Grubb & Ellis to be acquired
A small Santa Ana real estate company is taking over venerable commercial real estate brokerage Grubb & Ellis Co. and will move the firm’s headquarters from Chicago to Santa Ana.
The merger announced Tuesday with NNN Realty Advisors Inc., a privately held real estate services and management company in Santa Ana, marks the latest consolidation in the increasingly competitive industry.
“Companies need to be bigger to compete now,” said real estate analyst Craig Silvers of Bricks & Mortar Capital. “They can offer more market knowledge and greater property selection to their clients.”
The consolidation will bring together several specialties including Grubb & Ellis’ nationwide brokerage and property management services and NNN’s real estate investment portfolio.
It would be the latest of several real estate company mergers in recent years.
Last December, the giant El Segundo-based brokerage CB Richard Ellis Group Inc. bought rival brokerage, property manager and developer Trammell Crow Co. of Texas in a $1.9-billion deal, the nation’s largest.
Also that month, another monster brokerage, Cushman & Wakefield, announced that an Italian family had purchased a majority stake in the New York company.
NNN expects by year-end to complete the acquisition of Grubb & Ellis, ranked as the nation’s fifth-largest public real estate services company. If the stock-only transaction is approved by shareholders the combined firm would have a market value of $725 million.
Grubb & Ellis was founded in California in 1958 by real estate brokers Bill Grubb and Hal Ellis. The company moved its headquarters from San Francisco to Chicago in 1996.
It has about 5,000 employees and a substantial presence in Southern California, one of the nation’s largest real estate markets.
Grubb & Ellis has been trying to grow, said spokeswoman Janice McDill, and the merger will give it more resources to do so. “There are synergies between the two companies and the merger will create a platform for combined growth,” she said.
The predecessor of NNN was founded in Santa Ana in 1998 and the company now has about 500 employees. It sponsors real estate investment trusts that buy and operate offices, apartments, medical buildings and other commercial properties.
It is perhaps best known for offering individual investors the chance to buy commercial real estate as “tenant-in-common” owners.
Such real estate trades are covered by Section 1031 of the U.S. Tax Code, under which the owner of an investment property who swaps it for a similar property does not have to report a capital gain immediately. NNN had recently taken preliminary steps to go public.
By acquiring Grubb & Ellis, “they have bought a name that has cachet nationally,” said Mike Lipsey, president of Lipsey Co., an Orlando, Fla.-based real estate training and consulting firm. Grubb & Ellis is one of the most well-known real estate firms in the country, he said.
Grubb & Ellis will issue 0.88 of a share for every NNN share outstanding and NNN shareholders will own 59% of the combined company. Shares of Grubb & Ellis rose 86 cents, or 8%, on the news to $11.62.
Industry analyst Silvers said that “Grubb & Ellis can offer listings to NNN clients. Both sides are feeding each other.”
NNN Chief Executive Scott Peters will have the same position with Grubb & Ellis. What role Grubb’s current chief executive, Mark Rose, will play after the merger has not been determined.
Grubb & Ellis’ board will be increased to nine members, which will include six nominees from NNN and three from Grubb & Ellis.
Tony Thompson, NNN’s founder and chairman, said that “with access to Grubb & Ellis’ leading brokerage network, we believe the cross-selling opportunities are enormous.”
