NEW YORK (TheStreet) -- Chambers Street Properties (CSG) shares are declining 9% to $7.24 in early market trading after the real estate investment trust agreed to purchase rival Gramercy Property Trust (GPT) in an all-stock deal that values Gramercy at $25.36 per share.
The deal will create a new real estate investment trust with an enterprise value of about $5.7 billion with the combined companies holding 288 mostly net-lease and industrial building properties in the U.S. and Europe.
Gramercy shareholders will receive 3.19 shares of Chambers Street for every share they own, the companies said.
Gramercy CEO Gordon DuGan will be CEO of the new company which will keep the Gramercy name.
Gramercy shares are down 2.01% to $22.88 in early market trading.
TheStreet Ratings team rates CHAMBERS STREET PROPERTIES as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate CHAMBERS STREET PROPERTIES (CSG) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including poor profit margins and relatively poor performance when compared with the S&P 500 during the past year."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CSG's revenue growth has slightly outpaced the industry average of 8.5%. Since the same quarter one year prior, revenues slightly increased by 9.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- CHAMBERS STREET PROPERTIES reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, CHAMBERS STREET PROPERTIES turned its bottom line around by earning $0.08 versus -$0.02 in the prior year. This year, the market expects an improvement in earnings ($0.11 versus $0.08).
- In its most recent trading session, CSG has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
- The gross profit margin for CHAMBERS STREET PROPERTIES is rather low; currently it is at 24.77%. Regardless of CSG's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, CSG's net profit margin of 7.72% is significantly lower than the industry average.
- You can view the full analysis from the report here: CSG Ratings Report