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Gramercy Property Trust Reports Second Quarter 2018 Financial Results

July 30, 2018

NEW YORK--(BUSINESS WIRE)--Jul 30, 2018--Gramercy Property Trust (NYSE:GPT) today reported financial results for the second quarter of 2018.

As a result of the announcement of the Company’s proposed merger with affiliates of Blackstone Real Estate Partners VIII L.P. (“Blackstone”), Gramercy Property Trust will not conduct a conference call and webcast to discuss results for the quarter.

Operating Results:

Second Quarter 2018 Highlights

Announced a definitive agreement with affiliates of Blackstone, under which Blackstone has agreed to acquire all of the Company’s common shares for $27.50 per share in cash, plus, if the transaction is consummated after October 15, 2018, a per diem amount of approximately $0.004 per share for each day from October 15, 2018 until (but not including) the closing date. Disposed of eight assets and one vacant land parcel for aggregate gross proceeds of $20.0 million. Acquired two industrial properties for a purchase price of $22.2 million.

Summary

Gramercy Property Trust (NYSE: GPT) today reported net income to common shareholders of $22.9 million, or $0.14 per diluted common share, for the three months ended June 30, 2018. For the second quarter of 2018, the Company generated NAREIT defined funds from operations (“FFO”) of $93.2 million, or $0.56 per diluted common share. The Company also reported diluted Core FFO of $84.1 million, or $0.50 per diluted common share, during the quarter. The Company generated diluted adjusted funds from operations (“AFFO”) of $79.8 million, or $0.48 per diluted common share, during the quarter. The Company had 160,792,820 common shares issued and outstanding as of June 30, 2018 and had 166,771,937 diluted weighted average common shares and units outstanding for its non-GAAP financial measure calculations for the three months ended June 30, 2018. A reconciliation of FFO, Core FFO and AFFO to net income available to common shareholders is included in this press release.

For the second quarter of 2018, the Company recognized total revenues of approximately $145.6 million, a decrease of 2.6% over total revenues of $149.5 million reported in the prior quarter.

As of June 30, 2018, the Company owned 355 properties containing an aggregate of approximately 81.1 million rentable square feet with 96.7% occupancy and an ABR weighted average remaining lease term of 7.2 years.

Merger with Blackstone

On May 6, 2018, the Company and GPT Operating Partnership L.P. (the “Operating Partnership”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with BRE Glacier Parent L.P. (“Parent”), BRE Glacier L.P. (“Merger Sub I”), and BRE Glacier Acquisition L.P. (“Merger Sub II”), all of which are affiliates of Blackstone Real Estate Partners VIII L.P., an affiliate of The Blackstone Group L.P. Pursuant to the Merger Agreement, Merger Sub II will merge with, and into the Operating Partnership and the Company will merge with and into Merger Sub I (collectively, the “Mergers”). Following the Mergers, Merger Sub I and the Operating Partnership will continue as the surviving entities and the separate existence of Merger Sub II and the Company will cease. The Merger Agreement, the Mergers, and the other transactions contemplated thereby were unanimously approved by the Company’s board of trustees. Pursuant to the Merger Agreement, the closing of the Mergers will take place on the third business day after satisfaction of waiver of the conditions to the Merger (other than those conditions that by their nature are to be satisfied or waived at the closing, but subject to the satisfaction or waiver of such conditions) or at such other date as mutually agreed to by the parties to the Merger Agreement; however, Parent may on one or more occasions elect to delay the closing to a date that is on or prior to October 10, 2018.

Pursuant to the terms and conditions in the Merger Agreement, each of the Company’s common shares that is issued and outstanding immediately prior to the effective time of the Mergers will automatically be converted into the right to receive an amount in cash equal to $27.50, plus, if the Mergers are consummated after October 15, 2018, a per diem amount of approximately $0.004 for each day from and after such date until, but not including, the closing date (the “Merger Consideration”) without interest. Each of the Company’s 7.125% Series A Preferred Shares issued and outstanding immediately prior to the effective time of the Mergers will be redeemed as of the closing date of the Mergers through the payment of an amount in cash, without interest, equal to $25.00 plus accrued and unpaid dividends, if any, until, but not including, the closing date.

In addition, each outstanding Class A Unit of the Operating Partnership, or Class A Partnership Unit, that is issued and outstanding immediately prior to the effective time of the Mergers (other than certain specified Class A Partnership Units) will automatically be converted into, and will be canceled in exchange for, the right to receive an amount in cash equal to the Merger Consideration, without interest, or in lieu of receiving the Merger Consideration, each qualifying holder of a Class A Partnership Unit may elect to receive one newly created Series B Cumulative Preferred Unit in the surviving partnership for each OP Unit of such holder. Each unvested Company LTIP Unit (as defined in the Merger Agreement) will vest pursuant to its terms on the day prior to the effective time of the Mergers, and each vested Company LTIP Unit (including those that vest on the day prior to the effective time of the Mergers) will convert into a Class A Partnership Unit immediately prior to the effective time of the Mergers and be treated as a Class A Partnership Unit as described above.

The Merger Agreement contains customary representations, warranties and covenants, including, among others, covenants by the Company to, in all material respects, use commercially reasonable efforts to carry on its business in the ordinary course of business consistent with past practice, subject to certain exceptions, during the period between the execution of the Merger Agreement and the consummation of the Mergers. The obligations of the parties to consummate the Mergers are not subject to any financing condition or the receipt of any financing by Parent, Merger Sub I, or Merger Sub II.

The Mergers and the other transactions contemplated by the Merger Agreement must be approved by the affirmative vote of the holders of common shares entitled to cast not less than a majority of all the votes entitled to be cast on the matter at a special meeting of shareholders to be held on August 9, 2018 at 9:30 a.m., New York time, at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York, 10019. Please refer to the proxy statement filed with the SEC on June 27, 2018, which is available on the Company’s website www.gptreit.com for more information.

Property Dispositions

During the second quarter of 2018, the Company disposed of eight assets and one vacant land parcel for aggregate gross proceeds of $20.0 million.

The Company recorded net gains on disposals of $4.5 million for the assets sold during the quarter.

Second quarter 2018 property dispositions are summarized in the chart below:

Property Acquisitions

In the second quarter of 2018, the Company acquired two industrial properties in Orlando MSA and Atlanta MSA for a purchase price of $22.2 million.

Second quarter 2018 property acquisitions are summarized in the chart below:

Build-to-suit and development activity during the quarter is summarized in the charts below:

1. Investment includes costs accrued as of June 30, 2018.

Joint Ventures

E-Commerce

During the second quarter of 2018, the E-Commerce JV acquired two additional properties from its six asset seed portfolio for a pro rata purchase price of approximately $92.4 million.

Europe

During the second quarter of 2018, the Fund acquired eleven properties for a purchase price of $235.2 million (€216.9 million). The carrying value of the Company’s investment in the Fund was $27.0 million as of June 30, 2018.

Strategic Office Partners

On July 18, 2018, the Company sold its 25% interest in Strategic Office Partners for gross proceeds of $45.4 million, resulting in a profit to the Company of approximately $12.0 million, net of selling costs. The transaction valued the joint venture’s assets at $388.0 million. The carrying value of the Company’s investment in Strategic Office Partners was $31.5 million at June 30, 2018.

Corporate

As of June 30, 2018, the Company maintained approximately $468.0 million of liquidity, as compared to approximately $599.4 million of liquidity reported at the end of the prior quarter. Liquidity includes $59.7 million of unrestricted cash as compared to approximately $42.0 million reported at the end of the prior quarter. As of June 30, 2018, there were $441.8 million of borrowings outstanding under the revolving credit facility.

General and administrative (“G&A”), expenses were $8.9 million for the quarter ended June 30, 2018 compared to $9.7 million in the prior quarter. G&A expenses included non-cash share-based compensation costs of approximately $1.9 million and $0.5 million of transaction related costs for the quarter ended June 30, 2018, compared to non-cash share-based compensation costs of approximately $1.9 million and $0.9 million of transaction costs for the quarter ended March 31, 2017. Transaction costs in the second quarter of 2018 were primarily attributable to the E-Commerce JV acquisitions.

Quarterly Distributions

The Company’s Board of Trustees previously declared a second quarter 2018 dividend of $0.375 per share of common stock. The second quarter dividend was paid on July 16, 2018 to shareholders of record at the close of business on June 29, 2018. The Company also paid a second quarter 2018 dividend on its 7.125% Series A Cumulative Redeemable Preferred Shares in the amount of $0.44531 per share on April 2, 2018 to preferred shareholders of record as of March 19, 2018. Pursuant to the terms of the merger agreement with Blackstone, the Company will not pay dividends on the common shares for any quarter thereafter, provided that if the Mergers are completed after October 15, 2018, shareholders will receive a per diem amount of approximately $0.004 per share for each day from October 15, 2018 until, but not including, the closing date.

Company Profile

Gramercy Property Trust is a leading global investor and asset manager of commercial real estate. The Company specializes in acquiring and managing high quality, income producing commercial real estate leased to high quality tenants in major markets in the United States and Europe.

To review the Company’s latest news releases and other corporate documents, please visit the Company’s website at www.gptreit.com or contact Investor Relations at 888-686-0112.

Disclaimer

Non GAAP Financial Measures

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