Exhibit 99.1
CONTACT
Robert R. Foley
Chief Financial Officer
(212) 297-1000
or
Michelle M. LeRoy
Investor Relations
(212) 297-1000
FOR IMMEDIATE RELEASE
GRAMERCY CAPITAL CORP. REPORTS
NET INCOME OF $0.39 AND FFO OF $0.45 PER FULLY DILUTED SHARE
FOR THE SECOND QUARTER 2005
• Increased net income available to shareholders more than 60% over the previous quarter, from $4.6 million to $7.5 million, or from $0.24 to $0.39 per share.
• Increased FFO over the previous quarter, from $0.24 to $0.45 per share.
• Included in second quarter results of operations is recognition of $3.0 million in gains from the sale of 3 fixed-rate first mortgage loans.
• Generated total revenues of $18.8 million during the second quarter, a 76% increase over the previous quarter.
• Originated and closed 20 separate debt investments during the second quarter, totaling approximately $241.3 million, net of fees and discounts.
• Closed on previously announced 45% co-investment with SL Green Realty Corp. (NYSE: SLG) in the South Building at One Madison Avenue, which is net leased to CSFB through 2020. This was Gramercy’s inaugural investment for its net lease investment program.
• Structured, marketed and priced a $1.0 billion commercial real estate CDO financing, which was closed on July 14, 2005 at a weighted average interest rate of three-month LIBOR plus 49 basis points before transaction costs, and three-month LIBOR plus 69 basis points after giving effect to the amortization of up-front transaction costs over the expected lives of the bonds issued.
• Completed a $50.0 million issuance of Trust Preferred Securities having a 30-year term ending May 2035, and bearing interest at a fixed rate of 7.57% for the ten years ending June 2015.
• Increased master repurchase agreement with Wachovia Bank by $150.0 million to $500.0 million, and modified the initial term to reflect staggered maturities.
• Declared second consecutive increase to quarterly dividend, from $0.22 to $0.35 per common share.
1
Summary
NEW YORK, N.Y. – July 20, 2005 – Gramercy Capital Corp. (NYSE: GKK) today reported net income available to common shareholders of $7.5 million, or $0.39 per fully diluted share, and funds from operations (FFO) of $8.7 million, or $0.45 per fully diluted share, for the quarter ended June 30, 2005. The Company completed 20 separate debt investments totaling $241.3 million, net of fees and discounts, and generated total revenues of $18.8 million during the second quarter. At June 30, 2005, total assets were $834.7 million, total liabilities were $565.1 million, and stockholders’ equity was $269.6 million.
Investment Activity
On April 29, 2005, Gramercy closed on a $57.5 million investment in a joint venture with SL Green Realty Corp. (“SL Green”) to acquire, own and operate the South Building located at One Madison Avenue (the “Property”). The joint venture completed acquisition of the Property from Metropolitan Life Insurance Company for a total purchase price of $802.8 million (plus transaction costs), financed in part through a $690.0 million first mortgage loan on the Property. Gramercy’s 45% pari passu interest in the joint venture is reflected on its balance sheet as an investment in unconsolidated joint venture.
The acquisition of One Madison Avenue represented the launch of Gramercy’s net lease initiative, which is an integral part of the Company’s original business plan. The net lease initiative is intended to provide recurring, long-term investment earnings, encourage earnings retention by utilizing non-cash depreciation expense to shelter investment income, and to create the potential for long-term gains from real estate residual values. One Madison Avenue is expected to achieve all of these goals on the basis of its highly functional office layout, its excellent location on Manhattan’s Madison Square Park, and the 15-year net lease with Credit Suisse First Boston (USA), Inc. (“CSFB”).
Since its initial public offering in August 2004, the Company has originated and closed 46 separate debt investments with commitment amounts totaling approximately $944.0 million, which as of June 30, 2005 had a carrying value of $749.0 million after scheduled principal payments, prepayments, loan sales, unamortized fees and discounts, and unfunded commitments of $61.3 million. Included in this amount are four loans held as available for sale totaling $59.9 million on June 30, 2005. Aggregate carrying values, allocation by investment type and weighted average yields of the Company’s debt investments as of June 30, 2005 were as follows:
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|
| Debt |
| Percentage |
| Fixed Rate: |
| Floating Rate: |
| |
|
| ($ in millions) |
|
|
|
|
|
|
| |
Whole Loans - floating rate |
| $ | 291.5 |
| 38.9 | % | — |
| 308 bps |
|
Whole Loans-fixed rate |
| $ | 68.9 |
| 9.2 | % | 8.33 | % | — |
|
Subordinate Mortgage Interests -floating rate |
| $ | 252.9 |
| 33.8 | % | — |
| 643 bps |
|
Subordinate Mortgage Interests -fixed rate |
| $ | 35.0 |
| 4.7 | % | 9.60 | % | — |
|
Mezzanine Loans -floating rate |
| $ | 74.8 |
| 10.0 | % | — |
| 889 bps |
|
Mezzanine Loans -fixed rate |
| $ | 3.3 |
| 0.4 | % | 14.53 | % | — |
|
Preferred Equity |
| $ | 11.7 |
| 1.6 | % | — |
| 900 bps |
|
Commercial Mortgage Backed Securities |
| $ | 10.9 |
| 1.4 | % | 13.49 | % | — |
|
Total / Average |
| $ | 749.0 |
| 100 | % | 9.36 | % | 522 bps |
|
Note: Debt Investments are presented after scheduled amortization payments and prepayments, and are net of fees, discounts, asset sales and unfunded commitments.
The Company’s debt investment allocation remained consistent with the previous quarter, with the majority of capital invested in whole loans and subordinate mortgage interests. Asset yields for fixed rate and floating rate investments during the second quarter of 2005 were 9.4% and LIBOR plus 522 basis points, respectively, compared to 10.8% and 532 basis points, respectively, in the previous quarter. At June 30, 2005, the weighted average first-dollar and last-dollar loan-to-value ratios for the Company’s debt investments were 34% and 74%, respectively, and the weighted average remaining initial term of the Company’s investments was approximately 2.3 years.
Operating Results
Debt investments and loan sales generated revenues of $29.4 million for the six months ended June 30, 2005. Investment income was $15.7 million for the quarter ended, and $25.9 million for the six months ended June 30, 2005. Other income, primarily from gains on the sale of loans, was $3.1 million during the second quarter. A tax provision of $500,000 was established to cover taxable gains generated from loan sales. At quarter end, in connection with Gramercy’s periodic asset management review of its investment
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portfolio, Gramercy recorded a provision of $525,000 as a reserve to cover possible credit losses. Management believes the establishment of such reserves is a prudent approach to operating and managing its business.
Interest expense of $6.3 million for the quarter ended June 30, 2005, is primarily associated with outstanding balances on the Company’s credit facilities, which had a weighted average interest rate of LIBOR plus 190 basis points on June 30, 2005. For the first quarter of 2005, the comparable measure was LIBOR plus 207 basis points. Pursuant to existing management, outsourcing, servicing and financial advisory agreements, the Company paid fees to affiliates of SL Green totaling $1.9 million during the second quarter and $4.5 million for the six months ended June 30, 2005. Marketing, general and administrative expenses of $1.6 million included professional fees, insurance premiums and expenses associated with marketing, advertising and promotion of Gramercy and its products, as well as stock-based incentive compensation.
Equity in net loss of unconsolidated joint ventures of $404,000 represents Gramercy’s pro rata share of net losses from the joint venture that acquired the South Building at One Madison Avenue. The amount is net of $1.2 million of non-cash depreciation and amortization.
Funding and Liquidity
During the second quarter, Gramercy announced the pricing of a $1.0 billion commercial real estate collateralized debt obligation (“CDO”), which closed on July 14, 2005. The CDO securities consisted of $810.5 million of investment-grade notes, $84.5 million of non-investment grade notes, and $105.0 million of preferred shares. Gramercy retained ownership of the non-investment grade notes and preferred shares. At issuance, the weighted-average interest rate of the investment grade securities was three-month LIBOR plus 49 basis points excluding transaction costs, and three-month LIBOR plus 69 basis points after giving effect to the amortization of up-front transaction costs over the expected lives of the bonds issued. The CDO matures in 2035, and provides for a five-year reinvestment period during which Gramercy can utilize the proceeds of loan repayments to finance new investments.
Also during the second quarter, Gramercy issued $50.0 million of Trust Preferred Securities, which are reflected on the balance sheet at June 30, 2005 as Junior Subordinated Deferrable Interest Debentures. The securities were sold through Gramercy’s wholly-owned subsidiary, Gramercy Capital Trust I, and have a 30-year term ending May 2035. They bear interest at a fixed rate of 7.57% for the ten years ending June 2015. Thereafter, the rate will float at three-month LIBOR plus 3.00%. The securities can be redeemed at par beginning in July 2010.
The Company increased the commitment amount from $350.0 million to $500.0 million under its existing master repurchase agreement with Wachovia Bank and certain of its affiliates. The $150.0 million increase includes the consolidation of a separate, previously existing $50.0 million credit facility, resulting in a net increase of $100.0
4
million of borrowing capacity to the Company’s credit facilities. Additionally, the initial term of the master repurchase facility was modified to reflect staggered maturities and a deferral of certain fees. At June 30, 2005, $500.0 million was outstanding on the Company’s two credit facilities, resulting in a ratio of debt-to-total assets of 60%. Upon closing of the CDO, proceeds received from issuance were used to repay substantially all amounts outstanding under the Company’s credit facilities with Wachovia Bank and Goldman Sachs Mortgage Company.
Cash and cash equivalents totaled $15.6 million, and restricted cash associated with debt investment reserves totaled $3.0 million on June 30, 2005.
Dividends
During the second quarter of 2005, the Board of Directors of Gramercy approved an increase in the quarterly dividend from $0.22 to $0.35 per common share. This represented the second consecutive dividend increase for shareholders of the Company. The dividend was paid on July 15, 2005, to shareholders of record at the close of business on June 30, 2005. During 2004, the Board of Directors adopted a dividend policy under which it generally intends to distribute to its shareholders approximately 100% of the Company’s taxable income.
Company Profile
Gramercy is a national commercial real estate specialty finance company that specializes in the direct origination and acquisition of first mortgage loans, subordinate mortgage participations, mezzanine loans, preferred equity and net lease investments involving commercial property throughout the United States. GKK Manager LLC, which is the external advisor to Gramercy Capital Corp, is a majority-owned subsidiary of SL Green Realty Corp. (NYSE: SLG). Gramercy Capital Corp. is headquartered in New York City.
Conference Call
The Company’s executive management team, led by Marc Holliday, President and Chief Executive Officer of Gramercy Capital Corp., will host a conference call and audio web cast on Thursday, July 21, 2005 at 2:00 p.m. EST to discuss second quarter 2005 financial results. The conference call may be accessed by dialing 800-240-4186 (Domestic) or 303-262-2050 (International). No pass code is required. The live conference will be simultaneously broadcast in a listen-only mode on the Company’s web site at www.gramercycapitalcorp.com. A replay of the call will be available through Thursday, July 28, 2005 by dialing 800-405-2236 Domestic or 303-590-3000 International, using pass code 11033751.
To review Gramercy’s latest news release and other corporate documents, please visit the Company’s website at www.gramercycapitalcorp.com or contact Investor Relations at 212-297-1017.
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Disclaimer
During the quarterly conference call, the Company may discuss non-GAAP financial measures as defined by SEC Regulation G. In addition, the Company has used non-GAAP financial measures in this press release. A reconciliation of each non-GAAP financial measure and the comparable GAAP financial measure (net income) can be found on page 9 of this release.
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 the strength of the commercial real estate property markets, competitive market conditions, unanticipated administrative costs, general and local economic conditions, interest rates, capital market conditions, bankruptcies and defaults of borrowers or tenants in properties securing the Company’s investments, and other factors, which are beyond the Company’s control. We undertake no obligation to publicly update or revise any of the forward-looking information. For further information, please refer to the Company’s filings with the Securities and Exchange Commission.
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Selected Financial Data
Gramercy Capital Corp.
Consolidated Statements of Income
(Unaudited, amounts in thousands, except per share data)
|
| For the Three |
| For the Six |
| ||
Revenues |
|
|
|
|
| ||
Investment income |
| $ | 15,689 |
| $ | 25,939 |
|
Other income |
| 3,069 |
| 3,509 |
| ||
Total revenues |
| 18,758 |
| 29,448 |
| ||
|
|
|
|
|
| ||
Expenses |
|
|
|
|
| ||
Interest expense |
| 6,264 |
| 9,065 |
| ||
Management fees |
| 1,870 |
| 3,538 |
| ||
Depreciation and amortization |
| 106 |
| 128 |
| ||
Marketing, general and administrative |
| 1,632 |
| 3,266 |
| ||
Provision for loan loss |
| 525 |
| 525 |
| ||
Total expenses |
| 10,397 |
| 16,522 |
| ||
Income from continuing operations before equity in net loss of unconsolidated joint venture and provision for taxes |
| 8,361 |
| 12,926 |
| ||
Equity in net loss of unconsolidated joint venture |
| (404 | ) | (404 | ) | ||
Income from continuing operations before provision for taxes |
| 7,957 |
| 12,522 |
| ||
Provision for taxes |
| (500 | ) | (500 | ) | ||
Net income available to common stockholders |
| $ | 7,457 |
| $ | 12,022 |
|
|
|
|
|
|
| ||
Basic earnings per share: |
|
|
|
|
| ||
Net income available to common stockholders |
| $ | 0.40 |
| $ | 0.64 |
|
Diluted earnings per share: |
|
|
|
|
| ||
Net income available to common stockholders |
| $ | 0.39 |
| $ | 0.63 |
|
Dividends per common share |
| $ | 0.35 |
| $ | 0.57 |
|
Basic weighted average common shares outstanding |
| 18,833 |
| 18,833 |
| ||
Diluted weighted average common shares and common share equivalents outstanding |
| 19,033 |
| 19,026 |
| ||
7
Gramercy Capital Corp.
Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)
|
| June 30, |
| December 31, |
| ||
|
| 2005 |
| 2004 |
| ||
|
| (Unaudited) |
|
|
| ||
Assets: |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 15,598 |
| $ | 39,094 |
|
Restricted cash |
| 3,001 |
| 1,901 |
| ||
Loans and other lending investments, net |
| 678,141 |
| 395,717 |
| ||
Commercial mortgage backed securities, net |
| 10,948 |
| 10,898 |
| ||
Investment in unconsolidated joint venture |
| 57,190 |
| — |
| ||
Loans held for sale, net |
| 59,911 |
| — |
| ||
Stock subscriptions receivable |
| — |
| 60,445 |
| ||
Accrued interest |
| 3,719 |
| 2,921 |
| ||
Deferred financing costs |
| 5,041 |
| 2,044 |
| ||
Deferred costs |
| 672 |
| 189 |
| ||
Derivative instruments, at fair value |
| — |
| 249 |
| ||
Other assets |
| 446 |
| 589 |
| ||
Total assets |
| $ | 834,667 |
| $ | 514,047 |
|
|
|
|
|
|
| ||
Liabilities and Stockholders’ Equity: |
|
|
|
|
| ||
Credit facilities |
| $ | 500,000 |
| $ | 238,885 |
|
Management fees payable |
| 662 |
| 416 |
| ||
Dividends payable |
| 6,515 |
| 1,951 |
| ||
Accounts payable and accrued expenses |
| 3,919 |
| 1,935 |
| ||
Derivative instruments, at fair value |
| 487 |
| — |
| ||
Other liabilities |
| 3,501 |
| 1,901 |
| ||
Junior subordinated deferrable interest debentures held by trusts that issued trust preferred securities |
| 50,000 |
| — |
| ||
Total liabilities |
| 565,084 |
| 245,088 |
| ||
|
|
|
|
|
| ||
Commitments and contingencies |
| — |
| — |
| ||
|
|
|
|
|
| ||
Stockholders’ Equity: |
|
|
|
|
| ||
Preferred stock, par value $0.001, 25,000,000 shares authorized, no shares issued or outstanding |
| — |
| — |
| ||
Common stock, par value $0.001, 100,000,000 shares authorized, 18,833,060 and 18,812,500 shares issued and outstanding at June 30, 2005 and December 31, 2004, respectively |
| 19 |
| 19 |
| ||
Additional paid-in-capital |
| 268,479 |
| 268,558 |
| ||
Accumulated other comprehensive income / (loss) |
| (451 | ) | 282 |
| ||
Retained earnings |
| 1,536 |
| 100 |
| ||
Total stockholders’ equity |
| 269,583 |
| 268,959 |
| ||
Total liabilities and stockholders’ equity |
| $ | 834,667 |
| $ | 514,047 |
|
8
Gramercy Capital Corp.
Reconciliation of Non-GAAP Financial Measures
(Unaudited, amounts in thousands, except per share data)
|
| For the Three |
| For the Six |
| ||
|
|
|
|
|
| ||
Net income available to common stockholders |
| $ | 7,457 |
| $ | 12,022 |
|
Add: |
|
|
|
|
| ||
Depreciation and amortization |
| 537 |
| 956 |
| ||
FFO adjustment for unconsolidated joint venture |
| 1,199 |
| 1,199 |
| ||
Less: |
|
|
|
|
| ||
Amortization of deferred financing costs and depreciation on non rental real estate assets |
| (537 | ) | (956 | ) | ||
Funds from operations - basic |
| $ | 8,656 |
| $ | 13,221 |
|
Dividends on preferred shares |
| — |
| — |
| ||
Funds from operations - diluted |
| $ | 8,656 |
| $ | 13,221 |
|
|
|
|
|
|
| ||
Funds from operations per share - basic |
| $ | 0.46 |
| $ | 0.70 |
|
Funds from operations per share - diluted |
| $ | 0.45 |
| $ | 0.69 |
|
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