Gramercy Capital Corp. (NYSE: GKK) today announced that it has formed a joint venture with an affiliate of Garrison Investment Group (“Garrison”) and executed a definitive agreement to acquire 100% of the membership interests in entities owning 115 office buildings from an affiliate of KBS Real Estate Investment Trust, Inc. (“KBS”). The purchase price for the portfolio is $470 million in cash plus the issuance to KBS at closing of 6 million shares of the Company’s common stock, valued at $15.0 million. Buyer’s obligations under the purchase agreement are subject to the satisfaction of certain conditions, including obtaining mortgage financing on terms satisfactory to buyer. The acquisition is expected to close in the fourth quarter of 2012; however, there can be no assurances that the acquisition will close on the terms described herein or at all. Each partner owns a 50% membership interest in the joint venture.
The portfolio totals 5.6 million square feet of which approximately 81% is leased to Bank of America, N.A. for a term ending in June 2023. Total portfolio occupancy equals approximately 88%. The projected 2012 net operating income for the portfolio is approximately $41.5 million. The portfolio was previously part of the Company’s Gramercy Realty division, beneficial ownership of which was transferred to KBS pursuant to a collateral transfer and settlement agreement dated September 1, 2011. Bank of America, N.A. senior unsecured debt is currently rated A by Standard & Poor’s and Fitch and A3 by Moody’s.
The Company expects the joint venture to leverage the portfolio with approximately 55% to 60% mortgage financing. The Company also expects the joint venture to identify and market for sale certain non-core assets with the objective of arriving at a core portfolio of primarily single tenant properties subject to a long-term lease with Bank of America, N.A.