Gramercy Capital Corp. Reports Third Quarter 2010 Financial Results
NEW YORK--(BUSINESS WIRE)--Gramercy Capital Corp. (NYSE: GKK):
THIRD QUARTER HIGHLIGHTS
* For the quarter, generated funds from operations (“FFO”) of $20.5 million, an increase of $198.7 million from FFO of negative $178.2 million generated in the same quarter of the previous year. On a fully diluted per common share basis, FFO was $0.41 for the third quarter of 2010 as compared to FFO of negative $3.57 in the same quarter of the previous year. The increase in FFO for the quarter was primarily attributable to a decline of approximately $199.6 million in impairments and provisions for loan losses, as compared to the same quarter of the previous year.
* For the quarter, net income to common stockholders was $4.8 million, or $0.10 per diluted common share, as compared to the net loss of $203.1 million, or negative $4.07 per diluted common share, for the same quarter of the previous year.
* Maintained approximately $208.8 million of liquidity at quarter end, as compared to approximately $157.5 million of liquidity reported in the prior quarter. Liquidity at September 30, 2010 included approximately $141.6 million of cash and cash equivalents and approximately $67.2 million of restricted cash in two of the Company’s three CDOs.
* Repurchased $20.0 million of CDO bonds previously issued by the Company’s 2005-1 and 2006-1 CDOs, generating gains on early extinguishment of debt of $11.7 million for the quarter.
* Commenced a tender offer to purchase up to 4,000,000 shares of the Company’s 8.125% Series A Cumulative Redeemable Preferred Stock, or the Series A preferred stock.
* Gramercy Realty:
* During the quarter, closed on the sale of three properties with an aggregate sales price of approximately $17.7 million. Approximately $15.3 million of senior debt and $1.3 million of mezzanine debt related to these properties was repaid.
* During the quarter, commenced 22 new leases totaling approximately 78,573 square feet, and renewed 43 leases totaling approximately 179,087 square feet. Quarter-end occupancy was 83.7%, as compared to the 85.2% occupancy reported in the prior quarter.
* Gramercy Finance:
* During the quarter, modified two debt investments with an aggregate principal balance of $117.5 million.
* During the quarter, received $90.1 million of loan and CMBS repayments and reduced unfunded commitments associated with existing loans by $10.2 million to approximately $4.9 million from approximately $15.1 million at June 30, 2010.
* Recorded a net provision for loan losses of approximately $10.0 million relating to three separate loans with an aggregate carrying value of approximately $73.9 million, based on the Company’s quarterly review of its loan portfolio. By comparison, the Company’s provision for loan losses was approximately $13.2 million for the preceding quarter and approximately $205.5 million for the same quarter of the prior year. The Company’s reserve for loan losses at September 30, 2010 was $273.8 million, or approximately 19.1% of the unpaid principal balance, in connection with 21 separate loans with an aggregate carrying value of $534.4 million.
* Originated within CDO 2006-1 a new $28.5 million first mortgage investment, secured by an urban retail center which is 100.0% occupied.
SUMMARY
Gramercy Capital Corp. (NYSE: GKK) today reported funds from operations (“FFO”) of $20.5 million, or $0.41 per diluted common share, and net income available to common stockholders of $4.8 million, or $0.10 per diluted common share for the quarter ended September 30, 2010. The Company generated total revenues of $159.6 million during the third quarter, an increase of $5.6 million from $154.0 million generated during the same quarter of the previous year. At September 30, 2010, the Company owned 25.4 million rentable square feet of commercial real estate in 36 states and the District of Columbia with an aggregate book value of approximately $3.7 billion, in addition to approximately $1.2 billion of loan investments, $1.0 billion of commercial mortgage–backed real estate securities, or CMBS, and $713.1 million in other assets. As of September 30, 2010, approximately 55.5% of the Company’s assets were comprised of commercial property, 18.4% of debt investments, 15.3% of CMBS and 10.8% of other assets.
LIQUIDITY AND FUNDING
The Company remains focused on reducing leverage, extending or restructuring Gramercy Realty’s $240.5 million mortgage loan or the Goldman mortgage loan, and $550.7 million of senior and junior mezzanine loans, or the Goldman mezzanine loans, actively managing portfolio credit, generating liquidity from existing assets, accretively investing repayments in loan and CMBS investments and renewing expiring leases.
In March 2010, the Company amended its Goldman mortgage loan and Goldman mezzanine loans to extend the maturity date to March 11, 2011 and to modify certain other loan terms. The Goldman mortgage loan is collateralized by approximately 195 properties held by Gramercy Realty and the Goldman mezzanine loans are collateralized by the equity interests in substantially all of the entities comprising Gramercy Realty, including its cash and cash equivalents. The Company does not expect that it 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 it is unlikely to have sufficient capital to satisfy any shortfall. Failure to satisfy any shortfall will result in a default and could result in the foreclosure of the underlying Gramercy Realty properties and/or the Company’s equity interests in the entities that comprise substantially all of Gramercy Realty. Such default would materially and adversely affect the Company’s business, financial condition and results of operations. A loss of the Gramercy Realty portfolio or lack of resolution of the Goldman mortgage loan and the Goldman mezzanine loans would trigger a substantial book loss and would likely cause the Company to have negative book value. The Company continues to negotiate with its lenders to further extend or modify the Goldman mortgage loan and the Goldman mezzanine loans; however, the Company and its lenders have made no significant progress in those negotiations to date. There can be no assurance as to when, or if, the Company will be able to accomplish an extension or a modification to the Goldman mortgage loan and the Goldman mezzanine loans.
During the third quarter of 2010, the Company repurchased at a discount, four CDO bonds aggregating $20.0 million issued by its 2005-1 and 2006-1 CDOs, and generated a gain on extinguishment of debt of approximately $11.7 million. For 2010 year to date, the Company has repurchased at a discount, CDO bonds aggregating $39.0 million and generated gains on extinguishment of debt of approximately $19.4 million. These bonds were not retired, but are reflected on the Company’s balance sheet as a reduction in the amount of CDO bonds outstanding at September 30, 2010.
During the third quarter of 2010, Gramercy Realty sold three properties for an aggregate gross sales price of approximately $17.7 million. Approximately $15.3 million of senior debt and $1.3 million of mezzanine debt related to these properties was repaid.
Loan prepayments, partial repayments, and scheduled amortization payments in Gramercy Finance’s portfolio aggregated $90.1 million during the third quarter of 2010. Unfunded commitments associated with existing loans declined to $4.9 million at September 30, 2010 from approximately $15.1 million at June 30, 2010.
Liquidity at September 30, 2010 was approximately $208.8 million, as compared to approximately $157.5 million of liquidity for the prior quarter. The Company’s liquidity at September 30, 2010 included approximately $141.6 million of cash and cash equivalents and approximately $67.2 million of restricted cash in two of its three CDOs. Cash and cash equivalents increased approximately $7.9 million as of September 30, 2010 as compared to $133.7 million at the end of the second quarter of 2010, primarily due to an increase in prepaid rental collections by Gramercy Realty, including a prepayment of an annual rental payment of $5.1 million from the PREFCO Bank of America portfolio, as well as lower management, general and administrative costs. The increase in restricted cash in the Company’s CDOs was primarily attributable to additional loan prepayments, partial repayments and scheduled amortization payments, partially offset by the origination of a new $28.5 million first mortgage investment within 2006-1 CDO.
