Company Reports Revenue Gains, Improved Operating Performance
CHICAGO, Aug. 16 /PRNewswire-FirstCall/ -- Grubb & Ellis
Company (NYSE: GBE), a leading provider of integrated real estate
services, today reported revenue of $135.3 million for the fiscal
2007 fourth quarter ended June 30, an increase of 13.1 percent from
$119.6 million in the comparable period a year ago. Fiscal 2007
fourth quarter net income was $1.0 million, or $0.04 per diluted
share. Income before taxes for the fiscal 2007 fourth quarter was
approximately $4.9 million, exclusive of approximately $2.3 million
of non- recurring expenses related primarily to the Company's
proposed merger with NNN Realty Advisors, Inc. Fiscal 2007 fourth
quarter net income, excluding the merger-related costs, was $2.5
million, or $0.09 per diluted share. The Company reported net
income of $0.5 million, or $0.05 per diluted share, in the fourth
quarter of fiscal 2006. "The substantial progress we've achieved in
executing the objectives outlined in our five-year growth strategy
is reflected in our overall fiscal 2007 performance and,
specifically, the Company's strong fourth quarter results," said
Mark E. Rose, Chief Executive Officer of Grubb & Ellis Company.
"I am extremely proud of the pace of change at Grubb & Ellis
and the performance of our excellent team who has executed our
strategy in each of our markets. Our success is a testament to our
people, and their commitment and dedication to making Grubb &
Ellis a leading real estate services provider. Looking ahead, our
proposed merger with NNN Realty Advisors is an excellent fit, and
one that will create a full service real estate company with a
strong balance sheet and cash flow capable of accelerating our
growth plans, providing best-in-class solutions for our clients and
greater opportunities for our stockholders and employees." The
Company's 2007 fourth quarter results were driven by the strong
performance of its Transaction Services segment, which reported
year-over-year revenue growth of 16.3 percent. The improvement can
be attributed to the Company's focus on expanding its presence in
key markets, aggressive recruiting efforts and increased
productivity resulting from transitioning out underperformers.
Fiscal 2007 revenue was $513.3 million, an increase of 4.7 percent
from revenue of $490.1 million in the year ago period. The Company
reported a net loss to common stockholders of $102.2 million, or
($4.00) per diluted share, for fiscal 2007, compared with net
income of $4.9 million, or $0.40 per diluted share, in fiscal 2006.
The loss includes the GAAP treatment of the exchange of the
Company's preferred shares for common stock in conjunction with the
10-million-share public equity offering that closed in July 2006 as
well as a gain from the Company's sale of marketable securities in
the second fiscal quarter of 2007. Excluding the $105.3 million
charge to earnings attributable to the preferred stock exchange, of
which $95.2 million was non- cash, the $2.3 million securities sale
gain, and $1.4 million of merger- related costs, each net of taxes,
the Company realized net income of $2.2 million, or $0.08 per
diluted share. Fiscal Year 2007 Highlights * Advanced operational,
financial and investment management growth objectives by entering
into a merger agreement with NNN Realty Advisors. * Executed on the
Grubb & Ellis Realty Advisors warehousing initiative, acquiring
and subsequently agreeing to sell three commercial properties to
Grubb & Ellis Realty Advisors, which, subject to approval by
Grubb & Ellis Realty Advisors stockholders, is intended to
constitute the Grubb & Ellis Realty Advisors' business
combination. * Significantly upgraded the quality of the brokerage
sales force, attracting 199 professionals, while a total of 174
individuals transitioned out of the organization. * Increased
broker headcount to 931 from 906 at June 30, 2006. * Management
Services segment increased square footage under management by more
than 12 percent to 178 million square feet at June 30, from 158
million square feet in the year earlier period, and retained all of
its major facilities management contracts up for renewal. *
Increased the number of multi-service relationships to 33 from 25
during year. "The investments we have made to strengthen our core
businesses during the fiscal year resulted in quality revenue
growth in the fourth quarter. These initiatives complemented our
rigorous expense control and contributed to Grubb & Ellis'
improved fourth quarter profitability," said Rich Pehlke, Executive
Vice President and Chief Financial Officer. Financial Results
EBITDA (earnings before interest, taxes, depreciation &
amortization) was $5.1 million in the fourth quarter, compared with
$5.5 million in the year earlier period. Fiscal 2007 fourth quarter
EBITDA includes $2.3 million in costs related primarily to the
Company's proposed merger. EBITDA was $15.1 million in fiscal year
2007, compared with $16.5 million in the previous year. Fiscal 2007
EBITDA results include the previously mentioned merger costs and a
$3.8 million pre-tax gain from the sale of marketable securities,
which consisted of the Company's common stock investment in
LoopNet, a commercial real estate information services company,
that it originally acquired in 1999. The Company's EBITDA results
reflect the cost impact of its strategy to invest in people and its
strategic growth plan. Cost of services, which are variable in
nature, totaled 73.0 percent of total revenue in the fiscal 2007
fourth quarter, compared with 72.6 percent in the year earlier
period. During the quarter the Company saw an increase in
transactions from its higher producing brokers who generally
receive higher commission splits. For the fiscal year, cost of
services were 74.4 percent of total revenue, compared with 74.8
percent of revenue in fiscal year 2006. These costs are primarily
comprised of transaction commission expenses, which are incurred as
a percentage of the related transaction revenue, and reimbursable
salaries, wages and benefits that are fully offset by management
services fees received from Grubb & Ellis clients. The
Company's gross margin was 27.0 percent in the fiscal 2007 fourth
quarter, compared with 27.4 percent in the year earlier period. For
the full fiscal year, the Company's gross margin grew to 25.6
percent from 25.2 percent in fiscal 2006. In the fourth quarter,
general and administrative costs totaled $31.6 million, up from
$29.9 million reported during the fourth quarter of fiscal 2006.
For the full fiscal year, general and administrative costs were
$126.4 million, an increase of 10.0 percent from $114.9 million in
fiscal 2006. Salaries and wages was the key factor driving the
increase as the Company continued to invest in its growth strategy
and key professionals to build and expand offices and core
services. The Company reported year-over-year increases in salaries
and wages of 9.6 percent and 10.6 percent for the fiscal 2007
fourth quarter and full year, respectively. Transaction Services
Transaction Services fees, including commission, valuation and
consulting revenue, increased 16.3 percent to $82.4 million in
fiscal 2007 fourth quarter, compared with $70.9 million a year
earlier. For the year, Transaction Services generated fees of
$309.2 million, compared with $295.7 million in fiscal 2006.
Management Services Management Services fees include reimbursed
salaries, wages and benefits, and fees from property management and
facilities outsourcing services, along with business services fees.
Revenue was $52.9 million in the fourth quarter, an increase of 8.5
percent from $48.7 million in the fourth quarter of fiscal 2006.
Net of reimbursable salaries expense, Management Services fees
increased 13.3 percent in the fourth quarter, a result of the
increase in square feet under management over the past 12 months.
Fiscal year 2007 fees totaled $204.1 million, compared with $194.4
million in the prior year. Outlook "As we enter fiscal 2008, we
remain firmly committed to executing our business strategies and
accomplishing our strategic goals. The investments we've made to
date continue to serve as an important foundation for Grubb &
Ellis' future profitable growth. We are aggressively moving forward
with planning the integration of Grubb & Ellis and NNN Realty
Advisors. The combined company will be a highly diversified
best-in-class real estate services company -- one that will drive
synergies across all of its business lines and have a strong
financial platform to fund our growth initiatives," Rose said.
Conference Call & Webcast The Company's fourth quarter and
fiscal year 2007 earnings conference call will be held today at 10
a.m. CT. A live webcast will be accessible through the Investor
Relations section of the Company's Web site at http://www.grubb-/
ellis.com, or may be accessed by dialing 1.800.798.2796 for
domestic callers and 1.617.614.6204 for international callers. The
conference call ID number is 62804309. An audio replay will be
available beginning at 12 p.m. CT on Thurs., Aug. 16 until 5 p.m.
CT on Thurs., Aug. 23 and can be accessed by dialing 1.888.286.8010
and entering conference call ID 50390448. In addition, the
conference call audio will be archived on the company's Web site
following the call. Grubb & Ellis Company Grubb & Ellis
Company is one of the world's leading full-service commercial real
estate organizations, providing a complete range of transaction,
management and consulting services. By leveraging local expertise
with its global reach, Grubb & Ellis offers innovative,
customized solutions and seamless service to owners, corporate
occupants and investors throughout the globe. For more information,
visit the Company's Web site at http://www.grubb-ellis.com/.
Forward-looking Statement Except for historical information,
statements included in this announcement may constitute
forward-looking statements regarding, among other things, future
revenue growth, market trends, new business opportunities, the
proposed merger with NNN Realty Advisors, consummation of the sale
of three commercial properties to Grubb & Ellis Realty
Advisors, new hires, results of operation, 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)
the volume of sales and leasing transactions and prices for real
estate in the real estate markets generally;(ii) a general or
regional economic downturn that could create a recession in the
real estate markets; (iii) the Company's debt level and its ability
to make interest and principal payments; (iv) an increase in
expenses related to new initiatives, investments in people,
technology and service improvements; (v) the success of new
initiatives and investments; (vi) the inability to obtain the
requisite stockholder approvals from Grubb & Ellis and NNN
Realty Advisors to consummate the merger with NNN Realty Advisors;
(vii) Grubb & Ellis Realty Advisors' failure to obtain the
requisite approval of its stockholders to acquire the three
commercial properties from Grubb & Ellis and consummate its
business combination; and (viii) other factors described in the
Company's Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on July 3, 2007 and the
Company's quarterly reports on Form 10-Q for the three month
periods ended March 31, 2007, December 31, 2006 and September 30,
2006, and in the Company's annual report on Form 10-K for the
fiscal year ending June 30, 2006, filed with the SEC. 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 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 its stockholders in their analysis of the Company's
business and operating performance. 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 measure. Additionally, non-GAAP financial
measures as presented by Grubb & Ellis may not be comparable to
similarly titled measures reported by other companies. ADDITIONAL
INFORMATION AND WHERE TO FIND IT: THIS PRESS RELEASE IS FOR
INFORMATIONAL PURPOSES ONLY AND IS NOT AN OFFER TO BUY OR THE
SOLICITATION OF AN OFFER TO SELL ANY SHARES. In connection with the
proposed merger, Grubb & Ellis Company and NNN Realty Advisors
have filed a joint proxy statement/prospectus with the Securities
and Exchange Commission as part of a registration statement
regarding the proposed merger. Investors and security holders are
urged to read the joint proxy statement/prospectus of Grubb &
Ellis and NNN Realty Advisors because it contains important
information about Grubb & Ellis and NNN Realty Advisors and the
proposed merger. Investors and security holders may obtain copies
of the preliminary joint proxy statement/prospectus and the
definitive proxy statement/prospectus (when available), and other
documents filed by Grubb & Ellis and NNN Realty Advisors with
the SEC at the SEC's website at http://www.sec.gov/. The definitive
joint proxy statement/prospectus and other relevant documents may
also be obtained free of charge from Grubb & Ellis and NNN
Realty Advisors by directing such request to: Grubb & Ellis
Company, 500 West Monroe Street, Suite 2800, Chicago, IL 60661,
312.698.6707, Attention: Janice McDill or to NNN Realty Advisors,
Inc., 1551 N. Tustin Avenue, Suite 300, Santa Ana, CA 92705,
714.667.8252 x861, Attention: Michael Rispoli. Investors and
security holders are urged to read the joint proxy
statement/prospectus and other relevant material when they become
available before making any voting or investment decisions with
respect to the merger. Grubb & Ellis, NNN Realty Advisors and
their respective directors and executive officers may be deemed to
be participants in the solicitation of proxies from the
stockholders of and Grubb & Ellis and NNN Realty Advisors,
respectively, in connection with the merger. Information about
Grubb & Ellis' and NNN Realty Advisors' directors and executive
officers is set forth in the preliminary joint proxy
statement/prospectus, which can be found on the SEC's website at
http://www.sec.gov/. - TABLES FOLLOW - GRUBB & ELLIS COMPANY
Condensed Consolidated Statements of Operations (in thousands,
except share data) (unaudited) Three Months Ended Years Ended June
30, June 30, 2007 2006 2007 2006 Services revenue: Transaction fees
$82,377 $70,855 $309,151 $295,711 Management fees 52,873 48,721
204,135 194,416 Total services revenue 135,250 119,576 513,286
490,127 Costs of services: Transaction commissions 49,940 42,086
193,119 185,587 Reimbursable salaries, wages and benefits 37,616
35,216 148,788 143,537 Salaries, wages, benefits and other direct
costs 11,160 9,524 40,171 37,364 Total costs of services 98,716
86,826 382,078 366,488 General and administrative costs: Salaries,
wages and benefits 16,578 15,132 64,688 58,463 Selling, general and
administrative 12,548 12,078 52,864 48,700 Depreciation and
amortization 2,433 2,658 8,844 7,748 Merger related and other board
costs 2,337 -- 2,337 -- Total costs 132,612 116,694 510,811 481,399
Operating income 2,638 2,882 2,475 8,728 Other income and expenses
Gain on sale of marketable equity securities available for sale --
-- 3,765 -- Interest income 96 157 952 1,007 Interest expense (200)
(846) (999) (2,530) Income before income taxes 2,534 2,193 6,193
7,205 Income tax provision (1,294) (1,893) (3,253) (2,487) Income
before income from investment in affiliate 1,240 300 2,940 4,718
Income from investment in affiliate 75 193 529 193 Income from
continuing operations 1,315 493 3,469 4,911 Loss from operations of
real estate held for sale, net of taxes (284) -- (435) -- Net
income 1,031 493 3,034 4,911 Preferred stock redemption -- --
(105,267) -- Net income (loss) to common stockholders $1,031 $493
$(102,233) $4,911 Earnings per share - diluted Income (loss) from
continuing operations to common stockholders per share $0.05 $0.05
$(3.98) $0.40 Net income (loss) to common stockholders per share
$0.04 $0.05 $(4.00) $0.40 Weighted average shares outstanding
(diluted) 26,216,515 9,961,262 25,554,609 12,314,242 Net income
$1,031 $493 $3,034 $4,911 Depreciation and amortization 2,433 2,658
8,844 7,748 Interest, net 104 689 47 1,523 Income tax provision
1,294 1,893 3,253 2,487 Income from investment in affiliate (75)
(193) (529) (193) Loss from operations of real estate held for sale
284 -- 435 -- EBITDA(1) $5,071 $5,540 $15,084 $16,476 (1) EBITDA
represents earnings before interest, taxes, depreciation and
amortization. Management believes that EBITDA is relevant because
it assists investors in evaluating the Company's ability to service
its debt by providing a commonly used measure of cash available to
pay interest. EBITDA should not be considered as an alternative to
net income (loss) or cash flows from operating activities (which
are determined in accordance with GAAP), as an indicator of
operating performance or a measure of liquidity. EBITDA also
facilitates comparison of the Company's results of operations with
those companies having different capital structures. Other
companies may define EBITDA differently, and, as a result, such
measures may not be comparable to the Company's EBITDA. GRUBB &
ELLIS COMPANY Selected Condensed Consolidated Balance Sheet Data
(in thousands) (unaudited) June 30, June 30, 2007 2006 Assets Cash
and cash equivalents $ 10,088 $ 16,613 Services fees receivable,
net 15,241 12,528 Other receivables 4,206 5,185 Professional
service contracts, net 7,038 3,914 Prepaid and other current assets
2,919 3,442 Real estate held for sale 171,266 -- Deferred tax
assets, net 1,905 1,182 Total current assets 212,663 42,864
Equipment, software and leasehold improvements, net 11,282 9,908
Goodwill, net 24,763 24,763 Professional service contracts, net
12,348 6,028 Investment in affiliate 5,637 2,945 Other assets 2,156
7,715 Total assets $ 268,849 $ 94,223 Liabilities and Stockholders'
Equity Accounts payable $ 6,572 $ 4,112 Commissions payable 9,476
6,699 Accrued compensation and employee benefits 13,356 11,931
Liabilities related to real estate held for sale 169,930 -- Other
accrued expenses 10,593 10,129 Total current liabilities 209,927
32,871 Credit facility debt -- 40,000 Accrued claims and
settlements 4,681 4,396 Other liabilities 6,240 5,430 Total
liabilities 220,848 82,697 Total stockholders' equity 48,001 11,526
Total liabilities and stockholders' equity $ 268,849 $ 94,223 NOTE:
The following table is being provided for the convenience of
investors. GRUBB & ELLIS COMPANY Condensed Consolidated
Statements of Operations (in thousands, except share data)
(unaudited) Fiscal Year For the three months ended 2007 9/30/06
12/31/06 3/31/07 6/30/07 Total Services revenue: Transaction fees
$69,755 $93,838 $63,181 $82,377 $309,151 Management fees 47,506
51,989 51,767 52,873 204,135 Total services revenue 117,261 145,827
114,948 135,250 513,286 Costs of services: Transaction commissions
44,151 60,880 38,148 49,940 193,119 Reimbursable salaries, wages
and benefits 34,966 37,706 38,500 37,616 148,788 Salaries, wages,
benefits and other direct costs 8,978 10,001 10,032 11,160 40,171
Total costs of services 88,095 108,587 86,680 98,716 382,078
General and administrative costs: Salaries, wages and benefits
15,824 15,346 16,940 16,578 64,688 Selling, general and
administrative 12,565 13,818 13,933 12,548 52,864 Depreciation and
amortization 1,940 2,048 2,423 2,433 8,844 Merger related and other
board costs -- -- -- 2,337 2,337 Total costs 118,424 139,799
119,976 132,612 510,811 Operating income (loss) (1,163) 6,028
(5,028) 2,638 2,475 Other income and expenses Gain on sale of
marketable equity securities available for sale -- 3,765 -- --
3,765 Interest income 321 271 264 96 952 Interest expense (530)
(170) (99) (200) (999) Income (loss) before income taxes (1,372)
9,894 (4,863) 2,534 6,193 Income tax benefit (provision) 251
(4,004) 1,794 (1,294) (3,253) Income (loss) before income from
investment in affiliate (1,121) 5,890 (3,069) 1,240 2,940 Income
from investment in affiliate 150 169 135 75 529 Income (loss) from
continuing operations (971) 6,059 (2,934) 1,315 3,469 Loss from
operations of real estate held for sale, net of taxes -- -- (151)
(284) (435) Net income (loss) (971) 6,059 (3,085) 1,031 3,034
Preferred stock redemption (105,267) -- -- -- (105,267) Net income
(loss) to common stockholders $(106,238) $6,059 $(3,085) $1,031
$(102,233) Earnings per share - diluted Income (loss) from
continuing operations to common stockholders per share $(4.30)
$0.23 $(0.11) $0.05 $(3.98) Net income (loss) to common
stockholders per share $(4.30) $0.23 $(0.12) $0.04 $(4.00) Weighted
average shares outstanding (diluted) 24,698,879 26,087,406
25,839,360 26,216,515 25,554,609 Net income $(971) $6,059 $(3,085)
$1,031 $3,034 Depreciation and amortization 1,940 2,048 2,423 2,433
8,844 Interest, net 209 (101) (165) 104 47 Income tax (benefit)
provision (251) 4,004 (1,794) 1,294 3,253 Income from investment in
affiliate (150) (169) (135) (75) (529) Loss from operations of real
estate held for sale -- -- 151 284 435 EBITDA(1) $777 $11,841
$(2,605) $5,071 $15,084 (1) EBITDA represents earnings before
interest, taxes, depreciation and amortization. Management believes
that EBITDA is relevant because it assists investors in evaluating
the Company's ability to service its debt by providing a commonly
used measure of cash available to pay interest. EBITDA should not
be considered as an alternative to net income (loss) or cash flows
from operating activities (which are determined in accordance with
GAAP), as an indicator of operating performance or a measure of
liquidity. EBITDA also facilitates comparison of the Company's
results of operations with those companies having different capital
structures. Other companies may define EBITDA differently, and, as
a result, such measures may not be comparable to the Company's
EBITDA. DATASOURCE: Grubb & Ellis Company CONTACT: Janice
McDill of Grubb & Ellis Company, +1-312-698-6707, Web site:
http://www.grubb-ellis.com/ Company News On-Call:
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