This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

A New Day for Gramercy

NEW YORK ( TheStreet) -- Prior to the Great Recession, Gramercy Capital (GKK) was a high-flying mortgage REIT. The New York-based company was then a big player in the commercial real estate collateralized debt obligation (CRE, CDO) market -- the riskiest in the higher-yielding credit sector.

In an effort to balance that risk, Gramercy began to diversify into safer equity sectors and the company became a quasi-lending arm for executives of SL Green (SLG). By 2009, the debt markets began to unravel and Gramercy's legacy mortgage lending unit started to feel the pressure. The toxic paper originated by the CDOs was virtually worthless and it appeared that Gramercy was going to fade.



Shares that were higher than $35 in 2007 began to crash and by early 2009 the stock fell below $1. In addition, the company suspended its dividend.

No More Legacy for Gramercy

Last June, Gramercy brought in a new CEO, Gordon DuGan. Previously DuGan had worked at W.P. Carey (WPC), where he was the CEO for five years. An industry veteran in net lease investing, DuGan (as well as Gramercy associates Benjamin P. Harris and Nicholas L. Pell) was hired by Gramercy's board to stabilize the operations and build a focused single tenant net lease platform.

Gramercy's new strategic model -- named by DuGan as Gramercy Capital Corp. 2.0 -- was initiated to focus on modest leverage and to create recurring, durable cash flows from net leased real estate. Net leased real estate is the equity ownership of real estate that has a long-term lease with a corporation, with the tenant paying the majority of the operating costs, taxes, insurance and maintenance.

Gramercy, who at one time focused on two extremely different core business lines: High-risk commercial real estate lending and low-risk net-lease real estate, is now focused on investments in the most risk-averse triple-net sector.

While Gramercy is still a small-cap REIT with a market cap of around $275 million, the company is aiming to become a dominant player in the Triple-Net sector. By joining veteran REITs like Realty Income (O), National Retail Properties (NNN), WP Carey and American Realty Capital Properties (ARCP), Gramercy is hoping to carve its own niche of investing in banks and industrial properties.

Unlike the other peers, Gramercy is currently NOT paying a dividend. The company suspended both its preferred and common dividends when cash flow tightened. However, even without the sustainable dividend income, Gramercy has been an attractive play of late. Over the last year, Gramercy has returned more than 68%, with shares that have climbed from $2.71 a year ago to around $4.69.

I had an opportunity to interview Gramercy's CEO Gordon DuGan earlier this week at The Street. DuGan reflects on the new Gramercy, that includes a name change, (Gramercy Property Trust and a new ticker, GPT) effective on April 15.

At the time of publication the author had no position in any of the stocks mentioned. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $121.55 -0.67%
FB $94.01 -1.26%
GOOG $626.43 -0.97%
TSLA $266.15 -0.24%
YHOO $36.69 -2.00%

Markets

Chart of I:DJI
DOW 17,689.86 -56.12 -0.32%
S&P 500 2,103.84 -4.79 -0.23%
NASDAQ 5,128.2810 -0.5040 -0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs