Grubb & Ellis says exclusive Colony window closes, but other deal still on table

TRD New York /
May.May 31, 2011 07:18 PM

Grubb & Ellis said the exclusive negotiation period for the struggling commercial real estate brokerage to hammer out an acquisition or other strategic alliance with Colony Capital, expired this past Sunday.

The Santa Ana, Calif.-based firm, which hired investment bank JMP Securities in March to explore a potential suitor, said it will continue to discuss a possible deal with Colony Capital, a real estate fund led billionaire Thomas Barrack, and will pursue discussions with other potential partners as well.

Meanwhile, Grubb & Ellis said it has made significant progress with a potential sale of its Daymark Realty Advisors subsidiary, and expects to reach an agreement soon. Daymark, manages more than 30 million square feet of commercial real estate, including 8,700 multi-family apartment units nationwide. Daymark’s properties include 50 Lake Center, an 89,000-square-foot office complex in Marlton, N.J., and Doral Court, a 209,000-square-foot office complex in Miami, Fla.

“We have already made significant progress with both initiatives and now that we have expanded the pool of potential strategic partners, the board and management are intent on bringing the strategic process to a conclusion that creates value for all our stakeholders,” Thomas D’Arcy, president and CEO of Grubb & Ellis said in the statement issued this morning.

As previously reported, Grubb & Ellis entered a previous deal for Colony to commit $18 million and pursue a further investment. A spokesperson for Grubb & Ellis said the firm would not comment beyond the official announcement. Colony officials were not immediately available for comment.

Ben Thypin, senior market analyst at Real Capital Analytics, said it was unlikely that a major brokerage firm would put together a deal to rescue Grubb & Ellis, but said a niche firm or a firm not directly in the commercial real estate space might express interest in buying the firm.

The commercial brokerage business has begun to consolidate in recent months, mostly notably when BGC Partners acquired Newmark Knight Frank. The Real Deal reported today that BGC eyed possible deals with Cushman & Wakefield and Studley before moving forward with the Newmark acquisition. Grubb & Ellis has been officially up for sale since March and has since been notified by regulators that it was out of compliance for listing on the New York Stock Exchange. Just last week it was notified that its market capitalization, which is the stock price multiplied by outstanding shares, was below $50 million for more than 30 consecutive days, which if continued would be delisted.

Grubb & Ellis has 45 days to put together a plan to get the company back into compliance within 18 months and the NYSE has 45 days to review that plan.

In April, Grubb & Elllis was notified that it was out of compliance when its stock price fell below $1 a share for more than 30 days. 

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