Gramercy to buy American Financial for $1.1 billion
Last update: 10:44 a.m. EST Nov. 5, 2007
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Real-estate financier Gramercy Capital Corp. (GKK:
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GKK 0.96, -0.03, -3.0%) agreed to buy American Financial Realty Trust (AFR:
AFR
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AFR, , ) , a real-estate investment trust that specializes in properties leased by financial institutions, for about $1.1 billion in cash and stock.
The deal calls for American Financial holders to get $5.50 a share in cash and 0.12096 Gramercy share for every share of American Financial. That values each share of American Financial at $8.43 a share, a 31% premium over Friday's closing price.
Gramercy will assume about $2.3 billion in American Financial debt.
New York-based Gramercy, which is a mortgage REIT that specializes in originating and investing in commercial loans, doesn't typically own and lease out buildings. In acquiring American Financial of Jenkintown, Pa., Gramercy expects to be landlord of 27 million square feet of property in 37 states. American Financial buys properties leased primarily to banks and other financial institutions.
"This transaction will give Gramercy scale and diversity in a single stroke," said Marc Holliday, Gramercy's chief executive.
Separately, Gramercy announce that a fund managed by Morgan Stanley Real Estate bought $100 million of Gramercy stock last week at $26.25 each. The purchase makes Morgan Stanley Gramercy's largest shareholder after SL Green Realty Corp. (SLG), an office real-estate investment trust closely linked with Gramercy.
The American Finance deal comes at a slow time for deal making, particularly in the once-frenzied REITs market. It also comes amid uncertainty in credit markets and financial institutions that make up the bulk of American Financial's tenant base.
Gramercy's chief credit officer, Greg Hughes, said the core of American Financial's portfolio is about 98% leased, with no significant expirations until 2016. Moreover, he said, current conditions could create buying opportunities as banks eliminate redundancies or reduce real-estate holdings. He said financing is committed, and the deal is expected to close in the first quarter.
In the past year, total returns for American Financial are down 40.5%, compared with a drop of 2.7% for the SNL U.S. REIT Equity Index, according to SNL Financial, a Charlottesville, Va., financial research company.
-Jennifer S. Forsyth; The Wall Street Journal
(END) Dow Jones Newswires
November 05, 2007 06:24 ET (11:24 GMT)
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