Grubb & Ellis Agrees to Sell-Off in Chapter 11 – Feeding the BGC Behemoth

Along with 16 affiliates, Grubb & Ellis, Co., the Santa Ana, California, based commercial real estate brokerage firm – the third largest in the Sacramento area, employing over 3,000 people in 90 U.S. offices – filed for Chapter 11 bankruptcy in celebration of Presidents’ Day. G&E characterizes its commercial endeavors as “providing transaction services, property management, facilities management and valuation services.”

Grubb & Ellis was founded in 1958 by Bill Grubb and Harold “Hal” A. Ellis, Jr., who died in 2009. In the 1990s, the firm was struggling to maintain profitability and in 2007 was acquired by Santa Ana’s NNN Realty Advisors, Inc., in a $725 million stock only transaction. Financial struggles continued, however, into 2012.

In an interesting twist, G&E has agreed to an expedited sale of almost all of its assets to BGC Partners, Inc., which will also provide sufficient financing, as much as a $4.8 million loan, to keep G&E operating without interruption through the sale and Chapter 11 proceedings. The proposed § 363 sale must first meet the approval of the federal bankruptcy judge assigned to the case. Just last October, BGC absorbed the New York real estate services company Newmark Knight Frank which employed over 7,000 individuals.

In the bankruptcy petition filed with the U.S. Bankruptcy Court for the Southern District of New York (Manhattan), G&E reported approximately 12,000 sales and leases while managing over 250 million square feet of real property, with $150 million in assets and $167 million in debts. This was as of December 31, 2011.

G&E’s CFO Michael Rispoli blames his company’s 2007 merger with NNN Realty Advisors as an unfortunate action that “couldn’t have come at a worse time.” Losses in the national financial crisis and an ongoing anemic real estate market left G&E cash poor with insufficient funds to get through the month of March 2012.

G&E’s CEO Thomas P. D’Arcy believes the sale to BGC is best for both companies:

“We believe the transaction will be seamless for our clients and we expect no disruption to the company’s operations. Furthermore, we believe our professionals and clients will benefit greatly by being part of the BGC organization, which, with its recent acquisition of Newmark Knight Frank, will bring together two strong brands to create a powerhouse in the commercial real estate space.”

BGC’s CEO Howard W. Lutnick agrees with D’Arcy, but of course is focused more on what BGC will get out of the transaction:

“This transaction reflects [BGC’s] deep and unwavering commitment… to build a premier position in real estate services… [and] enable Grubb & Ellis to thrive and grow as part of the BGC family of companies.”

Out of the ashes will rise the Phoenix, or so goes the creation of a behemoth in the commercial real estate services business.