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| NNN Realty CEO Scott Peters |
Back in May when Grubb & Ellis Co. (NYSE:
GBE) and NNN Realty Advisors decided to merge, the real estate market was still riding the tail end of an unprecedented wave of liquidity and private capital chasing property deals.
Since then, the market has undergone a radical change, and so has the value of the merger. But Orange County-based NNN Realty and Chicago-based Grubb & Ellis consummated the deal Monday, just two business days after shareholders for the two firms gave their blessing to the marriage at special meetings in Orange County, CA.
The merger creates "a new Grubb & Ellis poised to pursue growth and to provide a broader range of services to a global client base," said new Grubb & Ellis President and Chief Executive Officer Scott D. Peters. "This merger combines two complementary firms to create a new company that is greater than the sum of its parts."
Peters added that Grubb & Ellis’ name recognition and a nationwide presence combined with NNN Realty Advisors' investment platforms can leverage the Grubb & Ellis brand and services.
The combined entity expects to pay an annual dividend of 41 cents per share to stockholders. Grubb & Ellis will now report its financial results on a calendar year rather than fiscal year basis.
"This is essentially the creation of a new company that is equipped to pursue both domestic and international growth," said Tony Thompson, the new Grubb & Ellis chairman.
C. Michael Kojaian, former chairman of Grubb & Ellis, remains the company's single largest stockholder and retains a seat on the company’s board of directors.
Triple Net Properties, one of the nation's leading sponsors of securitized 1031 tenant-in-common (TIC) exchange programs, and NNN Capital Corp., a registered broker-dealer, are now indirect wholly owned subsidiaries of Grubb & Ellis, which will assume sponsorship of the two public non-traded REITs formerly sponsored by NNN Realty Advisors: NNN Healthcare/Office REIT, Inc. and NNN Apartment REIT, Inc. The investment trusts will assume the new monikers Grubb & Ellis Healthcare REIT and Grubb & Ellis Apartment REIT.
The combined company will retain the Grubb & Ellis name (and New York Stock Exchange ticker) but its headquarters will be on NNN Realty’s home turf of Santa Ana, CA. NNN Realty Advisors stockholders will receive 0.88 shares of Grubb & Ellis common stock for each share of NNN Realty Advisors common stock outstanding.
It’s a vastly different real estate market from 6 ½ months ago and those Grubb & Ellis shares are valued at significantly less today. The company’s market cap is now about $166.4 million compared with about $300 million at the time of the merger, billed at the time as a combined $725 million deal.
GBE’s shares have lost more than half their value since reaching their year high of $13.06 two days after the May 22 merger announcement. The shares hit their year low of $5.05 last week but jumped nearly 15% to close at $6.41 Thursday on news of the shareholder approvals. The shares were priced at $6.64 at midday trading Monday.
In a separate transaction, NNN Realty announced Thursday the acquisition of a majority interest in Alesco Global Advisors, a registered investment advisor that focuses on real estate securities and manages private investment funds exclusively for qualified investors.
Alesco Global Advisors plans to launch and manage a family of U.S. and global real estate opened and closed-end mutual funds, separate accounts and hedge funds, Peters said.
Alesco will be a subsidiary of NNN Realty. Jay P. Leupp, founder, managing principal and senior portfolio manager at Alesco Global Advisors, will serve as the chief executive officer and president of Alesco and as an executive vice president of NNN Realty Advisors.
Peters said Alesco further strengthens NNN Realty’s platform as it adds mutual funds to its product lines. Leupp added that Alesco would benefit from NNN’s financial strength and "well-established broker-dealer network."