Gramercy Capital Corp. rose as much as 14 percent after the New York-based real estate investment trust said it agreed to settle $549.7 million in mortgage debt by transferring hundreds of U.S. buildings to lenders.
About 317 commercial properties in the REIT’s Gramercy Realty division were given up today to lender KBS Debt Holdings LLC in an initial transfer, Gramercy Capital said in a statement. The agreement obligates KBS to acquire all remaining Gramercy Realty entities and properties by Dec. 15 and releases the REIT from outstanding loan balances and contractual and default interest.
Lenders that offered to extend troubled real estate debt after the 2008 financial crisis are liquidating loans and selling the underlying assets, according to Real Capital Analytics Inc. In the first half, 76 percent of workouts were resolved, mostly through liquidations or sales, up from 45 percent a year earlier, data from the research firm show.
“What remains of Gramercy may be an attractive acquisition target both for buyers of discounted financial assets and someone looking to acquire a public real estate platform,” Ben Thypin, director of market analysis for New York-based Real Capital, said in a telephone interview. “The company may be an appealing target for private-equity firms with dry powder committed to real estate that they need to deploy.”
Shares of Gramercy Capital rose to as high as $3.20 after the close of U.S. exchanges. They fell 4 cents to $2.81 in regular trading today.
Under the agreement, Gramercy will retain 58 properties. It will also manage the buildings transferred through Dec. 31, 2013, for $10 million a year plus certain costs and incentive fees.
KBS, along with Goldman Sachs Group Inc. and Citigroup Inc., held senior and junior mezzanine loans on the Gramercy properties and threatened to foreclose on about 900 properties in May after Gramercy Capital failed to pay off debt.
Gramercy Capital was previously a financing unit of and run by executives from SL Green Realty Corp. SL Green remains its largest shareholder, according to data compiled by Bloomberg.