Santa Ana-based Grubb & Ellis Co. has lost one of its largest national facilities management assignments, the latest blow to the embattled commercial real estate company.
Grubb, whose stock has slumped in recent months amid uncertainty about its long-term future, was told earlier this month by Microsoft Corp. that the software company was terminating its facilities-management contracts with Grubb.
Microsoft’s real estate holdings total close to 34 million square feet of space, with a little less than half of that located in and around the company’s headquarters in Redmond, Wash.
Microsoft is believed to lease less than 50,000 square feet of space in Orange County, where it employs about 125 people.
Grubb’s property management division was said to be handling facilities-management for about 10 million square feet of Microsoft’s national portfolio, if not more.
Facilities-management services provided by Grubb include engineering, project management, maintenance and operations, security, and call center operations for offices, industrial buildings, data centers and other properties.
CBRE Group
CBRE Group Inc. is taking over the national Microsoft account, according to officials with the Los Angeles-based company.
It’s unknown how much of a financial hit Grubb is taking on the lost contract. The company did not comment last week on specifics of the Microsoft account.
The loss could be a sizeable one for Grubb, which has struggled to remain profitable the past few years. Mounting losses and substantial debt have driven Grubb’s market value to below $5 million recently.
A source familiar with Grubb’s operations and the facilities-management business estimated the Microsoft contract was worth close to $40 million annually, and was responsible for nearly $3.5 million in earnings before interest, taxes, depreciation and amortization for the company.
Grubb employs more than 100 people who work on the high-profile Microsoft account, which it took over in 2002, according to company marketing materials from a couple of years ago.
Microsoft named Grubb its vendor of the year in 2007, when the company reportedly bested more than 15,000 others for the honor.
• Headquarters: Santa Ana
• Founded: 1958
• Business: commercial real estate broker, manager
• Ticker symbol: GRBE (OTC)
• Market value about $4.6 billion
• Notable: loss of Microsoft building management comes amid ongoing struggles
Grubb did not disclose many other details about the account in a Feb. 2 regulatory filing, other than a confirmation that the contract will conclude at the end of the month.
Microsoft was among Grubb & Ellis’ largest corporate clients. The company’s website said its facilities-management group oversees more than 100 million square feet of space nationally for a variety of Fortune 500 clients.
Other companies the real estate company has provided similar facilities-management services to in recent years have included General Motors, Aetna, and Kraft.
The Microsoft account had been in flux since this summer, according to reports.
Report
A July report in the Puget Sound Business Journal noted that Microsoft had hired CBRE as well as accounting and consulting firm Ernst & Young to handle the selection of firms that oversee the software company’s property portfolio.
CBRE, whose West Coast operations hub is based in the company’s Newport Beach office, appears to have selected itself to take on a bulk of those services.
CBRE announced last week that it was retained by Microsoft to perform real estate strategy and portfolio planning, property management and lease administration, and construction and facilities-management services, among other duties.
It also will be working with Microsoft to build a commercial real estate computer system, the company said in a quarterly filing with the Securities and Exchange Commission.
