Howard Lutnick’s BGC Partners is expected to close soon on the acquisition of the bankrupt commercial brokerage Grubb & Ellis, but the total amount his firm plans to pay remains a mystery.
California-based Grubb filed for bankruptcy Feb. 20, as part of plan in which BGC would buy Grubb’s assets. A bankruptcy court judge approved the sale March 27, and the transaction is expected to close in the coming days.
An analysis by The Real Deal of the asset purchase agreement in bankruptcy court filings estimates the base purchase price at about $49.5 million, plus additional — still unknown – amounts, likely in the millions of dollars.
The $49.5 million figure was arrived at through a rumored $28 million paid to buy senior debt valued at about $30 million; about $5.5 million of debtor-in-possession financing used to keep the company running during the bankruptcy process; plus $16 million in cash.
In addition, BGC must pay additional unstated cure costs (including perhaps brokerage commissions) and “paid time off” liabilities.
But BGC, always considered a hard-driving negotiator, is looking to gain back millions of dollars following the closing of the purchase. That’s through non-specific legal actions against former directors and officers of Grubb as well as Grubb’s former financial advisor, JMP Securities, bankruptcy court filings show. BGC would win the first $20 million of any money gained through the courts, and then anything above that is split 50-50 between BGC and the former Grubb entities, except for JMP litigation. For that, BGC gets 75 percent and Grubb entities get 25 percent.
The former Grubb officers and directors were not identified. BGC, through an outside spokesperson, declined to comment. Grubb and JMP did not respond to requests for comment.
“Pursuant to the terms of the sale, BGC will be entitled to the first $20 million in proceeds realized from litigating the causes of action, and the debtors’ estates and BGC would split any proceeds realized above $20 million,” court records say.
A source familiar with the litigation cautioned that no litigation has commenced and there was no guarantee that any would.