(To read more on the debt and equity markets, click here.)
NEWTOWN SQUARE, PA-The special committee and bankers that are exploring a potential sale of locally based GMH Communities Trust "are operating under confidentiality agreements with several bidders," said Gary Holloway Sr., president, chairman and CEO, during a conference call disclosing the company's first-quarter financial performance. "We can't comment on the special committee's process," he added.
The REIT's second-quarter financials will be available "in the next few weeks," Holloway said, and the company "will forego any guidance" until their release. He reiterated his decision to not make an independent bid to acquire the company as well as his continuing willingness to participate with a third-party bidder.
An internal audit and investigation, prompted by an allegation of a "tone at the top" problem and "material weaknesses" in accounting reporting, added $2.6 million to the REIT's expenses during the three months ended March 31. "We expect to incur additional legal and accounting-related costs relating to this matter throughout the remainder of 2006," said management in an SEC filing.
The same filing noted that the company, Holloway and former CFO Bradley Harris are defendants in a class action complaint filed with the US District Court. It said, "the defendants have not yet responded...the company believes that it has valid defenses to the plaintiffs' claims and intends to defend the class action suit vigorously." Although Holloway did not refer to the suit during the conference call, he said the company continues "to persevere during a difficult and demanding time."
Despite its difficulties, both the student and military housing divisions delivered solid gains during first quarter. The student housing segment reported net income of approximately $2 million, based on total revenues of about $45.6 million, versus $1.3 million and $28 million, respectively, for the same three months of 2005. Net income for the military housing segment reached $2.9 million, based on total revenues of approximately $20 million this first quarter, compared with first-quarter 2005 net income of $1.8 million on total revenues of $12.7 million.
On Aug. 11, the day after the conference call and long-delayed release of first-quarter financials, shares of GCT opened on the NYSE at $12.03 a share. The 52-week high was $17.10 a share on March 1 this year, and the low of $10.75 a share occurred this April 13, following disclosure of the independent audit and investigation.
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