American Financial Realty Trust Announces 2007 Fourth Quarter Results

JENKINTOWN, Pa., Feb. 28 /PRNewswire-FirstCall/ -- American Financial Realty Trust today reported financial results for the quarter ended December 31, 2007. For the fourth quarter, the Company reported revenues from continuing operations of $92.4 million, excluding interest and other income, a $1.5 million decrease compared to the prior quarter as adjusted for the reclassification of buildings considered Held-for-Sale at December 31, 2007.

Funds from operations ("FFO")(1) during the fourth quarter were negative $3.9 million, down $0.03 per share when compared with the previous quarter. The decrease in FFO includes impairment charges of $18.1 million primarily related to assets placed under contract of sale in 2008.

Adjusted funds from operations ("AFFO")(2) in the fourth quarter were $19.1 million, or $0.15 per share, an increase of $0.02 per share compared with the prior quarter. Excluding the impact of the assets placed under contract in 2008 and costs associated with the Company's pending merger with Gramercy Capital Corp. ("Gramercy"), AFFO would have been $28.2 million or $0.22 per share.

For the fourth quarter, the Company's weighted average diluted common shares and operating partnership units outstanding were 128.9 million.

MG&A expenses for the fourth quarter, exclusive of deferred equity compensation costs, decreased $0.4 million compared with the prior quarter.

Assets sold during the fourth quarter resulted in a GAAP gain of $13.0 million, before minority interest. Impairment charges of $18.1 million were recognized for properties sold during the period and other properties that the Company expects to sell in subsequent quarters. In addition, the Company incurred yield maintenance fees of $1.3 million during the quarter related to the defeasance of debt associated with the assets sold.

For the fourth quarter, economic gains related to assets sold totaled $10.8 million, all of which was included in AFFO as an offset of costs associated with dispositions (impairment charges, yield maintenance fees and defeasance costs).

Full Year Results

Full year AFFO was $81.8 million or $0.63 per share after impairments and other charges related to the repositioning program. Excluding the impact of the assets placed under contract in 2008 and the one-time payment of $5.0 million paid to the estate of the former CEO, AFFO for the full year would have been $95.4 million or $0.73 per share.

Shareholders Approve Merger With Gramercy Capital Corp.

On November 2, 2007, Gramercy and the Company entered into a definitive merger agreement for Gramercy to acquire the Company for approximately $3.4 billion, including the assumption of the Company's outstanding indebtedness. The transaction was unanimously approved by the Gramercy board of directors and the Company's board of trustees, and on February 13, 2008, the Company's shareholders approved the merger and Gramercy's stockholders approved the issuance of its common stock in the merger at the respective special meetings of each company. The acquisition is expected to be completed during the second half of March 2008 and will combine the existing operating platforms of the Company and Gramercy to create an integrated commercial real estate finance and operating company.

The Company's fourth quarter dividend for shareholders of beneficial interest of $0.19 per share was paid on January 18, 2008, to shareholders and Operating Partnership unit holders of record at December 31, 2007. Pursuant to the merger agreement with Gramercy, the Company is not permitted to pay dividends thereafter.

FOURTH QUARTER 2007 PORTFOLIO AND TENANT OVERVIEW

Occupancy(3): As of December 31, 2007, the portfolio included in continuing operations had occupancy of 90.6%, while Same Store occupancy was approximately 91.8%. The Held-for-Sale asset portfolio had an average occupancy of 64.1%, which when combined with the continuing operations portfolio resulted in total occupancy of 86.7%.

Dispositions: The Company sold 19 properties, including two land parcels, all of which were non-core or off-strategy assets, for an aggregate sales price, net of transaction costs, of approximately $50.2 million. In addition, the Company terminated one leasehold in the fourth quarter. These dispositions resulted in a reduction to the real estate portfolio of approximately 657,000 square feet, of which approximately 124,500 square feet were vacant.

Acquisitions: The Company completed the acquisition of 31 bank branch properties comprising approximately 154,000 rentable square feet, and four land parcels under the terms of its Formulated Price Contract with Wachovia Bank, N.A. for an aggregate purchase price of approximately $34.5 million, including closing costs.

Leasing activity: The Company added approximately 205,300 square feet of new leasing from 49 leases, with an average rent of $20.87 per square foot(4). Associated tenant improvement costs, calculated on a weighted average lease term of 7.96 years, were $3.90 per square foot per year.

As of December 31, 2007, the total potential recapture space remaining in two portfolios was approximately 30,100 square feet, most of which is expected to be returned by the second quarter of 2008.

The following table provides statistics on the AFR portfolio as of December 31, 2007, with comparisons to the portfolio as of September 30, 2007.

(1) FFO is defined as net income (loss) before minority interest in our operating partnership (computed in accordance with generally accepted accounting principles), excluding gains (losses) from debt restructuring and gains (losses) from sales of property, less any impairments of asset values at cost (unrealized loss), plus real estate related depreciation and amortization (excluding amortization of deferred costs) and after adjustments for unconsolidated partnerships and joint ventures. (2) AFFO does not include GAAP gains (the difference between sale price and net book value (original purchase price less accumulated depreciation)) as a component of AFR's core earnings. The Company includes economic gains (the difference between sale price and original purchase price) realized during the reporting period solely to offset transaction costs incurred on assets sold and impairments taken within the same period. (3) Stable occupancy is the total occupancy less any space acquired during the quarter and all activity in the quarter associated with those assets, and recapture space. Total occupancy encompasses the entire portfolio, exclusive of joint venture assets, at any specific point in time. Same Store occupancy includes properties that were owned at the beginning and the end of the reporting period, excluding assets held for sale. See AFR 4Q 2007 Supplemental for additional details. (4) See AFR 4Q 2007 Supplemental page 31 for additional details. As of As of As of As of December December September September 31, 2007 31, 2007, 30, 2007 30, 2007, Net of Net of Held-for-Sale Held-for-Sale Number of Properties 1,081 950 1,066 937 -- Branches 690 622 669 603 -- Office Buildings 377 314 385 322 -- Land 14 14 12 12 Total Square Feet 30,224,165 25,758,756 30,730,275 27,207,281 -- Branches 4,574,365 3,919,857 4,502,269 3,817,490 -- Office Buildings 25,649,800 21,838,899 26,228,006 23,389,791 Occupancy -- Total Occupancy 86.7% 90.6% 86.6% 90.5% -- Stable Occupancy 87.1% 91.0% 86.8% 90.7% -- Same Store Occupancy (797 properties) 91.8% 91.8% 91.3% 91.3% % Rent from Financial Institutions 79.9% 82.8% 80.2% 80.9% % Rent from "A-" Rated Tenants 74.1% 76.2% 74.4% 74.8% % Rent from Net Leases 76.6% 86.3% 76.6% 77.5% Lease Expirations (within 1 year) 1.4% 1.3% 1.3% 1.2% Average Remaining Lease Term (years) 11.0 11.5 11.2 11.2 Average Remaining Debt Term (years) 8.8 N/A 9.1 N/A % Fixed Rate Debt to Total Debt 89.5% N/A 93.2% N/A Unconsolidated Joint Venture -- Branches owned in joint venture 239 239 239 239 -- Total Square feet in branches owned in joint venture 982,634 982,634 982,634 982,634 BALANCE SHEET UPDATE

As of December 31, 2007, the Company's total net debt (net of cash and certain escrow balances) to enterprise value (net debt and equity market capitalization) was 64.5% and the ratio of net debt to net assets at net book value was 61.5% within the Company's stated targeted range of 60 - 65%. The ratio of net secured debt to total real estate investments and real estate intangibles (at cost and before joint venture investments) was 45.2%, compared with 48.1% in the prior quarter.

Mortgage debt outstanding decreased during the period by $65.7 million due to the payoff of the 123 South Broad Street -- Unit II mortgage at maturity, the off-balance sheet defeasance of six properties from the Wachovia BBD loan, and monthly principal amortization. Advances under the Company's secured line of credit increased by a net of $81.0 million during the period. This reflects $50.0 million advanced in connection with the payoff of the 123 South Broad Street -- Unit II mortgage at maturity, and $31.0 million advanced to fund acquisitions from Wachovia in accordance with our formulated price contracts with the bank in the quarter, along with other working capital needs.

As of December 31, 2007, the Company had total indebtedness of approximately $2.2 billion, with a weighted average remaining term of 8.8 years and a weighted average interest rate (including amortized hedging costs) of 5.68%, compared to 5.73% in the prior quarter, reflecting increased short term borrowings from the Company's secured credit facility.

Supplemental Quarterly Financial and Operating Data

American Financial Realty Trust publishes supplemental quarterly financial and operating data, which can be found under the Investor Relations section of the Company's website at http://www.afrt.com/. These materials are also available via e-mail by calling 312-640-6770.

Non-GAAP Financial Measures

The Company believes that FFO and AFFO are helpful to investors as measures of the Company's performance as an equity REIT because they provide investors with an understanding of the Company's operating performance and profitability. FFO and AFFO are non-GAAP financial measures commonly used in the REIT industry, and therefore these measures may be useful in comparing the Company's performance with that of other REITs. However, the Company's definitions of FFO and AFFO may differ from those used by other companies, and investors should take definitional differences into account when comparing FFO and AFFO reported by other REITs. Additionally, FFO and AFFO (and their per share equivalents) should be evaluated along with GAAP net income and net income per share (the most directly comparable GAAP measures) in evaluating the performance of equity REITs.

The Company believes that EBITDA, which represents earnings before interest, taxes, depreciation and amortization, is also helpful to investors as a measure of the Company's performance.

About American Financial Realty Trust

American Financial Realty Trust is a self-administered, self-managed real estate investment trust that acquires properties from, and leases properties to, regulated financial institutions. The Company through its operating partnership and various affiliates owns and manages its assets primarily under long-term triple net and bond net leases with banks. The Company is traded on the New York Stock Exchange under the ticker symbol AFR.

For more information on American Financial Realty Trust, visit the Company's website at http://www.afrt.com/.

Forward-Looking Statements

This document may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical facts included in this press release are forward-looking statements. All forward-looking statements speak only as of the date of this press release. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance, achievements or transactions of American Financial Realty Trust and its affiliates or industry results or the benefits of the proposed transaction to be materially different from any future results, performance, achievements or transactions expressed or implied by such forward-looking statements. Such risks, uncertainties and other factors relate to, among others, the satisfaction of closing conditions to the Gramercy Capital Corp, merger transaction, the effects of general and local economic conditions, interest rates, capital market conditions, bankruptcies and defaults of borrowers or tenants in properties securing the Company's investments, and other factors, which are beyond the company's control. Additional information or factors which could impact the companies and the forward-looking statements contained herein are included in each company's filings with the Securities and Exchange Commission. American Financial Realty Trust assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

Additional Information and Where to Find It

This document does not constitute an offer of any securities for sale. Gramercy Capital Corp. filed with the SEC a Registration Statement on Form S- 4, which included a joint proxy statement/prospectus of Gramercy Capital Corp. and American Financial Realty Trust and other relevant materials in connection with the merger. The joint proxy statement/prospectus was mailed to the stockholders of Gramercy Capital Corp. and American Financial Realty Trust. Investors and security holders of Gramercy Capital Corp. and American Financial Realty Trust are urged to read the joint proxy statement/prospectus and the other relevant materials because they contain important information about Gramercy Capital Corp., American Financial Realty Trust and the merger. The joint proxy statement/prospectus and other relevant materials and any other documents filed by Gramercy Capital Corp. or American Financial Realty Trust with the SEC, may be obtained free of charge at the SEC's web site at http://www.sec.gov/. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by Gramercy Capital Corp. by contacting Gramercy Capital Corp.'s Investor Relations at http://www.gramercycapitalcorp.com/ or via telephone at 212-297-1000. Investors and security holders may obtain free copies of the documents filed with the SEC by American Financial Realty Trust at http://www.afrt.com/ or via telephone at 215-887-2280. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND THE OTHER RELEVANT MATERIALS.

Financial Statements

The attached financial statements and data are presented to supplement the Company's audited and unaudited regulatory filings and should be read in conjunction with those filings. The unaudited financial data presented herein is provided from the perspective of timeliness to assist readers of quarterly and annual financial filings. This financial data was prepared prior to the Company's auditors completing their audit. As such, data otherwise contained in future regulatory filings covering this same time period may differ from the data presented herein. The Company does not accept responsibility for highlighting these changes in its subsequent filings.

Set forth below is a reconciliation of our calculations of FFO and AFFO to net (loss) income (unaudited, in thousands except per share data and coverage ratio):

Quarter Ended Year to Date Ended December December September December December 31, 2007 31, 2006 30, 2007 31, 2007 31, 2006 Funds from operations (NAREIT defined): Net (loss) income $(22,954) $45,536 $(22,782) $(49,511) $(20,598) Add: Minority interest - Operating Partnership (326) 782 (322) (678) (871) Depreciation and amortization 33,296 38,270 34,355 134,421 168,077 Less: Non-real estate depreciation and amortization (1,117) (1,103) (1,172) (4,525) (4,325) Amortization of fair market rental adjustment, net 208 (42) 132 333 (186) Net gains from extinguishment of debt - - - (4,583) - Net gains from disposals, net of income taxes (13,021) (158,890) (9,809) (70,949) (243,854) Funds from operations (NAREIT defined) $(3,914) $(75,447) $402 $4,508 $(101,757) Funds from operations - diluted per share $(0.03) $(0.57) $0.00 $0.03 $(0.77) Adjusted funds from operations: Funds from operations $(3,914) $(75,447) $402 $4,508 $(101,757) Add: Economic gains 10,782 84,660 5,270 34,453 107,252 Non-real estate depreciation and amortization 1,117 1,103 1,172 4,525 4,325 Reverse straightline rental income 11,020 11,060 10,250 42,493 41,629 Amortization of deferred compensation 1,508 1,285 1,388 4,471 8,687 Amortization of deferred costs and interest rate cap 3,092 4,847 3,409 8,475 16,976 Straightline fee income (170) (217) (209) 783 (1,032) Amortization of deferred compensation - severance - - - - 4,344 Less: Straightline rental income (2,335) (3,340) (2,460) (1,726) (874) Recurring capex and tenant improvements (1,695) (1,762) (1,552) (6,427) (5,386) Capital expenditure reimbursement revenue (302) (776) (285) (9,725) (11,283) Adjusted funds from operations $19,103 $21,413 $17,385 $81,830 $62,881 Adjusted funds from operations - diluted per share $0.15 $0.16 $0.13 $0.63 $0.48 AFFO coverage ratio: Quarterly dividend $24,416 $25,328 $24,765 $98,396 $122,419 AFFO / quarterly dividend 0.78x 0.85x 0.70x 0.83x 0.51x AMERICAN FINANCIAL REALTY TRUST Comparative Balance Sheets (Unaudited and in thousands, except per share data) December 31, December 31, 2007 2006 Assets: Real estate investments, at cost: Land $312,232 $333,716 Land held for development 10,528 14,632 Buildings and improvements 1,844,805 1,947,977 Equipment and fixtures 264,539 283,704 Leasehold interests 18,930 16,039 Investment in joint venture 16,331 21,903 Total real estate investments, at cost 2,467,365 2,617,971 Less accumulated depreciation (358,833) (297,371) Total real estate investments, net 2,108,532 2,320,600 Cash and cash equivalents 124,848 106,006 Restricted cash 125,786 76,448 Marketable investments and accrued interest 2,675 3,457 Pledged treasury securities, net 88,658 32,391 Tenant and other receivables, net 67,499 62,946 Prepaid expenses and other assets 20,926 32,191 Assets held for sale 359,294 594,781 Intangible assets, net 271,294 314,753 Deferred costs, net 61,866 62,591 Total assets $3,231,378 $3,606,164 Liabilities and Shareholders' Equity: Mortgage notes payable $1,436,248 $1,557,313 Credit facilities 195,363 212,609 Convertible notes, net 446,551 446,343 Accounts payable 2,453 7,246 Accrued interest expense 15,593 15,601 Accrued expenses and other liabilities 45,052 58,940 Dividends and distributions payable 25,021 25,328 Below-market lease liabilities, net 43,660 57,173 Deferred revenue 264,738 179,456 Liabilities related to assets held for sale 142,902 247,798 Total liabilities 2,617,581 2,807,807 Minority interest 7,380 12,393 Shareholders' equity: Preferred shares, 100,000,000 shares authorized at $0.001 per share, no shares issued and outstanding at December 31, 2007 and December 31, 2006 - - Common shares, 500,000,000 shares authorized at $0.001 per share, 132,147,856 issued and 128,510,395 outstanding at December 31, 2007; 130,966,141 issued and outstanding at December 31, 2006 132 131 Capital contributed in excess of par 1,395,858 1,389,827 Common shares held in treasury at cost, 3,637,461 shares at December 31, 2007 (34,990) - Accumulated deficit (747,504) (599,596) Accumulated other comprehensive loss (7,079) (4,398) Total shareholders' equity 606,417 785,964 Total liabilities and shareholders' equity $3,231,378 $3,606,164 AMERICAN FINANCIAL REALTY TRUST Comparative Statements of Operations (Unaudited and in thousands, except per share data) Quarter Ended Year to date December December December December 31, 2007 31, 2006 31, 2007 31, 2006 Revenues: Rental income $59,555 $58,519 $239,114 $226,917 Operating expense reimbursements 32,877 39,637 133,786 161,857 Total revenues 92,432 98,156 372,900 388,774 Property operating expenses: Ground rents and leasehold obligations 3,660 3,352 14,266 14,218 Real estate taxes 9,638 9,137 39,885 39,398 Utilities 8,710 12,080 39,496 51,756 Property and leasehold impairments 141 2,033 1,880 10,416 Direct billable expenses 2,044 2,181 6,973 6,014 Other property operating expenses 20,624 26,258 85,776 97,813 Total property operating expenses 44,817 55,041 188,276 219,615 Property net operating income 47,615 43,115 184,624 169,159 Expenses: Marketing, general and administrative 4,162 5,588 19,483 25,110 Amortization of deferred equity compensation 1,492 1,285 4,471 8,687 Repositioning costs - 418 - 9,065 Merger costs 399 - 399 - Severance and related accelerated amortization of deferred compensation - - 5,000 21,917 Operating income 41,562 35,824 155,271 104,380 Investment and other income 5,955 2,979 11,728 6,315 EBITDA 47,517 38,803 166,999 110,695 Interest expense 32,057 35,635 128,423 132,459 Depreciation and amortization 30,875 28,262 119,556 113,100 Loss before equity in loss from unconsolidated joint venture, gain on sale of properties in continuing operations, minority interest and discontinued operations (15,415) (25,094) (80,980) (134,864) Equity in loss from joint venture (715) (697) (2,878) (1,397) Gain on sale of properties in continuing operations 103 13 782 2,043 Loss from continuing operations before minority interest (16,027) (25,778) (83,076) (134,218) Minority interest 260 362 1,174 2,731 Loss from continuing operations (15,767) (25,416) (81,902) (131,487) Discontinued operations: Loss from operations, net of minority interest of $233, ($286), $529 and $1,805 (19,553) (52,405) (42,741) (80,258) Yield maintenance fees and gains on extinguishment of debt, net of minority interest of $5, $15,319, $(84) and $15,564 (371) (32,724) 5,870 (46,409) Net gains on disposals, net of minority interest of $181, $72,587, $905 and $74,046 12,737 156,081 69,262 237,556 (Loss) income from discontinued operations (7,187) 70,952 32,391 110,889 Net (loss) income $(22,954) $45,536 $(49,511) $(20,598) Basic and diluted (loss) income per share: From continuing operations $(0.13) $(0.20) $(0.65) $(1.03) From discontinued operations (0.05) 0.55 0.26 0.86 Total basic and diluted (loss) income per share $(0.18) $0.35 $(0.39) $(0.17)