Grubb Bid Could Bring Challengers
Daniel Geiger March 20, 2012, 1:41 p.m.
Rumors have been swirling in real estate circles this week that when Grubb & Ellis hits the auctioning block in bankruptcy court this Thursday, BGC Partners, which holds the company’s senior debt, might not be the only firm that shows up to bid.
Brokers and real estate executives say that whispers have spread in the industry that CBRE and the Canadian real estate services firm Avison Young may hold out last minute offers, perhaps in partnership, to steal Grubb & Ellis away from BGC and divvy its assets between themselves. Another source said that UGL Equis, an Australia-based real estate services company, was also considering making an offer.
Though more than a handful of brokers and sources interviewed by The Commercial Observer expressed skepticism at the possibility, others could also see the logic for such a deal. By buying Grubb & Ellis, CBRE could gain access to lucrative property management and consulting contracts the company is said to have with a stable of corporate clients, and both Avison Young and UGL Equis could inherit the company’s sizable nationwide portfolio of offices, giving either the footprint both have been seeking in the U.S.
BGC Partners, a public company that purchased Newmark Knight Frank last year, bought Grubb & Ellis’s senior debt, which had a face value of nearly $30 million, earlier this year for an undisclosed sum and, when the company declared bankruptcy days later, agreed to lend Grubb & Ellis up to almost $5 million more to keep its operations going. Though Grubb & Ellis announced that it intended to sell its assets to BGC in the bankruptcy process, other interested buyers have the right to bid on the company so long as the offer exceeds the nearly $35 million of loans that BGC holds against Grubb. In such a scenario, BGC could ratchet up its own bid to match any competing offers.
A CBRE spokesperson wouldn’t comment on the rumor and issued a statement in an email to The Commercial Observer: “As a matter of company policy, CBRE does not comment on market rumors or speculation about our business strategies.”
One senior level executive in CBRE’s New York office said that he hadn’t heard anything within the company about it making a bid for Grubb & Ellis. That person however noted he hadn’t received advance notice that the company was buying Trammell Crow, a real estate firm CBRE acquired in 2006 for $2.2 billion.
Uncertainty has continued to permeate at Grubb & Ellis. Several brokers in the company’s New York office at 1301 Avenue of the Americas who were interviewed by The Commercial Observer said it was unclear whether employees would move to BGC if that company indeed finished its planned acquisition of Grubb. Questions also remain whether brokers at Grubb will be paid commissions they are owed.
Through the weekend, hundreds of Grubb & Ellis brokers filed objections in the bankruptcy court over a motion last week by Grubb & Ellis to sever its liability for commissions and other payments it owes. Several brokers are due considerable sums, including Michael Gottlieb and Howard Grufferman, two prominent executives in the company’s New York office.
In his letter of objection, Mr. Gottlieb listed more than $400,000 in commissions and payments he is owed as part of his employment contract. Howard Grufferman, in his letter, stated that he is owed $127,173.88 in commissions.
Sources also say that Grubb & Ellis’s time at 1301 Avenue of the Americas, in 60,000 square feet of sublease space it rented there last year, may be winding down, with one source saying the office would be padlocked by the sublandlord, Commerzbank.