Grubb & Ellis agrees to sale
Venerable commercial real estate brokerage Grubb & Ellis Co. will sell its assets to the parent company of rival Newmark Knight Frank as part of a prepackaged bankruptcy, the firms said Tuesday.
BGC Partners Inc., a New York financial services firm that acquired Newmark Knight Frank in October, agreed to buy essentially all the assets of Grubb & Ellis for an undisclosed price.
Grubb & Ellis will conduct its asset sale under Section 363 of the U.S. Bankruptcy Code and has commenced Chapter 11 proceedings in the U.S. Bankruptcy Court for the Southern District of New York.
BGC said it would provide financing to support the Santa Ana company’s operation during the sale process, which must be approved by a federal judge.
The brokerage industry has been consolidating for several years as smaller shops seek to combine forces in order to better compete with the major firms, said analyst Ben Thypin of Real Capital Analytics Inc.
“The acquisition of Grubb & Ellis, combined with last year’s purchase of Newmark Knight Frank, places BGC in a great position to challenge the industry’s biggest players,” Thypin said.
The firms did not reveal whether the Grubb & Ellis name would survive the takeover. The company’s yellow-and-black signs are a common sight on offices, warehouses and other commercial buildings available for sale or lease.
Grubb & Ellis was formed in Oakland in 1958 by Bill Grubb and Hal Ellis and grew into one of the largest publicly traded real estate brokerages in the United States.
It borrowed heavily to expand, however, and had trouble turning a profit after the real estate industry crashed in the early 1990s.
The company was acquired in 2007 by NNN Realty Advisors Inc., a privately held real estate services and management company in Santa Ana.
NNN kept the Grubb & Ellis brand after the stock-only transaction valued at $725 million.
In recent years, the recession and real estate crash further stressed the company as it lost market share in the competitive brokerage business.
In its bankruptcy filing, Grubb & Ellis listed $150 million in assets and $167 million in debt at the end of last year.
“Following a thorough and rigorous process and the evaluation of all available options, we determined that a partnership with BGC provides the best platform for our brokerage professionals, employees and clients,” said Thomas P. D’Arcy, chief executive of Grubb & Ellis.
“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.”
Grubb & Ellis was delisted by the New York Stock Exchange in January after its share prices fell below $1.
The company’s travails have taken a toll on its workers, said broker Neil Resnick, who worked for Grubb & Ellis for 11 years before leaving in August to open the Los Angeles office of Avison Young, a Canadian competitor.
“It saddens me terribly that they have had to endure significant uncertainty,” he said.
Last month he hired two former Grubb & Ellis brokers, Joseph Gabbaian and Martin McDermott.
Grubb & Ellis has more than 3,000 employees. In 2011, the company completed about 12,000 sale and lease transactions.
Grubb & Ellis and its affiliates manage more than 250 million square feet of property.
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