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NEW YORK CITY-Gramercy Capital Corp. priced Gramercy Real Estate CDO 2007-1, its third commercial real estate CDO transaction. The company will utilize the proceeds of CDO 3 issuance to retire outstanding borrowings under existing secured repurchase agreements, and to acquire virtually all of Gramercy's existing fixed-rate loans currently financed in Gramercy's two existing CDOs.
According to Gramercy Capital's release, CDO 3 is intended to match-fund on a long-term basis a portfolio of investment-grade CMBS acquired under the direction of its recently-formed Real Estate Securities Group, and will also create almost $350 million of immediate financing capacity in its existing CDOs and secured repurchase agreements.
A spokesperson for the company tells GlobeSt.com that no one involved in the deal can say anything on this as of yet. "Since it is a private (144A/Reg S) deal, the company is prohibited from speaking about it publicly until it closes," they say, adding that the deal will close shortly.
The CDO securities will be issued by Gramercy Real Estate CDO 2007-1 LTD and Gramercy Real Estate CDO 2007-1 LLC, and will consist of $1 million of bonds rated AAA through BBB-, plus interests that are not rated investment-grade. The issuer and co-issuer sold all of the bonds rated AAA through BBB-. As it did with CDO 1 and CDO 2, Gramercy will retain the non-investment grade interests in CDO 3.
The release notes that at issuance, the weighted-average spread will be 44.7 basis points, excluding transaction costs. The CDO will have an expected term of up to 10 years, and provides for a five-year reinvestment period with respect to the approximately $350 million of loans initially included in CDO 3. Gramercy expects the transaction to close on or about Aug. 15, 2007, subject to satisfaction of customary closing conditions.
Together with Gramercy Real Estate CDO 2005-1, a $1 billion CRE CDO which Gramercy issued in July 2005, and Gramercy Real Estate CDO 2006-1 ("CDO 2"), a $1 billion CRE CDO which Gramercy issued in July 2006, Gramercy now has $2.8 billion of long-term, non-recourse debt with no mark-to-market provisions. Assets to be contributed to CDO 3 by Gramercy will consist of investment-grade CMBS (68%) and first mortgage loans, subordinate participation interests in first mortgage loans, and mezzanine loans (together comprising 32%). All of the collateral for CDO 3 is presently owned by Gramercy or in the process of closing for inclusion in CDO 3.
Gramercy will treat the transaction as a financing and therefore consolidate on its balance sheet and statement of operations all of the assets, liabilities, income and expenses of the CDO issuer. All contributed collateral will be shown as assets, and the investment grade rated securities issued to third party investors will be shown as direct liabilities.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
