EX-99.3 5 v427391_ex99-3.htm EXHIBIT 99.3 Exhibit 993 Pro Forma

Exhibit 99.3

GRAMERCY PROPERTY TRUST 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Introduction

 

On December 17, 2015, Gramercy Property Trust Inc., or Gramercy or GPT, a publicly listed REIT, Chambers Street Properties, or Chambers or CSG, a publicly listed REIT, and Columbus Merger Sub LLC, or Merger Sub, an indirect wholly owned subsidiary of Chambers, completed the transactions contemplated in the definitive agreement to merge the companies, or the Merger Agreement, which was approved by stockholders of the respective companies at their stockholder meetings held on December 15, 2015. As such, on December 17, 2015, Gramercy merged with and into Merger Sub upon the completion of the transactions in the Merger Agreement, or the Merger. Under the terms of the Merger Agreement, the combined company, or the Combined Company,  is managed by the former Gramercy management team.  The Combined Company was renamed as Gramercy Property Trust and its shares listed on the New York Stock Exchange were changed from ticker symbol CSG to Gramercy’s former ticker symbol GPT, and began trading under the GPT ticker symbol on December 18, 2015. Pursuant to the Merger Agreement, Gramercy stockholders received 3.1898, or the Exchange Ratio, of newly issued common shares of beneficial interest of the Combined Company for each share of Gramercy common stock they owned, which equates to an inverse exchange ratio of 0.313 shares of Gramercy common stock for each Chambers common share. Each Chambers common share issued and outstanding remains outstanding as a  common share of the Combined Company.

 

The following unaudited pro forma condensed consolidated financial statements present the financial condition and results of operations of the Combined Company, after giving effect to the Merger, and have been prepared by applying the acquisition method of accounting rules under Accounting Standards Codification 805, Business Combinations,  or ASC 805, with Gramercy treated as the acquiring entity and the transaction accounted for as a reverse acquisition. The unaudited pro forma condensed consolidated financial statements are prepared for informational purposes only and are based on assumptions and estimates considered appropriate by management; however, they are not necessarily indicative of what the Combined Company’s financial condition or results of operations actually would have been if the Merger had been consummated as of the dates indicated, nor do they purport to represent the consolidated financial position or results of operations for future periods. Additionally, the unaudited pro forma condensed consolidated financial statements do not include the impact of all the potential synergies that may be achieved in the Merger or any strategies that the Combined Company’s management may consider in order to continue to efficiently manage the on-going operations of the Combined Company.

 

The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2015 and for the year ended December 31, 2014, give effect to the Merger as if the Merger had been consummated on January 1, 2014. The unaudited pro forma condensed consolidated balance sheet gives effect to the Merger as if it had occurred on September 30, 2015.

 

The unaudited pro forma condensed consolidated financial statements do not include any adjustments associated with: (1) Gramercy or Chambers acquisitions closed after September 30, 2015 or the related financing of those acquisitions, (2) Gramercy or Chambers acquisitions currently under contract or the related financing of those property acquisitions, (3) Gramercy or Chambers dispositions closed after September 30, 2015 or the repayment of the related financing of such dispositions, and (4) Gramercy or Chambers dispositions currently under contract or the repayment of the related financing of those dispositions.

 

These unaudited pro forma condensed consolidated financial statements, and the related notes thereto, should be read in conjunction with (1) Gramercy’s audited consolidated financial statements, and the related notes thereto, as of and for the year ended December 31, 2014, included in Gramercy’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission, or the SEC,  on March 9, 2015, and (2) Chambers’ audited consolidated financial statements, and the related notes thereto, as of and for the year ended December 31, 2014, included in Chambers’ Annual Report on Form 10-K as filed with the SEC on March 2, 2015.

 

1

 

 

GRAMERCY PROPERTY TRUST 
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Merger Consideration

 

The pro forma financial information reflects the accounting consideration of approximately $1.9 billion for the Merger, as calculated below treating Gramercy as the accounting acquirer (in millions, except price per share):

 

As Gramercy is treated as the acquiring entity, the calculation of the purchase price for accounting purposes is based on Gramercy’s common stock. However, under the terms of the Merger Agreement, Gramercy’s stockholders received 3.1898 newly issued shares of the Combined Company’s common shares of beneficial interest for each Gramercy share of common stock that they held immediately before the effective date of the Merger. This transaction has resulted in the Combined Company having approximately 236.9 million shares of common stock outstanding as of the date of the Merger.

 

The Merger Consideration will be allocated to all Chambers’ assets acquired and liabilities assumed based on their respective fair values. The allocation has not been finalized and is based upon preliminary estimates of fair values. The allocation of the Merger Consideration and the determination of the fair values of the Chambers’ assets and liabilities will be based on the actual tangible and intangible assets and liabilities that exist as of December 17, 2015, the date the Merger was consummated. The completion of the final valuations, and the allocation of the Merger Consideration, and the impact of ongoing integration activities could cause material differences in these unaudited pro forma condensed consolidated financial statements.

 

2

 

 

GRAMERCY PROPERTY TRUST

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

September 30, 2015

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A

 

 

 

 

B

 

 

 

 

GPT Historical

 

CSG Historical

 

Pro Forma Fair Value Adjustments

 

CSG Pro Forma

 

Pro Forma Merger Adjustments

 

GPT Pro Forma

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate investments, at cost:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land

$
439,591 

 

$
416,250 

 

$
142,524 

C

$
558,774 

 

$

 -

 

$
998,365 

Building and improvements

 
1,623,447 

 

 
1,878,601 

 

 
(399,908)

C

 
1,478,693 

 

 

 -

 

 
3,102,140 

Less: accumulated depreciation

 
(66,336)

 

 
(284,579)

 

 
284,579 

D

 

 -

 

 

 -

 

 
(66,336)

Total real estate investments, net

 
1,996,702 

 

 
2,010,272 

 

 
27,195 

 

 
2,037,467 

 

 

 -

 

 
4,034,169 

Cash and cash equivalents

 
38,108 

 

 
53,955 

 

 

 -

 

 
53,955 

 

 
(61,463)

E

 
30,600 

Restricted cash

 
9,128 

 

 
18,909 

 

 

 -

 

 
18,909 

 

 

 -

 

 
28,037 

Joint ventures and equity investments

 
13,928 

 

 
385,220 

 

 
205,678 

F

 
590,898 

 

 

 -

 

 
604,826 

Assets held for sale, net

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Servicing advances receivable

 
1,515 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
1,515 

Retained CDO bonds

 
11,568 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
11,568 

Tenant and other receivables, net

 
26,429 

 

 
56,625 

 

 
(45,072)

G

 
11,553 

 

 

 -

 

 
37,982 

Acquired lease assets, net

 
324,421 

 

 
164,698 

 

 
388,632 

H

 
553,330 

 

 

 -

 

 
877,751 

Deferred costs, net

 
15,566 

 

 
50,475 

 

 
(50,475)

I

 

 -

 

 

 -

 

 
15,566 

Goodwill

 
3,663 

 

 

 -

 

 
69,322 

J

 
69,322 

 

 

 -

 

 
72,985 

Other assets

 
10,699 

 

 
6,136 

 

 

 -

 

 
6,136 

 

 

 -

 

 
16,835 

Total assets

$
2,451,727 

 

$
2,746,290 

 

$
595,280 

 

$
3,341,570 

 

$
(61,463)

 

$
5,731,834 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exchangeable senior notes, net

$
108,997 

 

$

 -

 

$

 -

 

$

 -

 

$

 -

 

$
108,997 

Senior unsecured term loan

 
300,000 

 

 
570,000 

 

 
1,588 

K

 
571,588 

 

 

 -

 

 
871,588 

Unsecured credit facility

 
270,059 

 

 
290,044 

 

 
(946)

K

 
289,098 

 

 

 -

 

 
559,157 

Mortgage notes payable

 
318,874 

 

 
478,739 

 

 
(12,330)

K

 
466,409 

 

 

 -

 

 
785,283 

Total long term debt

 
997,930 

 

 
1,338,783 

 

 
(11,688)

 

 
1,327,095 

 

 

 -

 

 
2,325,025 

Accounts payable and accrued expenses

 
25,762 

 

 
64,413 

 

 

 -

 

 
64,413 

 

 

 -

 

 
90,175 

Dividends payable

 
12,927 

 

 
10,117 

 

 

 -

 

 
10,117 

 

 

 -

 

 
23,044 

Accrued interest payable

 
2,302 

 

 
4,334 

 

 

 -

 

 
4,334 

 

 

 -

 

 
6,636 

Deferred revenue

 
15,985 

 

 
18,420 

 

 

 -

 

 
18,420 

 

 

 -

 

 
34,405 

Below-market lease liabilities, net

 
214,609 

 

 
21,759 

 

 
18,078 

L

 
39,837 

 

 

 -

 

 
254,446 

Derivative instruments, at fair value

 
6,437 

 

 
15,115 

 

 

 -

 

 
15,115 

 

 

 -

 

 
21,552 

Other liabilities

 
7,849 

 

 
325 

 

 

 -

 

 
325 

 

 

 -

 

 
8,174 

Total liabilities

 
1,283,801 

 

 
1,473,266 

 

 
6,390 

 

 
1,479,656 

 

 

 -

 

 
2,763,457 

Commitments and contingencies

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Noncontrolling interest in the Operating Partnership

 
11,277 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
11,277 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 
57 

 

 
2,366 

 

 

 -

 

 
2,366 

 

 
1,780 

M

 
4,203 

Series B cumulative redeemable preferred stock

 
84,394 

 

 

 -

 

 

 -

 

 

 -

 

 
(84,394)

N

 

 -

Series A cumulative redeemable preferred stock

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
84,394 

N

 
84,394 

Additional paid-in-capital

 
2,053,955 

 

 
2,074,326 

 

 
(214,778)

O

 
1,859,548 

 

 
(34,193)

E, M

 
3,879,310 

Accumulated other comprehensive loss

 
(1,131)

 

 
(45,057)

 

 
45,057 

P

 

 -

 

 

 -

 

 
(1,131)

Accumulated deficit

 
(980,781)

 

 
(758,611)

 

 
758,611 

P

 

 -

 

 
(29,050)

E, Q

 
(1,009,831)

Total stockholders’ equity

 
1,156,494 

 

 
1,273,024 

 

 
588,890 

 

 
1,861,914 

 

 
(61,463)

 

 
2,956,945 

Noncontrolling interest in other partnerships

 
155 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
155 

Total equity

 
1,156,649 

 

 
1,273,024 

 

 
588,890 

 

 
1,861,914 

 

 
(61,463)

 

 
2,957,100 

Total liabilities and equity

$
2,451,727 

 

$
2,746,290 

 

$
595,280 

 

$
3,341,570 

 

$
(61,463)

 

$
5,731,834 

 

3

 

 

GRAMERCY PROPERTY TRUST
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2014

(Amounts in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AA

 

 

 

 

 

 

 

BB

 

CC

 

 

 

 

DD

 

 

 

 

GPT Historical

 

GPT Adjustments

 

GPT Pro Forma

 

CSG Historical

 

CSG Adjustments

 

CSG Pro Forma Adjustments

 

CSG Pro Forma

 

Pro Forma Merger Adjustments

 

GPT Pro Forma

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenue

$
60,258 

 

$
113,702 

 

$
173,960 

 

$
210,180 

 

$
(41)

 

$
(3,818)

EE

$
206,321 

 

$

 -

 

$
380,281 

Management fees

 
25,033 

 

 
(3,047)

 

 
21,986 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
21,986 

Operating expense reimbursements

 
20,604 

 

 
21,984 

 

 
42,588 

 

 
59,730 

 

 
356 

 

 

 -

 

 
60,086 

 

 

 -

 

 
102,674 

Investment income

 
1,824 

 

 

 -

 

 
1,824 

 

 
45 

 

 
2 

 

 

 -

 

 
47 

 

 

 -

 

 
1,871 

Other income

 
221 

 

 
103 

 

 
324 

 

 
2,387 

 

 
(155)

 

 

 -

 

 
2,232 

 

 

 -

 

 
2,556 

Total revenues

 
107,940 

 

 
132,742 

 

 
240,682 

 

 
272,342 

 

 
162 

 

 
(3,818)

 

 
268,686 

 

 

 -

 

 
509,368 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property management expenses

 
17,500 

 

 
(1,402)

 

 
16,098 

 

 
4,519 

 

 
(363)

 

 

 -

 

 
4,156 

 

 

 -

 

 
20,254 

Property operating expenses

 
21,120 

 

 
21,697 

 

 
42,817 

 

 
71,805 

 

 
(1,075)

 

 

 -

 

 
70,730 

 

 

 -

 

 
113,547 

Total property operating expenses

 
38,620 

 

 
20,295 

 

 
58,915 

 

 
76,324 

 

 
(1,438)

 

 

 -

 

 
74,886 

 

 

 -

 

 
133,801 

Depreciation and amortization

 
36,408 

 

 
63,274 

 

 
99,682 

 

 
109,292 

 

 
2,460 

 

 
25,386 

FF

 
137,138 

 

 

 -

 

 
236,820 

Interest expense

 
16,586 

 

 
7,645 

 

 
24,231 

 

 
55,311 

 

 
(1,324)

 

 
(5,134)

GG

 
48,853 

 

 

 -

 

 
73,084 

Loss on derivative instruments

 
3,300 

 

 

 -

 

 
3,300 

 

 
(71)

 

 

 -

 

 

 -

 

 
(71)

 

 

 -

 

 
3,229 

Net impairment recognized in earnings

 
4,816 

 

 

 -

 

 
4,816 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
4,816 

Impairment of real estate

 

 -

 

 

 -

 

 

 -

 

 
27,563 

 

 

 -

 

 

 -

 

 
27,563 

 

 

 -

 

 
27,563 

Management, general and administrative

 
18,416 

 

 

 -

 

 
18,416 

 

 
31,333 

 

 

 -

 

 

 -

 

 
31,333 

 

 

 -

 

 
49,749 

Acquisition expenses

 
6,171 

 

 
(6,171)

 

 

 -

 

 
2,272 

 

 
(2,272)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Total expenses

 
124,317 

 

 
85,043 

 

 
209,360 

 

 
302,024 

 

 
(2,574)

 

 
20,252 

 

 
319,702 

 

 

 -

 

 
529,062 

Income (loss) from continuing operations before equity in net income from joint ventures and equity investments, net gains on disposals, gain on remeasurement of previously held joint venture,  loss on early extinguishment of debt, and provision for taxes

 
(16,377)

 

 
47,699 

 

 
31,322 

 

 
(29,682)

 

 
2,736 

 

 
(24,070)

 

 
(51,016)

 

 

 -

 

 
(19,694)

Equity in net income of joint ventures and equity investments

 
1,959 

 

 
(1,547)

 

 
412 

 

 
28,823 

 

 

 -

 

 
(10,320)

II

 
18,503 

 

 

 -

 

 
18,915 

Net gains on disposals

 

 -

 

 

 -

 

 

 -

 

 
21,164 

 

 
(21,164)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Income (loss) from continuing operations before net gains on disposals, gain on remeasurement of previously held joint venture, loss on early extinguishment of debt, and provision for taxes

 
(14,418)

 

 
46,152 

 

 
31,734 

 

 
20,305 

 

 
(18,428)

 

 
(34,390)

 

 
(32,513)

 

 

 -

 

 
(779)

Gain on remeasurement of previously held joint venture

 
72,345 

 

 
(72,345)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Loss on early extinguishment of debt

 
(1,925)

 

 

 -

 

 
(1,925)

 

 
(477)

 

 
477 

 

 

 -

 

 

 -

 

 

 -

 

 
(1,925)

Provision for taxes

 
(809)

 

 
(6)

 

 
(815)

 

 
(780)

 

 

 -

 

 

 -

 

 
(780)

 

 

 -

 

 
(1,595)

Net income (loss) from continuing operations, before preferred dividends

 
55,193 

 

 
(26,199)

 

 
28,994 

 

 
19,048 

 

 
(17,951)

 

 
(34,390)

 

 
(33,293)

 

 

 -

 

 
(4,299)

Net loss (income) attributable to noncontrolling interest

 
236 

 

 

 -

 

 
236 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
(262)

JJ

 
(26)

Net income (loss) attributable to Gramercy Property Trust Inc.

 
55,429 

 

 
(26,199)

 

 
29,230 

 

 
19,048 

 

 
(17,951)

 

 
(34,390)

 

 
(33,293)

 

 
(262)

 

 
(4,325)

Preferred stock redemption costs

 
(2,912)

 

 

 -

 

 
(2,912)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
(2,912)

Preferred stock dividends

 
(7,349)

 

 
7,349 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
(6,235)

KK

 
(6,235)

Net income (loss) available to common stockholders

$
45,168 

 

$
(18,850)

 

$
26,318 

 

$
19,048 

 

$
(17,951)

 

$
(34,390)

 

$
(33,293)

 

$
(6,497)

 

$
(13,472)

Basic net income (loss) from continuing operations, after preferred dividends

$
1.72 

 

 

N/A

 

$
1.00 

 

$
0.08 

 

 

N/A

 

 

N/A

 

$
(0.14)

 

 

N/A

 

$
(0.04)

Diluted net income (loss) from continuing operations, after preferred dividends

$
1.68 

 

 

N/A

 

$
0.98 

 

$
0.08 

 

 

N/A

 

 

N/A

 

$
(0.14)

 

 

N/A

 

$
(0.04)

Basic weighted average common shares outstanding

 
26,202,954 

 

 

N/A

 

 
26,202,954 

 

 
236,866,656 

 

 

N/A

 

 

N/A

 

 
236,866,656 

 

 

N/A

LL

 
320,448,839 

Diluted weighted average common shares and common share equivalents outstanding

 
26,937,585 

 

 

N/A

 

 
26,937,585 

 

 
236,866,656 

 

 

N/A

 

 

N/A

 

 
236,866,656 

 

 

N/A

LL

 
320,448,839 

 

 

4

 

 

GRAMERCY PROPERTY TRUST
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2015

(Amounts in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AA

 

 

 

 

 

 

 

BB

 

CC

 

 

 

 

DD

 

 

 

 

GPT Historical

 

GPT Adjustments

 

GPT Pro Forma

 

CSG Historical

 

CSG Adjustments

 

CSG Pro Forma Adjustments

 

CSG Pro Forma

 

Pro Forma Merger Adjustments

 

GPT Pro Forma

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenue

$
117,990 

 

$
20,069 

 

$
138,059 

 

$
166,020 

 

$
(1,851)

 

$
(806)

EE

$
163,363 

 

$

 -

 

$
301,422 

Management fees

 
17,571 

 

 

 -

 

 
17,571 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
17,571 

Operating expense reimbursements

 
29,113 

 

 
561 

 

 
29,674 

 

 
46,917 

 

 
(269)

 

 

 -

 

 
46,648 

 

 

 -

 

 
76,322 

Investment income

 
1,208 

 

 

 -

 

 
1,208 

 

 
49 

 

 

 -

 

 

 -

 

 
49 

 

 

 -

 

 
1,257 

Other income

 
1,413 

 

 
15 

 

 
1,428 

 

 
1,614 

 

 

 -

 

 

 -

 

 
1,614 

 

 

 -

 

 
3,042 

Total revenues

 
167,295 

 

 
20,645 

 

 
187,940 

 

 
214,600 

 

 
(2,120)

 

 
(806)

 

 
211,674 

 

 

 -

 

 
399,614 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property management expenses

 
14,557 

 

 

 -

 

 
14,557 

 

 
3,272 

 

 
(42)

 

 

 -

 

 
3,230 

 

 

 -

 

 
17,787 

Property operating expenses

 
29,006 

 

 
567 

 

 
29,573 

 

 
55,182 

 

 
(943)

 

 

 -

 

 
54,239 

 

 

 -

 

 
83,812 

Total property operating expenses

 
43,563 

 

 
567 

 

 
44,130 

 

 
58,454 

 

 
(985)

 

 

 -

 

 
57,469 

 

 

 -

 

 
101,599 

Depreciation and amortization

 
68,534 

 

 
8,261 

 

 
76,795 

 

 
84,342 

 

 
(908)

 

 
17,156 

FF

 
100,590 

 

 

 -

 

 
177,385 

Interest expense

 
23,225 

 

 
1,449 

 

 
24,674 

 

 
38,397 

 

 

 -

 

 
(3,208)

GG

 
35,189 

 

 

 -

 

 
59,863 

Loss on derivative instruments

 

 -

 

 

 -

 

 

 -

 

 
(66)

 

 

 -

 

 

 -

 

 
(66)

 

 

 -

 

 
(66)

Management, general and administrative

 
14,299 

 

 

 -

 

 
14,299 

 

 
20,950 

 

 

 -

 

 

 -

 

 
20,950 

 

 

 -

 

 
35,249 

Acquisition and merger related expenses

 
13,508 

 

 
(13,508)

 

 

 -

 

 
10,554 

 

 

 -

 

 
(10,554)

HH

 

 -

 

 

 -

 

 

 -

Total expenses

 
163,129 

 

 
(3,231)

 

 
159,898 

 

 
212,631 

 

 
(1,893)

 

 
3,394 

 

 
214,132 

 

 

 -

 

 
374,030 

Income (loss) from continuing operations before equity in net income from joint ventures and equity investments, net gains on disposals, and provision for taxes

 
4,166 

 

 
23,876 

 

 
28,042 

 

 
1,969 

 

 
(227)

 

 
(4,200)

 

 
(2,458)

 

 

 -

 

 
25,584 

Equity in net income of joint ventures and equity investments

 
(974)

 

 

 -

 

 
(974)

 

 
14,419 

 

 

 -

 

 
(7,428)

II

 
6,991 

 

 

 -

 

 
6,017 

Net gains on disposals

 
593 

 

 
(593)

 

 

 -

 

 
5,844 

 

 
(5,844)

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Income (loss) from continuing operations before provision for taxes

 
3,785 

 

 
23,283 

 

 
27,068 

 

 
22,232 

 

 
(6,071)

 

 
(11,628)

 

 
4,533 

 

 

 -

 

 
31,601 

Provision for taxes

 
(2,116)

 

 

 -

 

 
(2,116)

 

 
(521)

 

 

 -

 

 

 -

 

 
(521)

 

 

 -

 

 
(2,637)

Net income (loss) from continuing operations, before preferred dividends

 
1,669 

 

 
23,283 

 

 
24,952 

 

 
21,711 

 

 
(6,071)

 

 
(11,628)

 

 
4,012 

 

 

 -

 

 
28,964 

Net loss attributable to noncontrolling interest

 
43 

 

 

 -

 

 
43 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
45 

JJ

 
88 

Net income (loss) attributable to Gramercy Property Trust Inc.

 
1,712 

 

 
23,283 

 

 
24,995 

 

 
21,711 

 

 
(6,071)

 

 
(11,628)

 

 
4,012 

 

 
45 

 

 
29,052 

Preferred stock dividends

 
(4,676)

 

 
4,676 

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 

 -

 

 
(4,676)

KK

 
(4,676)

Net income (loss) from continuing operations available to common stockholders

$
(2,964)

 

$
27,959 

 

$
24,995 

 

$
21,711 

 

$
(6,071)

 

$
(11,628)

 

$
4,012 

 

$
(4,631)

 

$
24,376 

Basic net income (loss) from continuing operations, after preferred dividends

$
(0.06)

 

$

N/A

 

$
0.47 

 

$
0.09 

 

$

N/A

 

$

N/A

 

$
0.02 

 

$

N/A

 

$
0.06 

Diluted net income (loss) from continuing operations, after preferred dividends

$
(0.06)

 

$

N/A

 

$
0.45 

 

$
0.09 

 

$

N/A

 

$

N/A

 

$
0.02 

 

$

N/A

 

$
0.06 

Basic weighted average common shares outstanding

 
53,226,406 

 

 

N/A

 

 
53,628,688 

 

 
236,915,614 

 

 

N/A

 

 

N/A

 

 
236,915,614 

 

 

N/A

LL

 
407,980,403 

Diluted weighted average common shares and common share equivalents outstanding

 
53,226,406 

 

 

N/A

 

 
55,035,186 

 

 
236,951,537 

 

 

N/A

 

 

N/A

 

 
236,951,537 

 

 

N/A

LL

 
412,502,774 

 

 

 

 

5

 

 

GRAMERCY PROPERTY TRUST
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

General

The Chambers historical amounts include the reclassification of certain historical balances to conform to Gramercy post-Merger presentation of these unaudited pro forma condensed consolidated financial statements, as shown below:

 

Balance Sheet as of September 30, 2015 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

CSG Historical

 

Reclassification Adjustments

 

Reclassified CSG Historical

Assets:

 

 

 

 

 

 

 

 

Real estate investments, at cost:

 

 

 

 

 

 

 

 

Land

$
617,867 

 

$
(201,617)

 

$
416,250 

Land available for expansion

 
24,218 

 

 
(24,218)

 

 

 -

Building and improvements

 
1,652,766 

 

 
225,835 

 

 
1,878,601 

Less: accumulated depreciation

 
(284,579)

 

 

 -

 

 
(284,579)

Total real estate investments, net

 
2,010,272 

 

 

 -

 

 
2,010,272 

Cash and cash equivalents

 
53,955 

 

 

 -

 

 
53,955 

Restricted cash

 
18,909 

 

 

 -

 

 
18,909 

Joint ventures and equity investments

 
385,220 

 

 

 -

 

 
385,220 

Tenant and other receivables, net

 
11,553 

 

 
45,072 

 

 
56,625 

Deferred rent

 
45,072 

 

 
(45,072)

 

 

 -

Deferred leasing costs and intangible assets, net

 
194,109 

 

 
(194,109)

 

 

 -

Acquired lease assets, net(1)

 

 -

 

 
164,698 

 

 
164,698 

Deferred financing costs, net

 
7,237 

 

 
(7,237)

 

 

 -

Deferred costs, net (1)

 

 -

 

 
50,475 

 

 
50,475 

Prepaid expenses and other assets

 
19,963 

 

 
(19,963)

 

 

 -

Other assets (1)

 

 -

 

 
6,136 

 

 
6,136 

Total assets

$
2,746,290 

 

$

 -

 

$
2,746,290 

 

 

 

 

 

 

 

 

 

Liabilities and Equity:

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Senior unsecured term loan

 
570,000 

 

 

 -

 

 
570,000 

Unsecured credit facility

 
290,044 

 

 

 -

 

 
290,044 

Mortgage notes payable

 
478,739 

 

 

 -

 

 
478,739 

Total long term debt

 
1,338,783 

 

 

 -

 

 
1,338,783 

Accounts payable, accrued expenses, and other liabilities

 
86,352 

 

 
(86,352)

 

 

 -

Accounts payable and accrued expenses (1)

 

 -

 

 
64,413 

 

 
64,413 

Dividends payable

 
10,117 

 

 

 -

 

 
10,117 

Accrued interest payable (1)

 

 -

 

 
4,334 

 

 
4,334 

Deferred revenue (1)

 

 -

 

 
18,420 

 

 
18,420 

Below-market lease liabilities, net

 
21,759 

 

 

 -

 

 
21,759 

Prepaid rent and security deposits

 
16,255 

 

 
(16,255)

 

 

 -

Derivative instruments, at fair value (1)

 

 -

 

 
15,115 

 

 
15,115 

Other liabilities (1) 

 

 -

 

 
325 

 

 
325 

Total liabilities

 
1,473,266 

 

 

 -

 

 
1,473,266 

Commitments and contingencies

 

 -

 

 

 -

 

 

 -

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Common stock

 
2,366 

 

 

 -

 

 
2,366 

Additional paid-in-capital

 
2,074,326 

 

 

 -

 

 
2,074,326 

Accumulated other comprehensive loss

 
(45,057)

 

 

 -

 

 
(45,057)

Accumulated deficit

 
(758,611)

 

 

 -

 

 
(758,611)

Total stockholders’ equity

 
1,273,024 

 

 

 -

 

 
1,273,024 

Total liabilities and equity

$
2,746,290 

 

$

 -

 

$
2,746,290 

 

(1) Line item is not presented by Chambers and is added to conform to Gramercy's line item presentation.

6

 

 

GRAMERCY PROPERTY TRUST

NOTES TO UNAUDITED PRO FORMA

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

Statement of Operations for the Year Ended December 31, 2014 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

CSG Historical

 

Reclassification Adjustments

 

Reclassified CSG Historical

Revenues

 

 

 

 

 

 

 

 

Rental revenue

$
210,180 

 

$

 -

 

$
210,180 

Operating expense reimbursements

 
59,730 

 

 

 -

 

 
59,730 

Investment income (1)

 

 -

 

 
45 

 

 
45 

Other income

 
1,780 

 

 
607 

 

 
2,387 

Total revenues

 
271,690 

 

 
652 

 

 
272,342 

Expenses

 

 

 

 

 

 

 

 

Property operating expenses:

 

 

 

 

 

 

 

 

Property management expenses (1)

 

 -

 

 
4,519 

 

 
4,519 

Property operating expenses

 
36,757 

 

 
35,048 

 

 
71,805 

Total property operating expenses

 
36,757 

 

 
39,567 

 

 
76,324 

Real estate taxes

 
39,567 

 

 
(39,567)

 

 

 -

Depreciation and amortization

 
109,292 

 

 

 -

 

 
109,292 

Interest expense

 
55,311 

 

 

 -

 

 
55,311 

Interest and other income

 
(652)

 

 
652 

 

 

 -

Interest expense and net change in fair value of non-qualifying derivative financial instruments

 
(71)

 

 
71 

 

 

 -

Loss on derivative instruments (1)

 

 -

 

 
(71)

 

 
(71)

Impairment of real estate

 
27,563 

 

 

 -

 

 
27,563 

Management, general and administrative

 
31,333 

 

 

 -

 

 
31,333 

Acquisition expenses

 
2,272 

 

 

 -

 

 
2,272 

Total expenses

 
301,372 

 

 
652 

 

 
302,024 

Loss from continuing operations before equity in net income from joint ventures and equity investments, net gains on disposals, loss on early extinguishment of debt, and provision for taxes

 
(29,682)

 

 

 -

 

 
(29,682)

Equity in net income of joint ventures and equity investments

 
28,823 

 

 

 -

 

 
28,823 

Net gains on disposals

 
21,164 

 

 

 -

 

 
21,164 

Income from continuing operations before loss on early extinguishment of debt and provision for taxes

 
20,305 

 

 

 -

 

 
20,305 

Loss on early extinguishment of debt

 
(477)

 

 

 -

 

 
(477)

Provision for taxes

 
(780)

 

 

 -

 

 
(780)

Net income from continuing operations available to common stockholders

$
19,048 

 

$

 -

 

$
19,048 

 

(1) Line item is not presented by Chambers and is added to conform to Gramercy's line item presentation.

7

 

 

GRAMERCY PROPERTY TRUST

NOTES TO UNAUDITED PRO FORMA

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

Statement of Operations for the Nine Months Ended September 30, 2015 (in thousands):

 

 

 

 

 

 

 

 

 

 

 

CSG Historical

 

Reclassification Adjustments

 

Reclassified CSG Historical

Revenues

 

 

 

 

 

 

 

 

Rental revenue

$
166,020 

 

$

 -

 

$
166,020 

Operating expense reimbursements

 
46,917 

 

 

 -

 

 
46,917 

Investment income (1)

 

 -

 

 
49 

 

 
49 

Other income

 
1,520 

 

 
94 

 

 
1,614 

Total revenues

 
214,457 

 

 
143 

 

 
214,600 

Expenses

 

 

 

 

 

 

 

 

Property operating expenses:

 

 

 

 

 

 

 

 

Property management expenses (1)

 

 -

 

 
3,272 

 

 
3,272 

Property operating expenses

 
26,404 

 

 
28,778 

 

 
55,182 

Total property operating expenses

 
26,404 

 

 
32,050 

 

 
58,454 

Real estate taxes

 
32,050 

 

 
(32,050)

 

 

 -

Depreciation and amortization

 
84,342 

 

 

 -

 

 
84,342 

Interest expense

 
38,397 

 

 

 -

 

 
38,397 

Interest and other income

 
(144)

 

 
144 

 

 

 -

Interest expense and net change in fair value of non-qualifying derivative financial instruments

 
(66)

 

 
66 

 

 

 -

Loss on derivative instruments (1)

 

 -

 

 
(66)

 

 
(66)

Management, general and administrative

 
31,505 

 

 
(10,555)

 

 
20,950 

Acquisition and merger related expenses

 

 -

 

 
10,554 

 

 
10,554 

Total expenses

 
212,488 

 

 
143 

 

 
212,631 

Income from continuing operations before equity in net income from joint ventures and equity investments, net gains on disposals, and provision for taxes

 
1,969 

 

 

 -

 

 -
1,969 

Equity in net income of joint ventures and equity investments

 
14,419 

 

 

 -

 

 
14,419 

Net gains on disposals

 
5,844 

 

 

 -

 

 
5,844 

Income from continuing operations before provision for taxes

 
22,232 

 

 

 -

 

 
22,232 

Provision for taxes

 
(521)

 

 

 -

 

 
(521)

Net income from continuing operations available to common stockholders

$
21,711 

 

$

 -

 

$
21,711 

 

(1) Line item is not presented by Chambers and is added to conform to Gramercy's line item presentation.

 

 

8

 

 

GRAMERCY PROPERTY TRUST

NOTES TO UNAUDITED PRO FORMA

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

Balance Sheet

 

General

 

A.The Merger will be effected by each of Gramercy’s 57.5 million issued and outstanding shares of common stock being converted into the right to receive 3.1898 newly issued shares of the Combined Company’s common stock. Chambers’ 236.9 million issued and outstanding shares of common stock will remain outstanding. As the Merger is considered a reverse acquisition, the total consideration transferred was computed on the basis of Gramercy’s closing common stock price of $24.63 on December 17, 2015 divided by the exchange ratio of 3.1898 multiplied by the number of Chambers shares of common stock outstanding as of September 30, 2015. As a result of the increase in Gramercy’s common stock price from the date the Merger was announced of $23.37 and December 17, 2015, Gramercy’s common stock price has increased by $1.26, or 5.39%. Gramercy will recognize goodwill of approximately $69.3 million, which is attributable to the increase in Gramercy’s common stock share price since the date the Merger was announced. Consideration transferred is calculated as such (in thousands except share and per share data):

 

 

 

 

 

Chambers common stock outstanding as of December 17, 2015

 
236,936,429 

Exchange ratio

 
3.1898 

Implied Gramercy common stock issued in consideration

 
74,279,400 

Gramercy common stock share price as of December 17, 2015

$
24.63 

Value of implied Gramercy common stock issued in consideration

$
1,829,502 

Chambers estimated merger costs

 
32,412 

Total implied consideration

$
1,861,914 

 

Chambers’ merger costs are included in total consideration because as of the date the Merger closes, these costs will either be accrued or already paid by Chambers and thus will be reflected as a reduction in the net assets of Chamber that are being acquired as part of the Merger. The total consideration is subject to change based upon any changes in Chambers estimated merger costs. The estimated allocation of the consideration presented in the unaudited pro forma condensed consolidated balance sheet incorporates reasonable fair value estimates for buildings and improvements, land, intangible lease assets and liabilities, related indebtedness and other assets and liabilities, including cash that are expected to be acquired and assumed in the Merger.

 

The allocation of the consideration and the determination of the fair values of Chambers’ assets and liabilities are based on the actual valuations of tangible and intangible assets and liabilities that exist as of December 17, 2015, the date the Merger was completed. The final determination of the fair value of real estate and real estate related assets and liabilities will be based on estimates and assumptions made by the Combined Company’s management, using customary methods, including data from appraisals, comparable sales, discounted cash flows and other methods.

 

9

 

 

GRAMERCY PROPERTY TRUST

NOTES TO UNAUDITED PRO FORMA

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

The preliminary allocation of the values of the real estate and real estate related assets and liabilities is as follows (in thousands):

 

 

 

 

Assets:

 

 

     Total real estate investments

$
2,037,467 

     Acquired lease intangible assets

 
553,330 

     Investments in joint ventures and equity investments

 
590,898 

     Other assets

 
90,553 

     Goodwill

 
69,322 

           Total assets:

 
3,341,570 

Liabilities:

 

 

     Mortgage notes payable

 
466,409 

     Unsecured credit facility and term loans

 
860,686 

     Acquired lease intangible liabilities

 
39,837 

     Other liabilities

 
112,724 

           Total liabilities:

 
1,479,656 

Estimated fair value of net assets acquired

$
1,861,914 

 

Remaining useful lives for the real estate and real estate related assets and liabilities as of September 30, 2015 are as follows:

 

 

Building

39 years

Land improvements

12 years

In-place lease assets

6 years

Above market lease assets

7 years

Below market lease liabilities

8 years

Mortgage notes payable

3 years

 

The determination of the consideration transferred and the allocation thereof is preliminary and subject to change.

B.  In connection with the Merger, the Combined Company has incurred expenses relating to legal, accounting and finance advisory services, severance costs, debt financing related costs and other third-party expenses. The pro forma condensed consolidated balance sheet has been adjusted accordingly. There may be significant, additional costs which may be incurred after the closing of the Merger which have not been reflected in the pro forma financial statements. Such effects involve estimates that could vary based on assumptions made as to the timing and expected outcomes resulting from decisions made after the closing of the Merger.

The adjustments to equity represent the impact of converting all of the equity and mezzanine equity interests of Gramercy into equity interests of Chambers.  

Assets

C. The adjustments reflect an increase in the carrying amounts of Chambers’ land and buildings and improvements to record them at their estimated fair values. The estimated fair values were determined by considering information from several sources and based on customary methods, primarily real estate market trends, including rental rates and income capitalization rates. The estimated allocation of the acquisition consideration is primarily based upon management’s existing methodology and historical experiences in determining and allocating the acquisition price of real estate transactions to the respective real estate and related assets and liabilities. 

 

10

 

 

GRAMERCY PROPERTY TRUST

NOTES TO UNAUDITED PRO FORMA

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

D.The adjustment eliminates Chambers’ historical balance for accumulated depreciation.

E.The adjustment reflects the expenses that the Combined Company expects to incur relating to legal, accounting and finance advisory services, and other third-party expenses in connection with the Merger that are in excess of the $14.7 million Chambers and Gramercy had incurred prior to September 30, 2015. The Combined Company expects to incur an estimated additional $15.9 million in retention and severance costs shortly after the closing of Chambers’ Princeton and Los Angeles offices.

F.The adjustment reflects an increase in the carrying amounts of the underlying assets and liabilities of Chambers’ joint ventures to record them at their fair values. The estimated fair values were determined using the same methodologies for the consolidated real estate investments. For the joint venture investments which have a functional currency that is different than the reporting currency of Gramercy, the fair value of the assets and liabilities were translated as of unaudited pro forma condensed consolidated balance sheet date.

G.The adjustment eliminates Chambers’ historical balances of straight-line rent receivables of $45.1 million.

H.The adjustment eliminates Chambers’ historical accumulated amortization and reflects an increase in the carrying amounts of Chambers’ intangible lease assets acquired to record them at their estimated fair values. The estimate of above market lease values is based upon the present value of the difference between the contractual amount to be paid pursuant to each lease and management’s estimate of the market lease rate for each lease, measured over a period equal to the remaining non-cancelable term of the lease.

The aggregate value of intangible assets related to in-place leases is primarily the difference between the property valued with existing in-place leases adjusted to market rental rates and the property valued as-if vacant. Factors considered by management in its analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property taking into account current market conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the anticipated lease-up period.

I.The adjustment eliminates Chambers’ historical balances in deferred financing costs and deferred leasing costs.

J.Reflects an estimate of goodwill calculated as the excess between the total Merger consideration and the estimated fair values of the assets acquired and liabilities assumed. The Combined Company considers this to represent the future economic benefits arising from other assets acquired in the Merger that are not individually identified and separately recognized, based on the preliminary purchase price allocation.

Liabilities

K.The adjustments reflect the estimated fair value adjustments for Chambers’ mortgage notes payable, unsecured credit facility and senior unsecured term loan assumed. The determination of fair values were estimated by discounting the expected future cash flows using an effective interest rate that management believes would be available to the Combined Company for financing arrangements with similar terms, collateral and remaining maturities.

L. The adjustment eliminates Chambers’ historical accumulated amortization and reflects the fair value adjustment of intangible lease liabilities assumed. The determination of the estimated fair value was primarily based on the present value of the difference between the contractual amount to be paid pursuant to each lease and management’s estimate of the market lease rate for each lease, measured over a period equal to the remaining non-cancelable term of the lease.

Equity

M.The adjustment converts Gramercy’s historical equity balances to the estimated value of the Combined Company’s common shares.  The calculation is based on 57.5 million shares outstanding based on the fixed conversion rate of 3.1898.

11

 

 

 

GRAMERCY PROPERTY TRUST

NOTES TO UNAUDITED PRO FORMA

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

N.The adjustment converts Gramercy’s 7.125% Series B Cumulative Redeemable Preferred Stock into 7.125% Series A Cumulative Redeemable Preferred Shares of the Combined Company, which have the same preferences, rights and privileges, pursuant to the Merger Agreement.

O.The adjustment converts Chambers’ historical equity balances into the Combined Company’s common shares. The calculation was based on 236.9 million issued and outstanding shares of Chambers common shares, which was divided by the exchange ratio and then multiplied by the closing price of Gramercy’s common stock on December 17, 2015, which was $24.63. Details of the additional paid-in-capital adjustments are as follows (in thousands):

 

 

 

 

Chambers historical additional paid-in-capital at September 30, 2015

$
2,074,326 

 

 

 

Implied Merger consideration

$
1,861,914 

Less: Chambers historical common stock at September 30, 2015

 
(2,366)

Pro forma Chambers ending additional paid-in-capital after fair valuation adjustments

$
1,859,548 

 

 

 

Change in Chambers additional paid-in-capital

$
(214,778)

 

P.The adjustment eliminates Chambers’ accumulated other comprehensive loss and accumulated deficit.

Q.The adjustment represents the $29.1 million in merger related costs which will be recognized by the Combined Company at closing.

Statements of Operations

General

AA.The pro forma adjustments reflect the effect of Gramercy’s acquisitions and dispositions subsequent to January 1, 2014 as if they had occurred as of January 1, 2014. The pro forma adjustments include elimination of historical amounts for dispositions subsequent to January 1, 2014, addition of historical amounts for acquisitions subsequent to January 1, 2014 for the period owned, addition of pro forma amounts for acquisitions subsequent to January 1, 2014 for the period prior to acquisition, adjustments to re-straightline rental amounts for acquisitions and elimination of acquisition expenses.

BB.The pro forma adjustments reflect the effect of Chambers’ acquisitions and dispositions subsequent to January 1, 2014 as if they had occurred as of January 1, 2014. The pro forma adjustments include elimination of historical amounts for dispositions subsequent to January 1, 2014, addition of historical amounts for acquisitions subsequent to January 1, 2014 for the period owned, addition of pro forma amounts for acquisitions subsequent to January 1, 2014 for the period prior to acquisition, adjustments to re-straightline rental amounts for acquisitions and elimination of acquisition expenses.

CC.The pro forma adjustments reflect the effect on Chambers’ historical consolidated statements of operations related to the fair valuation of Chambers’ assets and liabilities as if the Merger occurred on January 1, 2014.

DD.The Merger adjustments reflect the change in net income (loss) attributed to noncontrolling interest and an adjustment for preferred stock dividends related to the Combined Company’s new 7.125% Series A Cumulative Redeemable Preferred Shares.

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GRAMERCY PROPERTY TRUST

NOTES TO UNAUDITED PRO FORMA

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

Revenues

EE.The adjustment reflects the differences in Chambers’ pre-merger and post-merger rental revenue generated on a straight-line basis, the elimination of amortization of deferred leasing costs, as well as change in amortization for pre-merger and post-merger above and below market lease intangible assets and liabilities based on the estimated changes for their respective fair values, as follows (in thousands):

 

 

 

 

 

 

 

Pro forma merger adjustments to rental revenue

Year ended December 31, 2014

 

Nine Months ended September 30, 2015

Straight-line rent adjustments

$
4,437 

 

$
3,105 

Net above and below market lease amortization

 
(11,025)

 

 
(9,353)

Other revenue items that reset upon merger (1)

 
2,770 

 

 
5,442 

Total

$
(3,818)

 

$
(806)

 

(1) Includes free rent, amortization of lease inducements and tenant improvement allowance reimbursements, as these amounts are eliminated upon closing of the Merger.

 

Expenses

FF.The adjustment reflects the difference between Chambers’ historical depreciation and amortization and the estimated depreciation and amortization for real estate investments and in-place leases. The estimated depreciation reflects the pre-merger and post-merger difference between the pro forma estimated fair value amounts for buildings and improvements and Chambers’ historical carrying values over their estimated remaining useful lives. Amortization of in-place leases is determined by amortizing the estimated pro forma fair value over the remaining lease term.

GG.The adjustment eliminates Chambers’ historical amortization of deferred financing costs and reflects the change in amortization of the debt premiums and discounts based upon the fair valuation as of September 30, 2015, amortized over the remaining term for each debt instrument. The adjustments are as follows (in thousands):

 

 

 

 

 

 

 

Pro forma merger adjustments to interest expense

Year ended December 31, 2014

 

Nine Months ended September 30, 2015

Debt premium and discount amortization adjustments

$
(2,309)

 

$
(1,124)

Deferred financing cost amortization adjustments

 
(2,825)

 

 
(2,084)

Total

$
(5,134)

 

$
(3,208)

 

HH.The adjustment represents the elimination of Chambers’ merger related costs for the nine months ended September 30, 2015.

II.The adjustment represents the difference between Chambers’ pro rata share of net income of joint ventures as a result of the fair valuation of the assets and liabilities of the joint ventures. The adjustment reflects the difference between the joint ventures historical depreciation and amortization of real estate and lease intangible assets and liabilities as well as the amortization of discounts and premiums on the associated debt and an adjustment for the difference in the amortization of deferred financing fees.

JJ.The adjustment reflects the change in the net income attributable to noncontrolling interest related to the Gramercy’s OP units based upon the percentage ownership of OP Unit holders relative to the Combined Company’s total outstanding shares of common stock and OP Units.

13

 

 

GRAMERCY PROPERTY TRUST

NOTES TO UNAUDITED PRO FORMA

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

KK.Adjustment reflects a full period of dividends earned on the 7.125% Series A Cumulative Redeemable Preferred Stock of the Combined Company, for which the shares of Gramercy's 7.125% Series B Cumulative Redeemable Preferred Stock will be exchanged pursuant to the Merger Agreement. The shares of Gramercy's 7.125% Series B Cumulative Redeemable Preferred Stock were issued by Gramercy in August 2014 and replaced its outstanding 8.125% Series A Cumulative Redeemable Preferred Stock, which were redeemed in September 2014.

LL.The share amounts reflect the Combined Company’s pro forma weighted average basic and diluted shares of common stock outstanding, assuming the Merger occurred on January 1, 2014. The amounts were determined using Gramercy’s weighted average share amounts as of the end of the period multiplied by the Exchange Ratio plus Chambers weighted average share amounts as of the end of the period. For basic shares for year ended December 31, 2014, Gramercy’s weighted average basic shares outstanding of 26.2 million were multiplied by the exchange ratio of 3.1898 and added to Chambers’ weighted average basic shares outstanding of 236.9 million. The number of weighted average diluted shares outstanding for the year ended December 31, 2014 is equal to the weighted average basic shares outstanding due to the pro forma net loss from continuing operations for the period. For basic shares for the nine months ended September 30, 2015, Gramercy’s weighted average basic shares outstanding of 53.6 million, which include unvested restricted stock awards and earned were multiplied by the exchange ratio of 3.1898 and added to Chambers’ weighted average basic shares outstanding of 236.9 million. For diluted shares for the nine months ended September 30, 2015, Gramercy’s weighted average diluted shares outstanding of 55.0 million were multiplied by the exchange ratio of 3.1898 and added to Chambers’ weighted average basic shares outstanding of 237.0 million.

 

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