Gramercy Capital Rises After Settling $549.7 Million in Real Estate Loans

Gramercy Capital Corp. rose as much
as 14 percent after the New York-based real estate investment
trust said it agreed to settle $549.7 million in mortgage debt
by transferring hundreds of U.S. buildings to lenders.

About 317 commercial properties in the REIT’s Gramercy
Realty division were given up today to lender KBS Debt Holdings
LLC in an initial transfer, Gramercy Capital said in a
statement. The agreement obligates KBS to acquire all remaining
Gramercy Realty entities and properties by Dec. 15 and releases
the REIT from outstanding loan balances and contractual and
default interest.

Lenders that offered to extend troubled real estate debt
after the 2008 financial crisis are liquidating loans and
selling the underlying assets, according to Real Capital
Analytics Inc. In the first half, 76 percent of workouts were
resolved, mostly through liquidations or sales, up from 45
percent a year earlier, data from the research firm show.

“What remains of Gramercy may be an attractive acquisition
target both for buyers of discounted financial assets and
someone looking to acquire a public real estate platform,” Ben Thypin, director of market analysis for New York-based Real
Capital, said in a telephone interview. “The company may be an
appealing target for private-equity firms with dry powder
committed to real estate that they need to deploy.”

Shares of Gramercy Capital rose to as high as $3.20 after
the close of U.S. exchanges. They fell 4 cents to $2.81 in
regular trading today.

Under the agreement, Gramercy will retain 58 properties. It
will also manage the buildings transferred through Dec. 31,
2013, for $10 million a year plus certain costs and incentive
fees.

KBS, along with Goldman Sachs Group Inc. (GS) and Citigroup
Inc. (C), held senior and junior mezzanine loans on the Gramercy
properties and threatened to foreclose on about 900 properties
in May after Gramercy Capital failed to pay off debt.

Gramercy Capital was previously a financing unit of and run
by executives from SL Green Realty Corp. (SLG) SL Green remains its
largest shareholder, according to data compiled by Bloomberg.

To contact the reporter on this story:
Dan Levy in San Francisco at
dlevy13@bloomberg.net

To contact the editor responsible for this story:
Kara Wetzel at
kwetzel@bloomberg.net