Gramercy Property Trust (GPT) has agreed to be acquired by Blackstone Real Estate Partners VIII, an affiliate of Blackstone Group L.P. (BX), for $27.50 in an all cash deal. The offer is a 15% premium to the prior day's close and about 30% higher than the 52-week low price of $21.12. GPT shares quickly moved to the deal price on the day of announcement with volume north of 35M. Average daily volume prior to the acquisition announcement was around 1.5M. Factoring in the upcoming dividend, we estimate the risk premium to be approximately 3% based on an expected October deal close. We interpret this relatively low risk premium to indicate a high probability of the deal closing.
Recent Research
On February 27, 2018, we published a fundamental valuation estimate titled Gramercy Property Trust the Growth is Free. We estimated an intrinsic value range of $22-$34 per-share with an equally weighted average of $28 per-share. On that day GPT closed at $21.89. After the firm reported Q4, we published an updated NAV estimate of approximately $26.77. Seeking Alpha published the article on March 5, 2018, GPT closed at $22.24. Both articles were written because we believed there was an asymmetric return profile that offered substantial upside with limited downside. The public market failed to reprice shares, handing Blackstone an opportunity to purchase a high-quality portfolio with their patient capital.
