NEW YORK CITY—Ladenburg Thalmann & Co., an investmentadvisory firm, is liking what its hearing—and seeing—with respectto Gramercy Property Trust, calling the latter firm “the next bluechip net lease REIT in the making.”


“We believe GPT has all the makings of the next blue chipsingle-tenant net lease REIT,” says Daniel Donlan, VP of equityresearch and REITs at Ladenburg. “In our view, there is not a clearnet lease leader that is exclusively focused on industrial andoffice assets. Given GPT CEO Gordon DuGan's 22-year history withW.P. Carey, his deep underwriting experience across a variety ofnet lease asset types, his strong credibility and growingfamiliarity with institutional investors, we believe Gramercy canevolve into a blue chip REIT if the capital markets remain open totheir ambitious growth plan."


Given the longstanding industry relationships of both DuGan andpresident Ben Harris, who was WPC's former North Americanacquisition head, "we do not see sourcing attractive deal flow as ahindrance either," Donlan adds. "With that in mind, we view GPT's2015 AFFO/sh multiple of 10.1x as grossly undervaluing its sectorleading (and potentially industry leading) earnings growth in both2014 and 2015. We reiterate our buy rating and $7 pricetarget.”


Further, Donlan says, Gramercy is poised to move past what somemay perceive as issues now facing the REIT. “With GPT down 6.7% in2014, which has underperformed the net lease sector average and RMZby 1,465 basis points and 1,760 basis points, respectively, webelieve the REIT is positioned to rally from current levels as saidweakness has little to do with the underlying business plan. Forinstance, with GPT's 95.6% return leading all REITs in 2013, therehas understandably been some profit taking and style drift byinvestors in our view. In addition, with the October privateplacement lock-up expiring on March 25, we believe the stock waslikely pressured into the expiration, as is often the case withsuch situations. Lastly, with the REIT forecasting a 50/50equity/debt split to finance its projected 2014 acquisition volumeof $600M, we believe the stock has been held back by a perceivedequity overhang.”


After several days of meetings with DuGan, Ladenburg isconfident in Gramercy Property Trust. ”In light of all the positivetakeaways from our meetings, our sense is that REIT dedicatedinvestors are starting to gravitate toward GPT despite itsmicro-cap size. In fact, in all our years of traveling with smalland micro cap REITs, never before have we seen such widespreadinterest in a name. We strongly advise investors build positions inGPT now versus later.”

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Rayna Katz

Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.