Gramercy Capital has been on quite a run lately (22% YTD) as it continues its transformation into a net-lease equity REIT. After the close today, Gramercy announced they sold the CDO management business to CWCapital for $9.9 million plus freeing capital that was tied up in the CDOs:
Gramercy will continue to hold the equity tranche of each CDO, which are probably worthless but potentially have some optionality value if the commercial real estate continues to improve. While retaining the equity tranches is likely the right thing to do long term (free option), it means the CDOs will still be consolidated on the balance sheet creating negative shareholder's equity. I'd probably trade the CDO equity for a clean balance sheet that more investors are able to understand.
Even with an additional $56 million in liquidity, Gramercy will still need to raise additional equity to fully becoming a performing REIT again and reinstate the dividend, but at least with the recent runup, they won't be issuing equity quite as cheap.
Disclosure: I own shares of GKK and GKK-A
UPDATE (2/6/13): I heard back from Investor Relations that "at settlement, we expect to deconsolidate." Great news, Gramercy will have a clean balance sheet making the company easier to understand for investors and get to retain the potential upside of the CDO equity, however small that might be.