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Bigger Grubb Shakes Up Execs

Two months after shareholders approved joining Santa Ana-based NNN Realty Advisors Inc. with Chicago-based Grubb & Ellis Co., it’s clear who’s running the combined company.

It’s no surprise that executives from NNN Realty, which owns 59% of the combined company, dominate the board and executives posts. But it is intriguing to see who came out on top.

NNN Realty, which kept its headquarters in Santa Ana and took the better-known Grubb & Ellis name, shuffled the executive deck in the fourth quarter. Even chairman and NNN cofounder Tony Thompson left the decision-making table.

Thompson’s resignation came a little more than a month after NNN went public in December by purchasing a majority stake in Grubb.

The deal was valued at $750 million when struck in May 2007, but the company, which still trades under the Grubb ticker of GBE, now counts a market value of about $290 million. The company’s shares have rebounded from an early-year lull but are down about 40% in the past year.

The deal combined NNN’s real estate investing business with Grubb’s brokering of building sales, leases and other services.

Only one Grubb executive now sits in a top office for the combined company as former NNN heads swapped positions and saw promotions.

NNN Chief Executive Scott Peters took over for Grubb chief executive Mark Rose after the deal was completed in December.

In January, Jack Van Berkel, formerly NNN’s head of human resources, was promoted to chief operating officer for Grubb.

Earlier this month, Jeff Hanson was named president for Grubb & Ellis Realty Investors LLC,the new name for Triple Net Properties, a key division of NNN Realty. He had been chief investment officer for Triple Net, the country’s largest pooler of investors on real estate buys.

The highest-ranking official remaining from Grubb’s pre-deal executive team appears to be Richard Pehlke, the company’s chief financial officer.

But it’s the highest-ranking NNN official’s departure that has caused buzz among industry watchers.

Initially Thompson, now the combined company’s second-largest stockholder, had replaced Grubb chairman C. Michael Kojaian.

Detroit native Kojaian, the biggest stockholder of the combined company, remains as a director.

With Thompson’s resignation, effective earlier this month, he said he no longer plans to be actively involved in Grubb or its affiliates (see story, page 3).

He’s being replaced as chairman by Glenn Carpenter, a member of NNN’s board since 2006.

Carpenter, who won’t be a part of the company’s executive team, is chief executive of Newport Beach-based senior housing developer FountainGlen Properties LLC.


Thompson’s Switch

The move is a switch for Thompson, who founded Triple Net in 1998 and is considered one of the pioneers in the tenant-in-common industry. When the deal between NNN Realty and Grubb was struck last May, he said he planned to be a part of the company’s day-to-day operations.

Grubbb faces a slowing market. The company’s chief economist, Robert Bach, recently told trade journal Commercial Property News that industrywide transactions could be off by as much as 40% this year compared to 2007.

Company officials aren’t concerned that they’ll see that much of a decline in business this year compared with last year, as the company didn’t take part in a lot of the big portfolio deals that dominated 2007.

“Frankly, Grubb & Ellis did very little, if any, of the portfolio sales from an institutional perspective. So that’s 10% or 15% of the marketplace that you don’t expect to see and you haven’t seen,” Chief Executive Peters said during the combined company’s first quarterly call with analysts earlier this month.

So far, the company’s tenant-in-common business, which raised about $117 million last quarter, remains strong, according to Peters.

These types of deals “are not your institutional investment grade assets that get sold. They are the local geographic marketplace. They are the more what I would call the lower-valued assets,” Peters said.

That type of business is “less impacted, by far, than what you would consider to be the investment side of the equation,” he said.

In the fourth quarter, Grubb completed 18 acquisitions, valued at more than $400 million. The combined company made 77 acquisitions in all of 2007, valued at more than $2 billion. Also, the company said two of its real estate investment trusts that buy medical offices and apartments raised $76 million in the past quarter.

Revenue for the combined company was $103 million in the quarter, with net income of $2.9 million. The company says it is still working to finalize some figures after the acquisition.

“This merger is only 10 weeks old. We’ve got a new current environment as it relates to the real estate sector,” Peters said. “We’re impressed with our fourth quarter. We think we did very well.”

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.
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