In the latest installment of the Grubb & Ellis Co. boardroom fight, former chairman Tony Thompson has nominated himself and a pair of heavy hitters for the board of the Santa Ana-based real estate brokerage and investor.
Thompson, who is Grubb & Ellis’ second-largest shareholder and chairman of upstart real estate investor Thompson National Properties of Irvine, has nominated himself, Harold Ellis and Stuart Tanz for the company’s board, which currently counts eight members.
Ellis cofounded Grubb & Ellis in 1958 and served as chairman and chief executive until 1992. Stuart Tanz is the former chairman and chief executive of San Diego-based Pan Pacific Retail Properties Inc., now part of Kimco Realty Corp.
Grubb & Ellis’ existing board opposes the proposed board candidates, who seek to push the company to enact a series of aggressive, less conventional strategies that could help it better capitalize on the ongoing weakness in the real estate and credit markets, Thompson said.
Grubb & Ellis shareholders are scheduled to vote on the board matter in early December.
The boardroom drama comes as Grubb & Ellis,which has seen its stock price fall by nearly 80% during the past year,reported a tough third quarter last week, posting a net loss of $44 million due in large part to impairment charges related to buildings the company owns and is looking to sell.
It also announced it was letting go of about 100 of its nearly 900 brokers across the U.S..
Interim Chief Executive Gary Hunt said last week it’s the most challenging real estate market he’s seen in nearly 30 years, but that the company was performing well.
Thompson describes the commercial real estate market these days as “hand to hand combat,” and believes aggressive new strategies are needed to turn the company around.
“Tried and proven methods aren’t working,” said Thompson, who notes that the stock of other brokerages such as Los Angeles-based CB Richard Ellis Group Inc. and Chicago-based Jones Lang LaSalle Inc. also are suffering.
He’s recommending a number of initiatives for Grubb & Ellis, including the creation of a consulting and appraisal businesses, a re-tooled investment management division, a new debt acquisition business and broker retention initiatives, among other suggestions.
Thompson said he’s met with existing board members several times in recent months to discuss the new strategies.
“They say they are listening but I’ve concluded that they aren’t,” he said.
Grubb & Ellis officials last week advocated a more conservative approach, limiting expenses, walking away from deals in their tenant-in-common business and limiting expansion until the real estate market shows signs of improvement.
Part of that conservative approach is keeping Thompson off the board, which the existing members said is in the best interests of the shareholders.
On and Off the Board
It’s Thompson’s second attempt at getting back on the board of Grubb & Ellis this year.
Thompson stepped down from the board and his chairman seat early this year after his former company, NNN Realty Advisors Inc., parent company of tenant-in-common investor Triple Net Properties LLC, acquired Grubb & Ellis.
The combined company, which retained the better-known Grubb name, was valued at about $700 million at the time of the deal.
The company currently counts a market value of about $80 million. Thompson’s stake in Grubb & Ellis is now worth about $12 million.
Thompson said in late June he was unhappy with the real estate investor and brokerage’s stock performance and sought re-appointment to the company’s board. That request was rejected by the company in July.
There’s also talk that Grubb & Ellis executives see Thompson’s latest venture at Thompson National Properties as that of a competitor, and that his involvement on the board would create conflicts of interest.
Sources note that Thompson National already focuses on many of the programs that he’s suggested Grubb & Ellis take more interest in.
In particular, Thompson, who founded Triple Net Properties in 1998, has called for Grubb & Ellis to take advantage of expected consolidation in the tenant-in-common industry.
Last month, Thompson National went in a similar direction by taking over San Clemente-based Argus Realty Investors LP, which pools together individual investors to buy more expensive offices and other buildings.
The tenant-in-common industry has seen overall investments drop by nearly 50% in the past year. About $1.3 billion is expected to be raised for this type of investment during 2008. Grubb & Ellis counts about a 23% market share in the industry.
Thompson said there’s “zero conflict” between the two businesses.
