Around two weeks ago, I wrote an article on the proposed merger between Chambers Street Group (NYSE:CSG) and Gramercy Property Trust (NYSE:GPT). As you may recall, on June 10, Bloomberg first reported that Chambers Street was putting itself on the block “after receiving at least one offer from a competitor.”
Then around three weeks later, that rumor became reality. Chambers Street and Gramercy Property said they were combining forces through a merger into a combined entity that was expected to be valued at around $5.7 billion (based on EV).
At one time, I owned both Chambers Street and Gramercy, and earlier this year, I parted ways with Chambers Street.
Gramercy has been a dream REIT though, and while I was reluctant to hop in early, I have been very pleased with the overall performance, especially when the dividend was reinstated. I knew that my initial investment in Gramercy was somewhat speculative given the volatile history of the previous operating model.
However, I decided to take the initial dip after examining the experience of the management team, namely Gordon Dugan. As a shareholder in W.P. Carey (NYSE:WPC), I was well aware of Dugan’s track record there, and I was hoping to see his leadership skills move the needle again at Gramercy.
So I’m quite comfortable with Dugan at the helm, and while there is integration risk associated with the merger of near-equals, I recognize that the Chambers Street deal is not the first transformation portfolio that Dugan has masterminded. On the surface, the transaction looks complex, yet my interview this week with Dugan provides me with comfort that my principal is safe.
Brad Thomas (BT): The CSG deal appears to be a big step for GPT – upon completion, the total enterprise value (or TEV) of the combined company is expected to be 40 percent larger than GPT. How are you preparing for integration? What costs savings do you expect from this combination?
