American Financial Realty Trust
Following the announcement and joint conference call, shares of AFR on the NYSE spiked to $7.95, up slightly more than 23% from the Friday close of $6.45 a share. Shares of GKK took a slight dip in the opposite direction, falling from a Friday close of $24.23 a share to $23.57.
The buy would give Gramercy 27 million sf in 37 states. During the conference call, Marc Holliday, Gramercy's CEO, said that under its business plan for the acquisition, 147 of the current 1,305 properties in the AFR portfolio are held for sale.
Of the remaining 1,158 properties, 898 are considered core. "They represent 80% of the total transaction value," he said. They include 632 bank branches and 266 office and operations facilities, and this portion of the portfolio is "97% leased to credit tenants." They will be operated by SL Green Realty Corp., which is a majority owner of New York City-based Gramercy, and Holliday said 30% of the properties currently managed by SL Green are leased by financial-company tenants.
The remaining 260 properties are categorized as value-add. These, along with those held-for-sale and not sold by the close of the acquisition "will require 80% of the work over the next two years," Holliday said. The options for value-add assets include redevelopment, repositioning, re-tenanting, adaptive re-use or changes in zoning, he said.
Synergies are among the benefits of combining AFR and Gramercy, he said and estimated a savings of from $10 million to $15 million a year. Of AFR's current employees, he said, "we'll figure out which of the core AFR platform employees fit best into our culture. There's talent there, but, in reality, changes will be made."
Regarding the sale, Louis Ranieri AFR's chairman, said, "We found ourselves in a position to find a new CEO and get one in place." Hal Pote, the CEO who developed and implemented a restructuring of AFR, died unexpectedly.
In addition, Ranieri said, "we had to execute the second phase of a repositioning plan we were about to announce with equity and debt not easy to come by. We could go it alone, but how long would it take? We took a tremendous look at alternatives and determined this was the best we could do for our shareholders." The deal requires the approval of both companies' shareholders and is expected to close in March 2008.
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