X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

SANTA ANA, CA-Grubb & Ellis Co. has entered into agreements to raise $90 million through the sale of 900,000 shares of preferred stock, which will enable the company to pay off its credit line and will provide additional capital for other corporate purposes. Grubb & Ellis EVP and CFO Richard W. Pehlke tells GlobeSt.com that raising the new capital is a “transformational transaction” for the locally based company that will greatly shore up its finances. Grubb & Ellis chairman C. Michael Kojaian, the company’s largest stockholder, says in a statement that with the new capital, Grubb & Ellis will be “one of the stronger capitalized companies in the real estate services industry.”

The sale of the new stock is expected to close on or about Nov. 6. The company is selling the preferred shares, which carry a 12% coupon, through “definitive agreements with qualified institutional buyers and accredited investors.” Grubb & Ellis has also granted the initial purchaser and placement agent a 45-day option to purchase up to an additional 100,000 shares of preferred stock, which would raise an additional $10 million if the purchaser exercises the option. JMP Securities acted as the initial purchaser and sole placement agent on the preferred equity offering.

Pehlke tells GlobeSt.com that the new capital will enable Grubb & Ellis to pay off its credit line in full under a special one-time option that it has negotiated with Deutsche Bank Trust Company Americas that allows the company to settle the entire debt by paying 65% of the amount due. Grubb & Ellis owes $63 million on the credit line, so 65% of the amount due would be about $41 million.

The one-time option requires Grubb & Ellis to pay off the credit line by Nov. 30. “It is our intention to do that,” Pehlke says. “There will be some transaction costs, of course, but we will have a considerable amount of working capital available to us” after paying off the credit line, he says. Once the transaction is completed, Grubb & Ellis “will have a much improved balance sheet, with minimal debt obligations,” he says.

The $90 million that Grubb & Ellis is raising through the preferred stock offering will include $5 million that is a conversion to stock of a $5 million loan that an affiliate of Kojaian provided to the company on Oct. 2. As part of the transaction, the company intends to immediately seek stockholder approval to amend its certificate of incorporation to, among other things, increase its authorized capital. If the stockholders approve the increase, each share of the new preferred stock would be convertible into 60.6 shares of common stock at a conversion price of $1.65 per share of common stock.

Although this transaction would normally require approval of the company’s stockholders according to the rules of the New York Stock Exchange, Grubb & Ellis says, the NYSE shareholder approval policy “provides an exception in those cases where the delay in securing stockholder approval would seriously jeopardize the financial viability of the listed company.” Grubb & Ellis has applied to the NYSE for such an exception.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.