Gramercy Property Trust (NYSE:GPT) leads the sector rankings of mixed industrial/office REITs; that is no secret. They did not even disclose all the data needed for peer comparison. Because of its aggressive acquisition program, the company has been ahead in nearly all growth metrics. The question is what we should expect of their proposed merger with Chambers Street Properties (NYSE:CSG). Gramercy has recently scheduled a special meeting to vote on the merger.
This 100 percent stock transaction — called a “merger of equals” — is set to maintain a split between industrial and office properties in their portfolios, although upon closing, they want to change. The merged company plans to sell suburban offices in certain markets and keep the office footprint near 25 percent. They also aim to maintain/reduce the leverage ratio as both businesses present total debt-to-capitalization just over 40 percent, the current one certainly being in line with the sector average; a more conservative target would slow down the merged company’s growth.
The managements of both companies say the new entity will endure market cycles better for the portfolio’s diverseness and robustness. The merger will also make the company more prominent — it will certainly be in the sector’s top three — the component companies both being small for their sector in terms of market capitalization.
Although 56 percent of Chambers’ shareholders will own the new share pool, the new company will carry Gramercy’s name and ticker, and its CEO and chairman will be the current officeholders of Gramercy and Chambers respectively. Each company will choose five board members.
Gramercy-Chambers probably will not grow as much as Gramercy, but will likely continue leading the charts. Chambers placed second in the ranking, so this is really the combination of the sector’s two best performing REITs operationally.
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