SANTA ANA, Calif., Aug. 6 /PRNewswire-FirstCall/ -- Grubb & Ellis Company (NYSE: GBE), a leading real estate services and investment firm, today reported revenue of $124.6 million for the second quarter of 2009, compared with second quarter 2008 revenue of $158.4 million. The company reported first-half 2009 revenue of $244.8 million, compared with revenue of $310.7 million for the comparable 2008 period.
The net loss attributable to the company for the second quarter of 2009 was $32.8 million, or $0.52 per share, compared with a net loss of $5.4 million, or $0.08 per share, in the same period a year ago. For the first six months of 2009, the company reported a net loss of $74.3 million, or $1.17 per share, compared with a net loss of $11.7 million, or $0.18 per share, in the first six months of 2008.
Second Quarter Highlights
- Completed the disposition of Danbury Corporate Center for $72.4 million. Net proceeds from the sale were applied against the company's revolving credit facility.
- Recruited 13 senior-level brokerage sales professionals during the quarter, bringing to 68 the number of top brokerage sales professionals who have joined in the past 12 months.
- Won three significant Corporate Services portfolio assignments.
- Awarded 20 new property and facilities management assignments during second quarter totaling 4 million square feet of property.
- Ranked by Robert A. Stanger & Co. as the No. 2 public non-traded REIT sponsor based on equity investment sales for the second quarter, with $208.7 million in total equity raised during the three-month period. The company was ranked as the No. 1 sponsor of public non-traded REITs based on equity investments sales for the first six months of the year with $406.5 million in total equity raised during the period.
- Announced the formation of Energy & Infrastructure Advisors, a joint venture with Meridian Companies that intends to sponsor retail and institutional investment products focused on opportunities in the energy and infrastructure sector.
Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) for the second quarter of 2009 was negative $9.3 million, compared with positive adjusted EBITDA of $12.5 million in the same period a year ago. The 2009 second-quarter adjusted EBITDA results excluded the following charges:
- $9.7 million related to the company's investment management programs,
- $2.0 million in real estate-related impairments, and
- $5.1 million of stock-based compensation and amortization of signing bonuses.
For the first six months of 2009, the company reported adjusted EBITDA of negative $25.8 million, compared with positive adjusted EBITDA of $20.0 million in the same period a year ago. The first-half 2009 adjusted EBITDA results excluded the following charges:
- $14.4 million related to the company's investment management programs,
- $12.2 million in real estate-related impairments, and
- $10.0 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.
"The current environment is clearly impacting our 2009 results. Our focus continues to be on serving the needs of our clients and making the right investments to position the company to take advantage of the upswing in the commercial real estate market when it occurs," said Gary H. Hunt, interim chief executive 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 $66.6 million for the second quarter of 2009, up 10 percent from $60.6 million in the same period a year ago. First-half 2009 Management Services revenue was $132.2 million, an 8 percent increase from revenue of $122.4 million during the same period a year ago.
During the second quarter of 2009, Grubb & Ellis was awarded 20 new management assignments, 75 percent of which came from existing clients.
At June 30, 2009, the company managed approximately 241.8 million square feet of commercial real estate and multi-housing property, including 46.9 million square feet of Grubb & Ellis Realty Investors' captive property portfolio.
Transaction Services
Transaction Services revenue for the second quarter of 2009, including brokerage commission, valuation and consulting revenue, was $38.9 million, compared with $56.5 million in the same period a year ago. The segment generated revenue of $72.5 million during the first half of 2009, down 37 percent from revenue of $115.7 million in the same period in 2008. The business continues to be impacted by the current economic environment, specifically the contracting job market and stalled investment sales market. For the first six months of 2009, the company's leasing revenue decreased by 21 percent, while investment sales revenue declined by 69 percent, compared with the same period in 2008. This compares with an industry wide decline of 33 percent and 78 percent, year-over-year, in leasing and investment sales, respectively, according to industry statistics as well as the company's analysis.
Investment Management
Investment Management revenue for the second quarter of 2009, which includes transaction fees, captive management fees and dealer-manager fees, totaled $13.4 million, compared with fees of $35.0 million in the same period a year ago. For the first six months of 2009, Investment Management revenue was $29.1 million, compared with $60.4 million in the same period a year earlier. The decreases in both the current quarter and year-to-date revenue can be attributed to the current market environment, which has significantly slowed investment sales activity. The year-over-year decreases in acquisition, loan and disposition fees generated by the company's investment programs were 90 percent and 95 percent during the second quarter and six month periods, respectively.
During the first half of 2009, approximately $421 million in equity was raised for the company's investment programs, compared with $516 million in the first six months of 2008. This decrease was due primarily to a decrease in capital raised for tenant-in-common and private client wealth management programs, which was offset, in part, by the large amount of capital raised for the public non-traded REITs sponsored by the company. Grubb & Ellis ranked among the top sponsors in the public non-traded REIT sector during each of the first six months of 2009, according to published industry reports. The company's market share was 12.7 percent for the first half of 2009, up from 4.0 percent a year earlier. At June 30, 2009, the value of the company's assets under management was $6.9 billion, up from $6.8 billion at March 31, 2009.
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. Rental-related revenue and rental-related expense also includes results from one property held for investment.
Conference Call & Webcast
The company will host an earnings conference call to review its 2009 second quarter results on Thursday, August 6, at 10:30 a.m. Eastern Time. A live webcast will be accessible through the Investor Relations section of the company's Web site athttp://www.grubb-ellis.com. The direct dial-in number for the conference call is 1.866.362.4820 for domestic callers and 1.617.597.5345 for international callers. The conference call ID number is 53084194. An audio replay will be available beginning at 1:30 p.m. ET on Thursday, August 6, until 7 p.m. ET on Thursday, August 13 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 52057155. 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, 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) a continued or further 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, Form 10-Q for the three-month period ended March 31, 2009 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 Company 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 Company may not be comparable to similarly titled measures reported by other companies.
TABLES FOLLOW
Grubb & Ellis Company
Consolidated Statements of Operations
(in thousands)
(Unaudited)
Three Months Ended Six Months Ended
------------------- -----------------
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
---- ---- ---- ----
REVENUE
Management services $66,649 $60,620 $132,180 $122,376
Transaction services 38,939 56,541 72,472 115,689
Investment management 13,426 34,988 29,083 60,364
Rental related 5,555 6,279 11,097 12,266
----- ----- ------ ------
TOTAL REVENUE 124,569 158,428 244,832 310,695
------- ------- ------- -------
OPERATING EXPENSE
Compensation costs 34,946 39,994 72,979 76,811
Transaction Commissions
and related costs 28,011 38,429 53,786 78,793
Reimbursable salaries,
wages, and benefits 49,505 44,127 98,968 89,119
General and
administrative (1) 31,141 22,424 58,359 44,129
Depreciation and
amortization 2,423 4,315 4,864 7,160
Rental related 4,734 4,382 9,347 9,108
Interest 4,521 2,300 7,566 5,052
Merger related costs - 4,691 - 7,560
Real estate related
impairments 1,950 - 12,155 -
----- --- ------ ---
Total operating
expense 157,231 160,662 318,024 317,732
------- ------- ------- -------
OPERATING LOSS (32,662) (2,234) (73,192) (7,037)
------- ------ ------- ------
OTHER INCOME (EXPENSE)
Equity in (losses)
earnings of
unconsolidated
entities (180) 762 (1,411) (4,743)
Interest income 139 218 284 523
Other income (expense) 847 (2,773) 122 (3,293)
--- ------ --- ------
Total other income
(expense) 806 (1,793) (1,005) (7,513)
--- ------ ------ ------
Loss from continuing
operations before income
tax (provision) benefit (31,856) (4,027) (74,197) (14,550)
Income tax (provision)
benefit (304) 2,568 (671) 6,940
---- ----- ---- -----
Loss from continuing
operations (32,160) (1,459) (74,868) (7,610)
Loss from discontinued
operations (458) (3,779) (1,030) (3,922)
---- ------ ------ ------
Net loss $(32,618) $(5,238) $(75,898) $(11,532)
======== ======= ======== ========
Less: Net income (loss)
attributable to the
noncontrolling
interests 190 142 (1,588) 146
=== === ====== ===
Net loss attributable to
Grubb & Ellis Company $(32,808) $(5,380) $(74,310) $(11,678)
======== ======= ======== ========
Earnings per share - basic
and diluted:
Loss from continuing
operations
attributable to
Grubb & Ellis Company $(0.51) $(0.02) $(1.15) $(0.12)
Loss from discontinued
operations
attributable to
Grubb & Ellis Company (0.01) (0.06) (0.02) (0.06)
----- ----- ----- -----
Net loss per share $(0.52) $(0.08) $(1.17) $(0.18)
====== ====== ====== ======
Weighted average shares
outstanding, basic and
diluted 63,587 63,600 63,557 63,561
====== ====== ====== ======
Amounts attributable to
Grubb & Ellis Company
shareholders:
Loss from continuing
operations, net of tax $(32,350) $(1,601) $(73,280) $(7,756)
Loss from discontinued
operations, net of tax (458) (3,779) (1,030) (3,922)
---- ------ ------ ------
Net loss $(32,808) $(5,380) $(74,310) $(11,678)
======== ======= ======== ========
(1) General and administrative expense includes $11.1 million and $234,000
in bad debt expense for the three months ended June 30, 2009 and 2008,
respectively, and $16.5 million and $893,000 in bad debt expense for the
six months ended June 30, 2009 and 2008, respectively.
Grubb & Ellis Company
Consolidated Balance Sheets
(in thousands)
(Unaudited)
June 30, December 31,
2009 2008
---- ----
ASSETS
Cash and cash equivalents $14,843 $32,985
Restricted cash 17,794 36,047
Investment in marketable securities 1,014 1,510
Current portion of accounts receivable
from related parties - net 10,788 22,630
Current portion of advances to related
parties - net 1,866 2,982
Note receivable from related party - net 9,100 9,100
Services fees receivable - net 17,672 26,987
Current portion of professional service
contract - net 2,975 4,326
Real estate deposits and preacquisition
costs 3,394 5,961
Properties held for sale including
investments in unconsolidated real
estate - net 58,660 116,155
Identified intangible assets and
other assets held for sale - net 9,437 29,971
Prepaid expenses and other current assets 13,807 22,873
------ ------
TOTAL CURRENT ASSETS 161,350 311,527
Accounts receivable from related
parties - net 15,072 11,072
Advances to related parties - net 8,307 11,499
Professional service contracts - net 10,170 10,320
Investments in unconsolidated entities 4,547 8,733
Properties held for investment - net 46,585 51,252
Property, equipment and leasehold
improvements - net 15,136 14,009
Identified intangible assets - net 94,960 97,317
Other assets - net 4,706 4,548
----- -----
TOTAL ASSETS $360,833 $520,277
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $57,323 $70,222
Due to related parties 3,211 2,447
Current portion of line of credit 65,853 63,000
Current portion of notes payable and capital
lease obligations 1,026 333
Notes payable of properties held for sale 68,613 145,959
Liabilities of properties held for sale
- net 7,485 16,056
Other liabilities 40,130 36,549
Deferred tax liability 4,007 2,080
----- -----
TOTAL CURRENT LIABILITIES 247,648 336,646
Senior notes 16,277 16,277
Notes payable and capital lease obligations 71,185 70,203
Other long-term liabilities 6,630 6,077
Deferred tax liability 15,372 17,298
------ ------
TOTAL LIABILITIES 357,112 446,501
Common stock 653 654
Additional paid-in capital 409,431 402,780
Accumulated deficit (407,573) (333,263)
Other comprehensive loss (135) -
---- ---
Total Grubb & Ellis Company
stockholders' equity 2,376 70,171
Noncontrolling interests 1,345 3,605
----- -----
TOTAL EQUITY 3,721 73,776
----- ------
TOTAL LIABILITIES & EQUITY $360,833 $520,277
======== ========
Grubb & Ellis Company
Reconciliation of Net Loss to Adjusted EBITDA
(in thousands)
(Unaudited)
Three Months Ended Six Months Ended
-------------------- ------------------
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
---- ---- ---- ----
Net loss attributable
to Grubb & Ellis Company $(32,808) $(5,380) $(74,310) $(11,678)
Discontinued operations 458 3,779 1,030 3,922
Interest expense 4,521 2,300 7,566 5,052
Interest income (139) (218) (284) (523)
Depreciation and
amortization 2,423 4,315 4,864 7,160
Taxes 304 (2,568) 671 (6,940)
--- ------ --- ------
EBITDA (1) (25,241) 2,228 (60,463) (3,007)
Charges related to
sponsored programs 9,744 - 14,421 -
Real estate related
impairment 1,950 - 12,155 -
Write off of investment in
Grubb & Ellis Realty
Advisors, net - - - 5,828
Stock based compensation 3,217 3,150 6,181 5,634
Amortization of signing
bonuses 1,862 1,906 3,815 3,744
Loss on marketable
securities - 1,524 - 1,614
Merger related costs - 4,691 - 7,560
Amortization of contract
rights - 563 - 986
Real estate operations (915) (1,394) (1,971) (2,303)
Other 94 (123) 94 (76)
-- ---- -- ---
Adjusted EBITDA (1) $(9,289) $12,545 $(25,768) $19,980
======= ======= ======== =======
(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 Six Months Ended
-------------------- ------------------
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
---------- --------- ---------- ---------
Investment
management revenue:
Acquisition and loan fees $815 $13,741 $3,033 $24,268
Property and asset
management fees 8,516 10,078 16,977 18,522
Disposition fees (excluding
amortization of intangible
contract rights) - 4,370 - 5,113
Amortization of intangible
contract rights - (563) - (986)
Other 4,095 7,362 9,073 13,447
----- ----- ----- ------
Total investment
management revenue $13,426 $34,988 $29,083 $60,364
------- ------- ------- -------
Investment management data:
Total properties acquired 2 21 5 40
Total aggregate purchase
price $41,125 $487,756 $77,504 $836,682
Total properties disposed 2 5 5 7
Total aggregate sales value
at disposition $77,500 $143,350 $92,134 $179,425
Total square feet
under management 46,879 45,402 46,879 45,402
Assets under management(1) $6,851,884 $6,507,080 $6,851,884 $6,507,080
Equity raise:
Non-traded real estate
investment trust (2) $208,686 $138,665 $406,521 $212,844
Tenant-in-common 2,175 54,617 12,491 106,726
Private client accounts - 51,073 - 188,439
Other 42 7,521 2,002 7,521
-- ----- ----- -----
Total equity raise $210,903 $251,876 $421,014 $515,530
-------- -------- -------- --------
(1) The value of assets under management is based on the original
acquisition price of such assets.
(2) Excludes capital raised through the dividend reinvestment program
which totaled $9.9 million and $18.1 million for the three and six months
ended June 30, 2009, respectively, and $2.6 million and $5.9 million for
the three and six months ended June 30, 2008.
Grubb & Ellis Company
Segment Data
(in thousands)
(Unaudited)
Three Months Ended Management Transaction Investment
June 30, 2009 Services Services Management Total
------------------- --------- --------- ----------- ------
Revenue $66,649 $38,939 $13,426 $119,014
Compensation costs 8,779 10,180 6,869 25,828
Transaction commissions
and related costs 2,244 25,749 - 27,993
Reimbursable salaries,
wages, and benefits 46,975 - 2,530 49,505
General and
administrative 2,823 8,663 13,651 25,137
----- ----- ------ ------
Segment operating
income (loss) $5,828 $(5,653) $(9,624) $(9,449)
====== ======= ======= =======
Three Months Ended Management Transaction Investment
June 30, 2008 Services Services Management Total
------------------- --------- --------- ----------- ------
Revenue $60,620 $56,541 $34,988 $152,149
Compensation costs 9,171 12,425 7,238 28,834
Transaction commissions
and related costs 3,292 35,137 - 38,429
Reimbursable salaries,
wages, and benefits 42,346 - 1,781 44,127
General and
administrative 1,940 8,978 5,529 16,447
----- ----- ----- ------
Segment operating
income $3,871 $1 $20,440 $24,312
====== == ======= =======
Six Months Ended Management Transaction Investment
June 30, 2009 Services Services Management Total
------------------ --------- --------- ----------- ------
Revenue $132,180 $72,472 $29,083 $233,735
Compensation costs 18,387 21,769 14,684 54,840
Transaction commissions
and related costs 5,155 48,606 - 53,761
Reimbursable salaries,
wages, and benefits 94,268 - 4,701 98,969
General and
administrative 5,686 17,755 22,343 45,784
----- ------ ------ ------
Segment operating
income (loss) $8,684 $(15,658) $(12,645) $(19,619)
====== ======== ======== ========
Six Months Ended Management Transaction Investment
June 30, 2008 Services Services Management Total
------------------ --------- --------- ----------- ------
Revenue $122,376 $115,689 $60,364 $298,429
Compensation costs 18,395 24,726 14,324 57,445
Transaction commissions
and related costs 6,459 72,334 - 78,793
Reimbursable salaries,
wages, and benefits 86,693 - 2,426 89,119
General and
administrative 4,288 18,543 9,422 32,253
----- ------ ----- ------
Segment operating
income $6,541 $86 $34,192 $40,819
====== === ======= =======
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
-------- -------- -------- --------
2009 2008 2009 2008
---- ---- ---- ----
Reconciliation to
consolidated net
loss:
Total segment
operating (loss)
income $(9,449) $24,312 (19,619) $40,819
Non-segment:
Rental Operations,
net of rental
related expenses 821 1,897 1,750 3,158
Corporate overhead
(compensation,
general and
administrative costs) (15,140) (17,137) (30,738) (31,242)
Other operating
expenses (8,894) (11,306) (24,585) (19,772)
Other income (expense) 806 (1,793) (1,005) (7,513)
Loss (income)
attributable to
noncontrolling interest (190) (142) 1,588 (146)
Income tax (provision)
benefit (304) 2,568 (671) 6,940
Loss from discontinued
operations (458) (3,779) (1,030) (3,922)
---- ------ ------ ------
Net loss $(32,808) $(5,380) (74,310) $(11,678)
======== ======= ======= ========
