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Gramercy Capital Corp. Announces An Agreement To Sell Its Collateral Management Agreements For Its Collateralized Debt Obligations (“CDOs”) To CWCapital And Retain The Equity In Its CDOs

Gramercy Capital Corp. (NYSE: GKK) announced today the execution of a definitive agreement to transfer the collateral management and sub-special servicing agreements for its three Collateralized Debt Obligations, CDO 2005-1, CDO 2006-1 and CDO 2007-1, to CWCapital Investments LLC (“CWCapital”) for approximately $9.9 million, less adjustments and closing costs.

The Company will retain its equity interests in the three CDOs, which will provide the Company with the potential to recoup additional proceeds over the remaining life of the CDOs based upon resolution of underlying assets within the CDOs. Subject to customary closing conditions, the transfer is expected to close in March 2013.

The Company intends to liquidate its CDO bond portfolio. The Company also expects to receive additional cash proceeds for past CDO servicing advances of approximately $14.0 million when specific assets within the CDOs are liquidated.

The summary of the transaction is as follows:

                       

Amount

Timing

Collateral Management Agreements $9.9 million 45 days
CDO Equity Retained Liquidation of CDOs
CDO Bonds $32.0 million 30-90 days
CDO Advances $14.0 million Majority expected within 6-9 months
 

The transaction achieves a number of important objectives:

  • It maximizes the value of the servicing business through the sale to a large platform that has significant scale;
  • It greatly simplifies the going-forward business and significantly reduces the Company’s ongoing MG&A expenses through elimination of CDO related personnel costs and servicing advance requirements;
  • It unlocks in excess of $50.0 million in liquidity currently invested in the CDO business; and
  • It allows the Company to retain potential future upside in the equity in the three CDOs.

Gordon F. DuGan, Chief Executive Officer of Gramercy Capital Corp., commented, “This sale is a significant milestone in the transformation of Gramercy into a pure-play equity REIT. We are pleased to reach this agreement with CWCapital, a world-class real estate organization. With this transaction, we expect to achieve a number of important goals including an expected increase in corporate liquidity, a significant reduction in going-forward expenses, and a simplification of the balance sheet. We are very well positioned to continue our focus on creating durable, high-quality income from net lease assets throughout the United States.”

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