Gramercy Property Trust Inc. Reports Second Quarter 2013 Financial Results
Gramercy Property Trust Inc. Reports Second Quarter 2013 Financial Results
- Recognized total revenues of $16.3 million and recorded a net loss to common stockholders of $6.7 million or $0.11 per diluted common share.
- Generated negative funds from operations, or FFO, of $3.5 million or $0.06 per diluted common share.
- Generated adjusted funds from operations, or AFFO, of $0.0 million or $0.00 per fully diluted common share.
- Acquired 11 properties for a total purchase price of approximately $111.2 million with an average lease term of 15 years.
- Sold the defeased mortgage and corresponding pool of pledged treasury securities in the Bank of America Joint Venture, generating net cash proceeds of $1.8 million to the Company and eliminating future interest expense (or losses) related to the defeased mortgage.
- Reduced management, general and administrative expenses, or MG&A, to $4.3 million for the quarter from $4.4 million from the prior quarter. MG&A was $9.3 million for the same quarter of the prior year.
- Recognized $5.4 million of incentive fees based upon the value of the KBS Portfolio at quarter end.
- Recorded an impairment to write-down the carrying value of retained CDO bonds by approximately $1.0 million to $7.6 million.
- Ended the second quarter of 2013 with cash and cash equivalents of $49.0 million as compared to $100.5 million reported at the end of the prior quarter.
Gramercy Property Trust Inc. (NYS: GPT) today reported a net loss to common stockholders of $6.7 million, or $0.11 per fully diluted common share, and for the six months ended June 30, 2013, net income to common stockholders of $386.7 million, or $6.59 per fully diluted common share. For the quarter, FFO was negative $3.5 million, or $0.06 per fully diluted common share, and for the six months ended June 30, 2013, FFO was $392.5 million, or $6.69 per fully diluted common share. For the quarter the Company generated AFFO of $0.0 million, or $0.00 per fully diluted common share, and for the six months ended June 30, 2013, AFFO was negative $0.9 million, or $0.01 per fully diluted common share. A reconciliation of FFO and AFFO to net income available to common stockholders is included on page 9 of the press release.
As of June 30, 2013, the Company maintained $49.0 million of unrestricted cash as compared to approximately $100.5 million reported as of March 31, 2013. Subsequent to quarter end, the Company received approximately $4.7 million of its outstanding servicing advances receivable in cash.
MG&A expenses were $4.3 million for the quarter ended June 30, 2013 as compared to $4.4 million in the prior quarter and $9.3 million in the same quarter of the prior year. Decreases in MG&A expenses are primarily attributable to reductions in salary and employee benefit costs and reduced professional fees due in large part to the reduced complexity of the Company's business subsequent to the disposal of the commercial real estate finance business. In addition, the Company has expensed a total of $0.7 million, or $0.01 per fully diluted common share, and $1.2 million, or $0.02 per fully diluted common share for the three and six months ended June 30, 2013, respectively, related to acquisition costs.
In the second quarter of 2013, the Company recorded an impairment to write-down the carrying value of its retained CDO bonds to approximately $7.6 million from the prior quarter's carrying value of $8.6 million. The reduction in carrying value is primarily attributable changes in expected cash flows available to the Company's bonds related to a 50-basis point increase in the forward LIBOR curve, and adjustment made to extend the maturity and otherwise delay the resolution date of two large assets contained within the CDO collateral.
Gordon F. DuGan, Chief Executive Officer, commented, "The direction and momentum of the Company is very exciting and is a testament to the hard work of the entire team here at Gramercy. We continue to outpace our expectations, closing 11 discrete acquisitions in the second quarter. I am especially pleased with the results of our differentiated net lease investment strategy and our ability to find attractive investments that meet our strict underwriting standards. Our Asset Management platform continues to be a source of profits and acquisition opportunities. As we move forward, I am more confident than ever that we are creating a best-in-class, next generation net lease REIT that will grow and continue to be a significant factor in the net lease industry."
In the second quarter of 2013, the Company acquired 11 properties for a total purchase price of approximately $111.2 million with a 15-year average lease term, summarized below:
|(Dollar amount in thousands)|
|Investment||Location||Metropolitan Statistical Area (MSA)||Major Tenants||Square Feet|
Bank Branch Portfolio
|Emmaus Bank Branch||Emmaus, PA||Allentown||Wells Fargo||4,800||$ 1,610||100%|
|Calabash Bank Branch||Calabash, NC||Wilmington||PNC Bank||2,048||610||100%|
|Bellmawr Industrial||Bellmawr, NJ||Philadelphia||FedEx||62,230||$ 4,175||100%|
|Hialeah Industrial1||Hialeah, FL||Miami||Preferred Freezer||120,000||25,000||100%|
|Logan Township Industrial||Logan Township, NJ||Philadelphia||UNFI||70,000||11,725||100%|
|Hutchins Auto Auction Facility2||Hutchins, TX||Dallas||KAR/Adesa||196,300||$ 58,500||100%|
Cross-Dock Truck Terminals
|Atlanta Truck Terminal||Atlanta, GA||Atlanta||FedEx Freight||178||$ 7,850||100%|
|Deer Park Truck Terminal||Deer Park, NY||New York/New Jersey||YRC Freight||54||3,900||100%|
|Elkridge Truck Terminal||Elkridge, MD||Baltimore/Washington||New Penn||61||5,900||100%|
|Houston Truck Terminal||Houston, TX||Houston||YRC Freight||189||6,914||100%|
|Orlando Truck Terminal||Orlando, FL||Orlando||YRC Freight||72||5,036||100%|
|1||Build-to-Suit commitment to construct a 120,000 square foot cold storage facility which will be 100% leased for an initial term of 25 years when completed in the second quarter of 2014. Total costs are expected to be approximately $25.0 million.|
|2||Encumbered with a fully-amortizing, first mortgage of approximately $26.3 million at a fixed rate of 6.95% that is co-terminus with the lease. The first mortgages was assumed at the acquisition.|
|3||The Cross-Dock Truck Terminals contain approximately 330,000 building square footage. Cross-Dock Truck Terminals are typically sized based upon the number of dock doors.|
BANK OF AMERICA PORTFOLIO JOINT VENTURE
For the second quarter of 2013, the Company's interest in the Bank of America Joint Venture resulted in a $2.6 million net loss as summarized below (amounts in thousands):
|Three months ended|
|June 30, 2013|
|Income from core properties||$||818|
|Income from held-for-sale properties||190|
|Loss from defeasance pools||(3,642||)|
|Equity in net income (loss) from joint venture(1)||$||(2,634||)|
|Distributions from the joint venture||$||19,325|
The Company's Statement of Operations also includes a net contribution of $31 from its
Philips Building joint venture for a total equity in net loss from joint ventures of $2,603.
In connection with the acquisition, the Joint Venture acquired a pool of treasury securities that defeased the mortgage loan that had previously encumbered the acquired properties. Although principal and interest payments from the defeasance pool covered the necessary debt service requirements of the defeased mortgage, the interest income generated from the treasury securities was less than the interest expense on the defeased mortgage, generating a net loss for GAAP purposes. In May 2013, the Joint Venture sold the defeased mortgage and corresponding pool of pledged treasury securities for net cash proceeds of $3.6 million, of which $1.8 million was distributed to the Company. Subsequent to the sale of the defeasance pool, the contribution of GAAP income from the Joint Venture is expected to increase substantially.
The Company also sold a total of 20 held-for-sale properties from the Bank of America Portfolio Joint Venture during the second quarter of 2013, for net proceeds to the Joint Venture of approximately $21.4 million.
GRAMERCY ASSET MANAGEMENT
The Company's asset and property management business, which operates under the name Gramercy Asset Management, currently manages for third-parties, approximately $1.5 billion of commercial properties leased primarily to regulated financial institutions and affiliated users throughout the United States.
In the second quarter 2013, Gramercy Asset Management recognized fee revenues of $13.6 million in property management, asset management, administrative and incentive fees. The Gramercy Asset Management business generates most of its fee revenues from an asset management agreement with KBS Real Estate Investment Trust, Inc.
In addition to base management fees of approximately $9.0 million per year, the Management Agreement for the KBS Portfolio provides for an incentive fee, or the Threshold Value Profits Participation, in an amount equal to the greater of: (a) $3.5 million or (b) 10% of the amount, by which the portfolio equity value exceeds $375.0 million. During the second quarter of 2013, the Company recognized an additional $5.4 million of incentive fees based upon the portfolio equity value at quarter end, and the Company expects to earn the remaining $4.2 million over the remaining term of the agreement. The Threshold Value Profits Participation is capped at a maximum of $12.0 million. Net of the corresponding taxes, the incentive fee contributed approximately $3.2 million to net income available to common stockholders and FFO, or $0.05 per diluted common share. The Threshold Value Profits Participation is payable 60 days after the earlier to occur of June 30, 2014 (or March 31, 2015 upon satisfaction of certain extension conditions, including the payment by KBS of a $0.8 million extension fee) and the date on which KBS, directly or indirectly, sells, conveys or otherwise transfers at least 90% of the KBS Portfolio (by value).
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. In the early stages of the implementation of the Company's business strategy, the Company will seek to maximize capital available for investment and, therefore, expects to continue its policy of not paying dividends on its preferred or common stock. The Company expects, however, that as its business strategy is implemented and sustainable cash flows grow, the Company will re-evaluate its dividend policy with the intention of resuming dividends to stockholders.
Gramercy Property Trust Inc. is a fully-integrated, self-managed commercial real estate investment company focused on acquiring and managing income-producing office and industrial properties net leased to high quality tenants in major markets throughout the United States. The Company also operates an asset management business that manages for third-parties, including our joint venture partners, commercial real estate assets throughout the United States primarily leased to financial institutions and affiliated users.
To review the Company's latest news releases and other corporate documents, please visit the Company's website at www.gptreit.com or contact Investor Relations at 212-297-1000.
The Company's executive management team will host a conference call and audio webcast on Tuesday, August 6, 2013, at 2:00 PM EDT to discuss second quarter 2013 financial results. Presentation materials will be posted prior to the call on the Company's website, www.gptreit.com, under the Investor Center section in the "Events and Presentations" tab.
The live call will be webcast in listen-only mode on the Company's website at www.gptreit.com and on Thomson's StreetEvents Network. The presentation may also be accessed by dialing (888) 771-4371 - Domestic or (847) 585-4405 - International, using pass code "GRAMERCY".
A replay of the call will be available from August 6, 2013 at 5:00 PM EDT through August 9, 2013 at 11:59 PM EDT by dialing (888) 843-7419 - Domestic or (630) 652-3042 - International, using pass code 3481 4560#.
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 9 of this release.
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 Securities and Exchange Commission.
Selected Financial Data:
Gramercy Property Trust Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Dollar amounts in thousands, except per share data)
|Three Months Ended June 30,||Six Months Ended June 30,|
|Operating expense reimbursements||196||-||304||-|
|Property operating expenses:|
|Property management expenses||5,016||5,631||11,173||11,799|
|Property operating expenses||307||-||424||-|
|Total property operating expenses||5,323||5,631||11,597||11,799|
|Portion of impairment recognized in other comprehensive loss||-||-||-||-|
|Net impairment recognized in earnings||1,682||-||1,682||-|
|Depreciation and amortization||919||45||1,256||86|
|Management, general and administrative||4,272||9,319||8,694||14,446|
|Income (loss) from continuing operations before equity in income (loss) |
from joint ventures and provisions for taxes
|Equity in net income (loss) of joint ventures||(2,603||)||29||(3,791||)||57|
|Income (loss) from continuing operations before provision |
for taxes and discontinued operations
|Provision for taxes||(4,441||)||(2,107||)||(4,846||)||(3,419||)|
|Net loss from continuing operations||(3,719||)||(7,433||)||(7,629||)||(11,698||)|
|Net income (loss) from discontinued operations||(1,175||)||(12,331||)||9,970||(20,368||)|
|Gain on sale of joint venture interest to a related party||-||-||1,317||-|
|Net gains from disposals||-||53||389,140||11,996|
|Provision for taxes||-||(2,515||)||-|
|Net income (loss) from discontinued operations||(1,175||)||(12,278||)||397,912||(8,372||)|
|Net income (loss) attributable to Gramercy Property Trust Inc.||(4,894||)||(19,711||)||390,283||(20,070||)|
|Accrued preferred stock dividends||(1,790||
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