Banking, finance, and taxes
What a Huge Secondary Offering and Dividend Hike Mean for Gramercy
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Gramercy Property Trust Inc. (NYSE: GPT) announced that it will have a secondary offering, in conjunction with raising its dividend rate. The company is a real estate investment trust, or REIT, and its portfolio primarily consists of industrial and office properties.
The public offering is for a whopping 45 million shares, with an overallotment option for an additional 6.75 million shares. Morgan Stanley, Bank of America Merrill Lynch, J.P. Morgan and RBC Capital Markets are acting as underwriters for the offering.
Gramercy’s float prior to this offering was 102.23 million shares, according to Yahoo. The company’s SEC filing states that some 171,953,595 common shares will be outstanding after this offering, or some 178,703,595 shares if the overallotment is exercised in full. In short, this is a massive secondary offering, based on the shares being sold versus the number of shares outstanding.
In the company’s press release, the use of proceeds was detailed as:
The Company intends to use a portion of the net proceeds of the offering to repay outstanding borrowings under its revolving credit facility, to fund a portion of the cash purchase price for the previously announced acquisition of a portfolio of 12 single-tenant net lease assets, and to fund the cash purchase price for the other ten properties it currently has under contract to acquire.
The board of directors also declared a fourth quarter 2014 dividend of $0.05 per share, which is an increase of roughly 43% from the previous quarter’s dividend. This new dividend will be payable on January 15, 2015, for holders as of the close of business on December 31, 2014.
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The preferred stock dividend was also increased:
The Board of Directors also declared a dividend on the 7.125% Series B Cumulative Redeemable Preferred Stock from and including the original issue date to and including December 31, 2014 in the amount of $0.67292 per share, payable on December 31, 2014 to preferred stockholders of record as of the close of business on December 15, 2014.
Gramercy announced its outlook for 2015 as the expected core funds from operations of $0.45 to $0.50. This assumes the contribution from asset management business of approximately $4.4 million net of tax — an effective tax rate of 36%. Management and general administrative expenses are expected to be roughly $17 million in 2015. Finally, this assumes that 2015 acquisitions have an aggregate gross purchase price of $600 million to $900 million.
In response to the announcements, the share price fell nearly 3% to $5.60 in premarket trading. The stock has a consensus analyst price target of $7.05 and a 52-week trading range of $4.96 to $6.46. The market cap is about $716 million.
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