Grubb & Ellis Company Reports Second Quarter and First-Half 2008 Results

SANTA ANA, Calif., Aug. 5 /PRNewswire-FirstCall/ -- Grubb & Ellis Company
(NYSE: GBE), a leading real estate services and investment firm, today
reported revenue of $167.0 million for the second quarter of 2008. Revenue
for the six-month period ended June 30, 2008 was $327.5 million.
The Company reported a net loss of $5.1 million, or $0.08 per share, for
the second quarter. The net loss for the first six months of 2008 was $11.0
million, or $0.17 per share, which included a second quarter non-cash charge
of $8.9 million for catch-up depreciation and amortization related to the
reclassification of assets held for sale to assets held for investment. In
addition, both the second quarter and year-to-date results include
merger-related and integration costs of $4.7 million and $7.6 million,
respectively, resulting from the Company's December 2007 merger with NNN
Realty Advisors, LLC.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
for the second quarter of 2008 was $7.6 million, compared with EBITDA for the
combined companies of $24.8 million in the same period a year ago. For the
first half of 2008 EBITDA was $8.0 million, compared with a combined $30.1
million in the same period a year ago. Excluding certain non-cash and other
items described throughout the release and on pages 12 and 14, second quarter
and first-half 2008 adjusted EBITDA was $12.4 million and $20.1 million,
respectively. (Combined non-GAAP supplemental disclosure follows this
release.)
"We continue to execute on our strategy and leverage our strong brand to
maximize Company performance, despite very challenging market conditions,"
said Gary Hunt, interim Chief Executive Officer. "Our solid results and
continued financial strength highlight the benefits associated with, and need
for, the expansion of our platform and revenue stream that we achieved through
the merger. Going forward, we will continue to identify synergies and
eliminate redundancies throughout the organization, further streamlining the
business to operate efficiently in a turbulent environment."
Business Highlights
-- Raised an aggregate of approximately $252 million in the Company's
investment programs during the second quarter, bringing the total equity
raised for the year to approximately $516 million.
-- Increased annualized cost saving synergies as a direct result of the
merger during the second quarter to $17.5 million.
-- Completed 21 property acquisitions totaling approximately $497.5
million for the Company's investment programs during the second quarter of
2008.
-- During the first-half of 2008, the Company entered into selling
agreements for the Grubb & Ellis Healthcare REIT with three of the nation's
top five independent broker-dealers, increasing the number of registered
representatives marketing this public non-traded REIT by approximately 50
percent.
-- Enhanced the Company's management team with the addition of seven
executives in key management and operational roles.
-- Grubb & Ellis Board of Directors authorized a share repurchase program
of up to $25 million and suspended quarterly dividend payments following the
payment of the second quarter dividend on July 22, 2008.
-- Appointed Devin Murphy, a 22-year finance and real estate investment
banking veteran, to the Company's Board of Directors.
"We remain on track with the integration process and continue to see
additional value in the combination of the two companies," said Richard W.
Pehlke, Executive Vice President and Chief Financial Officer. "We are a much
stronger organization, both operationally and financially, than we were a year
ago, and remain excited about the opportunities ahead. With sustained
strength in key areas, including the Healthcare REIT, we continue to expect
that our diversified platform will position the Company to reach an adjusted
EBITDA for fiscal 2008 that meets or exceeds the combined companies' adjusted
EBITDA of $74.8 million for 2007 on a non-GAAP basis."
The merger between Grubb & Ellis and NNN Realty Advisors was consummated
on December 7, 2007. As required by generally accepted accounting principles
(GAAP), the transaction was accounted for as a reverse merger. The Company's
results of operations commencing and subsequent to December 7, 2007 include
the operations of the combined entity. Reported results of operations prior
to December 7, 2007, including second quarter 2007 results, reflect only the
operations of NNN Realty Advisors.
COMBINED COMPANIES SUPPLEMENTAL DISCLOSURE
In an effort to present a more complete financial and narrative
description of the results of operations, the Company has also provided
non-GAAP financial measures. The non-GAAP financial measures are intended to
reflect the Company's results of operations on a combined basis, exclusive of
the total financial or accounting impact associated with the merger
transaction, such as amortization associated with purchase price adjustments
or identified intangible assets. The non-GAAP combined results for the three
months ended June 30, 2007 do not purport to show the results as if the
companies were merged as of January 1, 2007, but rather represent an
arithmetic combination of results of the two companies, Grubb & Ellis and NNN
Realty Advisors. Results do not reflect the elimination of transactions
between the two companies and certain estimated synergies and expenses related
to the combination of the two companies for the periods presented. (Please
refer to the Combined Statements of Operations tables that follow.)
Second Quarter Operations
For the second quarter of 2008, the Company generated revenue of $167.0
million, compared with combined revenue of $182.7 million in the second
quarter of 2007. The Company posted a second quarter net loss of $5.1 million
in 2008, compared with net income of $11.3 million for the companies on a
combined basis in the same period of 2007. EBITDA was $7.6 million for the
second quarter of 2008, compared with combined EBITDA of $24.8 million in the
second quarter of 2007. The 2008 EBITDA includes charges of $4.7 million in
merger-related expenses, $3.2 million of non-cash stock based compensation,
$0.6 million for amortization of certain intangible assets related to contract
rights and $1.5 million of recognized loss on marketable equity securities due
to other than temporary impairment, which were partially offset by $4.9
million of rental-related operations and other non-cash items. Excluding
these items, adjusted EBITDA for the second quarter of 2008 was $12.4 million,
compared with combined companies' adjusted EBITDA of $27.4 million on the same
basis for the second quarter of 2007. (See Tables)
Six-Month Operations
For the first six months of 2008, the Company generated revenue of $327.5
million, compared with combined revenue of $331.2 million for the same period
in 2007. The Company posted a net loss of $11.0 million during the first six
months of 2008, compared with net income of $11.8 million for the companies on
a combined basis in the first six months of 2007. EBITDA was $8.0 million for
the first six months of 2008, compared with combined EBITDA of $30.1 million
in the first six months of 2007. EBITDA for the first six months of 2008
includes the previously announced $5.8 million charge related to the Company's
write-off of its sponsorship of Grubb & Ellis Realty Advisors, $7.6 million in
merger-related expenses, $5.7 million of non-cash stock based compensation,
$1.0 million for amortization of certain intangible assets related to contract
rights and $1.6 million of recognized loss on marketable equity securities due
to other than temporary impairment. These charges were partially offset by
$9.5 million of rental-related operations and other non-cash items. Excluding
these items, adjusted EBITDA for the first six months of 2008 was $20.1
million, compared with combined companies' adjusted EBITDA of $34.1 million
for the first six months of 2007. (See Tables)
OPERATING SEGMENTS
Transaction Services
Transaction Services revenue for the second quarter of 2008, including
brokerage commission, valuation and consulting revenue, was $56.5 million,
compared with $82.4 million for the combined companies for same period a year
ago. For the six month period ended June 30, 2008, the segment generated
revenue of $115.7 million, compared with $145.6 million for the combined
companies during the first six months of 2007.
The Company's Transaction Services business was negatively impacted by the
current economic environment, which has reduced commercial real estate
transaction velocity, particularly investment sales. This decrease in
brokerage activity was partially offset by higher fees generated by the
Company's Corporate Services Group, which generates recurring revenue from
real estate services provided to large corporate clients. During the first
six months of 2008, the Corporate Services Group secured several significant
new assignments and retained and expanded many of its existing relationships.
Investment Management
Investment Management revenue for the second quarter of 2008, which
includes transaction fees, captive management fees and dealer-manager fees,
totaled $35.4 million, compared with fees of $41.0 million in the same period
a year ago. Investment Management revenue for the first six months of 2008
totaled $61.5 million, compared with $70.5 million during the first six months
of 2007. The growth in acquisition and management fees were offset by a
decrease in disposition fees due to lower transaction volume year-over-year.
In total, approximately $252 million in equity was raised for the
Company's investment programs in the second quarter of 2008, compared with
$221 million in the second quarter of 2007. For the six-month period ended
June 30, 2008, approximately $516 million was raised for the Company's
investment programs, compared with $365 million raised during the first six
months of 2007. This increase in equity raised was driven by additional
equity raised by the Company's non-traded public REITs as well as its new
Wealth Management platform. During the first six months of 2008, the
Company's non-traded public REIT programs raised approximately $212.8 million,
compared with $140.8 million in the same period of 2007. The Wealth
Management platform placed $188.4 million in high quality real estate
investments on behalf of investors during the first-half of 2008. The
Company's tenant-in-common 1031 exchange programs raised $106.7 million in
equity during the first-half of 2008, compared with $224.4 million in the same
period of 2007. At June 30, 2008, the value of the Company's assets under
management was $6.5 billion, up from $6.1 billion at March 31, 2008.
Management Services
Management Services revenue includes asset and property management fees as
well as reimbursed salaries, wages and benefits from the Company's captive
management and third party property management and facilities outsourcing
services, along with business services fees. Management Services revenue was
$60.6 million for the second quarter of 2008, compared with $52.9 million for
the combined companies for the same period a year ago. For the first six
months of 2008, the Company reported Management Services revenue of $122.4
million, compared with $104.6 million for the combined companies in the same
period of 2007. The increase is primarily a result of the Company's strategy
to transfer the management of a significant portion of Grubb & Ellis Realty
Investors' (formerly Triple Net Properties, LLC, a wholly owned subsidiary of
NNN Realty Advisors) captive property portfolio to Grubb & Ellis Management
Services, Inc. Since the close of the merger in December 2007, Grubb & Ellis
Management Services has assumed management of approximately 25.8 million
square feet of Grubb & Ellis Realty Investors' 42.9 million-square-foot
captive investment management portfolio. At June 30, 2008, Grubb & Ellis
managed 218 million square feet of property, up from 178.1 million square feet
at June 30, 2007.
Rental-Related Operations
Rental-related revenue and rental-related expense includes revenue and the
related expense from the warehousing of properties held for investment or sale
primarily related to the Company's Investment Management programs and the
Company's prior affiliate Grubb & Ellis Realty Advisors, Inc., which has been
liquidated and dissolved. The combined benefit from the operations for the
properties held for sale is included in the Reconciliation of Net Income to
EBITDA disclosure which follows the release and is identified as real estate
operations. These line items also include pass-through revenue and related
expense for master lease accommodations related to the Company's
tenant-in-common programs.
Conference Call & Webcast
The Company's 2008 second quarter earnings conference call will be held
today at 11 a.m. ET. A live webcast will be accessible through the Investor
Relations section of the Company's Web site at http://www.grubb-ellis.com. The
direct dial-in number for the conference call is 1.800.591.6945 for domestic
callers and 1.617.614.4911 for international callers. The conference call ID
number is 80067069. An audio replay will be available beginning today at 1
p.m. ET until 7 p.m. ET on Tues., August 12, and can be accessed by dialing:
1.888.286.8010, and 1.617.801.6888 for international callers and entering
conference call ID 26954360. In addition, the conference call audio will be
archived on the company's Web site following the call.
About Grubb & Ellis
Grubb & Ellis Company (NYSE: GBE) is one of the largest and most respected
commercial real estate services and investment companies. With more than 130
owned and affiliate offices worldwide, Grubb & Ellis offers property owners,
corporate occupants and investors comprehensive integrated real estate
solutions, including transaction, management, consulting and investment
advisory services supported by proprietary market research and extensive local
market expertise.
Grubb & Ellis and its subsidiaries are leading sponsors of real estate
investment programs that provide individuals and institutions the opportunity
to invest in a broad range of real estate investment vehicles, including
tax-deferred 1031 tenant-in-common (TIC) exchanges, public non-traded real
estate investment trusts (REITs) and real estate investment funds. As of June
30, 2008, more than $3.6 billion in investor equity has been raised for these
investment programs. The Company and its subsidiaries currently manage a
growing portfolio of more than 218 million square feet of real estate. In
2007, Grubb & Ellis was selected from among 15,000 vendors as Microsoft
Corporation's Vendor of the Year. For more information regarding Grubb & Ellis
Company, please visit http://www.grubb-ellis.com.
Forward-looking Statement
Certain statements included in this announcement may constitute
forward-looking statements regarding, among other things, future revenue
growth, market trends, new business opportunities and investment programs,
synergies resulting from the merger of Grubb & Ellis Company and NNN Realty
Advisors, certain combined financial information regarding Grubb & Ellis
Company and NNN Realty Advisors, new hires, results of operations, changes in
expense levels and profitability and effects on the Company of changes in the
real estate markets. These statements involve known and unknown risks,
uncertainties and other factors that may cause the Company's actual results
and performance in future periods to be materially different from any future
results or performance suggested by these statements. Such factors which could
adversely affect the Company's ability to obtain these results include, among
other things: (i) the volume of sales and leasing transactions and prices for
real estate in the real estate markets generally; (ii) a general or regional
economic downturn that could create a recession in the real estate markets;
(iii) the Company's debt level and its ability to make interest and principal
payments; (iv) an increase in expenses related to new initiatives, investments
in people, technology and service improvements; (v) the success of current and
new investment programs; (vi) the success of new initiatives and investments;
(vii) the inability to attain expected levels of revenue, performance, brand
equity and expense synergies resulting from the merger of Grubb & Ellis
Company and NNN Realty Advisors; and (viii) other factors described in the
Company's annual report on Form 10-K for the fiscal year ending December 31,
2007 and 10-Q for the quarter ended March 31, 2008, filed with the SEC.
Non-GAAP Financial Information
In addition to the results reported in accordance with U.S. generally
accepted accounting principles (GAAP) included within this press release,
Grubb & Ellis has provided certain information, which includes non-GAAP
financial measures. Such information is reconciled to its closest GAAP measure
in accordance with the Securities and Exchange Commission rules and is
included in the attached supplemental data. Management believes that these
non-GAAP financial measures are useful to both management and the Company's
stockholders in their analysis of the business and operating performance of
the Company. Management also uses this information for operational planning
and decision-making purposes. Non-GAAP financial measures are not and should
not be considered a substitute for any GAAP measures. Additionally, non-GAAP
financial measures as presented by Grubb & Ellis may not be comparable to
similarly titled measures reported by other companies.

TABLES FOLLOW

Grubb & Ellis Company
Statements of Operations
(in thousands)
(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2008 2007 (1) 2008 2007 (1)
REVENUE
Transaction
services $56,540 $- $115,689 $-
Investment
management (2) 35,433 41,001 61,527 70,466
Management services 60,620 - 122,376 -
Rental related 14,372 4,411 27,926 8,060
TOTAL REVENUE 166,965 45,412 327,518 78,526

OPERATING EXPENSE
Compensation costs 38,100 10,987 73,095 22,124
Transaction
commissions and
related costs 38,429 - 78,793 -
Reimbursable
salaries, wages,
and benefits 44,125 3,323 89,117 5,777
General and
administrative 22,419 10,456 44,110 19,720
Depreciation and
amortization 13,419 483 18,475 1,006
Rental related 9,479 3,137 18,615 6,056
Interest 4,438 1,963 10,124 3,485
Merger related
costs 4,691 61 7,560 61
Total
operating
expense 175,100 30,410 339,889 58,229

OPERATING (LOSS) INCOME (8,135) 15,002 (12,371) 20,297

OTHER (EXPENSE) INCOME
Equity in (losses)
earnings of
unconsolidated
entities (184) 310 (6,198) 479
Interest income 217 722 523 1,267
Other (expense)
income (1,971) 937 (1,988) 1,068
Total other
(expense)
income (1,938) 1,969 (7,663) 2,814

(Loss) income from
continuing operations
before income tax
provision (10,073) 16,971 (20,034) 23,111
Income tax benefit
(provision) 4,943 (6,895) 9,088 (9,384)
(Loss) income from
continuing operations (5,130) 10,076 (10,946) 13,727
Loss from discontinued
operations 16 158 (36) 144
NET (LOSS) INCOME $(5,114) $10,234 $(10,982) $13,871

Basic earnings per
share:
(Loss) income from
continuing
operations $(0.08) $0.24 $(0.17) $0.33
Loss from
discontinued
operations 0.00 0.00 (0.00) 0.00
Net (loss) earnings
per share $(0.08) $0.24 $(0.17) $0.33

Diluted earnings per
share:
(Loss) income from
continuing
operations $(0.08) $0.24 $(0.17) $0.33
Loss from
discontinued
operations 0.00 0.00 (0.00) 0.00
Net (loss) earnings
per share $(0.08) $0.24 $(0.17) $0.33

Shares used in computing
basic net earnings per
share 63,600 (3) 41,943 63,561 (3) 41,943
Shares used in computing
diluted net earnings
per share 63,600 42,056 63,561 42,022

(1) In accordance with Generally Accepted Accounting Principles (GAAP),
the operating results for the three and six months ended June 30, 2007
only includes the results of legacy NNN Realty Advisors.

(2) The investment management segment represents legacy NNN Realty
Advisors' transaction, management and dealer-manager businesses.

(3) The affect of common stock equivalents were excluded from the
computation of diluted earnings per share as they were anti-dilutive.

Grubb & Ellis Company
Condensed Balance Sheet Data
(in thousands)
(Unaudited)

June 30, December 31,
2008 2007

Cash and cash equivalents $29,702 $49,072
Real estate held for investment and
other related assets, net 324,858 341,279
Goodwill and identified intangible
assets, net * 274,901 274,791
Total assets 869,179 975,732
Line of credit 63,000 8,000
Mortgage loans secured by real
estate held for investment 227,500 257,500
Total liabilities 469,109 548,362
Stockholders' equity 391,141 408,645

* Excludes identified intangible assets related to real estate held for
investment

Real estate held for investment primarily consists of five properties
previously held for sale known as Danbury Corporate Center, 6400 Shafer,
Abrams Centre, 200 Galleria and Avallon. These properties generated combined
revenue of approximately $10.3 million and $19.7 million, rental-related
expenses of approximately $5.4 million and $10.2 million and interest expense
of approximately $3.2 million and $8.0 million, for the three and six months
ended June 30, 2008, respectively. The Company also recorded depreciation and
amortization expense related to these properties of approximately $9.6 million
during the six months ended June 30, 2008 which included an $8.9 million
charge for catch-up depreciation and amortization for those assets previously
classified as held for sale.

Grubb & Ellis Company
Combined Statements of Operations
(in thousands)

Three
Months
Ended Three Months Ended
June 30, June 30, 2007
2008 (Unaudited)
(Unaudited)
Grubb & NNN Grubb & Combined
Ellis Realty Ellis Companies
Company Advisors Company (1)
REVENUE
Transaction services $56,540 $- $82,377 $82,377
Investment management (2) 35,433 41,001 - 41,001
Management services 60,620 - 52,873 52,873
Rental related 14,372 4,411 2,046 6,457
TOTAL REVENUE 166,965 45,412 137,296 182,708

OPERATING EXPENSES
Compensation costs 38,100 10,987 23,183 34,170
Transaction commissions and
related costs 38,429 - 54,495 54,495
Reimbursable salaries, wages, and
benefits 44,125 3,323 37,616 40,939
General and administrative 22,419 10,456 12,548 23,004
Depreciation and amortization 13,419 483 2,434 2,917
Rental related 9,479 3,137 1,252 4,389
Interest 4,438 1,963 1,459 3,422
Merger related costs 4,691 61 2,337 2,398
Total operating expense 175,100 30,410 135,324 165,734

OPERATING (LOSS) INCOME (8,135) 15,002 1,972 16,974

OTHER (EXPENSE) INCOME
Equity in (losses) earnings of
unconsolidated entities (184) 310 74 384
Interest income 217 722 97 819
Other (expense) income (1,971) 937 - 937
Total other (expense)
income (1,938) 1,969 171 2,140

(Loss) income from continuing
operations before income tax
provision (10,073) 16,971 2,143 19,114
Income tax benefit (provision) 4,943 (6,895) (1,113) (8,008)
(Loss) income from continuing
operations (5,130) 10,076 1,030 11,106
Loss from discontinued operations 16 158 - 158
NET (LOSS) INCOME $(5,114) $10,234 $1,030 $11,264

(1) To provide additional insight into its underlying results of
operations, the Company has also presented selected non-GAAP financial
measures intended to reflect its results of operations on a combined
basis and such numbers are exclusive of the total financial or
accounting impact associated with the merger transaction, such as
amortization associated with purchase price adjustments or identified
intangible assets. These non-GAAP combined results do not purport to
show the results as if the companies were merged as of January 1,
2007, but rather is an arithmetic combination of the results of the
two companies, Grubb & Ellis and NNN Realty Advisors. Results do not
reflect the elimination of transactions between the two companies and
certain estimated synergies and expenses related to the combination of
the two companies for the periods presented.

(2) The investment management segment represents legacy NNN Realty
Advisors' transaction, management and dealer-manager businesses.

Grubb & Ellis Company
Reconciliation of Combined Net Income to Adjusted EBITDA
(in thousands)

Three
Months
Ended Three Months Ended
June 30, June 30, 2007
2008 (Unaudited)
(Unaudited)
Grubb & NNN Grubb & Combined
Ellis Realty Ellis Companies
Company Advisors Company (1)

Net (loss) income $(5,114) $10,234 $1,030 $11,264
Interest expense 4,438 1,963 1,459 3,422
Interest income (217) (722) (97) (819)
Depreciation and amortization 13,419 483 2,434 2,917
Taxes (4,943) 6,895 1,113 8,008
EBITDA (2) 7,583 18,853 5,939 24,792

Stock based compensation 3,150 1,155 988 2,143
Loss (gain) on marketable securities 1,524 (974) 0 (974)
Merger related costs 4,691 61 2,337 2,398
Amortization of contract rights 563 1,014 0 1,014
Real estate operations (4,943) (1,455) (794) (2,249)
Other (125) 362 (75) 287
Adjusted EBITDA (2) $12,443 $19,016 $8,395 $27,411

(1) To provide additional insight into its underlying results of
operations, the Company has also presented selected non-GAAP financial
measures intended to reflect its results of operations on a combined
basis and such numbers are exclusive of the total financial or
accounting impact associated with the merger transaction, such as
amortization associated with purchase price adjustments or identified
intangible assets. These non-GAAP combined results do not purport to
show the results as if the companies were merged as of January 1,
2007, but rather is an arithmetic combination of the results of the
two companies, Grubb & Ellis and NNN Realty Advisors. Results do not
reflect the elimination of transactions between the two companies and
certain estimated synergies and expenses related to the combination of
the two companies for the periods presented.

(2) EBITDA represents earnings before net interest expense, interest
income, realized gains or losses on sales of marketable securities,
income taxes, depreciation and amortization. Management believes
EBITDA is useful in evaluating our performance compared to that of
other companies in our industry because the calculation of EBITDA
generally eliminates the effects of financing and income taxes and the
accounting effects of capital spending and acquisition, which items
may vary for different companies for reasons unrelated to overall
operating performance. As a result, management uses EBITDA as an
operating measure to evaluate the operating performance of the
Company's various business lines and for other discretionary purposes,
including as a significant component when measuring performance under
employee incentive programs.

However, EBITDA is not a recognized measurement under U.S. generally
accepted accounting principles, or GAAP, and when analyzing the
Company's operating performance, readers should use EBITDA in addition
to, and not as an alternative for, net income as determined in
accordance with GAAP. Because not all companies use identical
calculations, our presentation of EBITDA may not be comparable to
similarly titled measures of other companies. Furthermore, EBITDA is
not intended to be a measure of free cash flow for management's
discretionary use, as it does not consider certain cash requirements
such as tax and debt service payments. The amounts shown for EBITDA
also differ from the amounts calculated under similarly titled
definitions in the Company's debt instruments, which are further
adjusted to reflect certain other cash and non-cash charges and are
used to determine compliance with financial covenants and the
Company's ability to engage in certain activities, such as incurring
additional debt and making certain restricted payments.

Grubb & Ellis Company
Combined Statements of Operations
(in thousands)

Six
Months
Ended Six Months Ended
June 30, June 30, 2007
2008 (Unaudited)
(Unaudited)
Grubb & NNN Grubb & Combined
Ellis Realty Ellis Companies
Company Advisors Company (1)
REVENUE
Transaction services $115,689 $- $145,558 $145,558
Investment management (2) 61,527 70,466 - 70,466
Management services 122,376 - 104,640 104,640
Rental related 27,926 8,060 2,524 10,584
TOTAL REVENUE 327,518 78,526 252,722 331,248

OPERATING EXPENSES
Compensation costs 73,095 22,124 46,282 68,406
Transaction commissions and
related costs 78,793 - 96,516 96,516
Reimbursable salaries, wages,
and benefits 89,117 5,777 76,116 81,893
General and administrative 44,110 19,720 26,481 46,201
Depreciation and amortization 18,475 1,006 4,856 5,862
Rental related 18,615 6,056 1,581 7,637
Interest 10,124 3,485 1,954 5,439
Merger related costs 7,560 61 2,337 2,398
Total operating
expense 339,889 58,229 256,123 314,352

OPERATING (LOSS) INCOME (12,371) 20,297 (3,401) 16,896

OTHER (EXPENSE) INCOME
Equity in (losses) earnings
of unconsolidated entities (6,198) 479 209 688
Interest income 523 1,267 360 1,627
Other (expense) income (1,988) 1,068 - 1,068
Total other (expense)
income (7,663) 2,814 569 3,383

(Loss) income from continuing
operations before income
tax provision (20,034) 23,111 (2,832) 20,279
Income tax benefit (provision) 9,088 (9,384) 777 (8,607)
(Loss) income from continuing
operations (10,946) 13,727 (2,055) 11,672
Loss from discontinued operations (36) 144 - 144
NET (LOSS) INCOME $(10,982) $13,871 $(2,055) $11,816

(1) To provide additional insight into its underlying results of
operations, the Company has also presented selected non-GAAP financial
measures intended to reflect its results of operations on a combined
basis and such numbers are exclusive of the total financial or
accounting impact associated with the merger transaction, such as
amortization associated with purchase price adjustments or identified
intangible assets. These non-GAAP combined results do not purport to

show the results as if the companies were merged as of January 1,
2007, but rather is an arithmetic combination of the results of the
two companies, Grubb & Ellis and NNN Realty Advisors. Results do not
reflect the elimination of transactions between the two companies and
certain estimated synergies and expenses related to the combination of
the two companies for the periods presented.

(2) The investment management segment represents legacy NNN Realty
Advisors' transaction, management and dealer-manager businesses.

Grubb & Ellis Company
Reconciliation of Combined Net Income to Adjusted EBITDA
(in thousands)

Six
Months
Ended Six Months Ended
June 30, June 30, 2007
2008 (Unaudited)
(Unaudited)
Grubb & NNN Grubb & Combined
Ellis Realty Ellis Companies
Company Advisors Company (1)

Net (loss) income $(10,982) $13,871 $(2,055) $11,816
Interest expense 10,124 3,485 1,954 5,439
Interest income (523) (1,267) (360) (1,627)
Depreciation and amortization 18,475 1,006 4,856 5,862
Taxes (9,088) 9,384 (777) 8,607
EBITDA (2) 8,006 26,479 3,618 30,097

Write off of investment in Grubb &
Ellis Realty Advisors, net 5,828 - - -
Stock based compensation 5,681 2,598 1,155 3,753
Loss (gain) on marketable securities 1,614 (1,112) - (1,112)
Merger related costs 7,560 61 2,337 2,398
Amortization of contract rights 986 1,821 - 1,821
Real estate operations (9,512) (2,441) (943) (3,384)
Other (75) 738 (210) 528
Adjusted EBITDA (2) $20,088 $28,144 $5,957 $34,101

(1) To provide additional insight into its underlying results of
operations, the Company has also presented selected non-GAAP financial
measures intended to reflect its results of operations on a combined
basis and such numbers are exclusive of the total financial or
accounting impact associated with the merger transaction, such as
amortization associated with purchase price adjustments or identified
intangible assets. These non-GAAP combined results do not purport to
show the results as if the companies were merged as of January 1,
2007, but rather is an arithmetic combination of the results of the
two companies, Grubb & Ellis and NNN Realty Advisors. Results do not
reflect the elimination of transactions between the two companies and
certain estimated synergies and expenses related to the combination of
the two companies for the periods presented.

(2) EBITDA represents earnings before net interest expense, interest
income, realized gains or losses on sales of marketable securities,
income taxes, depreciation and amortization. Management believes
EBITDA is useful in evaluating our performance compared to that of
other companies in our industry because the calculation of EBITDA
generally eliminates the effects of financing and income taxes and the
accounting effects of capital spending and acquisition, which items
may vary for different companies for reasons unrelated to overall
operating performance. As a result, management uses EBITDA as an
operating measure to evaluate the operating performance of the
Company's various business lines and for other discretionary purposes,
including as a significant component when measuring performance under
employee incentive programs. However, EBITDA is not a recognized
measurement under U.S. generally accepted accounting principles, or
GAAP, and when analyzing the Company's operating performance, readers
should use EBITDA in addition to, and not as an alternative for, net
income as determined in accordance with GAAP. Because not all
companies use identical calculations, our presentation of EBITDA may
not be comparable to similarly titled measures of other companies.
Furthermore, EBITDA is not intended to be a measure of free cash flow
for management's discretionary use, as it does not consider certain
cash requirements such as tax and debt service payments. The amounts
shown for EBITDA also differ from the amounts calculated under
similarly titled definitions in the Company's debt instruments, which
are further adjusted to reflect certain other cash and non-cash
charges and are used to determine compliance with financial covenants
and the Company's ability to engage in certain activities, such as
incurring additional debt and making certain restricted payments.

Grubb & Ellis Company
Supplemental Data
(in thousands)
(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
Investment management revenue:
Acquisition fees $14,046 $12,775 $24,928 $20,669
Property and asset
management fees 9,491 8,859 17,315 17,307
Disposition fees (excluding
amortization of intangible
contract rights) 4,370 7,920 5,113 12,251
Amortization of intangible
contract rights (563) (1,014) (986) (1,821)
Other (1) 8,089 12,461 15,157 22,060
Total investment
management revenue $35,433 $41,001 $61,527 $70,466

Investment management data:
Total properties acquired 21 18 41 36
Total aggregate purchase
price $497,456 $444,518 $846,382 $923,548

Total properties disposed 5 8 7 15
Total aggregate sales
value at disposition $143,350 $267,575 $179,425 $521,732

Total square feet under
management 45,402 36,115 45,402 36,115

Assets under management $6,507,080 $4,886,032 $6,507,080 $4,886,032

Equity raise:
Tenant-in-common $54,617 $120,648 $106,726 $224,396
Non-traded real estate
investment trust 138,665 100,505 212,844 140,787
Wealth management 51,073 - 188,439 -
Other 7,521 - 7,521 -
Total equity raise $251,876 $221,153 $515,530 $365,183

(1) Decrease in other investment management revenue a result of lower
tenant-in-common equity raise.

SOURCE Grubb & Ellis Company

Janice McDill of Grubb & Ellis Company, +1-312-698-6707,
janice.mcdill@grubb-ellis.com