Santa Ana, Calif.-based Grubb & Ellis Co. announced Tuesday that it has filed for bankruptcy protection. The company has agreed to sell nearly all its assets to the New York-based financial services brokerage BGC Partners Inc.
BGC owns Newmark Knight Frank, one of the largest commercial real estate service firms in the U.S.
According to a Reuters report, Howard Lutnick, chief executive of BGC and also of the boutique investment bank Cantor Fitzgerald LP, said in a statement the purchase reflects BGC’s desire to "build a premier position" in real estate services.
Founded in 1958, Grubb & Ellis said it manages in excess of 250 million square feet (23.2 million square meters) of property, and employs more than 3,000 people.
The Milwaukee area Grubb & Ellis affiliate is Brookfield-based Apex Commercial.
Chief financial officer Michael Rispoli said in a court filing Grubb & Ellis was hurt by its merger with real estate investment management company NNN Realty Advisors Inc in December 2007, which in retrospect "couldn’t have come at a worse time,” according to the Reuters report. Rispoli said losses piled up during the financial crisis, and that Grubb & Ellis was further hurt by the sluggish real-estate market. Rispoli said Grubb & Ellis does not have enough cash to make it through the end of March.
"Upon completion, Grubb & Ellis believes the acquisition by BGC will bring the much-needed scale and resources the company had been seeking through its strategic process," the company said in a statement. "The partnership with BGC, a financially strong and respected organization with a deep commitment to the commercial real estate markets, will position Grubb & Ellis to become part of a well-capitalized global platform."
"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, president and chief executive officer 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. BGC’s purchase of the company’s senior debt and its willingness to provide incremental financing to ensure the smooth execution of the sale process demonstrate its commitment to the success of the Grubb & Ellis business."
Grubb & Ellis said it intends to implement the transaction as an asset sale under Section 363 of the U.S. Bankruptcy Code. The company has commenced Chapter 11 proceedings in the U.S. Bankruptcy Court for the Southern District of New York. Grubb & Ellis said it expects business to continue without disruption as it completes the "363" sale process as expeditiously as possible.
