Howard Lutnick's BGC Partners Inc. (NASDAQ: BGCP) has agreed to buy the commercial real estate brokerage Grubb & Ellis Co. (PINK:GRBE), which has filed for Chapter 11 bankruptcy protection after declining revenue from the commercial real estate bust.
Santa Ana, Calif.-based Grubb & Ellis, which filed for bankruptcy Monday, listed $150 million in assets and $167 million in debt. Grubb & Ellis hired Alvarez & Marsal Holdings LLC, a bankruptcy specialist perhaps best known for managing the Lehman Brothers estate.
Under terms of the deal, BGC will buy Grubb & Ellis' assets, which include property management and brokerage assignments, and provide financing up to $4.8 million.
The deal comes four months after BGC purchased Newmark Knght Frank, a rival commercial brokerage, representing another commitment to commercial real estate for Lutnick, who is also head of investment bank Cantor Fitzgerald.
This transaction reflects the deep and unwavering commitment of BGC -- the fastest-growing, and one of the world's largest, global brokerage companies serving the financial markets -- to build a premier position in real estate services, said Lutnick in a statement.
Grubb & Ellis had negotiated with BGC earlier this month about a possible sale, but emerged with no agreement. Andrew Farkas's C-III Capital Partners and Colony Capital LLC, had explored deals with the brokerage in the past year and took investment stakes.
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 D'Arcy, president and CEO of Grubb & Ellis, in a statement. We believe the transaction will be seamless for our clients and we expect no disruption to the company's operations.
It wasn't immediately clear if Grubb & Ellis will retain its brand or merge wholly with Newmark. A spokeswoman for Newmark declined to comment.
Grubb, which began as a single San Francisco office in 1958, grew to over 3,000 employees and 90 affiliated offices in the U.S. It was dragged down by an untimely merger and plunging real estate values, Michael Rispoli, Grubb's CFO and executive vice president, wrote in a court filing.
The company was battered by the slow recovery of commercial real estate market, along with losses from its 2007 merger with investment management company NNN Realty Advisors, Inc., which couldn't have come at a worse time, wrote Rispoli. The NNN division had a loss of $10 million in the first part of 2011 after earnings of $50 million in 2007, as investors lost their appetite for office and retail buildings.
While larger rivals such as CBRE Group Inc., Cushman & Wakefield and Jones Lang LaSalle expanded globally, Grubb, known as a midsize firm, was particularly hurt by the real estate crash in the U.S.
Because of the financial instability, brokers responsible for nearly 30 percent of the company's 2011 revenue have recently left the company, said the filing.
The departures included Chicago-based Shawn Mobley, former president of brokerage services, who joined Cushman & Wakefield, and Joseph Swingle, former executive managing director of New York Region, who joined rival Cassidy Turley.
Grubb & Ellis Healthcare REIT II, a separate entity, also terminated Grubb's advisory services in 2011, another financial blow to the company. The REIT assignment was responsible for $13.2 million in revenue in the first three quarters of 2011.
Grubb's stock fell 67 percent mid-Tuesday to 2.3 cents per share.