Gramercy Capital Corp. Announces Completion of Strategic Review, New Investment Strategy and New CEO Gordon F. DuGan
NEW YORK--(BUSINESS WIRE)--
Gramercy Capital Corp. (NYSE: GKK) today announced that its Board
of Directors has, following an extensive review of strategic
alternatives, approved a new investment strategy for the Company and has
appointed Gordon F. DuGan as the Company's new Chief Executive Officer.
The Board of Directors launched its strategic review in response to the
changes in market conditions that have affected the Company and its
peers. While conducting the review, at the Board's direction, the
Company implemented a series of initiatives for the purpose of
preserving capital, enhancing liquidity and reducing or eliminating
contingent liabilities. These initiatives, notably including the
resolutions of the Goldman Mortgage and Mezzanine Loans and the
negotiation of a long-term Asset Management Services Agreement with KBS
Acquisition Sub, LLC, a wholly owned subsidiary of KBS Real Estate
Investment Trust, Inc., have been successfully completed. In the course
of the review, the Board of Directors explored a wide variety of
strategic alternatives, including extensive discussions with parties
with respect to a variety of potential strategic transactions.
NEW BUSINESS STRATEGY
Following its review, the Board concluded that the most appropriate
alternative available to the Company is to remain independent and to
focus on building value by deploying the Company's capital into
income-producing net leased real estate. The new investment criteria
will focus on single tenant net lease investments with durable credits
across a wide variety of industries in markets with strong demographics.
The investments initially will be funded from existing financial
resources. Subsequently, subject to market conditions, the Company
expects to seek to raise additional debt and/or equity capital to
support further growth.
NEW MANAGEMENT TEAM
Gordon F. DuGan will become the Company's Chief Executive Officer and a
member of the Company's Board of Directors on July 1, 2012.
Mr. DuGan has over 20 years of senior management experience in the real
estate industry. For five years, he was CEO of W.P. Carey & Co. LLC
(NYSE: WPC), or W.P. Carey, a global investment firm with approximately
$12.5 billion of assets under management, and considered to be one of
the leading providers of net lease financing for corporate properties.
Prior to that, Mr. DuGan served in various capacities with W.P. Carey,
including President and Head of Investments. During his tenure as
President and CEO, W.P. Carey's assets grew from approximately $2.5
billion to approximately $10.0 billion. He is a former member of the
Board of NAREIT and has also appeared in numerous media outlets,
including Forbes, Institutional Investor, The Wall Street Journal,
BusinessWeek, Bloomberg and CNNfn. Mr. DuGan received his B.S. in
Economics from the Wharton School at the University of Pennsylvania.
During his first 60 days, in addition to beginning the implementation of
the Company's new investment strategy, Mr. DuGan, along with the
Company's Board, will lead an operational review of the Company's
existing assets and operations with the goal of reducing the current
cost structure, further strengthening the balance sheet and determining
which legacy assets and operations complement the new investment
strategy. The Company expects to provide an update on its implementation
of the investment strategy and this operational review in connection
with its second quarter 2012 financial results, which will be released
no later than August 9, 2012, and expects to further communicate the new
strategy through an investor presentation to be posted to the Company's
website no later than September 30, 2012.
"We are very excited to be joining our net lease expertise with the
Gramercy Finance and Realty platforms," said Mr. DuGan. "Gramercy is
well positioned to capitalize on opportunities now emerging in the
marketplace. With the addition of broader net lease expertise being
brought on, we plan to diversify and further strengthen the investment
platform already established. I look forward to working with the
Gramercy team as we move forward to build a great company."
Joining Mr. DuGan are Benjamin P. Harris, as President, and Nicholas L.
Pell, as Managing Director, as new members of senior management. Messrs.
DuGan, Harris and Pell have worked together for the last five years.
Mr. Harris was the head of U.S. Investments for W.P. Carey and has
over 10 years of experience sourcing, underwriting and closing
sale-leaseback and net lease transactions. Mr. Harris graduated with
joint degrees from the University of King's College and Dalhousie
University in Canada. He is a CFA charter holder.
Mr. Pell was a Director in the Investment Department of W.P. Carey and
has over five years of experience. Prior to joining W.P. Carey, he
spent three years as a Director of Business Development at Sony
Pictures Entertainment. Before he worked at Sony, he spent three years
as an analyst at J.P. Morgan & Co., including two years in the mergers
and acquisitions group. Mr. Pell received a B.A. in Economics from
Duke University and an M.B.A. from Harvard Business School.
In connection with Mr. DuGan's agreement to serve as our Chief Executive
Officer, Mr. DuGan also agreed to purchase 1,000,000 shares of the
Company's common stock from the Company on June 29, 2012, for an
aggregate purchase price of $2,520,000, or $2.52 per share. The per
share purchase price is equal to the closing price of the Company's
common stock on the New York Stock Exchange on the day prior to the date
Mr. DuGan entered into the subscription agreement with the Company.
APPOINTMENT OF LEAD INDEPENDENT DIRECTOR
Allan Baum, one of our directors, has been appointed as lead independent
director of the Board of Directors.
EMPLOYMENT AGREEMENTS AND EQUITY COMPENSATION
Messrs. DuGan, Harris and Pell have each entered into five-year
employment agreements with the Company and in connection therewith, the
Company agreed to grant equity awards to these executives on July 1,
2012, which are intended to primarily be performance-based and to align
the economic interests of these executives with value creation to
stockholders. These equity awards will be granted pursuant to the
exemption from Section 303A.08 of the New York Stock Exchange Listed
Company Manual for employment inducement awards and, in accordance with
the requirements for such exemption, the material terms of these awards
are described below.
The equity awards that will be granted to Messrs. DuGan, Harris and Pell
will consist of (i) 250,000, 150,000 and 100,000 restricted shares of
the Company's common stock, or Restricted Stock, respectively, subject
to vesting in five equal annual installments, (ii) 750,000, 450,000 and
300,000 restricted stock units, or RSUs, respectively, subject to
vesting in five equal annual installments as well as performance-based
vesting if the Company achieves certain funds from operations hurdles or
a stock price hurdle ranging from $3.00 per share to $5.00 per share,
and (iii) LTIP Units in GKK Capital LP, the Company's operating
partnership, or LTIP Units, granted pursuant to a long-term
outperformance plan whereby the executives, in the aggregate, may earn a
range of amounts from $4 million if the Company's stock price over a
four-year period equals a minimum hurdle of $5.00 per share (less any
dividends paid during the performance period) up to $20 million if the
Company's stock price equals or exceeds $9.00 per share (less any
dividends paid during the performance period) at the end of the
performance period. Any LTIP Units earned under the outperformance plan
will remain subject to vesting, with 50% of any LTIP Units earned
vesting on June 30, 2016 and the remaining 50% vesting on June 30, 2017.
Messrs. DuGan, Harris and Pell will be granted LTIP Unit awards
representing awards of up to $10 million of LTIP Units, $6 million of
LTIP Units and $4 million of LTIP Units, respectively. For further
detail regarding the equity compensation described above, see the
Company's Current Report on Form 8-K which the Company expects to file
with the Securities and Exchange Commission subsequent to this press
In accordance with the end of their employment contracts, Roger M. Cozzi
will be stepping down as Chief Executive Officer and Timothy J. O'Connor
will be stepping down as President. Mr. Cozzi will complete his service
as Chief Executive Officer and a director of the Company as of June 30,
2012. Mr. O'Connor will remain with the Company in his current position
through July 31, 2012 (during which time Mr. Harris will serve as Chief
Investment Officer) and has then agreed to serve as a consultant through
October 2012. Allan Baum, Chairman of the special committee of the Board
said, "On behalf of the Board and the entire organization, I thank Roger
and Tim for their contributions and leadership in steering the Company
through an especially difficult time. The efforts led by Roger and Tim
over the last three and a half years, including the resolution of
Gramercy Realty and other debt obligations and retention of liquidity,
have provided the Company with a strong balance sheet upon which we can
pursue the new investment strategy and plans to grow the Company that we
have announced today."
Gramercy Capital Corp. is a self-managed integrated commercial real
estate finance and property management and investment company whose
Gramercy Finance division focuses on the direct origination, acquisition
and portfolio management of whole loans, bridge loans, subordinate
interests in whole loans, mezzanine loans, preferred equity, commercial
mortgage-backed securities and other real estate securities, and whose
Gramercy Realty division focuses on third party management and, to a
lesser extent, ownership and management of commercial properties leased
primarily to regulated financial institutions and affiliated users
throughout the United States. The Company is headquartered in New York
City and has regional investment and portfolio management offices in
Jenkintown, Pennsylvania, Charlotte, North Carolina, and St. Louis,
To review the Company's latest news releases and other corporate
documents, please visit the Company's website at www.gkk.com
or contact Investor Relations at 212-297-1000.
This press release contains forward-looking information based upon the
Company's current best judgment and expectations. Actual results could
vary from those presented herein. The risks and uncertainties associated
with forward-looking information in this release include, but are not
limited to, factors that are beyond the Company's control, including the
implementation of the new business strategy, the integration of the new
management team, the results of the operational review and those factors
listed in the Company's Annual Report on Form 10-K and in the Company's
Quarterly Reports on Form 10-Q. The Company undertakes no obligation to
update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. For further information,
please refer to the Company's filings with the SEC.
Gramercy Capital Corp.
Chief Financial Officer
W. Clark, 212-297-1000
M. Rivera, 212-297-1000
Source: Gramercy Capital Corp.
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