SANTA ANA, Calif., May 28 /PRNewswire-FirstCall/ -- Grubb & Ellis Company (NYSE: GBE), a leading real estate services and investment firm, today announced that it has filed its 2008 Annual Report on Form 10-K with the Securities and Exchange Commission.
The filing follows the company's March 18, 2009 announcement that its 2008 10-K would be delayed to provide time to restate certain previously issued financial statements. The company also filed with the SEC amended Form 10-Qs for the first three quarters of 2008 to reflect the restatement. The restatement was necessary to correct accounting errors related to the timing of revenue recognition relating to certain tenant-in-common investment programs sponsored by NNN Realty Advisors and its subsidiaries prior to the company's merger with NNN Realty Advisors in December 2007. The 2008 10-K includes the restatement of Grubb & Ellis' previously issued financial statements for the years ended December 31, 2007 and 2006.
The company reported 2008 fourth quarter revenue of $156.0 million, and 2008 revenue of $611.8 million. The company reported a net loss of $262.9 million, or $4.15 per share, for the fourth quarter, and a net loss of $330.9 million, or $5.21 per share, for 2008.
Fourth Quarter 2008
The fourth quarter 2008 net loss includes the following charges, which other than $4.5 million of merger-related costs, had no cash impact to the fourth quarter:
- $181.3 million for the impairment of goodwill and intangibles;
- $11.5 million in charges related to the company's investment management programs;
- $6.2 million in real estate-related impairments;
- $4.5 million of merger-related and integration costs;
- $16.0 million loss from discontinued operations, and
- $5.4 million of stock-based compensation and amortization of signing bonuses.
Excluding these charges, the company reported adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) for the fourth quarter of 2008 of negative $4.4 million, compared with adjusted EBITDA for the combined companies of $22.8 million in the same period a year ago.
2008 Results
The company's 2008 net loss includes the following charges, which other than the $14.7 million of merger-related costs, had no cash impact in 2008:
- $181.3 million for the impairment of goodwill and intangibles;
- $27.8 million in charges related to the company's investment management programs;
- $18.0 million in real estate-related impairments;
- $14.7 million of merger-related and integration costs;
- $51.4 million loss from discontinued operations;
- $19.5 million of stock based compensation and amortization of signing bonuses;
- A $5.8 million write-off of investment in Grubb & Ellis Realty Advisors, and
- $3.1 million loss on the sale of securities, amortization of contract rights and other items.
Excluding these charges, the company reported 2008 adjusted EBITDA of $22.9 million, compared with adjusted EBITDA for the combined companies of $77.6 million in 2007. (Combined non-GAAP supplemental disclosure follows this release.)
Credit Amendment
On May 26, the company announced that it had renegotiated its senior secured credit facility. The credit agreement amendment, which was effective May 18, 2009, modifies the amount, terms and length of the facility. Under the new structure, the $67.3 million maximum aggregate credit facility includes a $29.3 million revolving line of credit and a $38 million term loan.
The merger between Grubb & Ellis and NNN Realty Advisors, Inc. was consummated on December 7, 2007. As required by generally accepted accounting principles (GAAP), the transaction was accounted for as a reverse merger. The company's results of operations commencing and subsequent to December 7, 2007 include the operations of the combined entity. Reported results of operations prior to December 7, 2007, including fourth quarter 2007 results, reflect only the operations of NNN Realty Advisors.
COMBINED COMPANIES SUPPLEMENTAL DISCLOSURE
In an effort to present a more complete financial and narrative description of the results of operations, the company has also provided non-GAAP financial measures. The non-GAAP financial measures are intended to reflect the company's results of operations on a combined basis, exclusive of the total financial or accounting impact associated with the merger transaction, such as amortization associated with purchase price adjustments or identified intangible assets. The non-GAAP combined results for the three and 12 months ended December 31, 2007 do not purport to show the results as if the companies were merged as of January 1, 2007, but rather represent an arithmetic combination of results of the two companies, Grubb & Ellis and NNN Realty Advisors. Results do not reflect the elimination of transactions between the two companies and certain estimated synergies and expenses related to the combination of the two companies for the periods presented. (Please refer to the Combined Statements of Operations tables that follow.)
Fourth Quarter Operations
For the fourth quarter of 2008, the company generated revenue of $156.0 million, compared with combined revenue of $194.6 million in the fourth quarter of 2007. The company posted a fourth quarter net loss of $262.9 million in 2008, compared with a net loss of $4.2 million on a combined basis in the same period of 2007. Adjusted EBITDA for the fourth quarter of 2008 was negative $4.4 million, compared with the combined companies' positive adjusted EBITDA of $22.8 million on the same basis for the fourth quarter of 2007. (See Tables)
2008 Operations
For calendar 2008, the company generated revenue of $611.8 million, compared with combined revenue of $692.9 million in 2007. The company posted a net loss of $330.9 million for 2008, compared with net income of $10.5 million for the companies on a combined basis in 2007. Adjusted EBITDA for 2008 was $22.9 million, compared with $77.6 million in 2007. (See Tables)
OPERATING SEGMENTS
Transaction Services
Transaction Services revenue for the fourth quarter of 2008, including brokerage commission, valuation and consulting revenue, was $67.1 million, compared with $93.6 million for the combined companies for the same period in the prior year. In 2008, the segment generated revenue of $240.3 million, compared with $312.3 million for the combined companies in 2007.
The company's Transaction Services business was adversely impacted by the current economic environment, which has reduced overall commercial real estate transaction velocity, particularly investment sales.
Investment Management
Investment Management revenue for the fourth quarter of 2008, which includes transaction fees, captive management fees and dealer-manager fees, totaled $17.2 million, compared with fees of $38.6 million for the same period in the prior year. Investment Management revenue for 2008 totaled $101.6 million, compared with $149.7 million in 2007. The decrease in revenue over prior-year periods can be attributed to current market conditions, which resulted in a significant decrease in equity raised by the company's tenant-in-common programs and lower acquisition and disposition fees across the company's investment programs.
In total, approximately $223.8 million in equity was raised for the company's investment programs in the fourth quarter of 2008, compared with $188.8 million in the fourth quarter of 2007. In 2008, approximately $984.3 million was raised for the company's investment programs, compared with $736.2 million raised during 2007. This increase in equity raised was driven by the company's public non-traded REITs, which raised approximately $592.7 million in 2008, compared with $278.0 million in 2007. The company's tenant-in-common 1031 exchange programs raised $176.9 million in equity during 2008, compared with $452.2 million in 2007. At December 31, 2008, the value of the company's assets under management was $6.8 billion, up from $6.7 billion at September 30, 2008.
Management Services
Management Services revenue includes asset and property management fees as well as reimbursed salaries, wages and benefits from the company's captive management and third party property management and facilities outsourcing services, along with business services fees. Management Services revenue was $67.8 million for the fourth quarter of 2008, compared with $56.6 million for the combined companies for the same period in the prior year. For the full year, the company reported Management Services revenue of $253.7 million, compared with $214.6 million for the combined companies in 2007.
As of December 31, 2008, Grubb & Ellis managed approximately 231.0 million square feet of commercial real estate and multi-housing property, including 46.8 million square feet of Grubb & Ellis Realty Investors' (formerly Triple Net Properties, LLC, a wholly owned subsidiary of NNN Realty Advisors) captive property portfolio.
Rental-Related Operations
Rental-related revenue and rental-related expense includes pass-through revenue and expenses for master lease accommodations related to the company's tenant-in-common programs.
About Grubb & Ellis
Named to The Global Outsourcing 100(TM) in 2009 by the International Association of Outsourcing Professionals(TM), Grubb & Ellis Company (NYSE: GBE) is one of the largest and most respected commercial real estate services and investment companies in the world. Our 6,000 professionals in more than 130 company-owned and affiliate offices draw from a unique platform of real estate services, practice groups and investment products to deliver comprehensive, integrated solutions to real estate owners, tenants and investors. The firm's transaction, management, consulting and investment services are supported by highly regarded proprietary market research and extensive local expertise. Through Grubb & Ellis Realty Investors, the company is a leading sponsor of real estate investment programs that provide individuals and institutions the opportunity to invest in a broad range of real estate investment vehicles, including public non-traded real estate investment trusts (REITs), tenant-in-common (TIC) investments suitable for tax-deferred 1031 exchanges and other real estate investment funds. For more information, visit www.grubb-ellis.com.
Forward-Looking Statements
Certain statements included in this press release may constitute forward-looking statements regarding, among other things, the ability of future revenue growth, market trends, new business opportunities and investment programs, synergies resulting from the merger of Grubb & Ellis Company and NNN Realty Advisors, certain combined financial information regarding Grubb & Ellis Company and NNN Realty Advisors, new hires, results of operations, changes in expense levels and profitability and effects on the Company of changes in the real estate markets. These statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results and performance in future periods to be materially different from any future results or performance suggested by these statements. Such factors which could adversely affect the Company's ability to obtain these results include, among other things: (i) the slowdown in the volume and the decline in transaction values of sales and leasing transactions; (ii) the general economic downturn and recessionary pressures on businesses in general; (iii) a prolonged and pronounced recession in real estate markets and values; (iv) the unavailability of credit to finance real estate transactions in general and the Company's tenant-in-common programs, in particular; (v) the reduction in borrowing capacity under the Company's amended credit facility, and the additional limitations with respect thereto; (vi) the Company's continuing ability to make the requisite payments and comply with the terms and conditions of its credit facility (vii) the ability of the company to return to compliance with the NYSE's continued listing standards; (viii) an increase in expenses related to new initiatives, investments in people, technology and service improvements; (ix) the success of current and new investment programs; (x) the success of new initiatives and investments; (xi) the inability to attain expected levels of revenue, performance, brand equity and expense synergies resulting from the merger of Grubb & Ellis Company and NNN Realty Advisors in general, and in the current macroeconomic and credit environment, in particular and (xii) other factors described in the Company's annual report on Form 10-K for the fiscal year ending December 31, 2008, in the Company's quarterly reports on Form 10-Q for the quarters ended March 31, 2008 as amended, June 30, 2008 as amended and September 30, 2008 as amended and in other current reports on Form 8-K filed with the Securities and Exchange Commission (the "SEC"). The Company does not undertake any obligation to update forward-looking statements.
Non-GAAP Financial Information
In addition to the results reported in accordance with U.S. generally accepted accounting principles (GAAP) included within this press release, Grubb & Ellis has provided certain information, which includes non-GAAP financial measures. Such information is reconciled to its closest GAAP measure in accordance with the Securities and Exchange Commission rules and is included in the attached supplemental data. Management believes that these non-GAAP financial measures are useful to both management and the company's stockholders in their analysis of the business and operating performance of the company. Management also uses this information for operational planning and decision-making purposes. Non-GAAP financial measures are not and should not be considered a substitute for any GAAP measures. Additionally, non-GAAP financial measures as presented by Grubb & Ellis may not be comparable to similarly titled measures reported by other companies.
TABLES FOLLOW
Grubb & Ellis Company
Consolidated Statements of Operations
(in thousands)
Three Months Twelve Months
Ended Ended
------------- --------------
December December December December
31, 2008 31, 2007 31, 2008 31, 2007
------- ------- ------- -------
REVENUE (Unaudited) (Unaudited)
Transaction services $67,059 $35,522 $240,250 $35,522
Investment management 17,237 38,611 101,581 149,651
Management services 67,809 16,365 253,664 16,365
Rental related 3,923 5,838 16,326 16,399
----- ----- ------ ------
TOTAL REVENUE 156,028 96,336 611,821 217,937
------- ------ ------- -------
OPERATING EXPENSE
Compensation costs 41,946 23,951 154,112 68,994
Transaction
commissions and
related costs 46,328 23,633 164,307 23,633
Reimbursable salaries,
wages, and benefits 49,242 11,482 184,585 11,482
General and
administrative 35,390 14,482 119,660 44,251
Depreciation and
amortization 2,731 1,341 10,312 2,621
Rental related 4,464 5,427 14,414 16,054
Interest 1,958 745 5,914 2,168
Merger related costs 4,515 6,184 14,732 6,385
Real estate
related impairments 6,239 - 17,954 -
Goodwill and
intangible assets
impairment 181,285 - 181,285 -
------- ---- ------- ----
Total operating
expense 374,098 87,245 867,275 175,588
------- ------ ------- -------
OPERATING (LOSS) INCOME (218,070) 9,091 (255,454) 42,349
-------- ----- -------- ------
OTHER INCOME (EXPENSE)
Equity in (losses)
earnings of
unconsolidated
entities (2,709) 159 (13,311) 2,029
Interest income 145 812 902 2,992
Other expense 2,770 (1,175) 5,261 (2,426)
----- ------ ----- ------
Total other income
(expense) 206 (204) (7,148) 2,595
--- ---- ------ -----
(Loss) income from
continuing operations
before income tax
(provision)
benefit (217,864) 8,887 (262,602) 44,944
Income tax (provision)
benefit (29,088) (2,769) (16,890) (18,118)
------- ------ ------- -------
(Loss) income from
continuing operations (246,952) 6,118 (279,492) 26,826
Income (loss) from
discontinued operations (15,958) (3,311) (51,378) (5,754)
------- ------ ------- ------
NET (LOSS) INCOME $(262,910) $2,807 $(330,870) $21,072
========= ====== ========= =======
Basic earnings per share:
(Loss) income from
continuing
operations $(3.90) $0.14 $(4.40) $0.69
Income (loss) from
discontinued
operations (0.25) (0.08) (0.81) (0.14)
----- ----- ----- -----
Net (loss)
earnings per
share $(4.15) $0.06 $(5.21) $0.55
====== ===== ====== =====
Diluted earnings per
share:
(Loss) income from
continuing
operations $(3.90) $0.14 $(4.40) $0.69
Income (loss) from
discontinued
operations (0.25) (0.08) (0.81) (0.14)
----- ----- ----- -----
Net (loss)
earnings per
share $(4.15) $0.06 $(5.21) $0.55
====== ===== ====== =====
Shares used in
computing basic
net earnings per
share 63,338 43,821 63,515 38,652
Shares used in
computing diluted
net earnings per
share 63,338 43,826 63,515 38,653
Grubb & Ellis Company
Consolidated Balance Sheets
(in thousands)
December December
31, 2008 31, 2007
------- -------
ASSETS
Cash and cash equivalents $32,985 $49,328
Restricted cash 36,047 70,023
Investment in marketable securities 1,510 9,052
Current portion of accounts receivable from
related parties - net 22,630 32,795
Current portion of advances to related
parties - net 2,982 6,667
Note receivable from related party - net 9,100 7,600
Services fees receivable - net 26,987 19,521
Current portion of professional service
contract - net 4,326 7,235
Real estate deposits and preacquisition costs 5,961 11,818
Properties held for sale including investments
in unconsolidated real estate - net 167,408 332,176
Identified intangible assets and other assets
held for sale - net 37,145 76,985
Prepaid expenses and other current assets 22,770 12,855
Deferred tax assets - 7,991
- -----
TOTAL CURRENT ASSETS 369,851 644,046
Accounts receivable from related parties - net 11,072 10,360
Advances to related parties - net 11,499 3,751
Professional service contracts - net 10,320 13,088
Investments in unconsolidated entities 8,733 22,191
Property, equipment and leasehold
improvements - net 14,009 16,728
Goodwill - 169,317
Identified intangible assets - net 91,527 105,473
Other assets - net 3,266 3,588
----- -----
TOTAL ASSETS $520,277 $988,542
======== ========
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY
Accounts payable and accrued
expenses $70,222 $102,004
Due to related parties 2,447 3,329
Current portion of line of
credit 63,000 -
Current portion of capital lease
obligations 333 351
Notes payable of properties held
for sale 215,959 348,931
Liabilities of properties
held for sale - net 16,843 25,550
Other liabilities 35,762 12,360
Deferred tax liability 2,080 -
----- ----
TOTAL CURRENT LIABILITIES 406,646 492,525
Line of credit - 8,000
Senior notes 16,277 16,277
Capital lease obligation 203 439
Other long-term liabilities 6,077 7,434
Deferred tax liability 17,298 29,915
------ ------
TOTAL LIABILITIES 446,501 554,590
MINORITY INTEREST 3,605 29,896
Common stock 654 648
Additional paid-in capital 402,780 393,665
(Accumulated deficit) retained
earnings (333,263) 10,792
Accumulated other
comprehensive loss - (1,049)
---- ------
TOTAL STOCKHOLDERS' EQUITY 70,171 404,056
------ -------
LIABILITIES, MINORITY
INTEREST AND STOCKHOLDERS'
EQUITY $520,277 $988,542
======== ========
Grubb & Ellis Company
Combined Statements of Operations
(in thousands)
Three Months
Ended
December Three Months Ended
31, 2008 December 31, 2007
(Unaudited) (Unaudited)
--------- ----------------------------------
Grubb & Grubb &
Ellis NNN Realty Ellis Combined
Company Advisors Company Companies(1)
------- ------ ------- ---------
REVENUE
Transaction services $67,059 $- $93,597 $93,597
Investment management(2) 17,237 38,611 - 38,611
Management services 67,809 - 56,555 56,555
Rental related 3,923 5,838 - 5,838
----- ----- ---- -----
TOTAL REVENUE 156,028 44,449 150,152 194,601
------- ------ ------- -------
OPERATING EXPENSES
Compensation costs 41,946 18,941 23,243 42,184
Transaction
commissions and
related costs 46,328 - 66,531 66,531
Reimbursable salaries,
wages, and benefits 49,242 - 40,611 40,611
General and
administrative 35,390 8,236 13,586 21,822
Depreciation and
amortization 2,731 379 1,141 1,520
Rental related 4,464 5,427 (347) 5,080
Interest 1,958 745 2 747
Merger related costs 4,515 6,184 7,847 14,031
Real estate related
impairments 6,239 - - -
Goodwill and intangible
assets impairment 181,285 - - -
------- ---- ---- ----
Total operating
expense 374,098 39,912 152,614 192,526
------- ------ ------- -------
OPERATING (LOSS) INCOME (218,070) 4,537 (2,462) 2,075
-------- ----- ------ -----
OTHER (EXPENSE) INCOME
Equity in (losses)
earnings of
unconsolidated
entities (2,709) 159 58 217
Interest income 145 756 102 858
Other (expense) income 2,770 (1,163) - (1,163)
----- ------ ---- ------
Total other
(expense) income 206 (248) 160 (88)
--- ---- --- ---
(Loss) income from
continuing operations
before income
tax provision (217,864) 4,289 (2,302) 1,987
Income tax benefit
(provision) (29,088) (946) (485) (1,431)
------- ---- ---- ------
(Loss) income from
continuing operations (246,952) 3,343 (2,787) 556
Income (loss) from
discontinued operations (15,958) (2,991) (1,803) (4,794)
------- ------ ------ ------
NET (LOSS) INCOME $(262,910) $352 $(4,590) $(4,238)
========= ==== ======= =======
(1) To provide additional insight into its underlying results of
operations, the Company has also presented selected non-GAAP financial
measures intended to reflect its results of operations on a combined
basis and such numbers are exclusive of the total financial or accounting
impact associated with the merger transaction, such as amortization
associated with purchase price adjustments or identified intangible
assets. These non-GAAP combined results do not purport to show the
results as if the companies were merged as of January 1, 2007, but rather
is an arithmetic combination of the results of the two companies, Grubb &
Ellis and NNN Realty Advisors. Results do not reflect the elimination of
transactions between the two companies and certain estimated synergies
and expenses related to the combination of the two companies for the
periods presented.
(2) The investment management segment represents legacy NNN Realty
Advisors' transaction, management and dealer-manager businesses.
Grubb & Ellis Company
Reconciliation of Combined Net Income to Adjusted EBITDA
(in thousands)
Three Months
Ended
December Three Months Ended
31, 2008 December 31, 2007
(Unaudited) (Unaudited)
--------- ----------------------------------
Grubb & Grubb &
Ellis NNN Realty Ellis Combined
Company Advisors Company Companies(1)
------- ------ ------- ---------
Net (loss) income $(262,910) $352 $(4,590) $(4,238)
Discontinued
operations 15,958 2,991 1,803 4,794
Interest expense 1,958 745 2 747
Interest income (145) (756) (102) (858)
Depreciation and
amortization 2,731 379 1,141 1,520
Goodwill and
intangible assets
impairment 181,285 - - -
Taxes 29,088 946 485 1,431
------ --- --- -----
EBITDA (2) (32,035) 4,657 (1,261) 3,396
Charges related to
sponsored programs 11,475 - - -
Real estate related
impairment 6,239 - - -
Stock based compensation 3,423 2,491 434 2,925
Amortization of
signing bonuses 1,967 - 1,772 1,772
Loss on marketable
securities - 228 - 228
Merger related costs 4,515 6,184 7,847 14,031
Amortization of
contract rights - 490 - 490
Other - 13 (58) (45)
---- ---- --- ---
Adjusted EBITDA
(2) $(4,416) $14,063 $8,734 $22,797
======= ======= ====== =======
(1) To provide additional insight into its underlying results of
operations, the Company has also presented selected non-GAAP financial
measures intended to reflect its results of operations on a combined
basis and such numbers are exclusive of the total financial or accounting
impact associated with the merger transaction, such as amortization
associated with purchase price adjustments or identified intangible
assets. These non-GAAP combined results do not purport to show the
results as if the companies were merged as of January 1, 2007, but rather
is an arithmetic combination of the results of the two companies, Grubb &
Ellis and NNN Realty Advisors. Results do not reflect the elimination of
transactions between the two companies and certain estimated synergies
and expenses related to the combination of the two companies for the
periods presented.
(2) EBITDA represents earnings before net interest expense, interest
income, realized gains or losses on sales of marketable securities,
income taxes, depreciation, amortization and impairments related to
goodwill and intangible assets. Management believes EBITDA is useful in
evaluating our performance compared to that of other companies in our
industry because the calculation of EBITDA generally eliminates the
effects of financing and income taxes and the accounting effects of
capital spending and acquisition, which items may vary for different
companies for reasons unrelated to overall operating performance. As a
result, management uses EBITDA as an operating measure to evaluate the
operating performance of the Company's various business lines and for
other discretionary purposes, including as a significant component when
measuring performance under employee incentive programs.
However, EBITDA is not a recognized measurement under U.S. generally
accepted accounting principles, or GAAP, and when analyzing the Company's
operating performance, readers should use EBITDA in addition to, and not
as an alternative for, net income as determined in accordance with GAAP.
Because not all companies use identical calculations, our presentation of
EBITDA may not be comparable to similarly titled measures of other
companies. Furthermore, EBITDA is not intended to be a measure of free
cash flow for management's discretionary use, as it does not consider
certain cash requirements such as tax and debt service payments. The
amounts shown for EBITDA also differ from the amounts calculated under
similarly titled definitions in the Company's debt instruments, which
are further adjusted to reflect certain other cash and non-cash charges
and are used to determine compliance with financial covenants and the
Company's ability to engage in certain activities, such as incurring
additional debt and making certain restricted payments.
Grubb & Ellis Company
Combined Statements of Operations
(in thousands)
Twelve Months
Ended Twelve Months Ended
December December 31, 2007
31, 2008 (Unaudited)
--------- ----------------------------------
Grubb & Grubb &
Ellis NNN Realty Ellis Combined
Company Advisors Company Companies(1)
------- ------ ------- ---------
REVENUE
Transaction services $240,250 $- $312,279 $312,279
Investment
management (2) 101,581 149,651 - 149,651
Management services 253,664 - 214,587 214,587
Rental related 16,326 16,399 - 16,399
------ ------ ---- ------
TOTAL REVENUE 611,821 166,050 526,866 692,916
------- ------- ------- -------
OPERATING EXPENSES
Compensation costs 154,112 63,984 95,611 159,595
Transaction
commissions and
related costs 164,307 - 214,024 214,024
Reimbursable
salaries, wages, and
benefits 184,585 - 155,223 155,223
General and
administrative 119,660 38,005 52,693 90,698
Depreciation and
amortization 10,312 1,659 4,258 5,917
Rental related 14,414 16,054 (952) 15,102
Interest 5,914 2,168 480 2,648
Merger related costs 14,732 6,385 10,925 17,310
Real estate
related
impairments 17,954 - - -
Goodwill and
intangible assets
impairment 181,285 - - -
------- ---- ---- ----
Total operating
expense 867,275 128,255 532,262 660,517
------- ------- ------- -------
OPERATING (LOSS) INCOME (255,454) 37,795 (5,396) 32,399
-------- ------ ------ ------
OTHER (EXPENSE) INCOME
Equity in (losses)
earnings of
unconsolidated
entities (13,311) 2,029 366 2,395
Interest income 902 2,936 623 3,559
Other income
(expense) 5,261 (2,414) - (2,414)
----- ------ ---- ------
Total other
(expense)
income (7,148) 2,551 989 3,540
------ ----- --- -----
(Loss) income from
continuing operations
before income
tax provision (262,602) 40,346 (4,407) 35,939
Income tax (provision)
benefit (16,890) (16,295) 855 (15,440)
------- ------- --- -------
(Loss) income from
continuing
operations (279,492) 24,051 (3,552) 20,499
Loss from
discontinued
operations (51,378) (5,434) (4,542) (9,976)
------- ------ ------ ------
NET (LOSS) INCOME $(330,870) $18,617 $(8,094) $10,523
========= ======= ======= =======
(1) To provide additional insight into its underlying results of
operations, the Company has also presented selected non-GAAP financial
measures intended to reflect its results of operations on a combined
basis and such numbers are exclusive of the total financial or accounting
impact associated with the merger transaction, such as amortization
associated with purchase price adjustments or identified intangible
assets. These non-GAAP combined results do not purport to show the
results as if the companies were merged as of January 1, 2007, but rather
is an arithmetic combination of the results of the two companies, Grubb &
Ellis and NNN Realty Advisors. Results do not reflect the elimination of
transactions between the two companies and certain estimated synergies
and expenses related to the combination of the two companies for the
periods presented.
(2) The investment management segment represents legacy NNN Realty
Advisors' transaction, management and dealer-manager businesses.
Grubb & Ellis Company
Reconciliation of Combined Net Income to Adjusted EBITDA
(in thousands)
Twelve Months
Ended
December Twelve Months Ended
31, 2008 December 31, 2007
(Unaudited) (Unaudited)
--------- ----------------------------------
Grubb & Grubb &
Ellis NNN Realty Ellis Combined
Company Advisors Company Companies(1)
------- ------ ------- ---------
Net (loss) income $(330,870) $18,617 $(8,094) $10,523
Discontinued operations 51,378 5,434 4,542 9,976
Interest expense 5,914 2,168 480 2,648
Interest income (902) (2,936) (623) (3,559)
Depreciation and
amortization 10,312 1,659 4,258 5,917
Goodwill and intangible
assets impairment 181,285 - - -
Taxes 16,890 16,295 (855) 15,440
------ ------ ---- ------
EBITDA (2) (65,993) 41,237 (292) 40,945
Write off of investment in
Grubb & Ellis Realty
Advisors, net 5,828 - - -
Charges related to
sponsored programs 27,771 - - -
Real estate related
impairment 17,954 - - -
Stock based compensation 11,907 7,505 2,190 9,695
Amortization of
signing bonuses 7,603 - 6,201 6,201
Loss / (Gain) on marketable
securities 1,783 (184) - (184)
Merger related costs 14,732 6,385 10,925 17,310
Amortization of
contract rights 1,179 3,168 - 3,168
Other 163 831 (366) 465
--- --- ---- ---
Adjusted EBITDA (2) $22,927 $58,942 $18,658 $77,600
======= ======= ======= =======
(1) To provide additional insight into its underlying results of
operations, the Company has also presented selected non-GAAP financial
measures intended to reflect its results of operations on a combined
basis and such numbers are exclusive of the total financial or accounting
impact associated with the merger transaction, such as amortization
associated with purchase price adjustments or identified intangible
assets. These non-GAAP combined results do not purport to show the
results as if the companies were merged as of January 1, 2007, but rather
is an arithmetic combination of the results of the two companies, Grubb &
Ellis and NNN Realty Advisors. Results do not reflect the elimination of
transactions between the two companies and certain estimated synergies
and expenses related to the combination of the two companies for the
periods presented.
(2) EBITDA represents earnings before net interest expense, interest
income, realized gains or losses on sales of marketable securities,
income taxes, depreciation, amortization and impairments related to
goodwill and intangible assets. Management believes EBITDA is useful in
evaluating our performance compared to that of other companies in our
industry because the calculation of EBITDA generally eliminates the
effects of financing and income taxes and the accounting effects of
capital spending and acquisition, which items may vary for different
companies for reasons unrelated to overall operating performance. As a
result, management uses EBITDA as an operating measure to evaluate the
operating performance of the Company's various business lines and for
other discretionary purposes, including as a significant component when
measuring performance under employee incentive programs.
However, EBITDA is not a recognized measurement under U.S. generally
accepted accounting principles, or GAAP, and when analyzing the Company's
operating performance, readers should use EBITDA in addition to, and not
as an alternative for, net income as determined in accordance with GAAP.
Because not all companies use identical calculations, our presentation of
EBITDA may not be comparable to similarly titled measures of other
companies. Furthermore, EBITDA is not intended to be a measure of free
cash flow for management's discretionary use, as it does not consider
certain cash requirements such as tax and debt service payments. The
amounts shown for EBITDA also differ from the amounts calculated under
similarly titled definitions in the Company's debt instruments, which are
further adjusted to reflect certain other cash and non-cash charges and
are used to determine compliance with financial covenants and the
Company's ability to engage in certain activities, such as incurring
additional debt and making certain restricted payments.
Grubb & Ellis Company
Supplemental Data
(in thousands except for properties acquired/disposed)
(Unaudited)
Three Months Twelve Months
Ended Ended
-------------- ---------------
December December December December
31, 2008 31, 2007 31, 2008 31, 2007
---------- ---------- ---------- ----------
Investment management revenue:
Acquisition fees $2,381 $12,730 $32,089 $46,728
Property and asset
management
fees (1) 10,947 13,413 37,973 41,032
Disposition fees
(excluding amortization
of intangible contract
rights) - 2,536 5,808 21,279
Amortization of
intangible contract
rights - (490) (1,179) (3,110)
Other (2) 3,909 10,423 26,890 43,722
----- ------ ------ ------
Total investment
management revenue $17,237 $38,611 $101,581 $149,651
======= ======= ======== ========
Investment management data:
Total properties acquired 4 19 50 77
Total aggregate purchase
price $119,565 $389,135 $1,175,797 $2,023,213
Total properties disposed - 6 9 30
Total aggregate sales
value at disposition $- $129,159 $225,775 $881,266
Total square feet under
management 46,838 41,721 46,838 41,721
Assets under management $6,794,580 $5,774,273 $6,794,580 $5,774,273
Equity raise:
Tenant-in-common $23,967 $110,902 $176,911 $452,185
Non-traded real estate
investment trust (3) 196,565 71,930 592,688 278,048
Private client accounts - - 193,290 -
Other 3,296 6,015 21,439 6,015
----- ----- ------ -----
Total equity raise $223,828 $188,847 $984,328 $736,248
======== ======== ======== ========
(1) Does not include $1.9 million and $6.8 million of property management
fees that were recorded by the management services business for the three
months and year ended December 31, 2008.
(2) Decrease in other investment management revenue a result of lower
tenant-in-common equity raise.
(3) Excludes capital raised through the dividend reinvestment program
which totaled $6.4 million for the three months ended December 31, 2008
and $16.9 million for the year ended December 31, 2008.
