SANTA ANA, Calif., May 28 /PRNewswire-FirstCall/ -- Grubb & Ellis Company (NYSE: GBE), a leading real estate services and investment firm, today reported revenue of $118.3 million for the first quarter of 2009, compared with first quarter 2008 revenue of $150.4 million. The net loss attributable to the company was $41.5 million, or $0.65 per share, for the first quarter of 2009, compared with a net loss attributable to the company of $6.3 million, or $0.10 per share, in the same period a year ago.
2009 Highlights
- Amended the company's senior secured credit facility.
- Recruiting momentum continues, with 18 senior-level brokers joining the company in the first quarter, raising to nearly 60 the number of top brokerage sales professionals who have joined in the past nine months.
- Company ranks as No. 1 public non-traded sponsor REIT based on equity investment sales for the months of February, March and April, with Grubb & Ellis Healthcare REIT surpassing the $1 billion mark in equity raised in April.
- Awarded 26 new property and facilities management assignments during first quarter totaling 16 million square feet of property.
- New cost reduction initiatives result in $5 million annualized savings. Cumulative 2008 and 2009 restructuring and cost reduction actions through March 31, 2009, total $25 million in estimated annualized savings.
Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) for the first quarter of 2009 was negative $16.5 million, compared with positive adjusted EBITDA of $7.4 million in the same period a year ago. The 2009 first-quarter adjusted EBITDA results excluded the following charges:
- $4.7 million related to the company's investment management programs;
- $5.2 million in real estate-related impairments;
- $3.6 million loss from discontinued operations, and
- $4.9 million of stock-based compensation and amortization of signing bonuses.
The adjusted EBITDA charges are detailed in the Reconciliation of Net Loss to Adjusted EBITDA in the tables following this release.
"Our results reflect the challenging operating environment as well as the seasonal nature of the commercial real estate industry," said Gary H. Hunt, interim chief executive officer. "We believe that by providing our clients with timely, innovative solutions to the real estate issues they are facing in today's environment we will be able to deliver long-term value to our stockholders so we remain squarely focused on recruiting top talent and providing unmatched client service."
He added, "At the same time, we recognize that financial flexibility is paramount to navigating today's environment, and we continue to be vigilant when it comes to cutting costs and managing our balance sheet."
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 amendment reflects the realities of today's credit markets. At the same time, it is an important step in ensuring our future success and demonstrates a continued commitment by the company's lenders in Grubb & Ellis, our growth strategy and our ability to navigate through the difficult environment," said Richard W. Pehlke, executive vice president and chief financial officer.
OPERATING SEGMENTS
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 $65.5 million for the first quarter of 2009, compared with $61.8 million in the same period a year ago. During the first quarter, Grubb & Ellis won 26 new management assignments, including the management of Red Mountain Retail Group's 4.8-million-square-foot retail portfolio and Tesoro Corporation's 600,000-square-foot new headquarters location in San Antonio.
At March 31, 2009, the company managed approximately 241.2 million square feet of commercial real estate and multi-housing property, including 47.0 million square feet of Grubb & Ellis Realty Investors' captive property portfolio.
Transaction Services
Transaction Services revenue for the first quarter of 2009, including brokerage commission, valuation and consulting revenue, was $33.5 million, compared with $59.1 million in the same period a year ago. Due to the seasonality of the brokerage business, the first quarter is typically the weakest for the industry with revenue accelerating throughout the year. The company's Transaction Services business was also negatively impacted by the current economic environment, which has reduced overall commercial real estate transaction velocity. On a year-over-year basis, the company's leasing revenue decreased by 18 percent, while investment sales revenue declined by 72 percent. This compares with 43 percent and 80 percent year-over-year declines in leasing and investment sales activity, respectively, industrywide, according to industry statistics as well as the company's analysis.
Investment Management
Investment Management revenue for the first quarter of 2009, which includes transaction fees, captive management fees and dealer-manager fees, totaled $15.5 million, compared with fees of $25.3 million in the same period a year ago. The decrease in revenue over the prior-year period can be attributed to the current market environment, which has significantly slowed investment sales activity. On a year-over-year basis, acquisition and disposition fees generated by the company's investment programs decreased 80 percent.
During the first quarter of 2009, approximately $210 million in equity was raised for the company's investment programs, compared with $264 million in the first quarter of 2008. This decrease was due primarily to lower capital raise for tenant-in-common and wealth management programs which was greatly offset by the large amount of equity flowing into the company's public non-traded REITs. For the months of February, March and April 2009, Grubb & Ellis ranked as the No. 1 sponsor in the public non-traded REIT sector, according to published industry reports. The company's marketshare stood at 13.6 percent at the end of the first quarter of 2009, up from 3.4 percent a year earlier. At March 31, 2009, the value of the company's assets under management was $6.8 billion, essentially flat from year-end.
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.
Conference Call & Webcast
The company will host an earnings conference call to review its 2008 fourth quarter and 2009 first quarter results on Thursday, May 28, at 10:30 a.m. Eastern Time. A live webcast will be accessible through the Investor Relations section of the company's Web site at http://www.grubb-ellis.com. The direct dial-in number for the conference call is 1.800.706.7741 for domestic callers and 1.617.614.3471 for international callers. The conference call ID number is 77473643. An audio replay will be available beginning at 1:30p.m. ET on Thursday, May 28, until 7 p.m. ET on Thursday, June 4 and can be accessed by dialing 1.888.286.8010 for domestic callers and 1.617.801.6888 for international callers and entering conference call ID 16770949. In addition, the conference call audio will be archived on the Company's Web site following the call.
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 current credit facility, and the additional limitations with respect thereto; (vi) the company's continuing ability to make interest and principal payments with respect to 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 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.
Grubb & Ellis Company
Consolidated Statements of Operations
(in thousands)
(Unaudited)
Three Months Ended
--------------------
March 31, March 31,
2009 2008
---- ----
REVENUE
Management services $65,531 $61,756
Transaction services 33,533 59,148
Investment management 15,498 25,306
Rental related 3,743 4,158
----- -----
TOTAL REVENUE 118,305 150,368
------- -------
OPERATING EXPENSE
Compensation costs 38,033 36,817
Transaction commissions and related costs 25,774 40,364
Reimbursable salaries, wages, and benefits 49,464 44,992
General and administrative 26,913 21,652
Depreciation and amortization 2,441 2,478
Rental related 4,015 3,789
Interest 1,970 878
Merger related costs - 2,869
Real estate related impairments 5,222 -
----- -----
Total operating expense 153,832 153,839
------- -------
OPERATING LOSS (35,527) (3,471)
------- ------
OTHER INCOME (EXPENSE)
Equity in earnings (losses) of unconsolidated
entities (1,231) (5,505)
Interest income 145 305
Other expense (725) (520)
---- ----
Total other expense (1,811) (5,720)
------ ------
Loss from continuing operations before
income tax (provision) benefit (37,338) (9,191)
Income tax (provision) benefit (2,328) 3,839
------ -----
Loss from continuing operations (39,666) (5,352)
Loss from discontinued operations (3,614) (942)
------ ----
Net loss $(43,280) $(6,294)
======== =======
Less: Net (loss) income attributable to the
noncontrolling interests (1,778) 4
====== ======
Net loss attributable to Grubb & Ellis Company $(41,502) $(6,298)
======== =======
Earnings per share - basic and diluted:
Loss from continuing operations
attributable to the controlling interests $(0.60) $(0.08)
Loss from discontinued operations
attributable to the controlling interests (0.05) (0.02)
----- -----
Net loss per share $(0.65) $(0.10)
====== ======
Weighted average shares outstanding, basic and
diluted 63,525 63,521
====== ======
Amounts attributable to Grubb & Ellis Company
shareholders:
Loss from continuing operations, net
of tax $(37,888) $(5,356)
Loss from discontinued operations, net
of tax (3,614) (942)
------ ----
Net loss $(41,502) $(6,298)
======== =======
Grubb & Ellis Company
Consolidated Balance Sheets
(in thousands)
(Unaudited)
March 31, December 31,
2009 2008
---- ----
ASSETS
Cash and cash equivalents $14,104 $32,985
Restricted cash 37,522 36,047
Investment in marketable securities 1,698 1,510
Current portion of accounts receivable from
related parties - net 16,124 22,630
Current portion of advances to related
parties - net 1,738 2,982
Note receivable from related party - net 9,100 9,100
Services fees receivable - net 18,316 26,987
Current portion of professional service contract -
net 2,866 4,326
Real estate deposits and preacquisition costs 1,525 5,961
Properties held for sale including investments in
unconsolidated real estate - net 161,723 167,408
Identified intangible assets and other assets
held for sale - net 37,556 37,145
Prepaid expenses and other current assets 24,695 22,770
------ ------
TOTAL CURRENT ASSETS 326,967 369,851
Accounts receivable from related parties - net 15,902 11,072
Advances to related parties - net 10,028 11,499
Professional service contracts - net 10,829 10,320
Investments in unconsolidated entities 4,916 8,733
Property, equipment and leasehold improvements -
net 13,654 14,009
Identified intangible assets - net 90,721 91,527
Other assets - net 3,028 3,266
----- -----
TOTAL ASSETS $476,045 $520,277
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $65,057 $70,222
Due to related parties 2,052 2,447
Current portion of line of credit 63,000 63,000
Current portion of notes payable and capital
lease obligations 319 333
Notes payable of properties held for sale 216,189 215,959
Liabilities of properties held for sale - net 15,559 16,843
Other liabilities 37,861 35,762
Deferred tax liability 4,134 2,080
----- -----
TOTAL CURRENT LIABILITIES 404,171 406,646
Senior notes 16,277 16,277
Capital lease obligation 130 203
Other long-term liabilities 5,900 6,077
Deferred tax liability 15,245 17,298
------ ------
TOTAL LIABILITIES 441,723 446,501
Common stock 653 654
Additional paid-in capital 405,712 402,780
Accumulated deficit (374,765) (333,263)
-------- --------
Total Grubb & Ellis Company stockholders'
equity 31,600 70,171
Noncontrolling interests 2,722 3,605
----- -----
TOTAL EQUITY 34,322 73,776
------ ------
TOTAL LIABILITIES & EQUITY $476,045 $520,277
======== ========
Grubb & Ellis Company
Reconciliation of Net Loss to Adjusted EBITDA
(in thousands)
(Unaudited)
Three Months Ended
--------------------
March 31, March 31,
2009 2008
---- ----
Net loss attributable to Grubb & Ellis Company $(41,502) $(6,298)
Discontinued operations 3,614 942
Interest expense 1,970 878
Interest income (145) (305)
Depreciation and amortization 2,441 2,478
Taxes 2,328 (3,839)
----- ------
EBITDA (1) (31,294) (6,144)
Write off of investment in Grubb & Ellis Realty
Advisors, net - 5,828
Charges related to sponsored programs 4,677 -
Real estate related impairment 5,222 -
Stock based compensation 2,964 2,531
Amortization of signing bonuses 1,953 1,838
Merger related costs - 2,869
Amortization of contract rights - 423
Other - 90
---- ----
Adjusted EBITDA (1) $(16,478) $7,435
======== ======
(1) EBITDA represents earnings before net interest expense, interest
income, realized gains or losses on sales of marketable securities,
income taxes, depreciation, amortization, discontinued operations 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 Ended
--------------------
March 31, March 31,
2009 2008
------------ ---------
Investment management revenue:
Acquisition fees $2,044 $10,163
Property and asset management fees (1) 8,532 8,443
Disposition fees (excluding amortization
of intangible contract rights) - 743
Amortization of intangible contract rights - (423)
Other 4,922 6,380
----- -----
Total investment management revenue $15,498 $25,306
------- -------
Investment management data:
Total properties acquired 3 19
Total aggregate purchase price $36,379 $348,926
Total properties disposed 3 2
Total aggregate sales value at disposition $14,634 $36,075
Total square feet under management 46,745 42,835
Assets under management $6,810,758 $6,127,862
Equity raise:
Non-traded real estate investment trust (2) $197,835 $74,179
Tenant-in-common 10,316 52,108
Private client accounts - 137,367
Other 1,960 -
----- ------
Total equity raise $210,111 $263,654
-------- --------
(1) Excludes property management fees that were recorded by the
management services business of $2.2 million for the three months ended
March 31, 2009 and $1.7 million for the three months ended March 31,
2008.
(2) Excludes capital raised through the dividend reinvestment program
which totaled $8.2 million for the three months ended March 31, 2009 and
$2.6 million for the three months ended March 31, 2008.
