G&E Says Loss Expected, Plans Five-Year Comeback

The company reported first quarter revenue of $117.3 million, a decrease of 2.9% from revenue of $120.7 million in the year ago period. Net loss to common stockholders for the first fiscal quarter was $106.2 million, or $4.30 per diluted share, compared with net income of $2.2 million, or 14 cents per diluted share in the year earlier period.

"We're pleased with the progress we've made toward our goals," Rose said in the company's conference call Nov. 7. "Our Atlanta, Chicago, New York and Washington DC markets saw significant changes. We invested considerable resources in those offices, and they performed well."

For example, he says, the Washington DC office won 350,000 sf of renewal leasing work from the GSA, in addition to 11 leasing assignments and seven project management assignments. That office hired 23 people in seven months, he said. "This mirrors the success we've had in the Chicago office. We're committed to increasing our sales force," Rose said. "Our performance reflects a company in the early stages of its repositioning and investment phase...and it takes time for those changes to translate into meaningful results."

Rose said he expects the national economy to improve for both the office and industrial markets, though not everything is rosy. "We believe investor demand will be reasonably healthy in 2007, as leasing picks up," he said. "We do see weakness in the eastern part of the Midwest, and in the product markets, retail warrants special attention du to consumer spending trends."

Shelby Sherard, executive vice president and chief financial officer, said in the conference call that for the second consecutive quarter the company recognized an overall decline in transaction commission expenses as a percentage of transaction services fees. Gross margin for the first quarter of fiscal 2007 improved to 24.9%, up from 24.2% in the same period a year ago.

General and administrative costs, including salaries and wages, were $30.3 million in the fiscal first quarter, up from $26.6 million reported during the same period in 2005. In the first quarter of fiscal 2007, salaries and wages increased 10.8% from the same period a year ago, a result of continued investment in professionals, including key business leaders in New York, to build and expand strategic offices and core services.

The company also noted other accomplishments in the first fiscal quarter. Smurfit-Stone named Grubb & Ellis its exclusive provider of real estate lease administration and transaction services in North America, bringing the number of multi-service wins during calendar 2006 to five.