Just as two previous investors have apparently stepped back from potential deals for Grubb & Ellis Co., a third influential player has started talks to acquire or invest in the struggling Santa Ana, CA-based commercial real estate services firm.
Grubb & Ellis Co. has entered into exclusive negotiations with an affiliate of Cantor Fitzgerald and its CEO Howard Lutnick, whose BGC Partners, L.P. caught many observers by surprise when it acquired Newmark Knight Frank in October 2011 for a reported $65.6 million in cash and stock. This week, Grubb & Ellis disclosed that it has granted BGC the exclusive right through Jan. 31 to pursue debt or equity financing, an acquisition or another strategic transaction with Grubb & Ellis.
Grubb’s previous exclusive agreements with C-III Capital Partners LLC, led by distressed real estate specialist Andrew Farkas, and Colony Capital LLC, headed by Tom Barrack, expired without a deal being reached on Jan. 15.
BGC Partners said that it may consider a transaction to extend a term loan to Grubb & Ellis to refinance the company’s existing senior debt and providing additional working capital, among other purposes. In exchange, Grubb will work exclusively with BGC on a “potential debt financing transaction and/or an alternative equity financing transaction, acquisition, recapitalization, asset sale or other strategic transaction” through Jan. 31, according to a Grubb & Ellis securities filing.
On Oct. 13, Lutnick and BGC Partners (Nasdaq:BGCP) entered the CRE services market in a big way through its acquisition of New York-based Newmark & Company Real Estate, Inc., a leading brokerage and advisory firm which operates in the U.S. as Newmark Knight Frank. The deal included about 425 brokers and 35 Newmark offices. Lutnick, who also serves as chairman and CEO of Cantor Fitzgerald, L.P., spun off BGC in 2004 as a leading provider of voice and electronic financial brokerage services. He named the firm in honor of B. Gerald Cantor, who founded what became Cantor Fitzgerald in 1945.
Lutnick clearly sees an opportunity in Grubb & Ellis. The firm has approximately 5,200 brokers in more than 100 offices across the country, but it has seen plenty of financial misfortune since a 2007 merger with NNN Realty Advisors misfired just as the economy and real estate market tanked.
On Jan. 6, the New York Stock Exchange delisted Grubb & Ellis after months of warnings that the company’s stock price and market capitalization had fallen consistently below $1 and $50 million, respectively. The firm’s stock, which now trades over the counter, closed its last NYSE trading day with a share price of 9 cents and a total stock value of $6.2 million.
Just a couple of days later, Grubb & Ellis Healthcare REIT II completed the transition of dealer-manager and advisory agreements, along with a name change to Griffin-American Healthcare REIT II, to co-sponsorship by Griffin Capital Corp. and American Healthcare Investors.
Along the way, dozens of executives and brokers have left Grubb & Ellis for rivals such as CBRE, Lee & Associates, Colliers International, Studley and others.
This week, Griffin Capital Securities announced that Grubb & Ellis’s entire wholesaling team, together with most of the broker dealer executives from Grubb & Ellis Capital Corp., — a total of 37 employees — have joined Griffin Capital. In total, 42 former Grubb employees have come to work for Griffin over the last month. (credit, r, drummer, co-star)