Grubb & Ellis Company
Grubb & Ellis Company
2215 Sanders Road
Northbrook, Illinois 60062
Fax: (847) 753-9034
Web site: http://www.grub-ellis.com
Sales: $197.3 million (1996)
Stock Exchanges: New York
SICs: 6531 Real Estate Agents and Managers
Grubb & Ellis Company is one of the largest commercial real estate brokers in the United States, with approximately 90 offices in 60 major metropolitan areas. The company sells, leases, manages, and provides an entire range of real estate services for commercial properties such as office, industrial, retail and hotel properties, and undeveloped land. Through its subsidiary, Axiom Real Estate Management, Inc., the company provides high-quality property and facilities management services, and manages over 90 million square feet of commercial property with a total value exceeding $9 billion. Having also increased its business with institutional owners of real estate, including such firms as GE Capital, Prudential Insurance Company of America, and Heitman Financial Services, the company’s revenues continue to rise dramatically. Gross revenues for the first quarter of 1997 rose 31 percent over the same period one year earlier, and brokerage revenue increased an amazing 36 percent over the previous year. In addition, the stock market has started looking closely at the success of Grubb & Ellis. From the middle of 1996, when the company’s stock price was hovering around $2.50 per share, to when it reached $13.75 in early June of 1997, Grubb & Ellis was one of the top performing stocks on the New York Exchange.
The history of Grubb & Ellis parallels the history of the real estate industry from the late 1950s to the present. Grubb & Ellis was founded in 1958 by two real estate brokers working in northern California. Having spent many years in the selling and managing of both residential and commercial real estate, the two friends decided to start a business of their own. Established as Grubb & Ellis, Inc., the new firm quickly made a name for itself as a reliable and trustworthy residential brokerage company. Careful, even fastidious, in their management approach, the two founders spent most of the early years establishing the firm’s structure, and planning for future growth.
The decade of the 1960s was one of expansion and growth for Grubb & Ellis. Having already made their mark in the field of residential brokerage, the two entrepreneurs decided to embark on the more lucrative, but much more challenging, commercial brokerage business. By 1961, the company had established a commercial brokerage operation, and also developed an insurance brokerage capability. During the next two years, Grubb & Ellis also began to provide property and asset management, as well as real estate development services.
In addition to providing new brokerage and real estate management services, Grubb & Ellis embarked on a comprehensive and strategic plan to expand the company’s offices in the San Francisco Bay area. With original headquarters in a small office in Oakland, California, expansion into the San Francisco area was a milestone in the company’s growth. Most of the new offices opened in the Bay area focused on providing customers with residential brokerage services. The success of the company’s residential brokerage business in the area convinced the two friends to open commercial brokerage offices both in the San Francisco Bay area and in the burgeoning Los Angeles metropolitan region.
Grubb & Ellis had grown so rapidly during the early 1960s, in terms of revenues, geographical location, and brokerage services to customers, that management thought it best to reorganize the company and create operating divisions. In 1965, Grubb & Ellis created separate operating divisions for all of its specialized brokerage activities, including a residential division, an office properties division, an industrial properties division, a retail properties division, and an investment properties division. A few years later, a land division was also created. These separate operating divisions gave the company the opportunity to focus on individual brokerage operations in California, where the real estate market was booming and property brokerage services were in high demand.
Recognizing that this real estate boom formed a once in a lifetime opportunity to build a major property management firm, the two owners didn’t hesitate to capitalize on the marketplace. As office construction spread like wildfire in the larger metropolitan regions throughout California, especially in Los Angeles and San Francisco, Grubb & Ellis kept pace by opening more residential and commercial brokerage offices. Especially in Los Angeles, where the construction of commercial office space was increasing at a dizzying pace, the company concentrated on providing a full range of commercial brokerage and property management services. The growth in commercial and residential property construction didn’t stop at the borders of the state of California. Across the western part of the United States, new houses and corporate buildings were appearing at a record pace. To accommodate its customers, and to take advantage of the growth opportunities, Grubb & Ellis opened new offices in Arizona, Colorado, Hawaii, Texas, Utah, and Washington. By the end of the 1960s, the company was one of the largest and most prestigious real estate and property management firms operating in the western United States.
Growth and Expansion During the 1970s and 1980s
Primarily concerned with consolidating its growing market share in regions throughout the western United States, Grubb & Ellis did not initiate any new brokerage services during the 1970s. Rather, management focused on the expansion and improvement of already existing real estate and property management services including the addition of more locations to its office network. Grubb & Ellis concentrated in particular on gaining a larger share of both the residential and commercial brokerage markets in California, Hawaii, and Arizona.
A program of acquisitions during the 1980s brought about a tenfold increase in Grubb & Ellis’s operations. In 1981, Grubb & Ellis purchased GMR Properties of Jacksonville, Florida, one of the largest real estate and property management firms in the southeastern United States. After incorporating GMR Properties into its operations, management took the company public and started trading stock on the New York Stock Exchange in 1983. In addition to the acquisition of GMR Properties, Grubb & Ellis also purchased certain assets of Wright & Company Realtors, a residential brokerage firm located in San Francisco, James Felt Realty, Inc., an appraisal and consultation services firm located in New York City, Krueger Insurance Company, an insurance brokerage company located in Concord, California, a mortgage brokerage firm called George Smith Financial Corporation based in Los Angeles, and the Marquam Commercial Brokerage Company of Portland, Oregon, which provided Grubb & Ellis with an opportunity to enter the Oregon real estate market. These acquisitions not only enabled Grubb & Ellis to expand its operations and locations throughout the United States, but also gave it the ability to provide more diverse real estate services to its customers.
During the mid-1980s, Grubb & Ellis continued its acquisition strategy. The company entered the Midwest market by purchasing Midwest Realty Exchange, Inc., a commercial brokerage firm in Chicago. The company’s southeastern region of operations was strengthened when it entered into partnership with Commercial Realty Services Group, based in Jacksonville, Florida, and the Adams/Cates Company, a commercial brokerage firm located in Atlanta, Georgia. The most important acquisition of the decade occurred in 1984, however, when the company acquired and then merged its operations with Henry S. Miller Companies. Based in Dallas, Texas, the Henry S. Miller Companies had become the largest real estate firm in Texas with 28 offices providing services in such areas as commercial and residential brokerage, property management, appraisal, mortgage brokerage, development, real estate securities and investments. With the acquisition of Henry S. Miller Companies, Grubb & Ellis became the third largest real estate services firm in the United States, including Hawaii and Alaska.
In addition to its continuing focus on an aggressive acquisitions strategy, during the 1980s Grubb & Ellis management implemented a comprehensive reorganization of the firm’s corporate structure. The result of this reorganization led to the formation of a Real Estate Investment Banking Group, which engaged in wide-ranging activities within the field of real estate capital formation, such as private placements, mortgage brokerage and joint ventures. In just a few short years, this group was playing a major role in the company’s growing real estate asset portfolio by purchasing properties across the United States.
In order to maintain the company’s effectiveness and efficiency as a growing real estate and property management firm, during the mid and late 1980s Grubb & Ellis installed a company-wide computer system with equipment in each of its commercial brokerage offices in the continental United States, Hawaii, and Alaska. One of the most advanced and sophisticated computer systems of the time, modified to specifications of the management team at Grubb & Ellis for the needs of the residential and commercial brokerage markets, each piece of computer equipment was linked to all other units by means of special data lines. With this computer system, company employees could get immediate information on all the major property categories within the industry, including office, industrial, retail and land properties. Each office maintained and updated this information in each location and the company as a whole benefitted from the shared information that was passed on from one regional office to another. The system also provided detailed demographic information on each region where Grubb & Ellis had offices, providing the company with an in-depth analysis of the investment potential of commercial properties throughout the United States.
By the end of the 1980s, Grubb & Ellis management’s strategic acquisitions plan had served the company well. Expansion in the commercial and residential brokerage markets enabled the company to conduct a growing business in the eastern and northeastern regions of the United States, in addition to its well established presence in the west and southeast. Grubb & Ellis was also successful in expanding the various types of real estate services it provided, as well as building the real estate asset portfolio that it controlled or managed as owner, partner or fiduciary. As the decade came to a close, Grubb & Ellis reported the market value of its real estate asset portfolio at approximately $1 billion.
The 1990s and Beyond
By the early 1990s, Grubb & Ellis had become the largest publicly-traded real estate information and services company in the United States. Having developed close working partnerships with clients, the company offered such varied services as appraisal, consulting, tax appeal, mortgage brokerage, property management, banking services, auctions and construction management. One of the most significant decisions made by company management during this time was to sell all of its residential brokerage operations. With the sale of its non-commercial real estate related activities, the company devoted itself to expanding its core commercial real estate businesses.
For companies that were unaccustomed to the business of real estate, or were concentrating more on their own business, Grubb & Ellis provided valuable insight and years of expertise. The cost of real estate is one of the highest fixed operating expenses of any large firm, so management at these companies wanted to optimize their offices’ costs, space and locations. Serving as a tenant advocate, Grubb & Ellis procured the best possible location at the most cost-effective price for its clients. The Seattle office of the company assisted Resource Group International, an international holding company, to relocate its headquarters from Norway to the U.S. Bank Centre, one of Seattle’s most prestigious office complexes. The Dallas office, working for corporate client TGI Friday’s, identified and assisted in arranging the purchase of strategic retail sites for the company. The largest retail lease in the city of San Francisco in a decade was arranged by Grubb & Ellis’s office for the well-known regional retailer, Gump’s. The company’s Miami office worked closely with the city of Miami’s administration to purchase a $10 million parcel of land for the development of a convention hotel in South Beach.
Also during the early and mid-1990s, Grubb & Ellis expanded worldwide and established a network of offices to provide real estate services to clients in England, France, Germany, Italy, The Netherlands, Spain, and Mexico. With its overseas operations growing by leaps and bounds, management decided to open an office in London that would serve as the company’s European headquarters. By the end of fiscal 1996, Grubb & Ellis had been involved in over 13,000 real estate transactions on behalf of tenants and property owners around the world, with the total value of these transactions exceeding $9 billion.
In 1997, Grubb & Ellis’s more than 3,600 professional staff provided real estate services in 64 markets across the United States, and in every major American metropolitan area. In order to position itself more strategically to serve its growing list of clients both domestically and internationally, the company moved its corporate headquarters from San Francisco to North-brook, Illinois, a suburb of Chicago, in January of 1997. As the commercial real estate market continues to expand internationally, Grubb & Ellis has created for itself one of the most reliable and trustworthy reputations in the industry. The company seems well prepared to meet the demands of the marketplace for the foreseeable future.
Axiom Real Estate Management, Inc.; Grubb & Ellis of Florida, Inc.; James Felt Realty Services, Inc.
Bloomfield, Craig, “Young Takes Hold of Grubb & Ellis,” Commercial Property News, June 1, 1997, pp. 7-10.
Ciandella, Donald R., “Grubb & Ellis, Gronich Tie-Up Provides Support for Both,” National Real Estate Investor, June 1994, p. 6.
“Grubb &Ellis Company,” Wall Street Journal, March4,1997, p. 7B.
“Grubb & Ellis Poised to Acquire, Grow Two-Fold Says Young,” National Real Estate Investor, April 1997, p. 10.
Kummerow, Max, “Logical Steps in Property Evaluation,” Appraisal Journal, January 1997, pp. 25-31.
Miller, James, P.,“New Start for Grubb & Ellis,” Wall Street Journal, p. 10B.
Stephens, Paula, “CEO Hanauer to Complete Grubb & Ellis Restructuring,” National Real Estate Investor, August 1994, p. 6.