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Article by DailyStocks_admin    (11-06-08 03:47 AM)

Filed with the SEC from Oct 23 to Oct 29:

Grubb & Ellis (GBE)
Investor Anthony W. Thompson submitted a letter nominating himself and two others for election to the board at the Dec. 3 annual meeting. Thompson intends to present stockholder proposals at the annual meeting that, if adopted, would amend GBE bylaws to prevent the board from delaying the annual meeting or adjourning any meeting without stockholder approval, if a quorum is present. Thompson owns 8,672,708 shares (13.3%).

BUSINESS OVERVIEW

Business

General

Grubb & Ellis Company (“the Company” or “Grubb & Ellis”), a Delaware corporation founded 50 years ago in Northern California, is one of the country’s largest and most respected commercial real estate services and investment management firms. As more fully described below, on December 7, 2007, the Company effected a stock merger (the “Merger”) with NNN Realty Advisors, Inc. (“NNN”), a real estate asset management company and nationally recognized sponsor of tax deferred tenant in common (“TIC”) 1031 property exchanges as well as a sponsor of public non-traded real estate investment trusts (“REITs”) and other investment programs. Upon the closing of the Merger, a change of control of the Company occurred. The former stockholders of NNN acquired approximately 60% of the Company’s issued and outstanding common stock.

With 130 owned and affiliate offices worldwide (57 owned and approximately 73 affiliates) and more than 6,000 professionals, including a brokerage sales force of more than 1,800 brokers, the Company offers property owners, corporate occupants and program investors comprehensive integrated real estate solutions, including transactions, management, consulting and investment advisory services supported by proprietary market research and extensive local market expertise. The combination of the established Grubb & Ellis brand with the innovative real estate investment programs sponsored by the Company’s subsidiary Grubb & Ellis Realty Investors, LLC (“GERI”) (formerly Triple Net Properties, LLC) broadens and strengthens the overall strategic and financial platform of the Company. As a result, the Company is now more balanced and diversified in its product and service offerings, which enhances its financial stability and better positions the Company to pursue growth opportunities, both domestically and internationally, as well as to better serve its clients.

In certain instances throughout this Annual Report phrases such as “legacy Grubb & Ellis” or similar descriptions are used to reference, when appropriate, the Company prior to the Merger. Similarly, in certain instances throughout this Annual Report the term NNN, “legacy NNN”, or similar phrases are used to reference, when appropriate, NNN Realty Advisors, Inc. prior to the Merger.

Business Segment Reporting

As a result of the Merger in December 2007, the newly combined Company’s operating segments were evaluated for reportable segments. As a result, the legacy NNN reportable segments were realigned into a single operating and reportable segment called Investment Management. This realignment had no impact on the Company’s consolidated balance sheet, results of operations or cash flows.

The Company reports its revenue by three business segments in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 131, Disclosures about Segments of an Enterprise and Related Information : Investment Management, which includes providing acquisition, financing and disposition services with respect to its programs, asset management services related to its programs, and dealer-manager services by its securities broker-dealer, which facilitates capital raising transactions for its TIC, REIT and other investment programs; Transaction Services, which comprises its real estate brokerage operations; Management Services, which includes property management, corporate facilities management, project management, client accounting, business services and engineering services for unrelated third parties and the properties owned by the programs it sponsors, and additional information on these business segments can be found in Note 18 of Notes to Consolidated Financial Statements in Item 8 of this Report.

For the year ended December 31, 2007, the Company, after giving pro forma effect to the Merger, as well as other acquisitions completed during the year, generated combined revenue of approximately $732.8 million and income from continuing operations of approximately $2.7 million.

Transaction Services

Grubb & Ellis has a 50 year track record of proven performance in the commercial real estate industry and is one of the largest real estate brokerage firms in the country, offering clients the experience of thousands of successful transactions and the expertise that comes from a nationwide platform. By focusing on the overall business objectives of its clients, Grubb & Ellis utilizes its research capabilities, extensive properties database and expert negotiation skills to create, buy, sell and lease opportunities for both users and owners of commercial real estate. With a comprehensive approach to transactions, Grubb & Ellis offers a full suite of services to clients, from site selection and sale negotiations to needs analysis, occupancy projections, prospect qualification, pricing recommendations, long-term value consultation, tenant representation and consulting services. As one of the most active and largest commercial real estate brokerages in the United States, Grubb & Ellis’ traditional real estate services provide added value to the real estate investment programs of its affiliates by offering a comprehensive market view and local area expertise. This powerful business combination allows the company to identify attractive investment properties and quickly acquire them for the benefit of its program investors. In addition, select brokers will have the opportunity to cross-sell product through the investment management platform.

The Company actively engages its brokerage force in the execution of its marketing strategy. Regional and metro-area managing directors, who are responsible for operations in each major market, facilitate the development of brokers. Through the Company’s specialty practice groups, known as “Specialty Councils,” key personnel share information regarding local, regional and national industry trends and participate in national marketing activities, including trade shows and seminars. This ongoing dialogue among brokers serves to increase their level of expertise as well as their network of relationships, and is supplemented by other more formal education, including recently expanded training programs offering sales and motivational training and cross-functional networking and business development opportunities.

In some local markets where the Company does not have owned offices, it has affiliation agreements with independent real estate service providers that conduct business under the Grubb & Ellis brand. The Company’s affiliation agreements provide for exclusive mutual referrals in their respective markets, generating referral fees. The Company’s affiliation agreements are generally multi-year contracts. Through its affiliate offices, the Company has access to more than 900 brokers with local market research capabilities.

The Company’s Corporate Services Group provides comprehensive coordination of all required Grubb & Ellis services to realize the needs of client’s real estate portfolios and to maximize their business objectives. These services include consulting services, lease administration, strategic planning, project management, account management and international services. As of December 31, 2007, Grubb & Ellis had in excess of 1,800 brokers at its owned and affiliate offices, of which 927 brokers were at its owned offices, up from 917 at December 31, 2006. Approximately 47% and 53% of legacy Grubb & Ellis transaction services revenue were from leasing and sale transactions, respectively, during 2007.

Management Services

Grubb & Ellis delivers integrated property, facility, asset, construction, business and engineering management services to a host of corporate and institutional clients. The Company offers customized programs that focus on cost-efficient operations and tenant retention.

The Company manages a comprehensive range of properties including headquarters, facilities and class A office space for major corporations, including many Fortune 500 companies. Grubb & Ellis’ skills extend to management of industrial, manufacturing and warehousing facilities as well as data centers, retail outlets and multi-family properties for real estate users and investors.

Additionally, Grubb & Ellis provides consulting services, including site selection, feasibility studies, exit strategies, market forecasts, appraisals, strategic planning and research services.

The Company is committed to providing unparalleled client service. In addition to expanding the scope of products and services offered, it is also focused on ensuring that it can support client relationships with

best-in-class service. During 2007, the Company continued to expand the number of client service relationship managers, which provide a single point of contact to corporate clients with multi-service needs.

Grubb & Ellis Management Services, the Company’s management services subsidiary, was recognized as Microsoft Corporation’s top vendor of 2007 from among more than 15,000 vendors. At December 31, 2007, Grubb & Ellis managed approximately 216 million square feet, of which 175 million were from third parties and 41 million related to its investment management programs.

Investment Management

The Company 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 TIC exchanges; public REITs and real estate investment funds. As of December 31, 2007, more than $3 billion in investor equity has been raised for these investment programs; the Company has more than $5.7 billion of assets under management related to the various programs that it sponsors. The Company has completed transaction acquisition and disposition volume totaling approximately $10.0 billion on behalf of more than 34,000 program investors since its founding in 1998.

Investment management products are distributed through the Company’s broker-dealer subsidiary, Grubb & Ellis Securities Inc. (“GBE Securities”) (formerly NNN Capital Corp.). GBE Securities is registered with the Securities and Exchange Commission (the “SEC”), the Financial Industry Regulatory Authority (“FINRA”) and all 50 states. GBE Securities has agreements with an extensive network of broker dealers with more than 150 selling agreements and over 40,000 registered representatives as of December 31, 2007. Part of the Company’s strategy is to expand its network of broker-dealers to increase the amount of equity that it raises in its various investment programs.

GERI, a subsidiary of the Company, is a recognized market leader in the securitized TIC industry as measured by total equity raised according to published reports of OMNI Research and Consulting. This product strategy allows investors to fractionally own large, institutional-quality real estate assets with the added advantage of qualifying for deferred tax benefits on real estate capital gains. The aggregate amount of equity that has been invested in the TIC industry has grown from less than $200 million in 2001 to approximately $2.4 billion in 2007, according to published reports of Omni Research and Consulting. The Company currently sponsors more than 150 TIC programs and has taken more than 50 programs full cycle (from acquisition through disposition). The Company raised more than $450 million of TIC equity in 2007.

Public non-traded REITs are registered with the SEC but are not listed on any of the securities exchanges like a traded REIT. According to the published Stanger Report, Winter 2008, by Robert A. Stanger and Co., an independent financial advisor, approximately $11.5 billion was raised in this sector in 2007. The Company sponsors two demographically focused programs that are actively raising capital, the Grubb & Ellis Healthcare REIT, Inc. and the Grubb & Ellis Apartment REIT, Inc. which raised more than $280 million in combined capital in 2007.

On February 12, 2008, the Company launched its Wealth Management Platform for high net worth investors. This platform provides comprehensive real estate investment and advisory services to high net worth investors, offering qualified individuals, entities and corporations, the opportunity to benefit from the potential advantages of real estate investment through a passive, sole-ownership vehicle that delivers discretion to the investor. The Wealth Management Platform is open to all qualified investors seeking to build or expand their commercial real estate portfolio, whether their investment objectives are tax-deferred 1031 exchange driven or not. The Company had $180 million of committed investments through this platform at the time it was initiated.

The Company intends to start a family of U.S. and global open and closed end mutual funds that focus on real estate securities and manage private investment funds exclusively for qualified investors through its 51% ownership in Grubb & Ellis Alesco Global Advisors, LLC. The Company also looks for joint venture opportunities and currently manages over $475 million of real estate for which it maintains a minority ownership interest. Through its multi-family platform, the Company provides investment management services for TIC and REIT apartment product and currently manages in excess of 10,000 apartment units through Grubb & Ellis Residential Management, Inc., the Company’s multi-family management services subsidiary.

Our Opportunity

The Company seamlessly integrates its traditional transaction and management services with the innovative investment programs of GERI. All functions of the new Company work together to provide comprehensive service to clients and program investors. Teamed with a forward-looking investment strategy that seeks to capitalize on the nation’s changing demographics, the Company’s various service offerings support its investment programs to provide clients and program investors with a full array of solutions for multiple needs. The proprietary research and demographic investing strategy of the Company establishes a foundation upon which its investment programs are based. The real estate brokerage network of the Company offers keen insight into the available pool of assets nationwide, in order to maximize acquisition opportunities for program investors. The professional property and asset management services of the Company drive value to each of the investment programs from acquisition through ultimate disposition. Additionally, the business platform of the post-merger Company is designed to offer consistent and reliable growth and better withstand the fluctuations and turbulence of commercial real estate market cycles. The Company’s management believes that it has the vision, financial strength, discipline and strategy to deliver innovative solutions across the full spectrum of commercial real estate, whether it is a need for space, strategic planning or a real estate investment product that meets specific return criteria.

The Company has re-branded its investment programs as Grubb & Ellis subsequent to the Merger to capitalize on the strength of the brand name. Its TIC programs are sponsored by GERI, its REIT investment programs are now Grubb & Ellis Healthcare REIT, Inc. and Grubb & Ellis Apartment REIT, Inc. and its FINRA registered broker-dealer, NNN Capital Corp., is now GBE Securities, Inc. The Company expects to achieve $10.0 million of expense synergies in the first twelve months following the Merger and $18.5 million of synergies in the first 18 months as a result of expense and revenue cross-selling opportunities.

The Merger

Pursuant to an Agreement and Plan of Merger dated May 22, 2007 (the “Merger Agreement”) by and among the Company, NNN, and a wholly-owned merger subsidiary of the Company, upon the effectiveness of the Merger, NNN would become a wholly-owned subsidiary of the Company, and in connection therewith (i) each issued and outstanding share of common stock of NNN would automatically be converted into a 0.88 of a share of common stock of the Company, and (ii) each issued and outstanding stock option of NNN, exercisable for common stock of NNN, would automatically be converted into the right to receive stock option exercisable for common stock of the Company based on the same 0.88 share conversion ratio.

Unless otherwise indicated, all pre-merger NNN share data has been adjusted to reflect the conversion as a result of the Merger (see Note 9 of Notes to Consolidated Financial Statements in Item 8 of this Report for additional information).

At a special meeting of each of the Company’s and NNN’s stockholders, both of which were held on December 6, 2007, stockholders of both companies representing a majority of each company’s issued and outstanding common stock voted to adopt the Merger Agreement. In addition, the stockholders of the Company representing a majority of the issued and outstanding shares of the Company’s common stock voted in favor of each of the following proposals, subject to the consummation of the Merger, to (i) amend the Company’s amended and restated certificate of incorporation to increase the authorized number of shares of the Company’s common stock from 50 million to 100 million; (ii) issue common stock to the NNN stockholders in connection with the Merger, (iii) amend the Company’s amended and restated certificate of incorporation to increase the authorized number of shares of the Company’s preferred stock from one million to 10 million; (iv) provide for a classified board of directors comprising three classes of directors, the first class of directors, Class A directors, having a term that would initially expire on the Company’s next annual meeting of stockholders after the effective date of the Merger, the second class of directors, Class B directors, having a term that would initially expire on the Company’s second annual meeting of stockholders after the



effective date of the Merger, and the third class of directors, Class C directors, having a term that would initially expire on the Company’s third annual meeting of stockholders after the effective date of the Merger, with each subsequent term of each class of directors being for a three year period; and (v) elect the following individuals to the board of directors upon the effectiveness of the Merger: Scott D. Peters, Harold H. Greene and D. Fleet Wallace as Class A directors; Gary H. Hunt, Glenn L. Carpenter and Robert J. McLaughlin as Class B directors; and Anthony W. Thompson, C. Michael Kojaian and Rodger D. Young as Class C directors.

Accordingly, upon the closing of the Merger, which occurred on December 7, 2007, the 43,779,740 shares of common stock of NNN that were issued and outstanding immediately prior to the Merger were automatically converted into 38,526,171 shares of common stock of the Company, and the 2,249,850 NNN restricted stock and stock options that were issued and outstanding immediately prior to the Merger were automatically converted into 1,979,868 shares of restricted stock and stock options of the Company. The shares of the Company’s common stock issued in connection with the Merger were registered under the Securities Act of 1933, as amended (the “Securities Act”), and the Company’s common stock, including the shares of common stock issued pursuant to the Merger, continue to trade on the New York Stock Exchange (the “NYSE”) under the symbol “GBE”.

Upon the closing of the Merger, each of Mark E. Rose, Anthony G. Antone and F. Joseph Moravec (a former member of the Audit Committee) resigned from the Company’s board of directors. Scott D. Peters became Chief Executive Officer and President and Andrea Biller became General Counsel, Executive Vice President and Corporate Secretary. In addition, upon the closing of the merger C. Michael Kojaian resigned from the position of chairman of the board of directors of the Company (without resigning or otherwise affecting his position as a director of the Company) upon the closing of the merger and Anthony W. Thompson became chairman of the Company’s board of directors. Mr. Thompson subsequently resigned as chairman of the board of directors effective February 8, 2008 and Glenn L. Carpenter was appointed the Company’s chairman of the board of directors.

Effective December 7, 2007, the Company amended its amended and restated certificate of incorporation and bylaws as contemplated by the Merger Agreement. In addition, the Company’s bylaws were also amended to comply with the regulations of the NYSE that before January 1, 2008, the Company’s by-laws expressly provide for uncertified shares of stock to be evidenced by a book-entry system, by stock certificates, or by a combination of both.

Finally, subsequent to the closing of the Merger, in December 2007, the Company relocated its headquarters from Chicago, Illinois to Santa Ana, California, changed its fiscal year from June 30 to December 31, and appointed Ernst & Young LLP (“Ernst & Young”) as its independent registered public accounting firm to audit financial statements of the Company going forward.

Secured Credit Facility

On December 7, 2007, in connection with the Merger, the Company replaced its existing amended and restated $60 million senior secured revolving credit facility (the “Prior Credit Facility”) with a Second Amended and Restated Credit Agreement (the “New Credit Facility”) by and among the Company, certain of the Company’s subsidiaries (the “Guarantors”), the initial lender named therein, Deutsche Bank Trust Company Americas, as syndication agent, Deutsche Bank Securities, Inc., as sole book-running manager and sole lead arranger, and Deutsche Bank Trust Company Americas (“Deutsche Bank”), as the initial issuing bank, swing line bank and administrative agent for the Lenders. Deutsche Bank was the lead bank in the Prior Credit Facility.

The New Credit Facility increased the overall size of the Prior Credit Facility from $60 million to $75 million, and eliminated the currently outstanding $20 million term loan portion of the Prior Credit Facility. Proceeds from the New Credit Facility may be used for general corporate purposes, including the repayment of amounts borrowed under the Company’s Prior Credit Facility. As of December 31, 2007, there was $8.0 million outstanding under the New Credit Facility. As a condition to the closing of the New Credit Facility, the existing $25 million unsecured credit facility of NNN with LaSalle Bank, N.A. was terminated. The New Credit Facility extends the terms of the Prior Credit Facility to December 7, 2010 subject to the Company’s right to extend the term of the New Credit Facility for an additional twelve (12) months until December 7, 2011. Other terms and provisions of the Prior Credit Facility remain substantially unchanged, except for the revision of various financial and other covenants to give effect to and to take into account the Merger.

As a condition to entering into the New Credit Facility, the Company and certain subsidiaries simultaneously entered into a Second Amended and Restated Security Agreement, dated December 7, 2007, with Deutsche Bank, in its capacity as administrative agent, pursuant to which the Company granted a first priority security interest in substantially all of the Company’s assets to the “Secured Parties” as that term is defined in such Second Amended and Restated Security Agreement.

CEO BACKGROUND

R. David Anacker
71, has served as a director of the Company since May 1994. Mr. Anacker is a Principal of Canal Partners, a private investment organization. He is also the Business Development Specialist, Office of the President, for Parker-Hannifin Corporation’s Instrumentation Group, which is headquartered in Cleveland, Ohio. He has been Vice Chairman of Veriflo Corporation, an industrial equipment manufacturing firm located in Richmond, California, since November 1991. He served as a director of Grubb & Ellis Management Services, Inc., a subsidiary of the Company, from August 1992 to July 1994.


Anthony G. Antone
37, has served as a director of the Company since July 2002. Mr. Antone, an attorney, has been associated with Kojaian Management Corporation, a real estate investment firm headquartered in Bloomfield Hills, Michigan, since October 1998, serving as Vice President — Development since September 2001, and as Director — Development from October 1998 to September 2001. Prior to that time he served in the office of Spencer Abraham, United States Senator, as Deputy Chief of Staff. He is also a director of Bank of Michigan.


C. Michael Kojaian
44, has served as Chairman of the Board of Directors of the Company since June 2002 and as a director of the Company since December 1996. He has been the President of Kojaian Ventures, L.L.C. and also Executive Vice President, a director and a shareholder of Kojaian Management Corporation, both of which are investment firms headquartered in Bloomfield Hills, Michigan, since 2000 and 1985, respectively. He has also been a director of Arbor Realty Trust, Inc. since June 2003 and a director of Grubb & Ellis Realty Advisors, Inc., an affiliate of the Company, since its inception in September 2005.


Robert J. McLaughlin
73, has served as a director of the Company since July 2004. Mr. McLaughlin previously served as a director of the Company from September 1994 to March 2001. He founded The Sutter Group in 1982, a management consulting company that focuses on enhancing shareholder value, and currently serves as its President. Previously, Mr. McLaughlin served as President and Chief Executive Officer of Tru-Circle Corporation, an aerospace subcontractor, from November 2003 to April 2004, and as Chairman of the Board of Directors of Imperial Sugar Company from August 2001 to February 2003, and as Chairman and Chief Executive Officer from October 2001 to April 2002. He is a director of Imperial Sugar Company and Meridian Automotive Systems.


F. Joseph Moravec
56, has served as a director of the Company since July 2006. Mr. Moravec is currently a self-employed consultant to real property owners, operating companies and non-profit organizations in the formulation and execution of asset transaction management and organizational solutions. From 2001 to 2005, Mr. Moravec served as Commissioner of the Public Buildings Service of the General Services Administration, where he was responsible for asset management and design, construction, leasing, operations and disposal of the GSA’s real estate portfolio. From 1998 to 2001, he served as Senior Advisor for Business Development at George Washington University. Prior to 1998, Mr. Moravec served in various executive positions in the commercial real estate industry, including serving as the President of the Company’s Eastern Division and a member of the Company’s five-person Executive Committee from 1989 to 1991. He presently serves as a member of the Real Estate Investment Advisory Committee of ASB Capital Management.


Mark E. Rose
43, has served both as the Company’s Chief Executive Officer and as a director of the Company since March 2005. Mr. Rose has also served as the Chief Executive Officer, Secretary and as a member of the board of directors of Grubb & Ellis Realty Advisors, Inc., an affiliate of the Company, since its inception in September 2005. From 1993 to 2005, Mr. Rose served in various positions with Jones Lang LaSalle, including serving as Chief Innovation Officer from 2000 to 2002, as Chief Financial Officer of the Americas from 2002 to 2003, and as Chief Operating Officer and Chief Financial Officer of the Americas from 2003 through his departure in 2005. Prior to joining Jones Lang LaSalle, Mr. Rose was the Chairman and Chief Executive Officer of the U.S. Real Estate Investment Trust of the British Coal Corporation Pension Funds, where he oversaw the management and subsequent disposal of a $1 billion portfolio of real estate assets. Mr. Rose serves on the board of directors of the Chicago Shakespeare Theater, Chicago Botanic Garden, and the Chicago Central Area Committee.


Rodger D. Young
60, has served as a director of the Company since April 2003. Mr. Young has been a name partner of the law firm of Young & Susser, P.C. since its founding in 1991, a boutique firm specializing in commercial litigation with offices in Southfield, Michigan and New York City. In 2001, Mr. Young was named Chairman of the Bush Administration’s Federal Judge and U.S. Attorney Qualification Committee by Governor John Engler and Michigan’s Republican Congressional Delegation.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview and Background

Grubb & Ellis Company (the “Company”), is a commercial real estate services and investment management firm. On December 7, 2007, NNN Realty Advisors, Inc. (“NNN”) effected a stock merger (the “Merger”) with the legacy Grubb & Ellis Company, a 50 year old commercial real estate services firm. Upon the closing of the Merger, a change of control of the Company occurred, as the former stockholders of NNN acquired approximately 60% of the Company’s issued and outstanding common stock. Pursuant to the Merger, each issued and outstanding share of NNN automatically converted into a 0.88 of a share of common stock of the Company. Based on accounting principles generally accepted in the United States of America (“GAAP”), the Merger was accounted for using the purchase method of accounting, and although structured as a reverse merger, NNN is considered the accounting acquirer of legacy Grubb & Ellis. As a consequence, the operating results for the twelve months ended December 31, 2007 includes the full year operating results of NNN and the operating results of legacy Grubb & Ellis for the period from December 8, 2007 through December 31, 2007. The years ended December 31, 2006 and 2005 include solely the operating results of NNN.

Unless otherwise indicated, all pre-merger NNN share data have been adjusted to reflect the conversion as a result of the Merger (see Note 9 of Notes to Consolidated Financial Statements in Item 8 of this Report for additional information).

NNN is a real estate investment management company and sponsor of tax deferred tenant in common (“TIC”) 1031 property exchanges as well as a sponsor of public non-traded real estate investment trusts (“REITs”) and other investment programs. Pursuant to the merger, the Company now sponsors under the Grubb & Ellis brand, Grubb & Ellis Realty Investors, LLC (“GERI”), (formerly Triple Net Properties, LLC), real estate investment programs to provide investors with the opportunity to engage in tax-deferred exchanges of real property and to invest in other real estate investment vehicles and continues to offer full-service real estate asset management services. GERI raises capital for these programs through an extensive network of broker-dealer relationships. GERI structures, acquires, manages and disposes of real estate for these programs, earning fees for each of these services.

Legacy Grubb & Ellis business units provide a full range of real estate services, including transaction, which comprises its brokerage operations, management and consulting services for both local and multi-location clients, which includes third-party property management, corporate facilities management, project management, client accounting, business services and engineering services.

NNN was organized in September 2006 to acquire each of Triple Net Properties, LLC, (“Triple Net Properties”), Triple Net Properties Realty, Inc., (“Realty”), and NNN Capital Corp., or (“Capital Corp”), and to bring the businesses conducted by those companies under one corporate umbrella. On November 30, 2006, NNN completed a $160.0 million private placement of common stock to institutional investors and certain accredited investors with 14.1 million shares of the Company’s common stock sold in the offering at $11.36 per share. Net proceeds from the offering were $146.0 million. Triple Net Properties was the accounting acquirer of Realty and Capital Corp.

In certain instances throughout this Annual Report phrases such as “legacy Grubb & Ellis” or similar descriptions are used to reference, when appropriate, the Company prior to the Merger. Similarly, in certain instances throughout this Annual Report the term NNN, “legacy NNN”, or similar phrases are used to reference, when appropriate, NNN Realty Advisors, Inc. prior to the Merger.

Critical Accounting Policies

The Company’s consolidated financial statements have been prepared in accordance with GAAP. Certain accounting policies are considered to be critical accounting policies, as they require management to make assumptions about matters that are highly uncertain at the time the estimate is made and changes in the accounting estimate are reasonably likely to occur from period to period. The Company believes that the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of its consolidated financial statements.

Revenue Recognition

Transaction Services

Real estate sales commissions are recognized at the earlier of receipt of payment, close of escrow or transfer of title between buyer and seller. Receipt of payment occurs at the point at which all Company services have been performed, and title to real property has passed from seller to buyer, if applicable. Real estate leasing commissions are recognized upon execution of appropriate lease and commission agreements and receipt of full or partial payment, and, when payable upon certain events such as tenant occupancy or rent commencement, upon occurrence of such events. All other commissions and fees are recognized at the time the related services have been performed and delivered by the Company to the client, unless future contingencies exist.

Investment Management

The Company earns fees associated with its transactions by structuring, negotiating and closing acquisitions of real estate properties to third-party investors. Such fees include acquisition and disposition fees. Acquisition and disposition fees are earned and recognized when the acquisition or disposition is closed. Organizational marketing expense allowance (“OMEA”), fees are earned and recognized from gross proceeds of equity raised in connection with offerings and are used to pay formation costs, as well as organizational and marketing costs. The Company is entitled to loan advisory fees for arranging financing related to properties under management. These fees are collected and recognized upon the closing of such loans.

The Company earns captive asset and property management fees primarily for managing the operations of real estate properties owned by the real estate programs, REITs and limited liability companies that invest in real estate or value funds it sponsors. Such fees are based on pre-established formulas and contractual arrangements and are earned as such services are performed. The Company is entitled to receive reimbursement for expenses associated with managing the properties; these expenses include salaries for property managers and other personnel providing services to the property. Each property in the Company’s TIC programs is charged an accounting fee for costs associated with preparing financial reports. The Company is also entitled to leasing commissions when a new tenant is secured and upon tenant renewals. Leasing commissions are recognized upon execution of leases.

Through its dealer-manager, the Company facilitates capital raising transactions for its programs its dealer-manager acts as a dealer-manager exclusively for the Company’s programs and does not provide securities services to any third party. The Company’s wholesale dealer-manager services are comprised of raising capital for its programs through its selling broker-dealer relationships. Most of the commissions, fees and allowances earned for its dealer-manager services are passed on to the selling broker-dealers as commissions and to cover offering expenses, and the Company retains the balance.

Management Services

Management fees are recognized at the time the related services have been performed by the Company, unless future contingencies exist. In addition, in regard to management and facility service contracts, the owner of the property will typically reimburse the Company for certain expenses that are incurred on behalf of the owner, which are comprised primarily of on-site employee salaries and related benefit costs. The amounts which are to be reimbursed per the terms of the services contract, are recognized as revenue by the Company in the same period as the related expenses are incurred.

Purchase Price Allocation

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations , the purchase price of acquired properties is allocated to tangible and identified intangible assets and liabilities based on their respective fair values. The allocation to tangible assets (building and land) is based upon determination of the value of the property as if it were vacant using discounted cash flow models similar to those used by independent appraisers. Factors considered include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases. Additionally, the purchase price of the applicable property is allocated to the above or below market value of in-place leases and the value of in-place leases and related tenant relationships.

The value allocable to the above or below market component of the acquired in-place leases is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be paid pursuant to the lease over its remaining term, and (ii) the Company’s estimate of the amounts that would be paid using fair market rates over the remaining term of the lease. The amounts allocated to above market leases are included in identified intangible assets and below market lease values are included in identified intangible liabilities-net in the accompanying consolidated financial statements and are amortized to rental revenue over the weighted-average remaining term of the acquired leases with each property.

The total amount of identified intangible assets acquired is further allocated to in-place lease costs and the value of tenant relationships based on management’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with that respective tenant. Characteristics considered in allocating these values include the nature and extent of the credit quality and expectations of lease renewals, among other factors. These allocations are subject to change within one year of the date of purchase based on information related to one or more events identified at the date of purchase that confirm the value of an asset or liability of an acquired property.

Impairment of Long-Lived Assets

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets , long-lived assets are periodically evaluated for potential impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. In the event that periodic assessments reflect that the carrying amount of the asset exceeds the sum of the undiscounted cash flows (excluding interest) that are expected to result from the use and eventual disposition of the asset, the Company would recognize an impairment loss to the extent the carrying amount exceeded the fair value of the property. The Company estimates the fair value using available market information or other industry valuation techniques such as present value calculations. No impairment losses were recognized for the years ended December 31, 2007, 2006 and 2005.

The Company recognizes goodwill in accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”). Under SFAS No. 142, goodwill is recorded at its carrying value and is tested for impairment at least annually or more frequently if impairment indicators exist at a level of reporting referred to as a reporting unit. Goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. If a potential impairment exists, then an impairment loss is recognized to the extent the carrying value of goodwill exceeds the difference between the fair value of the reporting unit and the fair value of its other assets and liabilities. The Company recognizes goodwill in accordance with SFAS No. 142 and tests the carrying value for impairment during the fourth quarter of each year. No impairment indicators were identified for the year ended December 31, 2007.

Insurance and Claim Reserves

The Company has maintained partially self-insured and deductible programs for, general liability, workers’ compensation and certain employee health care costs. In addition, the Company assumed liabilities at the date of the Merger representing reserves related to a self insured errors and omissions program of the acquired company. Reserves for all such programs are included in accrued claims and settlements and compensation and employee benefits payable, as appropriate. Reserves are based on the aggregate of the liability for reported claims and an actuarially-based estimate of incurred but not reported claims. As of the date of the Merger, the Company entered into a premium based insurance policy for all error and omission coverage on claims arising after the date of the Merger. Claims arising prior to the date of the Merger continue to be applied against the previously mentioned liability reserves assumed relative to the acquired company.

The Company is also subject to various proceedings, lawsuits and other claims related to commission disputes and environmental, labor and other matters, and is required to assess the likelihood of any adverse judgments or outcomes to these matters. A determination of the amount of reserves, if any, for these contingencies is made after careful analysis of each individual issue. New developments in each matter, or changes in approach such as a change in settlement strategy in dealing with these matters, may warrant an increase or decrease in the amount of these reserves.

Recently Issued Accounting Pronouncements

In September 2006, the FASB issued Statement No. 157 (“SFAS No. 157”), Fair Value Measurements . SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157” (the “FSP”). The FSP amends SFAS 157 to delay the effective date of SFAS No. 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (that is, at least annually). For items within its scope, the FSP defers the effective date of SFAS No. 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company does not believe adoption will have a material effect on its financial condition, results of operations and cash flow.

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunities to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November, 15, 2007. The Company is currently evaluating the effect, if any, the adoption of SFAS No. 159 will have on its financial condition, results of operations and cash flow.

In December 2007, the FASB issued revised Statement No. 141, Business Combinations (“SFAS No. 141R”). SFAS No. 141R will change the accounting for business combinations. Under SFAS No. 141R, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS No. 141R will change the accounting treatment and disclosure for certain specific items in a business combination. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. SFAS No. 141R will have an impact on accounting for business combinations once adopted but the effect is dependent upon acquisitions at that time.

In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51 (“SFAS No. 160”). SFAS No. 160 establishes new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008. The Company is currently evaluating the effect if any, the adoption of SFAS No. 160 will have impact on its consolidated financial position, results of operations and cash flows.

RESULTS OF OPERATIONS

Overview

The Company reported revenue of $231.4 million for the year ended December 31, 2007, compared with revenue of $108.3 million for the same period of 2006. Approximately $53.8 million of the increase was attributed to revenue from Grubb & Ellis’ legacy Transaction Services and Management Services businesses and the operations of the assets warehoused for GERA from December 8 through December 31, 2007. The remaining $69.3 million of the increase was attributed primarily to legacy NNN’s Investment Management business, including $19.0 million from increased rental related revenue, a $17.3 million increase resulting from operations of the Company’s broker-dealer acquired in December 2006, higher captive management revenue from additional assets under management year-over-year and higher investment management fees resulting from a larger period-over-period equity raise.

As a result of the Merger in December 2007, the newly combined Company’s operating segments were evaluated for reportable segments. As a result, the legacy NNN reportable segments were realigned into a single operating and reportable segment called Investment Management. This realignment had no impact on the Company’s consolidated balance sheet, results of operations or cash flows.

The Company reports its revenue by three business segments in accordance with the provisions of Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information (“SFAS 131”). Transaction Services, which comprises its real estate brokerage operations; Investment Management which includes providing acquisition, financing and disposition services with respect to its programs, asset management services related to its programs, and dealer-manager services by its securities broker-dealer, which facilitates capital raising transactions for its TIC, REIT and other investment programs; and Management Services, which includes property management, corporate facilities management, project management, client accounting, business services and engineering services for unrelated third parties and the properties owned by the programs it sponsors. Additional information on these business segments can be found in Note 18 of Notes to Consolidated Financial Statements in Item 8 of this Report.

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

Revenue

Transaction Services

The Company earns revenue from the delivery of transaction and management services to the commercial real estate industry. Transaction fees include commissions from leasing, acquisition and disposition, and agency leasing assignments as well as fees from appraisal and consulting services. Management fees, which include reimbursed salaries, wages and benefits, comprise the remainder of the Company’s services revenue, and include fees related to both property and facilities management outsourcing as well as project management and business services.

Transaction services segment was acquired from the legacy Grubb & Ellis on December 7, 2007 which includes brokerage commission, valuation and consulting revenue. At December 31, 2007, legacy Grubb & Ellis had 927 brokers, up from 917 at December 31, 2006.

Investment Management

Investment management revenue of $149.4 million for the year ended December 31, 2007, which includes transaction, captive management and dealer-manager businesses, was comprised primarily of transaction fees of $81.4 million, asset and property management fees of $45.9 million and dealer-manager fees of $18.0 million.

Transaction related fees increased $24.5 million, or 43.0%, for the year ended December 31, 2007, primarily due to increases of $21.0 million in real estate acquisition fees, $2.5 million in real estate disposition fees and $1.4 million in OMEA fees, partially offset by a net decrease of approximately $400,000 in other transaction related fees.

Acquisition fees increased $21.0 million, or 82.0%, to $46.5 million for the year ended December 31, 2007, compared to $25.5 million for the same period in 2006. Net fees as a percentage of aggregate acquisition price increased to 2.6% for the twelve months ended December 31, 2007, compared to 2.1% for the same period in 2006, which resulted in $7.7 million in additional fees earned during 2007. During the year ended December 31, 2007, the Company acquired 77 properties (including six which were still owned as of December 31, 2007) on behalf of its sponsored programs for an approximate aggregate total of $2.0 billion, compared to 45 properties for an approximate aggregate total of $1.4 billion during the same period in 2006. This increase in acquisition volume in 2007 resulted in an additional $11.9 million in net fees. Also contributing to the increase in net fees during 2007 was $1.6 million in recognition of fees that were deferred in 2006.

The $2.5 million increase in real estate disposition fees for the year ended December 31, 2007 was primarily due to an increase in fees realized from the sales of properties, with $18.2 million in net fees realized from the disposition of 28 properties, with an average sales price of $31.3 million per property for the year ended December 31, 2007, compared to $15.7 million in fees realized from the disposition of 22 properties for the same period in 2006 with an average sales price of $37.9 million per property. Included in the fees realized from the sales of properties were $5.7 million in fees earned as a result of the continuing liquidation of G REIT, Inc. (“G REIT”) for the year ended December 31, 2007, compared to $5.3 million for the same period in 2006. Reducing the disposition fees during the year ended December 31, 2007 and 2006 was $3.2 million and $410,000, respectively, as a result of amortizing the identified intangible contract rights associated with the acquisition of Realty as they represent the right to future disposition fees of a portfolio of real properties under contract. Fees on dispositions as a percentage of aggregate sales price was 2.4% for the year ended December 31, 2007, compared to 1.9% for the same period in 2006 (excluding one property sold in 2006 for which the Company waived the entire amount of the disposition fee), primarily due to a change in the mix of properties sold.

OMEA fees increased $1.4 million, or 18.2%, to $9.1 million for the twelve months ended December 31, 2007, compared to $7.7 million for the same period in 2006. OMEA fees as a percentage of equity raised for the year ended December 31, 2007 was 2.0%, compared to 1.5% for the same period in 2006. The increase in OMEA fees earned was primarily due to $2.5 million in non-recurring credits issued in 2006 partially offset by $0.9 million due to lower TIC equity raised in 2007 of $451.0 million, compared to $510.0 million in TIC equity raised in 2006.

The diversified platform created as a result of the merger is already beginning to generate new revenue opportunities. The Company’s largest TIC investment during the fourth quarter of 2007 was generated from the net proceeds of a Transaction Services client that was re-invested on a tax deferred basis through GERI’s TIC platform.

The Company completed a total of 77 acquisitions and 30 dispositions on behalf of the investment programs it sponsors at values in excess of $2.0 billion and $880.0 million, respectively, during 2007. The net acquisitions from the Investment Management business allowed the Company to grow its captive assets under management by more than 27.0% during 2007. At December 31, 2007, the value of the Company’s assets under management was in excess of $5.7 billion.

The $7.3 million, or 18.8%, increase in captive management revenue was primarily due to an increase in property and asset management fees of $6.2 million, or 18.6%, to $39.5 million for the year ended December 31, 2007, compared to $33.3 million for 2006. This increase was primarily the result of the growth in recurring revenue, as total square footage of assets under management increased to an average of approximately 29.4 million for the year ended December 31, 2007, compared to approximately 26.2 million for the same period in 2006. Property and asset management fees per average square foot were $1.35 for the year ended December 31, 2007, compared to $1.27 for the same period in 2006. The increase in property and asset management fees per average square foot was primarily due to a change in product mix. During 2007, assets managed under TIC programs and within Grubb & Ellis Healthcare REIT, Inc. (“Healthcare REIT”) and Grubb & Ellis Apartment REIT, Inc. (“Apartment REIT”) increased to approximately 83.7% of average assets under management compared to 75.7% in 2006, while assets managed under G REIT and T REIT, Inc. (“T REIT”) decreased to approximately 5.7%, compared to 17.6% in 2006 as a result of the liquidation of those entities. Property and asset management fees in TIC programs earn up to 6% and in Healthcare REIT and Apartment REIT earn up to approximately 4% plus 1% of each REIT’s average invested assets, while G REIT and T REIT programs earn approximately 4%.

Management Services

Management Services revenue includes asset and property management fees as well as reimbursed salaries, wages and benefits from the Company’s third party property management and facilities outsourcing services, along with business services fees. Revenue was $16.4 million from December 8, 2007 through December 31, 2007. Following the closing of the merger, Grubb & Ellis Management Services assumed management of nearly 23 million square feet of NNN’s 41.7 million-square-foot captive investment management portfolio. The Company expects to transfer 6 million square feet of outsourced property management during the first half of 2008. At December 31, 2007, the Company managed 216 million square feet of property.

Rental

Rental revenue includes revenue from the warehousing of properties held for sale primarily to the Company’s Investment Management programs and for GERA. These line items also include pass-through revenue for the master lease accommodations related to the Company’s TIC programs.

Operating Expense Overview

Operating expenses increased $101.2 million, or 104.0%, for the year ended December 31, 2007, compared to the same period in 2006. Of the $101.2 million, $49.5 million was due to the Grubb & Ellis legacy business from December 8, 2007 to December 31, 2007. The remaining $51.7 million of the increase was attributed to legacy NNN’s Investment Management business, including $11.4 million in rental related expense, $10.2 million resulting from operations of the Company’s broker-dealer acquired in December 2006, $5.5 million in compensation related costs, $7.5 million in non-cash stock based compensation, $6.4 million in merger related costs, $6.5 million in depreciation and amortization and $4.7 million in interest expense activity primarily related to two properties for sale that are currently reflected in properties held for sale on the balance sheet, offset by a net decrease of approximately $500,000 in other operating costs.

Compensation costs

Compensation costs increased $54.7 million, or 110.5%, to $104.1 million for the year ended December 31, 2007, compared to $49.4 million for the same period in 2006. Approximately $41.7 million of the increase was attributed to compensation costs from legacy Grubb & Ellis’ operations from December 8 through December 31, 2007. The remaining $13.0 million of the increase was related to the investment management business which increased to $62.5 million, or 26.3%, for the year ended December 31, 2007, compared to $49.5 million for the same period in 2006. The increase of $5.5 million, or 11.1%, in compensation related costs, which included $2.1 million in reimbursable salaries, wages and benefits, was primarily due to an increase in full-time equivalent employees of approximately 89%. Contributing to the increase in compensation costs was $7.5 million in non-cash stock based compensation.

General and Administrative

General and administrative expense increased $13.7 million, or 44.9%, to $44.3 million for the year ended December 31, 2007, compared to $30.5 million for the same period in 2006. Approximately $4.7 million of the increase was attributed to general and administration expenses from the legacy Grubb & Ellis operations from December 8, 2007 through December 31, 2007. The remaining $9.0 million of the increase was related to the investment management business which increased to $39.5 million for the year ended December 31, 2007, compared to $30.5 million for the same period in 2006. The increase was primarily due to $10.2 million resulting from operations of the Company’s broker-dealer acquired in December 2006, partially offset by decrease of $1.2 million related to non-recurring credits granted to certain investors in 2006.

Depreciation and Amortization

Depreciation and amortization increased $7.5 million, or 357.5%, to $9.5 million for the year ended December 31, 2007, compared to $2.1 million for the same period in 2006. Approximately $1.0 million was attributed to depreciation and amortization expense from the legacy Grubb & Ellis operations from December 8 through December 31, 2007. The remaining $6.5 million of the increase was related to the investment management business which increased to $8.6 million for the year ended December 31, 2007, compared to $2.1 million for the same period in 2006. The increase in activity was primarily related to two properties for sale that are currently reflected in properties held for investment on the balance sheet.

Rental Expense

Rental expense includes the related expense from the warehousing of properties held for sale primarily to the Company’s Investment Management programs and for GERA. These line items also include pass-through expenses for master lease accommodations related to the Company’s TIC programs.

Interest Expense

Interest expense increased $5.4 million, or 85.5%, to $11.6 million for the year ended December 31, 2007, compared to $6.2 million for the same period in 2006. Approximately $607,000 was attributed to interest expense from the legacy Grubb & Ellis operations from December 8 through December 31, 2007. The remaining $4.7 million of the increase was related to the investment management business which increased to $11.0 million for the year ended December 31, 2007, compared to $6.2 million for the same period in 2006. The increase in activity was primarily related to two properties held for investment on the balance sheet.

Discontinued Operations

In 2007, GERI acquired 13 properties to resell to its sponsored programs. In accordance with SFAS No. 144, for the year ended December 31, 2007, discontinued operations included the net income (loss) of one property and its associated limited liability company (“LLC”) entity sold to a joint venture, two properties and the associated LLCs resold to Healthcare REIT and ten properties and their associated LLCs classified as held for sale as of December 31, 2007 (See Note 19 of Notes to Consolidated Financial Statements in Item 8 of this Report for additional information).

MANAGEMENT DISCUSSION FOR LATEST QUARTER

RESULTS OF OPERATIONS

Overview

The Company reported revenue of approximately $327.5 million for the six months ended June 30, 2008, compared with revenue of $78.5 million for the same period in 2007. Approximately $248.8 million of the increase was attributed to revenue from the Transaction Services and Management Services businesses and the operations of the assets warehoused for Grubb & Ellis Realty Advisors (“GERA”). The remaining increase was attributed to $9.1 million of rental related revenue primarily due to two assets held for investment in the Company’s Investment Management business, offset by a net decrease of $8.9 million in Investment Management revenue. The growth in acquisition and management fees were offset by a decrease in disposition fees due to lower TIC related volume year-over-year. The Company completed a total of 41 acquisitions and seven dispositions on behalf of the investment programs it sponsors at values of approximately $846.4 million during the six months ended June 30, 2008. The net acquisitions from the Investment Management business allowed the Company to grow its captive assets under management by approximately 12%. At June 30, 2008, the value of the Company’s assets under management was approximately $6.5 billion, compared to $5.8 billion at December 31, 2007.

The net loss for the first six months of 2008 was $11.0 million, or $0.17 per diluted share, which included a second quarter non-cash charge of $8.9 million for depreciation and amortization related to the reclassification of five assets held for sale to assets held for investment and a first quarter net write-off of its investment in GERA of $5.8 million. In addition, the year-to-date results include merger-related and integration costs of $7.6 million, resulting from the Company’s recent merger with NNN, approximately $5.7 million of stock-based compensation, $2.8 million for amortization of intangible assets and $1.6 million of recognized loss on marketable equity securities. These charges were partially offset by $9.5 million of rental related operations.

As a result of the Merger in December 2007, the newly combined Company’s operating segments were evaluated for reportable segments. As a result, the legacy NNN reportable segments were realigned into a single operating and reportable segment called Investment Management. This realignment had no impact on the Company’s consolidated balance sheet, results of operations or cash flows.

The Company reports its revenue by three business segments in accordance with the provisions of Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information (“SFAS No. 131”). Transaction Services, which comprises its real estate brokerage operations; Investment Management, which includes providing acquisition, financing and disposition services with respect to its programs, asset management services related to its programs, and dealer-manager services by its securities broker-dealer, which facilitates capital raising transactions for its TIC, REIT and other investment programs; and Management Services, which includes property management, corporate facilities management, project management, client accounting, business services and engineering services for unrelated third parties and the properties owned by the programs it sponsors. Additional information on these business segments can be found in Note 13 of Notes to Consolidated Financial Statements in Item 1 of this Report.

Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

Revenue

Transaction and Management Services Revenue

The Company earns revenue from the delivery of transaction and management services to the commercial real estate industry. Transaction fees include commissions from leasing, acquisition and disposition, and agency leasing assignments as well as fees from appraisal and consulting services. Management fees, which include reimbursed salaries, wages and benefits, comprise the remainder of the Company’s services revenue, and include fees related to both property and facilities management outsourcing as well as project management and business services. Following the close of the merger, Grubb & Ellis Management Services assumed management of nearly 25.8 million square feet of NNN’s 42.9 million-square-foot captive investment management portfolio. At June 30, 2008, the Company managed approximately 218 million square feet of property.

Transaction Services revenue, including brokerage commission, valuation and consulting revenue, was $56.5 million for the three months ended June 30, 2008. 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.

Management Services revenue of $60.6 million for the three months ended June 30, 2008 includes revenue from the transfer of management of a significant portion of GERI’s captive property portfolio to Grubb & Ellis Managements Services.

Investment Management Revenue

Investment Management revenue of $35.4 million for the three months ended June 30, 2008 reflected the revenue generated through the fee structure of the various investment products, which included acquisition and disposition fees of approximately $18.4 million and captive management fees of $9.5 million. These fees include acquisition, disposition, financing, asset management, placement, broker-dealer and other fees. Key drivers of this business are the dollar value of equity raised, the amount of transactions that are generated in the investment product platforms and the amount of assets under management.

In total, $251.9 million in equity was raised for the Company’s investment programs for the three months ended June 30, 2008, compared with $221.1 million in the same period in 2007. The increase was driven by the Company’s new wealth management platform, with $51.1 million raised for high quality real estate investments on behalf of investors, as well as an increase in equity raised by the Company’s public non-traded REITs. During the three months ended June 30, 2008, the Company’s public non-traded REIT programs raised $138.7 million, 38.3% higher than the $100.5 million equity raised in the same period in 2007. The Company’s TIC 1031 exchange programs raised $54.6 million in equity during the second quarter of 2008, compared with $120.6 million in the same period in 2007. The lower TIC equity raised for the three months ended June 30, 2008 reflects current market conditions.

Acquisition fees increased approximately $1.2 million, or 9.4%, to approximately $14.0 million for the three months ended June 30, 2008, compared to approximately $12.8 million for the same period in 2007. The quarter-over-quarter increase in acquisition fees was primarily attributed to an increase of $6.1 million in fees earned from the Company’s non-traded REIT programs and $1.4 million from the wealth management platform, partially offset by a decrease of $6.1 million in fees from the TIC programs. During the three months ended June 30, 2008, the Company acquired 21 properties on behalf of its sponsored programs for an approximate aggregate total of $497.5 million, compared to 18 properties for an approximate aggregate total of $444.5 million during the same period in 2007.

Disposition fees decreased approximately $3.6 million, or 44.3%, to approximately $4.4 million for the three months ended June 30, 2008, compared to approximately $7.9 million for the same period in 2007. The decrease reflects lower sales volume due to current market conditions. Offsetting the disposition fees during the three months ended June 30, 2008 and 2007 was approximately $563,000 and $1.0 million, respectively, of amortization of identified intangible contract rights associated with the acquisition of Triple Net Properties

Realty, Inc. (“Realty”) as they represent the right to future disposition fees of a portfolio of real properties under contract.

Captive management fees were relatively flat year-over-year, after moving approximately $4.1 million of revenue to the Company’s management services segment, primarily due to the growth in non-traded REIT properties managed.

Rental Revenue

Rental revenue includes revenue from properties held for investment. These line items also include pass-through revenue for the master lease accommodations related to the Company’s TIC programs.

Operating Expense Overview

The Company’s operating expense of $175.1 million for the three months ended June 30, 2008 increased approximately $144.7 million, or 475.8%, for the three months ended June 30, 2008, compared to the same period in 2007, which included approximately $127.0 million due to the legacy Grubb & Ellis business, $4.7 million due to additional merger related costs, $3.2 million in non-cash stock based compensation, $8.9 million in depreciation and amortization primarily related to five properties held for sale and $894,000 in amortization expense for other identified intangible assets.

Compensation Costs

Compensation costs increased approximately $106.3 million, or 743.1%, to $120.6 million for the three months ended June 30, 2008, compared to approximately $14.3 million for the same period in 2007 due to approximately $105.5 million of compensation costs attributed to legacy Grubb & Ellis’ operations. Compensation costs related to the investment management business increased approximately 5.7% to $15.1 million, for the three months ended June 30, 2008, compared to $14.3 million for the same period in 2007. Included in the compensation costs were non-cash stock compensation expense which increased by approximately $2.0 million to $3.2 million for the three months ended June 30, 2008 compared to $1.2 million for the same period in 2007.

General and Administrative

General and administrative expense increased approximately $12.0 million, or 114.4%, to $22.4 million for the three months ended June 30, 2008, compared to approximately $10.5 million for the same period in 2007 due to approximately $13.1 million of general and administration expenses attributed to legacy Grubb & Ellis operations, partially offset by a $1.1 million decrease related to the investment management business, primarily due to marketing related fees.

General and administrative expense was 13.4% of total revenue for the three months ended June 30, 2008, compared with 23.0% for the same period in 2007.

Depreciation and Amortization

Depreciation and amortization increased approximately $12.9 million to $13.4 million for the three months ended June 30, 2008, compared to approximately $483,000 for the same period in 2007. Included in depreciation and amortization expense was $894,000 for amortization of other identified intangible assets. Approximately $9.5 million was attributed to depreciation and amortization expense from the legacy Grubb & Ellis operations, $5.8 million of which was related to the reclassification from three properties held for sale to assets held for investment. The remaining $3.4 million of the increase was related to the investment management business, which increased to approximately $3.9 million for the three months ended June 30, 2008, compared to $483,000 for the same period in 2007, primarily related to two properties held for sale that were reclassified to held for investment on the balance sheet.



Rental Expense

Rental expense includes the related expense properties held for investment. These line items also include pass-through expenses for master lease accommodations related to the Company’s TIC programs.

Interest Expense

Interest expense increased approximately $2.5 million, or 126.1%, to $4.4 million for the three months ended June 30, 2008, compared to $1.9 million for the same period in 2007. Approximately $2.2 million was attributed to interest expense from the legacy Grubb & Ellis operations, which was primarily related to three assets held for investment. The remaining increase was related to the investment management business which increased to $2.3 million for the three months ended June 30, 2008, compared to $2.0 million for the same period in 2007. The increase in activity was primarily related to two properties held for investment on the balance sheet.

Income Tax

The Company recognized a tax benefit of approximately $4.9 million for the three months ended June 30, 2008, compared to a tax provision of $6.9 million for the same period in 2007. The net $11.8 million decrease in tax expense was primarily a result of the non-recurring tax benefit primarily due to the cumulative charge of depreciation expense for the SPAC properties and lower fee revenues earned in the three months ended June 30, 2008 as compared to the same period in 2007. In addition, the Company is subject to the highest federal income tax rate of 35% for the three months ended 2008, compared to a 34% statutory tax rate for the three months ended June 30, 2007. (See Note 19 of Notes to Consolidated Financial Statements in Item 1 of this Report for additional information.)

Net (Loss) Income

As a result of the above items, the Company recognized a net loss of $5.1 million, or $0.08 per diluted share for the three months ended June 30, 2008, compared to net income of $10.2 million, or $0.24 per diluted share, for the same period in 2007.

CONF CALL

Michael Rispoli

This morning we issued a press release announcing our financial results for the second quarter of 2008. This release is posted on our website at www.grubb-ellis.com. This call is being webcast live and will be archived and available for replay. The replay may be accessed from the Investor Relations section of our website. In just a moment we will provide commentary on our results and then we will open up the call for Q&A.

First, I would like to remind you that comments made during this call may include certain forward-looking statements. Actual results and the timing of certain events could materially differ from forward-looking information discussed on this call. Factors that may cause such results to differ are set forth in this morning's press release and the company's filings with the Securities and Exchange Commission. The merger between Grubb & Ellis and NNN Realty Advisors was completed on December 7th, 2007.

As required by Generally Accepted Accounting Principles, the transaction was accounted for as a reverse merger with NNN as the accounting acquirer. Accordingly, the company's results of operations commencing on and subsequent to December 7, 2007 include the operations of the combined entity. Results of operations prior to that date including second quarter 2007 results reflect only the operations of NNN.

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.

These financial measures also exclude the impact of non-cash stock-based compensation, rental related operations primarily with respect to certain assets held for investment, and other non-cash items. 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 the results of the two companies. Results do not reflect the elimination of transactions between the companies and certain estimated synergies and expenses related to the combination for the periods presented.

As required by SEC regulations, we have provided reconciliations of these non-GAAP measures to what we believe are the most directly comparable GAAP measures in our earnings release and related 8-K filing. With that, I will turn the call over to Gary Hunt, our interim Chief Executive Officer for opening remarks.

Gary Hunt

Joining me in today's call is Rich Pehlke, our Chief Financial Officer and Jack Van Berkel, our Chief Operating Officer. Jeff Hanson, President of Grubb & Ellis Realty Investors is also here with us this morning and will be available to respond to any of your questions.

We are pleased to have the opportunity this morning to review our second quarter performance and update you on the progress achieved by Grubb & Ellis as we continue the post-merger integration process and leverage our expanded platform. As you know, I became the company's interim CEO on July 10 upon the resignation of Scott Peters. I would like to reaffirm that Scott has retained his roles as Chairman and Chief Executive Officer of the Grubb & Ellis Healthcare REIT and Executive Vice President of the Grubb & Ellis Apartment REIT, and we are very pleased to continue to have Scott's involvement and advice as we move forward.

Presently we are in the early stages of our search for a permanent CEO. In the interim, I am working closely with the executive management team to ensure that we continue to move forward with our merger integration process and execute on our overall growth strategy.

Today, my colleagues and I will discuss current market conditions, their impact on our businesses, and how we are responding to these conditions. Additionally, we will update you on our progress regarding the merger integration as well as our overall goal to make Grubb & Ellis a leading global real estate services and investment firm. First, I would like to highlight key quarterly financial results.

Grubb & Ellis reported second quarter 2008 revenue of $167 million compared with revenue of $182.7 million for the combined companies in the second quarter of 2007. The company posted a second quarter net loss of $5.1 million compared with net income of $11.3 million for the companies on a combined basis in the same period of 2007.

Adjusted EBITDA which excludes certain charges, specifically noncash stock compensation and the impact of assets held for sale, for the second quarter was $12.4 million compared with $27.4 million for the companies on a combined basis in the second quarter of 2007.

For the first six months of 2008, Grubb & Ellis generated revenue of $327.5 million compared with revenue of $331.2 million for the companies on a combined basis in the first six months of 2007. The company posted a net loss of $11 million for the first half of 2008 compared with net income of $11.8 million for the companies on a combined basis in the first half of 2007. Adjusted EBITDA was $20.1 million for the first half of 2008 compared with the combined companies' adjusted EBITDA of $34.1 million for the first half of 2007.

Let me pause for a moment and point out that it is extremely important to put these numbers into context in light of current market conditions. The economic slowdown and tightening credit conditions that have brought to capital markets to a virtual halt began one year ago. Prior to the slowdown, the commercial real estate industry was extremely healthy, and Grubb & Ellis and NNN Realty Advisors like its peers were benefiting from a robust capital markets and commercial real estate environment.

Given the significant headwinds that we are currently facing, we at Grubb believe that our results for the quarter and so far in 2008 are strong. They represent the resiliency and diversified nature of our business. Now I will spend a few minutes reviewing present market conditions.

Today, capital markets continue to struggle with nonissuance of CMBS. Loans are available from banks and insurance companies but many banks are focused on maintaining their capital reserves to guard against further losses in their residential loan portfolios, while insurance companies are said to be already bumping up against their annual allocations to commercial real estate.

Consequently, while capital for development and investment transactions remains available, it is more difficult to obtain with lower loan to value ratios and more onerous terms such as the return of recourse lending. As a result, commercial real estate investment volume was down 69% industry wide in the first half of 2008 versus the first half of 2007. Cap rates are experiencing upward pressure with analysts' estimates surprised the clients ranging from as low as 10% to as high as 30%.

Additionally, rising vacancies and softening rental rates are expected to result in some forced asset sales by investors, particularly those who purchased in the last couple of years with the help of higher leveraged and overly optimistic or aggressive performers. We expect the gap between the buyer and seller expectations to close slowly property by property as sales are consummated. More forced sales are likely to come to market and delinquency and foreclosure rates are expected to rise.

Although it my take capital markets longer to recover, there is a large amount of private and institutional capital waiting in the wings to scoop up those properties where the bargains finally began to appear, which could help to strive transactional volume sooner. The U.S. commercial real estate leasing markets also started to slow in the second quarter. Although the labor market is shedding jobs at a surprisingly gradual pace, job losses are nevertheless being felt in the leasing markets in the form of rising vacancy rates, moderate negative absorption, and more generous concession packages for tenants.

Though absorption activity is only modestly negative, a fair amount of space remains in the construction pipeline. As this space is delivered, it will push vacancy rates higher though at a pace we believe will be moderate and to levels that we also believe are expected to fall short of the peaks reached in the last soft cycle in 2001. Leasing market conditions are expected to soften for all property types at least through year end, with the greatest softening expected in the retail market followed by office, industrial and apartment.

As noted in our earnings release, Grubb & Ellis' second quarter 2008 results clearly benefited from the company's expanded platform. The diversification of our investment programs which produce stable annuity income attributed to a 41% increase in our equity raise year over year. Our tenant-in-common programs continue to source equity and make acquisitions on behalf of investors, albeit at a slower pace than last year.

The lower equity raise with respect to our TICK [ph] programs was offset by the increased equity flowing into our two non-public trade REITs and our recently introduced wealth management platform. During the first half of 2008, we entered into selling agreements for the Grubb & Ellis Healthcare REIT with LPL, NPH, and AIG; three of the five largest independent broker dealers in the country. These agreements considerably expand the distribution of our public and non-traded Healthcare REIT and will allow us to attract equity at a greater pace.

Another positive takeaway was the fact that assets under management also increased during the quarter to $6.5 billion from $6.1 billion at March 31, 2008. Since the beginning of the year, assets under management have grown by 12%. Like our investment business, our Management Services business produces stable annuity income. Management Services fees increased 15% during the quarter over the prior year period. Conversely, our Transaction Services business, which derives fees from brokerage sales and leasing, saw a 31% decrease in revenue year over year. Investment sales activity for this business segment was down by 52%.

Despite lower transaction velocity, the current environment is prompting many companies to cut costs, which is leading to a growth in outsourcing. This trend bodes well for our global client services business which is positioned to deliver record results in 2008. Through the first half of 2008, our global client services practice retained all of its major client relationships and in many cases expanded those relationships.

We recently renewed and expanded our scope of transaction and facilities management work for several key clients, including AJ Gallagher, Qwest, Safeco and United Stationers. In addition, we have added several new Fortune 1000 corporate clients since the start of the year, including a large multi-market engagement for a Fortune 50 financial services firm.

While current market conditions are challenging, Grubb & Ellis has been making progress against our stated objectives and seeing the benefits from the post merger expansion of our platform, which has diversified our revenue base. Additionally, we are continuing to realize the cost of revenue synergies created by the merger and are on track to achieve our integration goals.

Let me conclude by reiterating that our plan is to ensure that Grubb & Ellis is fully positioned to help our clients take advantage of the opportunities that exist both in the current market and as conditions begin to improve. We believe that we are taking the steps necessary to bring that plan to fruition. We have been navigating well through a challenging market by responding quickly to changing market conditions and remaining focused on servicing our clients.

With that, I would like to turn the call over to Rich Pehlke, our Chief Financial Officer.

Rich Pehlke

As Gary indicated, current market conditions are extremely difficult, and as a result, our 2008 results are being impacted. We do not anticipate conditions improving significantly in the near term. We continue to manage our business conservatively and taken a number of actions to respond to the current environment.

Second quarter revenue decreased approximately 8% year over year, which was primarily the result of lower Transaction Services fees as well as lower disposition fees associated with our investment program, both the direct result of the weak market conditions. The company reported a net loss of $5.1 million for the quarter. The loss was primarily due to a catch-up depreciation and amortization expense related to classifying five real estate properties as held for investment rather than held for sale.

This reclass resulted in a one-time non-cash pre-tax charge of $8.9 million for the quarter. Also during the quarter, we recorded $4.7 million of merger-related costs, $3.2 million of noncash stock-based compensation, $600,000 for amortization of certain intangible assets, and $1.5 million of recognized loss on marketable securities. These charges were partially offset by $4.9 million of rental related operations and other noncash items.

Based on approximately $63.6 million average shares outstanding during the quarter, the company reported a loss of $0.08 per share, again off of the $5.1 million net loss. EBITDA was $7.6 million for the quarter. Adjusted EBITDA, which excludes the charges I outlined earlier, specifically the non-cash stock compensation and the impact of the assets held for sale and merger related costs was $12.4 million compared with $27.4 million during the prior year period.

We continue to expect to meet or exceed 2007 adjusted EBITDA goal and the goal of adjusted EBITDA of $74.8 million, which meets or exceeds last year's number. This expectation is based on the following assumptions. Continued growth in the equity raises of our non-traded REIT and TICK programs. We expect to raise significantly more equity in these programs during the second half of the year as compared to the first, largely due to our increased broker dealer platform that Gary outlined.

In addition, we expect a 15% to 25% increase in Transaction Services revenue compared with the first half of 2008. And we will also realize cost synergies from the actions completed during the first half of '08. Grubb & Ellis is leveraging is expanded platform and strategic initiatives including an expanded broker dealer network and a strong brand, and we will position the company for growth and expansion both in the second half of 2008 and beyond.

At the same time, we continue to keep a close hand on expenses. We continue to identify synergies and maximize operating efficiencies as a result of the merger. To date, we have identified more than $17.5 million in annual cost savings. Some of these savings are being reinvested in key talent to ensure that we are positioned optimally for when the market recovers. But at the same time, in response to the current economic environment, we are keeping a tight reign on expenses; we have imposed hiring fees for nonessential positions throughout the organization, and have implemented other cost saving measures to ensure there are expenses in line with our revenue expectations.

Majority of our expenses are related to compensation and reimbursable costs directly related to revenue production. G&A represented 13% of the revenue for the quarter. More importantly, G&A costs are lower compared to the second quarter of '07 on a combined basis.

As I mentioned earlier, our bottom line was adversely impacted by the overall expense burden of five properties recently reclassified as held for investments. Just a reminder, these five properties were sourced; two of them came from pre-merger with NNN Realty of the strategic office fund strategy of value added properties and three assets that were brought to the merger from Grubb & Ellis through a special acquisition corporation strategy of value added assets.

These assets are performing at or above expected levels on an operating basis and we have added their operating income back into our EBITDA calculation. However, as we said repeatedly, these assets are not core to our long-term strategy. We are continuing to examine ways to maximize value from our investment and are considering all options in a very timely manner. As most of you know, our credit facility contain provisions requiring us to sell the three assets purchased for Grubb & Ellis Realty Advisors by September 30th, 2008.

In cooperation with our bank partners, we are pleased to announce that we have amended our credit facility to allow us to hold these specific assets until March 31, 2009. We finished the quarter with $29.7 million of cash and cash equivalents, up from the $24.8 million at March 31. During the quarter, we drew down $25 million on our credit facility and as of June 30th, we have $63 million outstanding on our facility; $14 million of that drawdown was used to retire mezzanine debt and one of the assets held for investment and $6.5 million was used to fund the first quarter '08 cash dividend.

Other sources and uses of cash during the quarter were essentially breakeven. On a year to date basis, the company reported revenue of $327.5 million compared with $331.2 million in the first six months of '07. For the first half of 2008, the company reported a net loss to common stockholders of $11 million compared with net income of $11.8 million in the year ago period.

For the first six months of '08, EBITDA was $8 million compared with $30.1 million during the same period of '07. Adjusted EBITDA for the first six months of '08 was $20.1 million versus $34.1 million for the first six months of '07. The primary drivers for the year over year decline in adjusted EBITDA are a decline in Transaction Services revenue of $29.9 million and a $7 million decline in disposition fee revenue. We expect this trend to continue as rising cap rates and differing expectations between buyer and sellers result in a longer holding periods for some of our investment products.

These decreases that I outlined were partially offset by the recurring revenue from the increases in square feet and assets under management, and the beginning effects of receiving synergies resulting from the merger. Since Gary detailed the factors driving the services business and predominantly all of the adjusted EBITDA generated in the first half of '08 came from our Investment Management business, I will focus my segment comments on the investment business.

Second quarter Investment Management revenue totaled $35.4 million compared with $41 million in the same period a year ago. The growth in acquisition and management fees were more than offset by a decrease in disposition fees due to lower transaction volume year-over-year. During the quarter, our public non-traded REITs and our wealth management platforms continued to perform extremely well.

As a result, our investment programs raised an aggregate of $252 million of equity during the second quarter. This compares favorably to a total equity raised of $221 million a year ago. For the year, the company's investment programs raised approximately $516 million compared with $365 million in 2007. Our public non-traded REITs raised approximately $138.7 million during the second quarter, up 38% from the equity raised in the quarter '07. And the equity raised continues to accelerate as our new broker dealers begin to ramp up the marketing of our products.

For the first half of the year, non-traded REIT products have raised approximately $212.9 million of equity, up from $140.8 million raised a year earlier. The equity raise reflects both the strong investment appeal of our REIT products under the Grubb & Ellis brand and the strength of our proprietary REITs in the alternative investment sector. The continued success of our REITs and the relationships that we are building within the broker dealer network will be instrumental in reaching our goals for '08 and beyond.

Since the beginning of the year, our wealth management program, our newest investment platform, has placed approximately $188 million in a variety of high quality real estate assets on behalf of high net worth individuals and corporations. Our traditional tenant-in-common 1031 exchange programs raised approximately $106.7 million during the first half of 2008 compared with $224.4 million a year ago. We expect the equity raised in this investment product to pick up in the second half of the year despite a significantly lower total market.

Our financial position as a sponsor should bring continued opportunity to gain market share in an environment where many competitors are not as strongly capitalized. During the second quarter of '08, Grubb & Ellis Realty Investors completed 21 acquisitions valued in excess of $497 million. As of June 30th, approximately 25.8 million square feet of properties from Grubb & Ellis Realty Investors captive management portfolio has been successfully transitioned to our Management Services subsidiary, Grubb & Ellis Management Services. At June 30th, 2008, Grubb & Ellis managed approximately 218 million square feet of property.

Before I close my remarks, I would like to briefly address our decision to institute a share repurchases program, allowing us to repurchase up to 25 million of the company's common stock and the suspension of our quarterly dividend payment. By utilizing a portion of our liquidity to repurchase shares to current levels, we will have greater financial flexibility to invest in growth opportunities as well as create shareholder value for our stockholders. The plan is in place and will commence in the third quarter.

Overall, we believe the company is in a sound financial position. We will remain diligent with regard to cost cutting and growth opportunities, and will stay focused on delivering the best possible results for our shareholders. At this point, I would like to ask Jack Van Berkel to update you on our merger integration.

Jack Van Berkel

As you know, one of our priorities since the closing of the merger has been to integrate NNN Realty Advisors in Grubb & Ellis company. This process is integral of the success of the merger not only from a client service standpoint but also from a cost and revenue perspective.

Since we last spoke to you in May, we are pleased to say that we have identified an additional $1 million in expense synergies. This brings the total to more than $17.5 million in identified annualized cost savings. To put our accomplishments in perspective, it is important to reiterate the rationale behind the merger of Grubb & Ellis and NNN Realty Advisors. While the industry continues to consolidate our merger with NNN Realty Advisors was unique and there was little overlap of products and services.

Instead it has provided an opportunity to combine Grubb & Ellis' brand strength, broader footprint and real estate services with the earnings power in investment expertise of one of the leading sponsors of alternative real estate products, ultimately creating a new company, the company that has all the elements necessary to become one of the leading providers of real estate services and investment products.

As we integrate the two companies, we are focused on creating a more streamlined organization that allows us to recognize the benefits associated with the merger. All of our actions have been designed to support the goals of; one, cross-selling our real estate services and investment products and capitalizing on the synergies of our businesses; two, leveraging the strength of the Grubb & Ellis' brand to expand the broker dealer network of our 1031 tenant-in-common exchange and public non-traded REIT products; and three, building a global platform that offers real estate services and investment products that anyone from the largest corporate users and institutional investors to individuals who believe real estate is an important part of their investment portfolio.

With regard to cross-selling, our new go-to-market strategy which was launched on July 1st more closely integrates our service delivery platform. We believe this new structure will allow us to more effectively service our clients as they increasingly expect holistic solutions of service providers as well as better insulate Grubb & Ellis from the types of market conditions we are seeing today.

Our new structure is designed to seamlessly integrate our Transaction Management Services and investment platforms. Local Managing Directors are responsible for the profitability of the respective regions, and we will be supported by senior management and corporate service directors to ensure that our clients are best served. This structure will be further supported by an operations infrastructure focused on reporting metrics and data.

Just last week, Jim Jones who has spent the last three years as Executive Vice President of Operations, CB Richard Ellis joins us. Jim will have the same title at Grubb & Ellis and is charged with building an infrastructure that fosters operational excellence. Jim is just one of several new hires made over the past several months and is representative of our focus on attracting top talent and strengthening our platform.

Within the past several weeks, we announced that Chuck Hunt, a 20-year veteran of the Southern Californian real estate market was returning to Grubb & Ellis to run our LA County brokerage operations. On the investment side, we announced that John Caley, an 18-year veteran of the commercial real estate investment market has joined the firm from Meridian Value Partners to oversee the acquisition and disposition process for investment programs.

Since the beginning of the year, we have added seven key individuals and senior operational business development positions. We also continue to attract high quality talent in our local offices. As both Gary and Rich have mentioned, our goal is about the need to manage our business for current market conditions with our goal building a diversified global platform of product and service offerings.

As we all know, the market will recover, and when it does, Grubb & Ellis will be more prepared than ever to service the needs of corporate and institutional clients and individual investors. Despite market conditions and the pace of change within our organization morale remains extremely high. As witnessed by our recent personnel announcement, the opportunity to be a part of an organization and to provide additional opportunities to its professionals, and a unique product set attracts top talent.

Although we continue to actively replace our lower performing brokerage professionals with high quality producers, we have seen almost no turnover among our top producers which is extremely encouraging. The strength of the Grubb & Ellis brand has quickly become a competitive advantage for our investment products. Probably one of our biggest successes today has been our ability to expand our broker dealer network primarily as a result of the Grubb & Ellis brand.

As Gary mentioned, since the close of the merger, we have entered into selling agreements for the Grubb & Ellis Healthcare REIT with LPL, NPH, and AIG, three of the five largest independent broker dealers in the country. These agreements more than doubled the number of registered reps eligible to market the healthcare REIT and has resulted in our ability to attract equity at a greater pace and it had increased the name recognition for Grubb & Ellis and all of our products and services.

With each new broker dealer that comes aboard, we also expand the Grubb & Ellis brand. We have more than 1,800 real estate brokerage and tens of thousands of financial reps in the field each day discussing our company and its products with our clients. Before I turn the call over to Gary for concluding remarks, I want to reiterate how pleased I am with the progress we have made, particularly in the face of a challenging market environment and I believe the company is better positioned for both current conditions as well as the eventual rebounding market.

Our integration is on track and we continue to add the talent and resources that will allow Grubb & Ellis to deliver best in class service, ability to its employees, and long-term value to its stockholders.

Gary Hunt

To summarize the quarter, we continue to integrate our organization and execute our growth strategy, while keeping a tight reign on costs. Our expanded platform and the resulting cross-selling opportunities as well as our ability to leverage the Grubb & Ellis brand, to expand the distribution channel for our investment products is helping to mitigate the impact of the current market conditions.

We are focused on continuing to position Grubb & Ellis for the future, both through organic growth and strategic acquisitions; so that we are poised to maximize our earnings potential as the market recovers. As we move forward with our growth strategy, Grubb & Ellis has and will continue to keep its focus and attention squarely where it belongs, and that is on its clients, the true arbiters of our success, and focused on our shareholders, our investors.

Before taking your questions, I would like to make a couple of comments related to the composition of our Board. Last month we announced that Devin Murphy joined our Board of Directors. I would like to take this opportunity to welcome Devin and say how pleased we are to have someone of his caliber as a member of the Board of Grubb & Ellis.

Devin brings more than 22 years of financial and real estate investment banking expertise and has worked at some of the largest financial institutions in the world, including Deutsche Bank and Morgan Stanley. We conducted an extensive search prior to Devin's appointment, and could not be more pleased with his outcome. And I would like to just iterate as a former member of NNN Board and a member of the Board of Grubb & Ellis and now the interim CEO that the same rationale for merging Grubb & Ellis and NNN Realty Advisors in December 2007 still exists today.

We are very pleased with the progress of our company to date. We are very pleased with the expansion of our platforms and we are very pleased with the foundation it is laying for the future. And we continue to execute on the objectives outlined in our growth strategy.

At this point, I would like to open up the call to your questions. Sitting here, as I indicated, we have Rich, Jack, and Jeff, and myself, and we will be glad to answer any questions that you may have.

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