Santa Ana-based Grubb & Ellis Co. has been productive lately.
It hired a chief executive, found new institutional investors and rid itself of more than $60 million of near-term debt since late October.
Now there’s speculation another big change could be in store for the real estate brokerage and investor—a cross-country move.
Filings made last week with the Securities and Exchange Commission suggest the company has considered relocating its executive offices out of Orange County, where the company’s been based the past two years.
Chicago and New York appear to be in the running for a relocation, if one were to occur.
Chicago was Grubb’s headquarters before the company was acquired in a 2007 reverse merger with real estate investor NNN Realty Advisors Inc. of Santa Ana.
The combined company opted to keep the better-known Grubb name but moved headquarters to NNN Realty’s local offices, just off the Costa Mesa (55) freeway. The company still has some executives and other personnel in Chicago.
New York is a real estate market where Grubb’s been trying to grow its brokerage business in recent years.
A move there would make sense from a marketing perspective, as well as give the company’s executive team closer access to Wall Street, according to sources familiar with the company.
Speculation about a move started after it was revealed that Grubb’s employment agreement with its new chief executive, Thomas D’Arcy, said he “initially” will be based in Santa Ana. The agreement specifies that if Grubb opts to move its principal executive offices to New York or Chicago during the term of his contract, he’d be required to move.
The three-year contract that D’Arcy agreed to was filed last week with the SEC as part of Grubb’s third-quarter earnings report.
D’Arcy is chairman of Inland Real Estate Corp., a $1.5 billion real estate investment trust based in Oak Brook, Ill., about 10 miles from downtown Chicago.
He’s getting a base annual salary of $650,000, and he could get a bonus of up to $1.3 million next year if certain targets are met, according to the contract.
The company hired D’Arcy this month as the conclusion to an executive search that lasted more than a year. Since July 2008, Gary Hunt, a former Irvine Company executive, had been running the company on an interim basis.
Company officials said last week that Grubb has “no plans” to relocate its headquarters.
Grubb declined to discuss the specific language of D’Arcy’s employment contract.
An employment lawyer noted its peculiarity.
“It’s a tad bit unusual,” said Bruce May, a shareholder in the employment practice of Newport Beach-based law firm Stradling Yocca Carlson & Rauth.
Of note, the employment agreement specifies that if Grubb’s executive offices are moved to New York or Chicago, D’Arcy couldn’t use that event as grounds to terminate his contract for good reason, and he wouldn’t be entitled to his severance package, May said.
“It would imply, to some, that Grubb & Ellis has contemplated moving,” May said. “The bottom line is that it’s speculation, but it is curious.”
Other than D’Arcy’s contract, there’s been no evidence that a move could be in the works, or even has been considered. But with changes at Grubb coming at a fast clip in the past month, a relocation of executive offices doesn’t appear to be out of the realm of possibility.
The company’s coming off a month where it closed a $90 million refinancing plan that solved its near-term debt issues and gave the company cash to operate in a rough commercial real estate market.
Grubb had a recent market value of about $90 million.
The details of the investors in the recapitalization plan—who effectively will be grabbing a nearly 50% interest in Grubb—still are trickling out.
One new institutional investor appears to be FMR LLC, the Boston-based parent of Fidelity Investments.
Grubb’s current chairman, C. Michael Kojaian, a real estate developer and investor who long has been Grubb’s largest individual shareholder, also appears to have increased his stake in the company in the refinancing.
Kojaian and his Bloomfield, Mich.-based affiliates now control a nearly 34% stake in the company, according to SEC filings made last week. That’s up from a nearly 25% stake a quarter earlier.
He returned to the chairman role in January.
Kojaian also held the seat when Grubb was based in Chicago, prior to its merger with NNN Realty.
