EX-99.1 2 v242569_ex99-1.htm EXHIBIT 99.1 Unassociated Document
 
   
Exhibit 99.1
     
 
INDEX TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements
1
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2011
2
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Nine Months Ended September 30, 2011
4
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2010
5
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2009
6
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 2008
7
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
8
 
 
 

 
 
GRAMERCY CAPITAL CORP.
 
Introduction to Unaudited Pro Forma Condensed Consolidated Financial Statements
 
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet as of September 30, 2011, reflects our financial position as if the transfer and sales of properties described in the notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements were completed on September 30, 2011. The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the nine months ended September 30, 2011, and the years ended December 31, 2010, 2009 and 2008 present our results of operations as if the transfer and sales of properties described in the notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements were completed on January 1, 2008.  The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the nine months ended September 30, 2011 and the year ended December 31, 2010 also present our results of operations as if the interim management agreement described in the notes to the Unaudited Pro Forma Condensed Consolidated Statements of Operations was effective January 1, 2010. These Unaudited Pro Forma Condensed Consolidated Financial Statements should be read in connection with our financial statements for the nine months ended September 30, 2011, included in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, and our financial statements for the years ended December 31, 2010, 2009 and 2008 included in our Annual Report on Form 10-K for the year ended December 31, 2010.
 
The Unaudited Pro Forma Condensed Consolidated Financial Statements reflect the transfer of interests in entities owning 867 properties and certain other assets by December 15, 2011 to KBS Acquisition Sub, LLC, or KBS, pursuant to a Settlement Agreement, dated as of September 1, 2011, or the Settlement Agreement.  These Unaudited Pro Forma Condensed Consolidated Financial Statements are provided for informational purposes only and upon completion of these transfers, our financial position and results of our operations may be significantly different than what is presented in these Unaudited Pro Forma Condensed Consolidated Financial Statements.  In the opinion of management, all adjustments necessary to reflect the effects of the transactions described in the notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements have been included in the Unaudited Pro Forma Condensed Consolidated Financial Statements. These Unaudited Pro Forma Condensed Consolidated Financial Statements have been prepared in accordance with SEC regulations and are not intended to represent our financial position or results of operations that would have actually occurred had the transfers under the Settlement Agreement been completed on January 1, 2008 or if the interim management agreement was effective January 1, 2010; nor are they intended to project our results of operations as of any future date or for any future period.
 
Unaudited Pro Forma Condensed Consolidated Financial Statements are not necessarily indicative of the expected results of operations for any future period.  Differences will result if the transfers of any of the properties we expect to be transferred are not completed as planned.  Differences could also result from, among other matters, future changes in our portfolio of investments, changes in interest rates, changes in our capital structure, changes in property level operating expenses, and changes in property level revenues, including rents expected to be received on leases in place or signed during and after 2011.  Consequently, amounts presented in the Unaudited Pro Forma Condensed Consolidated Financial Statements related to these transactions are likely to be different than actual future results.
 
 
1

 
 
GRAMERCY CAPITAL CORP.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
September 30, 2011
(Dollars in thousands, except share and per share data)
 
         
Pro Forma Adjustments
       
   
Historical (A)
   
Completed Transfers to Lenders (B)
   
Pending Transfers to Lenders (C)
   
Adjustments
   
Pro Forma
 
Assets:
                             
Real estate investments, at cost:
                             
Land
  $ 447,653     $ (95,498 )   $ (335,372 )   $ -     $ 16,783  
Building and improvements
    1,414,051       (425,137 )     (942,812 )     -       46,102  
Other real estate investments
    20,318       -       -       -       20,318  
Less: accumulated depreciation
    (157,331 )     50,493       103,906       -       (2,932 )
Total real estate investments, net
    1,724,691       (470,142 )     (1,174,278 )     -       80,271  
                                         
Cash and cash equivalents
    191,238       (7,388 )     (29,228 )     -       154,622  
Restricted cash
    128,262       (22,929 )     (96,592 )     -       8,741  
Pledged government securities, net
    89,375       (85,276 )     (4,099 )     -       -  
Loans and other lending investments, net
    891       -       -       -       891  
Investment in joint ventures
    898       -       (340 )     -       558  
Tenant and other receivables, net
    37,183       (12,391 )     (20,871 )     -       3,921  
Derivative instruments, at fair value
    8       -       -       -       8  
Acquired lease assets, net of accumulated amortization
    245,577       (53,904 )     (186,422 )     -       5,251  
Deferred costs, net of accumulated amortization
    6,013       (1,280 )     (2,534 )     -       2,199  
Other assets
    17,775       (4,297 )     (9,979 )     -       3,499  
Subtotal
    2,441,911       (657,607 )     (1,524,343 )     -       259,961  
                                         
Assets of Consolidated Variable Interest Entities ("VIEs"):
                                       
Real estate investments, at cost:
                                    -  
Land
    21,967       -       -       -       21,967  
Building and improvements
    4,100       -       -       -       4,100  
Less:  accumulated depreciation
    (234 )     -       -       -       (234 )
Total real estate investments, net
    25,833       -       -       -       25,833  
                                         
Cash and cash equivalents
    58       -       -       -       58  
Restricted cash
    59,088       -       -       -       59,088  
Loans and other lending investments, net
    1,182,432       -       -       -       1,182,432  
Commercial mortgage backed securities - available-for-sale
    731,305       -       -       -       731,305  
Assets held-for-sale, net
    9,957       -       -       -       9,957  
Derivative instruments, at fair value
    927       -       -       -       927  
Accrued interest
    29,164       -       -       -       29,164  
Deferred costs, net of accumulated amortization
    10,324       -       -       -       10,324  
Other assets
    23,811       -       -       -       23,811  
Subtotal
    2,072,899       -       -       -       2,072,899  
                                         
Total assets
  $ 4,514,810     $ (657,607 )   $ (1,524,343 )   $ -     $ 2,332,860  
 
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
 
 
2

 
 
GRAMERCY CAPITAL CORP.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
September 30, 2011
(Dollars in thousands, except share and per share data)
 
         
Pro Forma Adjustments
       
   
Historical (A)
   
Completed Transfers to Lenders (B)
   
Pending Transfers to Lenders (C)
   
Adjustments
   
Pro Forma
 
Liabilities and Stockholders' Equity:
                             
Liabilities:
                             
Mortgage notes payable
  $ 1,201,478     $ (333,104 )   $ (868,374 )   $ -     $ -  
Mezzanine loans payable
    462,464       (264,147 )     (198,317 )     -       -  
Total secured and other debt
    1,663,942       (597,251 )     (1,066,691 )     -       -  
                                         
Accounts payable and accrued expenses
    44,690       (14,516 )     (17,658 )     -       12,516  
Dividends payable
    21,485       -       -       -       21,485  
Accrued interest payable
    27,652       (13,520 )     (14,132 )     -       -  
Deferred revenue
    37,709       (10,681 )     (23,901 )     -       3,127  
Below market lease liabilities, net of accumulated amortization
    580,864       (107,155 )     (470,384 )     -       3,325  
Leasehold interests, net of accumulated amortization
    13,914       -       (13,914 )     -       -  
Liabilities related to assets held-for-sale
    18       -       -       -       18  
Total liabilities
    2,390,274       (743,123 )     (1,606,680 )     -       40,471  
                                         
Non-Recourse Liabilities of Consolidated VIEs:
                                       
Collateralized debt obligations
    2,537,489       -       -       -       2,537,489  
Total secured and other debt
    2,537,489       -       -       -       2,537,489  
                                         
Accounts payable and accrued expenses
    5,000       -       -       -       5,000  
Accrued interest payable
    2,960       -       -       -       2,960  
Deferred revenue
    100       -       -       -       100  
Derivative instruments, at fair value
    176,277       -       -       -       176,277  
Other liabilities
    774       -       -       -       774  
Subtotal
    2,722,600       -       -       -       2,722,600  
                                         
Total liabilities
    5,112,874       (743,123 )     (1,606,680 )     -       2,763,071  
                                         
Commitments and contingencies
    -       -       -       -       -  
                                         
Equity:
                                       
Common stock, par value $0.001, 100,000,000 shares authorized, 50,517,365 shares issued and outstanding at September 30, 2011
    50       -       -       -       50  
Series A cumulative redeemable preferred stock, par value $0.001, liquidation preference $88,146, 4,600,000 shares authorized, 3,525,822 shares issued and outstanding at September 30, 2011.
    85,235       -       -       -       85,235  
Additional paid-in-capital
    1,080,093       -       -       -       1,080,093  
Accumulated other comprehensive loss
    (417,426 )     -       -       -       (417,426 )
Accumulated deficit
    (1,346,919 )     85,516       83,998       -       (1,177,405 )
Total Gramercy Capital Corp. stockholders' equity
    (598,967 )     85,516       83,998       -       (429,453 )
Non-controlling interest
    903       -       -       -       903  
Total Equity
    (598,064 )     85,516       83,998       -       (428,550 )
Total liabilities and equity
  $ 4,514,810     $ (657,607 )   $ (1,522,682 )   $ -     $ 2,334,521  
 
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
 
 
3

 
 
GRAMERCY CAPITAL CORP.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Nine Months Ended September 30, 2011
(Amounts in thousands, except share and per share data)
 
           
Pro Forma Adjustments
           
   
Historical (D)
     
Completed Transfers to Lenders (E)
   
Pending Transfers to Lenders (F)
   
Adjustments
     
Pro Forma
   
                                     
Revenues
                                   
Rental revenue
  $ 168,861       $ (43,423 )   $ (119,101 )   $ -       $ 6,337    
Investment income
    119,444         -       -       2,745  
(G)
    122,189    
Operating expense reimbursements
    75,810         (36,761 )     (37,632 )     -         1,417    
Other income
    38,293         (61 )     (1,854 )     10,755  
(H)
    47,133    
Total revenues
    402,408         (80,245 )     (158,587 )     13,500         177,076    
                                               
Expenses
                                             
Property operating expenses
                                             
Real estate taxes
    24,648         (8,172 )     (14,598 )     -         1,878    
Utilities
    24,886         (10,910 )     (12,091 )     -         1,885    
Ground rent and leasehold obligations
    10,988         (1,568 )     (8,850 )     -         570    
Property and leasehold impairments
    396         -       (396 )     -         -    
Direct billable expenses
    2,617         (530 )     (2,058 )     -         29    
Other property operating expenses
    48,350         (19,599 )     (23,655 )     -         5,096    
Total property operating expenses
    111,885         (40,779 )     (61,648 )     -         9,458    
                                               
Other-than-temporary impairment
    30,752         -       -       -         30,752    
Portion of impairment recognized in other comprehensive loss
    (4,014 )       -       -       -         (4,014 )  
Net Impairment recognized in earnings
    26,738         -       -       -         26,738    
Interest expense
    140,038         (12,215 )     (66,893 )     -         60,930    
Depreciation and amortization
    43,168         (11,536 )     (29,664 )     -         1,968    
Management, general and administrative
    24,524         -       -       -         24,524    
Provision for loan loss
    46,482         -       -       -         46,482    
Total expenses
    392,835         (64,530 )     (158,205 )     -         170,100    
                                               
Income from continuing operations before equity in net income (loss) of joint ventures, provision for taxes
    9,573         (15,715 )     (382 )     13,500         6,976    
                                               
Equity in net income (loss) of joint ventures
    (1,806 )       -       1,896       -         90    
                                               
Income from continuing operations before provision for taxes and gain on extinguishment of debt
    7,767         (15,715 )     1,514       13,500         7,066    
                                               
Gain on extinguishment of debt
    14,526         -       -       -         14,526    
Provision for taxes
    (73 )       -       -       -         (73 )  
                                               
Net income from continuing operations
  $ 22,220       $ (15,715 )   $ 1,514     $ 13,500       $ 21,519    
                                               
Basic earnings per share:
                                             
Net income from continuing operations, after preferred dividends
  $ 0.34  
 (I)
                            $ 0.32  
 (J)
                                               
Diluted earnings per share:
                                             
Net income from continuing operations, after preferred dividends
  $ 0.33  
 (I)
                            $ 0.32  
 (J)
                                               
Basic weighted average common shares outstanding
    50,125,875                                   50,125,875    
                                               
Diluted weighted average common shares and common share equivalents outstanding
    50,708,486                                   50,708,486    
 
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
 
 
4

 
 
GRAMERCY CAPITAL CORP.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2010
(Amounts in thousands, except share and per share data)
 
           
Pro Forma Adjustments
           
   
Historical (K)
     
Completed Transfers to Lenders (L)
   
Pending Transfers to Lenders (M)
   
Adjustments
     
Pro Forma
   
                                     
Revenues
                                   
 Rental revenue
  $ 311,069       $ (139,996 )   $ (165,983 )   $ -       $ 5,090    
 Investment income
    166,642         -       -       4,231  
 (N)
    170,873    
 Operating expense reimbursements
    114,304         (61,711 )     (50,500 )     -         2,093    
 Other income
    15,133         (3,862 )     (2,308 )     20,537  
 (O)
    29,500    
Total revenues
    607,148         (205,569 )     (218,791 )     24,768         207,556    
                                               
Expenses
                                             
 Property operating expenses:
                                             
 Real estate taxes
    36,822         (16,445 )     (18,495 )     -         1,882    
 Utilities
    39,297         (23,487 )     (13,940 )     -         1,870    
 Ground rent and leasehold obligations
    19,754         (7,043 )     (11,931 )     -         780    
 Property and leasehold impairments
    913,648         (429,353 )     (482,963 )     -         1,332    
 Direct billable expenses
    6,543         (1,590 )     (4,928 )     -         25    
 Other property operating expenses
    81,073         (41,158 )     (27,039 )     -         12,876    
 Total property operating expenses
    1,097,137         (519,076 )     (559,296 )     -         18,765    
                                               
 Interest expense
    198,107         (33,660 )     (79,266 )     -         85,181    
 Depreciation and amortization
    108,232         (49,600 )     (56,678 )     -         1,954    
 Management, general and administrative
    33,293         -       -       -         33,293    
 Impairment on loans held-for-sale and commercial mortgage-backed securities
    39,453         -       -       -         39,453    
 Impairment on business acquisition, net
    2,722         -       -       -         2,722    
 Provision for loan loss
    84,392         -       -       -         84,392    
Total expenses
    1,563,336         (602,336 )     (695,240 )     -         265,760    
                                               
Loss from continuing operations before equity in net loss of joint ventures and provision for taxes
    (956,188 )       396,767       476,449       24,768         (58,204 )  
                                               
Equity in net loss of joint ventures
    (4,139 )       -       2,884       -         (1,255 )  
                                               
Loss from continuing operations before provision for taxes, and gain on extinguishment of debt
    (960,327 )       396,767       479,333       24,768         (59,459 )  
                                               
Gain on extinguishment of debt
    19,443         -       -       -         19,443    
Provision for taxes
    (966 )       -       -       -         (966 )  
                                               
Net loss from continuing operations
  $ (941,850 )     $ 396,767     $ 479,333     $ 24,768       $ (40,982 )  
                                               
Basic earnings per share:
                                             
Net loss from continuing operations, net of non-controlling interest and after preferred dividends
  $ (18.77 )
 (P)
                            $ (0.72 )
 (Q)
                                               
Diluted earnings per share:
                                             
Net loss from continuing operations, net of non-controlling interest and after preferred dividends
  $ (18.77 )
 (P)
                            $ (0.72 )
 (Q)
                                               
Basic weighted average common shares outstanding
    49,923,930                                   49,923,930    
                                               
Diluted weighted average common shares and common share equivalents outstanding
    49,923,930                                   49,923,930    
 
  See accompanying notes to unaudited pro forma condensed consolidated financial statements.
 
 
5

 
 
GRAMERCY CAPITAL CORP.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2009
(Amounts in thousands, except share and per share data)
 
           
Pro Forma Adjustments
         
   
Historical (R)
     
Completed Transfers to Lenders (S)
   
Pending Transfers to Lenders (T)
   
Adjustments
   
Pro Forma
   
                                   
Revenues
                                 
 Rental revenue
  $ 318,075       $ (137,274 )   $ (177,616 )   $ -     $ 3,185    
 Investment income
    184,607         -       -       -       184,607    
 Operating expense reimbursements
    119,718         (63,594 )     (54,063 )     -       2,061    
 Other income
    4,688         (2,893 )     (507 )     -       1,288    
Total revenues
    627,088         (203,761 )     (232,186 )     -       191,141    
                                             
Expenses
                                           
 Property operating expenses:
                                           
 Real estate taxes
    39,539         (19,253 )     (18,806 )     -       1,480    
 Utilities
    41,833         (24,451 )     (15,915 )     -       1,467    
 Ground rent and leasehold obligations
    18,496         (6,644 )     (11,422 )     -       430    
 Property and leasehold impairments
    18,933         (8,294 )     (6,623 )     -       4,016    
 Direct billable expenses
    6,449         (1,102 )     (5,337 )     -       10    
 Other property operating expenses
    81,681         (42,585 )     (31,205 )     -       7,891    
 Total property operating expenses
    206,931         (102,329 )     (89,308 )     -       15,294    
                                             
 Interest expense
    229,493         (36,710 )     (81,979 )     -       110,804    
 Depreciation and amortization
    111,681         (51,308 )     (58,116 )     -       2,257    
 Management, general and administrative
    39,380         -       -       -       39,380    
 Management fees
    7,787         -       -       -       7,787    
 Impairment on loans held-for-sale and commercial mortgage-backed securities
    151,081         -       -       -       151,081    
 Provision for loan loss
    517,784         -       -       -       517,784    
Total expenses
    1,264,137         (190,347 )     (229,403 )     -       844,387    
                                             
Loss from continuing operations before equity in net income (loss) of joint ventures and provision for taxes
    (637,049 )       (13,414 )     (2,783 )     -       (653,246 )  
                                             
Equity in net income (loss) of joint ventures
    (2,524 )       -       2,637       -       113    
                                             
Loss from continuing operations before provision for taxes, and gain on extinguishment of debt
    (639,573 )       (13,414 )     (146 )     -       (653,133 )  
                                             
Gain on extinguishment of debt
    119,305         -       -       -       119,305    
Provision for taxes
    (2,495 )       -       -       -       (2,495 )  
                                             
Net loss from continuing operations
  $ (522,763 )     $ (13,414 )   $ (146 )   $ -     $ (536,323 )  
                                             
Basic earnings per share:
                                           
Net loss from continuing operations, net of non-controlling interest and after preferred dividends
  $ (10.68 )
 (U)
                          $ (10.95 )
 (V)
                                             
Diluted earnings per share:
                                           
Net loss from continuing operations, net of non-controlling interest and after preferred dividends
  $ (10.68 )
 (U)
                          $ (10.95 )
 (V)
                                             
Basic weighted average common shares outstanding
    49,854,174                                 49,854,174    
                                             
Diluted weighted average common shares and common share equivalents outstanding
    49,854,174                                 49,854,174    
 
  See accompanying notes to unaudited pro forma condensed consolidated financial statements.
 
 
6

 
 
GRAMERCY CAPITAL CORP.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2008
(Amounts in thousands, except share and per share data)
 
           
Pro Forma Adjustments
         
   
Historical (W)
     
Completed Transfers to Lenders (X)
   
Pending Transfers to Lenders (Y)
   
Adjustments
   
Pro Forma
   
                                   
Revenues
                                 
Rental revenue
  $ 222,045       $ (98,545 )   $ (121,912 )   $ -     $ 1,588    
Investment income
    254,821         -       -       -       254,821    
Operating expense reimbursements
    92,469         (49,234 )     (41,844 )     -       1,391    
Other income
    15,373         (2,286 )     (857 )     -       12,230    
Total revenues
    584,708         (150,065 )     (164,613 )     -       270,030    
                                             
Expenses
                                           
Property operating expenses:
                                           
Real estate taxes
    28,287         (13,883 )     (13,376 )     -       1,028    
Utilities
    31,419         (17,420 )     (12,810 )     -       1,189    
Ground rent and leasehold obligations
    13,260         (4,829 )     (8,265 )     -       166    
Direct billable expenses
    5,664         (1,805 )     (4,048 )     -       (189 )  
Other property operating expenses
    66,201         (29,117 )     (23,023 )     -       14,061    
Total property operating expenses
    144,831         (67,054 )     (61,522 )     -       16,255    
                                             
Interest expense
    256,607         (34,818 )     (75,012 )     -       146,777    
Depreciation and amortization
    66,688         (32,378 )     (34,087 )     -       223    
Management, general and administrative
    16,550         -       -       -       16,550    
Management fees
    30,299         -       -       -       30,299    
Incentive fee
    2,350         -       -       -       2,350    
Provision for loan loss
    97,853         -       -       -       97,853    
Total expenses
    615,178         (134,250 )     (170,621 )     -       310,307    
                                             
Loss from continuing operations before equity in net loss from joint ventures and provision for taxes
    (30,470 )       (15,815 )     6,008       -       (40,277 )  
                                             
Equity in net loss from joint ventures
    (2,432 )       -       2,092       -       (340 )  
                                             
Loss from continuing operations before provision for taxes, and gain on extinguishment of debt
    (32,902 )       (15,815 )     8,100       -       (40,617 )  
                                             
Gain on extinguishment of debt
    77,234         -       -       -       77,234    
Provision for taxes
    (53 )       -       -       -       (53 )  
                                             
Net income from continuing operations
  $ 44,279       $ (15,815 )   $ 8,100     $ -     $ 36,564    
                                             
Basic earnings per share:
                                           
Net income from continuing operations, net of non-controlling interest and after preferred dividends
  $ 0.73  
 (Z)
                          $ 0.58  
 (AA)
                                             
Diluted earnings per share:
                                           
Net income from continuing operations, net of non-controlling interest and after preferred dividends
  $ 0.73  
 (Z)
                          $ 0.58  
 (AA)
                                             
Basic weighted average common shares outstanding
    47,205,078                                 47,205,078    
                                             
Diluted weighted average common shares and common share equivalents outstanding
    47,330,182                                 47,330,182    
 
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
 
 
7

 

GRAMERCY CAPITAL CORP.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(Dollars in thousands)
 
Unaudited Pro Forma Condensed Consolidated Balance Sheet Adjustments as of September 30, 2011

(A)  
Historical financial information derived from Gramercy Capital Corp.’s Quarterly Report on Form 10-Q as of September 30, 2011.

(B)  
Represents the effect of our transfer of interests in entities owning 116 properties on December 1, 2011 to KBS pursuant to the Settlement Agreement. The effect of our previously completed transfers of interests in entities owning 317 properties on September 1, 2011 pursuant to the execution of the Settlement Agreement, our transfer of the Dana portfolio (15 properties) to its mortgage lender pursuant to the Deed In Lieu of Foreclosure Agreement dated July 29, 2011 and the sale of two properties to third parties in 2011 are reflected in our historical financial statements.

(C)  
Represents the effect of our pending transfers of interests in entities owning 434 Gramercy Realty properties and certain other assets to KBS pursuant to the Settlement Agreement.  As of September 30, 2011, the pending transfer of interests in entities owning 434 properties and certain other assets that have an aggregate carrying value of $1,524,343 and associated mortgage, mezzanine and other liabilities of $1,606,680. The certain other assets include, among other things, an investment in a joint venture that owns 52 properties.
 
Unaudited Pro Forma Condensed Consolidated Statement of Operations Adjustments for the Nine Months Ended September 30, 2011

(D)  
Historical financial information derived from Gramercy Capital Corp.’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2011.

(E)  
Represents the effect on our historical operations for the nine months ended September 30, 2011 of the transfer of interests in entities owning 116 properties on December 1, 2011 to KBS pursuant to the Settlement Agreement. The effect of our transfer of interests in entities owning 317 properties on September 1, 2011 pursuant to the execution of the Settlement Agreement, our transfer of the Dana portfolio (15 properties) to its mortgage lender pursuant to the Deed In Lieu of Foreclosure Agreement dated July 29, 2011 and the sale of two properties to third parties in 2011 were presented within discontinued operations on the historical financial statements.

(F)
Represents the effect of our pending transfers of interests in entities owning 434 Gramercy Realty properties and certain other assets to KBS pursuant to the Settlement Agreement.  The pending transfer of interests in entities owning 434 properties and certain other assets have been reflected as if the transfer had occurred on January 1, 2011.

(G)
Represents the investment income for the eight months ended August 31, 2011, on a $64,172 first mortgage loan as if the transfers had ocurred on January 1, 2011.  The borrowers under the mortgage loan are First States Investors DB I, L.P., First States Investors DB I B, L.P., First States Investors 4200, LLC, First States Investors DB I SP, L.P. and First States Investors DB I TRS, L.P., affiliates of Gramercy Capital Corp., and the lender was a subsidiary of Gramercy Capital Corp.  The investment income was previously eliminated in consolidation because it was an intercompany loan, but pursuant to the Settlement Agreement, it was assumed by KBS.

(H)
Represents the revenue that we would have earned based on the interim management agreement as if the interim management agreement was in place as of January 1, 2010.  The revenue includes the annual asset management fee of $10,000, the minimum threshold value participation fee of $3,500 over the term of the interim management agreement, and property management fees and reimbursement of costs received by First States Management Corp, a subsidiary of Gramercy Capital Corp., pursuant to the Settlement Agreement.  The property management fees and reimbursement of costs received by First States Management Corp were previously eliminated because they were intercompany revenue.

(I)
Net income from continuing operations in earnings per share calculations have been adjusted for $5,370 of accrued preferred stock dividends.

(J)
Net income from continuing operations in earnings per share calculations have been adjusted for $5,370 of accrued preferred stock dividends.
 
 
8

 
 
GRAMERCY CAPITAL CORP.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(Dollars in thousands)

Unaudited Pro Forma Condensed Consolidated Statement of Operations Adjustments for the Year Ended December 31, 2010

(K)
Historical financial information derived from Gramercy Capital Corp.’s Annual Report on Form 10-K for the year ended December 31, 2010.
 
 
(L)
Represents the effect on our historical operations for the year ended December 31, 2010 of the transfers of interests in entities owning 317 and 116 properties to KBS pursuant to the Settlement Agreement on September 1, 2011 and December 1, 2011, respectively, our transfer of the Dana portfolio (15 properties) to its mortgage lender pursuant to the Deed In Lieu of Foreclosure Agreement dated July 29, 2011 and the sale of two properties to third parties in 2011, all as if these transactions had occurred on January 1, 2010.

(M)
Represents the effect on our operations for the year ended December 31, 2010, of our pending transfers of interests in entities owning 434 Gramercy Realty properties and certain other assets to KBS pursuant to the Settlement Agreement, all as if these pending transfers had occurred on January 1, 2010.

(N)
Represents the investment income for the year ended December 31, 2010, on a $64,172 first mortgage loan as if the transfers had occurred on January 1, 2010.  The borrowers under the mortgage loan are First States Investors DB I, L.P., First States Investors DB I B, L.P., First States Investors 4200, LLC, First States Investors DB I SP, L.P. and First States Investors DB I TRS, L.P., affiliates of Gramercy Capital Corp., and the lender was a subsidiary of Gramercy Capital Corp.  The investment income was previously eliminated because it was an intercompany loan, but pursuant to the Settlement Agreement, it was assumed by KBS.

(O)
Represents the revenue that we would have earned based on the interim management agreement as if the interim management agreement was in place as of January 1, 2010.  The revenue includes the annual asset management fee of $10,000, the minimum threshold value participation fee of $3,500 over the term of the interim management agreement, and property management fees and reimbursement of costs received by First States Management Corp, a subsidiary of Gramercy Capital Corp., pursuant to the Settlement Agreement.  The property management fees and reimbursement of costs received by First States Management Corp were previously eliminated in consolidation because they were intercompany revenue.

(P)
Net loss from continuing operations in earnings per share calculations have been reduced by $145 and $8,798 for non-controlling interest and accrued preferred stock dividends, respectively, and increased by $13,713 for the excess of carrying amount of tendered preferred stock over consideration paid.

(Q)
Net loss from continuing operations in earnings per share calculations have been reduced by $8,798 for accrued preferred stock dividends and increased by $13,713 for the excess of carrying amount of tendered preferred stock over consideration paid.

Unaudited Pro Forma Condensed Consolidated Statement of Operations Adjustments for the Year Ended December 31, 2009

(R)
Historical financial information derived from Gramercy Capital Corp.’s Annual Report on Form 10-K for the year ended December 31, 2010.
 
 
(S)
Represents the effect on our historical operations for the year ended December 31, 2009 of the transfers of entity interests owning 317 and 116 properties to KBS pursuant to the Settlement Agreement on September 1, 2011 and December 1, 2011, respectively, our transfer of the Dana portfolio (15 properties) to its mortgage lender pursuant to the Deed In Lieu of Foreclosure Agreement dated July 29, 2011 and the sale of two properties to third parties in 2011, all as if these transactions had occurred on January 1, 2009. 
 
 
9

 
 
GRAMERCY CAPITAL CORP.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(Dollars in thousands)

 (T)
Represents the effect on our operations for the year ended December 31, 2009, of our pending transfers of interests in entities owning 434 Gramercy Realty properties and certain other assets to KBS pursuant to the Settlement Agreement all as if these pending transfers had occurred on January 1, 2009.
(U)