Santa Ana’s NNN Realty Advisors Inc., a privately held company that’s a relative newcomer to real estate, is making its way to Wall Street by snapping up one of the bigger names in the industry.
NNN Realty, best known as the parent of Triple Net Properties LLC,the country’s largest sponsor of tenant-in-common deals,said last week it was buying Chicago-based brokerage Grubb & Ellis Co. Complete terms of the deal still aren’t known.
The buy’s a stunning move for NNN Realty. Earlier this month, NNN Realty announced plans for an initial public offering of up to $423 million, which would have been the largest in recent years here.
Not to mention that Grubb & Ellis’ annual revenue,$500 million,is more than triple that of NNN Realty’s $130 million.
Grubb & Ellis Name
The combined company is keeping the Grubb & Ellis name. It will have a market value of roughly $725 million and is set to continue trading on the New York Stock Exchange under “GBE.”
The new Grubb & Ellis will manage and broker sales of commercial real estate and handle property management duties for a national portfolio running close to 200 million square feet.
NNN Realty is getting the upper hand, with its shareholders set to own 59% of the combined company. It’s also set to remain based in Santa Ana.
Scott Peters, chief executive of NNN Realty, will head the new Grubb & Ellis. Tony Thompson, NNN Realty’s founder and largest shareholder with a 26% stake, is set to become chairman.
Thompson said he plans to remain active in the day-to-day operations.
Most of NNN Realty’s roughly 450 workers,a tenth of Grubb & Ellis’ workforce,work in two Santa Ana offices.
NNN Realty was founded in 1998. Grubb & Ellis has been around for more than 50 years.
In Orange County, Grubb & Ellis employs about 90 brokers. The company’s Newport Beach and Orange offices are among its best performers.
Peters said not to expect any significant changes,either additions or consolidations,in the new company’s local operations.
As for NNN Realty’s IPO plans, the Grubb & Ellis deal makes better sense for all concerned, according to Peters.
“The synergies of the two companies and the combination of platforms are in the best interest of the shareholders,” he said.
There’s little overlap between the two, but plenty of opportunities to cross sell, according to Peters.
NNN Realty’s money raising,nearly $260 million this year,will help drive Grubb & Ellis’ brokerage business and boost its property management business through office and other acquisitions.
At the same time, the Grubb & Ellis name should lift awareness of NNN Realty’s tenant-in-common, real estate investment trust and other businesses, as well as drive money raising efforts.
“The biggest challenge (of late) is getting the message out, educating the marketplace (about 1031 exchanges) and communicating this to investors,” Peters said.
The company is the country’s largest sponsor of tenant-in-common 1031 exchanges, which pool together investors for deals. It counts about a 15% market share in the sector. Its investments have seen average returns of about 18.6% to date.
NNN Realty has been one of Grubb & Ellis’ top five clients for the past several years, providing it about $6 million to $7 million annually in management fees.
Last year, the company hired local Grubb & Ellis broker Jeff Hanson to head up its Triple Net Properties Realty Inc. unit, which handles acquisitions and sales nationally for the company.
