Zacks_Analysts' Blog : GKK Completes Asset Sale - Analyst Blog

Gramercy Capital Corp. (GKK), a real estate investment trust (REIT), has recently completed the asset sale transaction worth $390.8 million, including the assumption of $265.6 million in debt. The assets were sold to SL Green Realty Corp. (SLG), a New-York based publicly held REIT.

With the deal, Gramercy Capital was able to monetize non-controlling joint-venture interests in several properties, thereby increasing its liquidity and deleveraging its balance sheet. The company raised approximately $89.8 million of unrestricted cash from the transaction and approximately $39.0 million of restricted cash for one of its three collateralized debt obligations (CDOs).

Gramercy Capital originates, acquires and manages a portfolio of whole loans, mezzanine loans, preferred equity, commercial mortgage-backed securities and other real estate securities through its Finance division. The company also targets commercial properties leased primarily to financial institutions across the U.S. through its Realty division.

The deal enabled SL Green to consolidate its asset portfolio in midtown Manhattan. The company acquired a 45% ownership stake in the ‘Lipstick Building’ for approximately $39.3 million. With the acquisition, SL Green had full ownership of the property. The company also acquired a 45% joint venture interest in 2 Herald Square for approximately $25.6 million and 292 Madison Avenue for approximately $19.2 million, both in New York.

SL Green primarily acquires, owns and manages Manhattan office properties. As of September 30, 2010, SL Green owned interests in 30 office properties across New York City, spanning 22.3 million square feet of space, making it the largest office landlord in the region. In addition, SL Green has ownership interests in 8 retail properties totaling approximately 366,312 square feet, and 31 suburban assets totaling 6.8 million square feet in Brooklyn, Queens, Long Island, Westchester County, Connecticut and New Jersey.

We presently have a ‘Neutral’ rating on SL Green, which currently has a Zacks #3 Rank that translates into a short-term ‘Hold’ rating and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months.