Gramercy Capital's Further Downside Risks

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 |  Includes: CLI, FCE, GPT, ICF, IYR, RWR, SLG, VNQ
by: Judy Weil

Gramercy Capital (GKK) is a REIT that specializes in mortgage and real estate loans. A slew of REITs have been reporting in the last two weeks, and several have mentioned outstanding loans and joint ventures with Gramercy. Gramercy has given some of them extensions on their loans, but it doesn't appear to be from a position of strength.

Shares have been in a downtrend since May 2008 when they were still trading around $20. GKK closed at $1.05 on Friday; there could be more downside to go.

From SL Green Realty Corp.'s Q408 conference call: (NYSE:SLG)

In light of current market conditions, we decided to write-down SLG’s investment in GKK stock and write-off our investment in the manager. As GKK’s largest investor, we have seen our stake rise and fall over the past five years, but we have concluded that after much effort, it was appropriate to take the write-down in our investment with limited near-term market relief in sight.

Office REIT Mack-Cali Realty Corp.'s Q408 conference call: (NYSE:CLI)

We have taken an impairment charge [on our joint venture with SL Green]... There is a mortgage coming due May 9th through Gramercy Capital (GKK) of slightly in excess of $90 million... Our partner has elected, which is within its purview, not to further invest capital in the properties... Given that fact, we have elected not to invest further capital in those properties.

Q: Looking at the Mack, Gale, Green financial statements correctly, is it basically a $277 million of total liabilities on about 880,000 square feet of assets?

A: Yes.

Q: Sounds like a lender is in trouble, doesn't it?

A: I render no opinion on that. I’m just presenting the facts.

NY-based journal Gothamist reports:

Developer Bruce Ratner's embattled, $4.2 billion plan to build a Nets basketball arena, office towers and thousands of apartments in Brooklyn, New York, is staying alive, at least for now. This month was critical for Ratner because a $177 million loan from Gramercy Capital Corporation for the 22-acre property was due.

Ratner's company Forest City (FCE) has just bought more time from Gramercy Capital, working out a deal to make a $15 million payment immediately, as well as additional large payments in the future, in return for a two-year extension.

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