531
Derivative instruments, at fair value 175,915 157,932 Other
Liabilities 764 3,128 Subtotal
2,654,109 2,851,912 Total liabilities
2,698,760 5,984,986 Commitments
and contingencies - -
Equity:
Common stock, par value $0.001,
100,000,000 shares authorized, 51,086,2666 and 49,984,559 shares
issued and outstanding at December 31, 2011 and December 31, 2010,
respectively.
50 50
Series A cumulative redeemable preferred
stock, par value $0.001, liquidation preference $88,146, 4,600,000
shares authorized, 3,525,822 shares issued and outstanding at
December 31, 2011 and 2010, respectively.
85,235 85,235 Additional paid-in-capital 1,080,600 1,078,198
Accumulated other comprehensive loss (440,939 ) (160,785 )
Accumulated deficit (1,166,279 ) (1,496,594 ) Total
Gramercy Capital Corp. stockholders' equity (441,333 ) (493,896 )
Non-controlling interest 903 903 Total
equity (440,430 ) (492,993 ) Total liabilities and
equity $ 2,258,330 $ 5,491,993
Gramercy Capital Corp. Reconciliation of Non-GAAP
Financial Measures (Amounts in thousands, except per share
data) For the Three
Months Ended For the Year Ended December 31, 2011
December 31, 2010 December 31, 2011 December 31,
2010 Net income (loss) available to common stockholders
$ 165,591 $ (955,535 ) $ 330,315 $ (968,773 ) Add: Depreciation and
amortization 11,353 29,004 70,215 115,051 FFO adjustments for
unconsolidated joint ventures 290 1,096 3,219 4,347 Non-real estate
depreciation and amortization 14 923,523 1,296 923,885 Less: Non
real estate depreciation and amortization (1,587 ) (1,886 ) (7,044
) (7,925 ) Gain on sale of real estate (176 ) (219 )
(2,713 ) (13,302 )
Funds from operations $
175,485 $ (4,017 ) $ 395,288 $ 53,283
Funds from operations per share -
basic
$ 3.47 $ (0.08 ) $ 7.87 $ 1.07 Funds
from operations per share - diluted $ 3.42 $ (0.08 ) $ 7.75
$ 1.07
Funds from Operations
FFO is a non-GAAP financial measure. The Company presents FFO
because it considers FFO an important supplemental measure of the
Company's operating performance and believes that it is frequently
used by securities analysts, investors and other interested parties
in the evaluation of REITs. The Company also uses FFO as one of
several criteria to determine performance-based incentive
compensation for members of the Company's senior management, which
may be payable in cash or equity awards. The revised White Paper on
FFO approved by the Board of Governors of the National Association
of Real Estate Investment Trusts ("NAREIT") defines FFO as net
income (loss) (determined in accordance with GAAP), excluding
impairment writedowns of investments in depreciable real estate and
investments in in-substance real estate investments, gains or
losses from debt restructurings and sales of depreciable operating
properties, plus real estate-related depreciation and amortization
(excluding amortization of deferred financing costs), less
distributions to non-controlling interests and gains/losses from
discontinued operations and after adjustments for unconsolidated
partnerships and joint ventures. FFO does not represent cash
generated from operating activities in accordance with GAAP and
should not be considered as an alternative to net income
(determined in accordance with GAAP), as an indication of the
Company's financial performance, or to cash flow from operating
activities (determined in accordance with GAAP) as a measure of our
liquidity, nor is it entirely indicative of funds available to fund
the Company's cash needs, including the Company's ability to make
cash distributions. The Company's calculation of FFO may be
different from the calculation used by other companies and,
therefore, comparability may be limited.
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