Grubb & Ellis Co. is getting out of another line of business as speculation continues to swirl over the future of the Santa Ana-based commercial brokerage.
The company announced last week it was turning over management of Grubb & Ellis Healthcare REIT II Inc., a non-traded real estate investment trust it runs, to a pair of area companies, one of them led by Grubb’s former chief investment officer.
The Healthcare REIT has bought medical office buildings and other healthcare-related facilities valued at close to $430 million since launching in 2009. It plans to exit its advisory and dealer-manager arrangements with Grubb around the end of the year.
Taking over those sponsorship roles are Griffin Capital Corp., a Los Angeles-based real estate investment company that’s sponsored other non-traded REITs, and American Healthcare Investors LLC, a recently formed company based in Newport Beach.
American Healthcare’s management team includes Jeff Hanson, who had been Grubb’s chief investment officer and head of the company’s investment management division, and Danny Prosky, president of the Healthcare REIT.
Hanson and Prosky both resigned from Grubb in conjunction with the announcement.
The Healthcare REIT plans to rename itself Griffin-American Healthcare Trust Inc. and hopes to raise upward of $3 billion to buy additional medical properties, according to company officials.
Investors Flock
Investors have been flocking to medical-property investments, which have come to be viewed as one of the better-performing segments of commercial real estate in recent years. Traded and non-traded healthcare-focused real estate investment trusts have raised close to $22.5 billion from investors since early 2010, according to data from Chicago-based brokerage Jones Lang LaSalle Inc.
The decision to disassociate itself from Grubb was made by the Healthcare REIT’s independent directors, who “considered, among other things, the current circumstances and strategic direction of Grubb & Ellis,” according to regulatory filings.
Grubb has been eyeing potential financing deals and exploring a potential merger or sale since March.
Last month, the company announced it had struck a financing deal with Irving, Texas-based C-III Capital Partners LLC, and said it was is in negotiations with the real estate investor “regarding a strategic transaction.”
C-III Capital is an affiliate of Island Capital Group LLC, a New York-based real estate merchant bank led by Andrew Farkas, the former chairman of Insignia Financial Group Inc. and one of New York’s better-known real estate executives.
Island Capital and C-III earlier this year announced a deal to buy another commercial brokerage, Princeton, N.J.-based NAI Global. That deal has yet to close.
If Farkas and C-III are able to complete deals with both NAI and Grubb, some in the industry speculate Farkas would then integrate the brokerages or merge the companies outright.
NAI executives and brokers have expressed reservations about such a merger and want to close their deal with C-III first. That would then give them a seat at the table regarding C-III’s evaluation of Grubb, according to sources.
Grubb counts about 80 brokers in its two Orange County offices, while NAI has 30 brokers in its Newport Beach office.
· Headquarters: Santa Ana
· Business: commercial real estate services
· Founded: 1958
· Ticker symbol: GBE (NYSE)
· Market value: about $26 million
· Notable: turning over management of Grubb & Ellis Healthcare REIT II to two area companies
Slimming Down
Grubb has been slimming down its non-brokerage operations the past few months, in a bid to make the company—which counts a market value of about $27 million—a more attractive takeover of investment candidate.
In its biggest move of late, Grubb shed its Daymark Realty Advisors subsidiary in August to a pair of companies—San Diego-based real estate investor Sovereign Capital Management Group Inc. and a unit of New York-based investor Infinity Group.
Daymark, formed earlier this year, runs Grubb’s tenant-in-common portfolio, which totals about 33 million square feet of offices, retail centers, apartments and other properties across the country.
That business brought in about $22 million in revenue last year.
Grubb’s investment management division, which oversaw the Healthcare REIT, brought in another $21 million in acquisition, property management, and other related fees for the company last year.
With the Healthcare REIT changing sponsors, the division now lacks any other REITs to sponsor and has yet to name a replacement for Hanson.
The division has seen two other REITs it once sponsored distance themselves from Grubb over the past few years, including an offering that targeted apartments, as well as another healthcare offering that now operates as Healthcare Trust of America Inc.
The chief executive of Healthcare Trust, based in Scottsdale, Ariz., is Scott Peters, who was chief executive of Grubb & Ellis before stepping down in 2008.
