More Defections at Grubb & Ellis Indicate Trouble
February 11, 2009
We wrote a post on two weeks ago about how important it was for brokerages like Grubb & Ellis (GBE: 0.00 N/A) to retain top talent in the face of the current crisis. Not two weeks removed from losing another one of their more successful brokers locally, two additional brokers from Grubb & Ellis’s San Jose office have headed for the exit.
Granted this is only one office amongst many, but things are not looking good at Grubb & Ellis. They have a significant debt burden, are showing operating losses, and are an already diluted firm as a result of the acquisition of NNN Properties in 2007. As a result, their share price has been on a serious decline and is currently in the 60 cent range.
Grubb & Ellis isn’t alone though. Both of its publicly-traded competitors, CB Richard Ellis (CBG: 24.23 0.00%) and Jones Lang LaSalle (JLL: 94.49 0.00%) both have significant amounts of debt on their books. The difference for now is that both CBRE and JLL are for the time being showing decent profitability, both on an operating and net basis whereas Grubb & Ellis is showing a loss an on operating basis as of the MRQ.
With only $50M in net current assets and $300M in debt, Grubb & Ellis will need to think of something pretty quickly if the current commercial real estate downturn is to last another year or two as many are anticipating. The most recent quarter’s balance sheet looks a bit concerning – G&E has $155M in cash and equivalents + receivables, and another $50M in inventory (properties held for sale – which have likely lost value) and “other current assets”, which include items such as Deferred Tax Assets and Prepaid Expenses – which for the sake of operations aren’t all that helpful. Grubb & Ellis’ current liabilities in the same quarter? $146M, an amount almost equal to their cash, equivalents, and receivables, which doesn’t leave a whole lot of breathing room for the firm financially if business slows down further.
Finally, their most recent 10-Q reveals this valuable tidbit of information:
We may not have appropriate financial covenants with respect to, and we currently do not have any further borrowing capacity under, our current credit facility as recently amended.
Uh Oh.
Similar Posts:
- Grubb Secures 11% Loan Secured by Accounts Receivable
- Grubb & Ellis Posts $41.5 Million Loss; Renegotiates Debt
- Sperry Van Ness To Close Southern California Offices
- Shake-Up at Grubb & Ellis San Jose
- Grubb & Ellis Q4 2009 Office Report
screw you…what do you know about finance. why is the stock up today then?
not much it seems but I do know that today’s volume so far is only 33K shares, or about $22K dollars only.
The reality might not be as bad as it seems – and I hope it isn’t – but I do know that where there’s smoke, there is usually fire – and defections of numerous top brokers constitute smoke in the brokerage industry.
Your article makes me angry!
you guys brothers?
tip of the iceberg.
Their failed TIC business will come back to haunt them