Threatened with Commission Cuts, Brokers File Flurry of Objections

Scores of Grubb & Ellis brokers and employees filed a flurry of objections over the weekend to a motion in the company’s case in bankruptcy court that would cancel money they are owed in commissions and from employment contracts.

grubb ellis logo Threatened with Commission Cuts, Brokers File Flurry of ObjectionsOn March 8, Grubb & Ellis sent letters to its staff alerting them it would be offering them a “cure amount,” the money they are owed in pre-bankruptcy commissions and other payments, of $0. When the company, which filed for Chapter 11 protection last month, sought to have the court approve the motion late last week, more than 300 objections were filed by employees of the firm.

The challenges were launched by brokers nationwide, but some of the larger payments in dispute were for employees in the company’s New York office.

Michael Gottlieb, a top Manhattan leasing executive at Grubb & Ellis, said he was owed $56,156.83 in back commissions, another $250,000 next year as payments due through his employment contract and $99,646.07 in upcoming commissions for deals that have not yet closed.

Other brokers in the company’s offices around the country also challenged the company’s attempt to cancel its debts with significant claims. Scott Read, a senior vice president in the firm’s Newport Beach office in California, stated in a weekend objection that his cure amount shouldn’t be zero but $150,425.02 for his half of commissions that were due to the company by the end of 2011.

Scores of other employees contested the motion, claiming smaller amounts owed, such as compensation for vacation time that is still unused.

Questions about commissions have surrounded the bankruptcy case since it began on February 20. Grubb & Ellis entered into an expedited reorganization that would allow it to sell its assets to its senior creditor, BGC Partners, which already owns the real estate services company Newmark Knight Frank and plans to amalgamate the two brokerage platforms.

Brokers who are owed commissions for deals that were done before the filing date have become unsecured creditors of Grubb & Ellis and it is uncertain whether they will be able to recoup their earnings.

In recent weeks BGC Partners offered Grubb & Ellis brokers a two-year loan equal to the commissions they were owed in order to retain them. The loan was structured so that after the two year period, the debt would be forgiven. Last week, however, the court barred BGC from extending those loans. Even before the court prohibited the loans, many brokers at the company who were interviewed by The Commercial Observer expressed mixed feeling about the payment, with a number of brokers stating they didn’t want to have to accept money they had earned as a retention bonus.

It’s unclear if BGC plans to make successful brokers like Mr. Gottlieb a direct offer once it acquires portions of Grubb & Ellis’s operations.

“You would think that BGC would likely offer top producing brokers at Grubb & Ellis some kind of payment to keep them on,” said Scott Markowitz, a bankruptcy lawyer and expert at the firm Tarter Krinsky & Drogin LLP who is not involved in the Grubb & Ellis case but has been observing it like many people in the industry. “I mean the company is buying Grubb & Ellis’s assets, but what are its assets? It is its people.”

While Grubb & Ellis brokers sweat it out whether they will be paid or not, Grubb & Ellis’s bankruptcy attorneys meanwhile disclosed that they have been paid over $800,000 for their services so far representing the company through the Chapter 11 process.


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