UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-8122

GRUBB & ELLIS COMPANY

Delaware (State or other jurisdiction of incorporation or organization)		94-1424307 (IRS Employer Identification No.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of shares outstanding of the registrant’s common stock as of October 31, 2009 was 65,180,830 shares.

 

 

EXPLANATORY NOTE

This Amendment No. 1 to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 (the “Amended 10-Q”), amends our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, filed with the Securities and Exchange Commission on November 13, 2009 (the “Original 10-Q”). This Amended 10-Q amends the Original 10-Q solely for the purpose of (i) correcting a typographical error in Part I, Item 4 with respect to the date of management’s date of evaluation of disclosure controls and procedures to reflect September 30, 2009 and (ii) correcting a typographical error in Part I, Item 2 to reflect the amount of properties acquired on behalf of sponsored programs during the three months ended September 30, 2008 as $209.9 million.

This Amended 10-Q does not reflect events occurring after the filing of the Original 10-Q and does not modify or update the disclosure in the Original 10-Q, other than the corrections noted above and the filing of certifications of our principal executive officer and principal financial officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 and Section 906 of the Sarbanes-Oxley Act of 2002. This Amended 10-Q replaces the Original 10-Q in its entirety.

Part I — FINANCIAL INFORMATION

Item 1.		Financial Statements.

GRUBB & ELLIS COMPANY

CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)

		September 30,				December 31,
		2009				2008
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	9,444			$	32,985
Restricted cash			12,476				36,047
Investment in marketable securities			631				1,510
Current portion of accounts receivable from related parties — net			7,756				22,630
Current portion of advances to related parties — net			26				2,982
Notes receivable from related party — net			9,100				9,100
Service fees receivable — net			22,208				26,987
Current portion of professional service contracts — net			3,372				4,326
Real estate deposits and pre-acquisition costs			4,127				5,961
Properties held for sale — net			22,468				78,708
Identified intangible assets and other assets held for sale — net			4,823				25,751
Prepaid expenses and other assets			14,115				23,620
Total current assets			110,546				270,607
Accounts receivable from related parties — net			13,819				11,072
Advances to related parties — net			6,897				11,499
Professional service contracts — net			8,613				10,320
Investments in unconsolidated entities			3,341				8,733
Property held for investment — net			82,808				88,699
Property, equipment and leasehold improvements — net			14,078				14,016
Identified intangible assets — net			96,455				100,631
Other assets — net			5,621				4,700
Total assets		$	342,178			$	520,277
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable and accrued expenses		$	61,179			$	70,222
Due to related parties			1,992				2,447
Current portion of line of credit			62,709				63,000
Current portion of capital lease obligations			984				333
Notes payable of properties held for sale			31,613				108,959
Liabilities of properties held for sale — net			2,376				9,257
Other liabilities			41,117				37,550
Deferred tax liability			4,822				2,080
Total current liabilities			206,792				293,848
Long-term liabilities:
Senior notes			16,277				16,277
Notes payable and capital lease obligations			107,953				107,203
Other long-term liabilities			11,262				11,875
Deferred tax liabilities			15,664				17,298
Total liabilities			357,948				446,501
Commitments and contingencies (See Note 14)			—				—
Stockholders’ (deficit) equity:
Preferred stock: $0.01 par value; 10,000,000 shares authorized as of September 30, 2009 and December 31, 2008; no shares issued and outstanding as of September 30, 2009 and December 31, 2008			—				—
Common stock: $0.01 par value; 100,000,000 shares authorized; 65,180,830 and 65,382,601 shares issued and outstanding as of September 30, 2009 and December 31, 2008, respectively			651				654
Additional paid-in capital			411,913				402,780
Accumulated deficit			(428,931	)			(333,263	)
Other comprehensive loss			(43	)			—
Total Grubb & Ellis Company stockholders’ (deficit) equity			(16,410	)			70,171
Noncontrolling interests			640				3,605
Total (deficit) equity			(15,770	)			73,776
Total liabilities and stockholders’ (deficit) equity		$	342,178			$	520,277

See accompanying notes to consolidated financial statements.

GRUBB & ELLIS COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2009				2008				2009				2008
REVENUE
Management services		$	67,456			$	63,479			$	199,636			$	185,855
Transaction services			46,321				57,502				118,793				173,191
Investment management			14,829				24,116				43,912				84,480
Rental related			7,498				8,119				22,754				25,302
Total revenue			136,104				153,216				385,095				468,828
OPERATING EXPENSE
Compensation costs			116,339				120,765				342,072				365,488
General and administrative			25,464				40,258				83,801				84,387
Depreciation and amortization			3,504				4,884				8,368				13,692
Rental related			4,961				4,337				16,159				15,384
Interest			3,741				2,947				12,490				9,928
Merger related costs			—				2,657				—				10,217
Real estate related impairments			2,393				34,778				16,615				34,778
Goodwill and intangible assets impairment			583				—				583				—
Total operating expense			156,985				210,626				480,088				533,874
OPERATING LOSS			(20,881	)			(57,410	)			(94,993	)			(65,046	)
OTHER INCOME (EXPENSE)
Equity in losses of unconsolidated entities			(224	)			(5,859	)			(1,635	)			(10,602	)
Interest income			188				234				472				757
Other income (loss)			272				(508	)			394				(3,801	)
Total other income (expense)			236				(6,133	)			(769	)			(13,646	)
Loss from continuing operations before income tax (provision) benefit			(20,645	)			(63,543	)			(95,762	)			(78,692	)
Income tax (provision) benefit			(277	)			15,943				(587	)			23,124
Loss from continuing operations			(20,922	)			(47,600	)			(96,349	)			(55,568	)
Discontinued operations
Loss from discontinued operations — net of taxes			(535	)			(14,941	)			(379	)			(18,871	)
Gain (loss) on disposal of discontinued operations — net of taxes			—				(185	)			(626	)			181
Total loss from discontinued operations			(535	)			(15,126	)			(1,005	)			(18,690	)
Net loss			(21,457	)			(62,726	)			(97,354	)			(74,258	)
Net loss attributable to noncontrolling interests			(98	)			(6,444	)			(1,686	)			(6,298	)
Net loss attributable to Grubb & Ellis Company		$	(21,359	)		$	(56,282	)		$	(95,668	)		$	(67,960	)
Basic loss per share:
Loss from continuing operations attributable to Grubb & Ellis Company		$	(0.33	)		$	(0.65	)		$	(1.49	)		$	(0.79	)
Loss from discontinued operations attributable to Grubb & Ellis Company			(0.01	)			(0.23	)			(0.02	)			(0.28	)
Net loss per share		$	(0.34	)		$	(0.88	)		$	(1.51	)		$	(1.07	)
Diluted loss per share:
Loss from continuing operations attributable to Grubb & Ellis Company		$	(0.33	)		$	(0.65	)		$	(1.49	)		$	(0.79	)
Loss from discontinued operations attributable to Grubb & Ellis Company			(0.01	)			(0.23	)			(0.02	)			(0.28	)
Net loss per share		$	(0.34	)		$	(0.88	)		$	(1.51	)		$	(1.07	)
Basic weighted average shares outstanding			63,628				63,601				63,618				63,574
Diluted weighted average shares outstanding			63,628				63,601				63,618				63,574
Dividends declared per share		$	—			$	—			$	—			$	0.2050

See accompanying notes to consolidated financial statements.

GRUBB & ELLIS COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

		For the Nine Months
		Ended September 30,
		2009				2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(97,354	)		$	(74,258	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss on sale of real estate			1,031				—
Equity in losses of unconsolidated entities			1,635				10,602
Depreciation and amortization (including amortization of signing bonuses)			12,770				28,017
Loss on disposal of property, equipment and leasehold improvements			449				312
Impairment of real estate			16,365				45,767
Impairment of goodwill and intangibles			583				—
Stock-based compensation			8,734				8,484
Compensation expense on profit sharing arrangements			102				1,716
Amortization/write-off of intangible contractual rights			776				1,179
Amortization of deferred financing costs			1,501				342
(Gain) loss on marketable equity securities			(449	)			3,344
Deferred income taxes			1,108				(28,849	)
Allowance for uncollectible accounts			12,824				10,861
Loss on write-off of real estate deposit and pre-acquisition costs			122				—
Other operating noncash gains			—				612
Changes in operating assets and liabilities:
Accounts receivable from related parties			9,750				4,635
Prepaid expenses and other assets			7,463				(24,395	)
Accounts payable and accrued expenses			(7,167	)			(31,103	)
Other liabilities			704				8,614
Net cash used in operating activities			(29,053	)			(34,120	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment			(2,332	)			(3,359	)
Tenant improvements and capital expenditures			(2,571	)			(2,958	)
Purchases of marketable equity securities			(4,231	)			(505	)
Proceeds from sale of marketable equity securities			—				2,653
Advances to related parties			(3,808	)			(10,169	)
Proceeds from repayment of advances to related parties			1,934				22,543
Payments to related parties			(455	)			(2,217	)
Origination of notes receivable to related parties			—				(15,100	)
Repayment of notes receivable from related parties			—				13,600
Investments in unconsolidated entities			(3,963	)			(673	)
Distributions of capital from unconsolidated entities			91				603
Acquisition of properties			—				(111,690	)
Proceeds from sale of properties			93,471				—
Real estate deposits and pre-acquisition costs			(2,565	)			(56,568	)
Proceeds from collection of real estate deposits and pre-acquisition costs			4,277				81,851
Restricted cash			1,337				15,270
Net cash provided by (used in) investing activities			81,185				(66,719	)
CASH FLOWS FROM FINANCING ACTIVITIES
Advances on line of credit			11,389				55,000
Repayments on line of credit			(11,389	)			—
Borrowings on notes payable			936				94,149
Repayments of notes payable and capital lease obligations			(79,154	)			(56,219	)
Other financing costs			(137	)			52
Deferred financing costs			(1,456	)			(2,693	)
Net proceeds from the issuance of common stock			—				314
Repurchase of common stock			—				(1,840	)
Dividends paid to common stockholders			—				(15,129	)
Contributions from noncontrolling interests			5,827				15,323
Distributions to noncontrolling interests			(1,689	)			(3,020	)
Net cash (used in) provided by financing activities			(75,673	)			85,937
NET DECREASE IN CASH AND CASH EQUIVALENTS			(23,541	)			(14,902	)
Cash and cash equivalents — Beginning of period			32,985				49,328
Cash and cash equivalents — End of period		$	9,444			$	34,426
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
Issuance of warrants		$	534			$	—
Capital lease obligations		$	2,274			$	—
Deconsolidation of assets held by variable interest entities		$	—			$	243,398
Deconsolidation of liabilities held by variable interest entities		$	—			$	198,409
Deconsolidation of sponsored mutual fund		$	5,517			$	—

See accompanying notes to consolidated financial statements.

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview

Grubb & Ellis Company (“the Company” or “Grubb & Ellis”), a Delaware corporation founded over 50 years ago in Northern California, is a commercial real estate services and investment management firm. 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 sponsor of public non-traded real estate investment trusts (“REITs”), as well as a sponsor of tax deferred tenant-in-common (“TIC”) 1031 property exchanges and other investment programs. Upon the closing of the Merger, a change of control occurred. The former stockholders of NNN acquired approximately 60% of the Company’s issued and outstanding common stock.

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 market research and local market expertise.

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

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned controlled subsidiaries, variable interest entities (“VIEs”) in which the Company is the primary beneficiary, and partnerships/limited liability companies (“LLCs”) in which the Company is the managing member or general partner and the other partners/members lack substantive rights (hereinafter collectively referred to as the “Company”), and are prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2008. In the opinion of management, all adjustments necessary for a fair presentation of the financial position and results of operations for the interim periods presented have been included in these financial statements and are of a normal and recurring nature.

The Company consolidates entities that are VIEs when the Company is deemed to be the primary beneficiary of the VIE. For entities in which (i) the Company is not deemed to be the primary beneficiary, (ii) the Company’s ownership is 50.0% or less and (iii) the Company has the ability to exercise significant influence, the Company uses the equity accounting method (i.e. at cost, increased or decreased by the Company’s share of earnings or losses, plus contributions less distributions). The Company also uses the equity method of accounting for jointly-controlled tenant-in-common interests. As reconsideration events occur, the Company will reconsider its determination of whether an entity is a VIE and who the primary beneficiary is to determine if there is a change in the original determinations and will report such changes on a quarterly basis.

As of September 30, 2009, the Company has classified two of its remaining four properties as properties held for sale in its consolidated balance sheets and has included the operations of such properties in discontinued operations in the consolidated statements of operations for all periods presented as required by the Property, Plant and Equipment Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification”). All four remaining properties had been previously classified as held for sale in the Annual Report on Form 10-K/A for the year ended December 31, 2008 and the Quarterly Report on Form 10-Q for the period ended March 31, 2009. However, as of June 30, 2009, one of these properties, and as of September 30, 2009 a second of these properties, no longer met the held for sale criteria under the requirements of the Property, Plant and Equipment Topic of the FASB Codification and, accordingly, each was reclassified to properties held for investment in the consolidated balance sheets with the operations of such property included in continuing operations in the consolidated statements of operations for all periods presented.

Use of Estimates

The financial statements have been prepared in conformity with GAAP, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities (including disclosure of contingent assets and liabilities) as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

Reclassifications

Certain reclassifications have been made to prior year and prior period amounts in order to conform to the current period presentation. These reclassifications have no effect on reported net loss and are of a normal recurring nature.

Restricted Cash

Restricted cash is comprised primarily of cash and loan impound reserve accounts for property taxes, insurance, capital improvements, and tenant improvements related to consolidated properties.

Fair Value Measurements

In September 2006, the FASB issued the requirements of the Fair Value Measurements and Disclosures Topic of the FASB Codification. The Topic defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value instruments. In February 2008, the FASB amended the Topic to delay the effective date of the Fair Value Measurements and Disclosures for non-financial assets and non-financial 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). There was no effect on the Company’s consolidated financial statements as a result of the adoption of the Topic as of January 1, 2008 as it relates to financial assets and financial liabilities. For items within its scope, the amended Fair Value Measurements and Disclosures Topic deferred the effective date of Fair Value Measurements and Disclosures to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company adopted the requirements of the Topic as it relates to non-financial assets and non-financial liabilities in the first quarter of 2009, which did not have a material impact on the consolidated financial statements.

The Fair Value Measurements and Disclosures Topic establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. Level 1 inputs are the highest priority and are quoted prices in active markets for identical assets or liabilities. Level 2 inputs reflect other than quoted prices included in Level 1 that are either observable directly or through corroboration with observable market data. Level 3 inputs are unobservable inputs, due to little or no market activity for the asset or liability, such as internally-developed valuation models.

The following table presents changes in financial and nonfinancial assets measured at fair value on either a recurring or nonrecurring basis for the nine months ended September 30, 2009:

						Quoted Prices in
						Active Markets				Significant Other				Significant
						for Identical				Observable				Unobservable				Total
		September 30,				Assets				Inputs				Inputs				Impairment
Assets (in thousands)		2009				Level 1				Level 2				Level 3				Losses
Investments in marketable equity securities		$	631			$	631			$	—			$	—			$	—
Properties held for sale		$	22,468			$	—			$	—			$	22,468			$	250
Property held for investment		$	82,808			$	—			$	—			$	82,808			$	(7,050	)
Investments in unconsolidated entities		$	3,341			$	—			$	—			$	3,341			$	(9,565	)

Fair Value of Financial Instruments

The Financial Instruments Topic, requires disclosure of fair value of financial instruments, whether or not recognized on the face of the balance sheet, for which it is practical to estimate that value. The Topic defines fair value as the quoted market prices for those instruments that are actively traded in financial markets. In cases where quoted market prices are not available, fair values are estimated using present value or other valuation techniques. The fair value estimates are made at the end of each quarter based on available market information and judgments about the financial instrument, such as estimates of timing and amount of expected future cash flows. Such estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument, nor do they consider that tax impact of the realization of unrealized gains or losses. In many cases, the fair value estimates cannot be substantiated by comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instrument.

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

As of September 30, 2009, the fair values of the Company’s notes payable, senior notes and line of credit were calculated to be approximately $120.3 million, $15.8 million and $42.6 million, respectively, compared to the carrying values of $138.6 million, $16.3 million and $63.0 million, respectively. The calculation was based on assumed discount rates ranging from 8.25% to 10.25%. In addition, the First Credit Facility Letter Amendment (as defined and discussed in Note 11) granted the Company a one-time right, exercisable by November 30, 2009, to prepay the Credit Facility (as defined in Note 11) in full for a reduced principal amount equal to 65% of the aggregate principal amount of the Credit Facility then outstanding. Calculation of the fair value of the line of credit assumed a high probability the Credit Facility would be prepaid at the reduced principal amount.

As of December 31, 2008, the fair values of the Company’s notes payable, senior notes and lines of credit, which were calculated based on assumed discount rates ranging from 8.4% to 10.4%, were approximately $195.4 million, $15.5 million and $60.0 million, respectively, compared to the carrying values of $216.0 million, $16.3 million and $63.0 million, respectively. The amounts recorded for accounts receivable, notes receivable, advances and accounts payable and accrued liabilities approximate fair value due to their short-term nature.

Noncontrolling Interests

In December 2007, the FASB issued an amendment to the requirements of the Consolidation Topic. The Consolidation Topic established new accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. The Topic requires that noncontrolling interests be presented as a component of consolidated stockholders’ equity, eliminates minority interest accounting such that the amount of net income attributable to the noncontrolling interests is presented as part of consolidated net income in the accompanying consolidated statements of operations and not as a separate component of income and expense, and requires that upon any changes in ownership that result in the loss of control of the subsidiary, the noncontrolling interest be re-measured at fair value with the resultant gain or loss recorded in net income. The requirements of the Topic became effective for fiscal years beginning on or after December 15, 2008. The Company adopted the requirements of the Topic on a retrospective basis on January 1, 2009. The adoption of the requirements of the Topic had an impact on the presentation and disclosure of noncontrolling (minority) interests in the consolidated financial statements. As a result of the retrospective presentation and disclosure requirements of the Topic, the Company is required to reflect the change in presentation and disclosure for all periods presented. Principal effect on the consolidated balance sheet as of December 31, 2008 related to the adoption of the requirements of the Topic was the change in presentation of minority interest from mezzanine to redeemable noncontrolling interest, as reported herein. Additionally, the adoption of the requirements of the Topic had the effect of reclassifying (income) loss attributable to noncontrolling interest in the consolidated statements of operations from minority interest to separate line items. The Topic also requires that net income (loss) be adjusted to include the net (income) loss attributable to the noncontrolling interest, and a new line item for net income (loss) attributable to controlling interest be presented in the consolidated statements of operations.

A noncontrolling interest relates to the interest in the consolidated entities that are not wholly owned by the Company. As a result of adopting the requirements of the Consolidation Topic on January 1, 2009, the Company has restated the December 31, 2008 consolidated balance sheet, as well as the statement of operations for the three and nine months ended September 30, 2008 as follows:

		As Previously
As of December 31, 2008		Reported				Adjustment				As Adjusted
Minority interests		$	3,605			$	(3,605	)		$	—
Noncontrolling interest equity		$	—			$	3,605			$	3,605
Total equity		$	70,171			$	3,605			$	73,776

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

		As Previously
Three Months Ended September 30, 2008		Reported				Adjustment				As Adjusted
Minority interest in loss		$	6,444			$	(6,444	)		$	—
Net loss		$	(56,282	)		$	(6,444	)		$	(62,726	)
Loss attributable to noncontrolling interests		$	—			$	(6,444	)		$	(6,444	)

		As Previously
Nine Months Ended September 30, 2008		Reported				Adjustment				As Adjusted
Minority interest in income		$	6,298			$	(6,298	)		$	—
Net loss		$	(67,960	)		$	(6,298	)		$	(74,258	)
Income attributable to noncontrolling interests		$	—			$	(6,298	)		$	(6,298	)

Recently Issued Accounting Pronouncements

The Company follows the requirements of the Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification. The Topic defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value instruments. In February 2008, the FASB amended the Topic to delay the effective date of the Fair Value Measurements and Disclosures for non-financial assets and non-financial 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). There was no effect on the Company’s consolidated financial statements as a result of the adoption of the Topic as of January 1, 2008 as it relates to financial assets and financial liabilities. For items within its scope, the amended Fair Value Measurements and Disclosures Topic defered the effective date of Fair Value Measurements and Disclosures to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company adopted the requirements of the Topic as it relates to non-financial assets and non-financial liabilities in the first quarter of 2009, which did not have a material impact on the consolidated financial statements.

In December 2007, the FASB issued an amendment to the requirements of the Business Combinations Topic. The amended Topic requires an acquiring entity to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. The Topic changed the accounting treatment and disclosure for certain specific items in a business combination. The Topic 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. The Company adopted the requirements of the Topic on a prospective basis on January 1, 2009. The adoption of the requirements of the Topic will materially affect the accounting for any future business combinations.

In March 2008, the FASB issued an amendment to the requirements of the Derivatives and Hedging Topic. The requirements of the amended Topic are intended to improve financial reporting of derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. The requirements of the amended Topic achieve these improvements by requiring disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entity’s liquidity by requiring disclosure of derivative features that are credit risk-related. Finally, it requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments. The requirements of the amended Topic became effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company adopted the requirements of the amended Topic in the first quarter of 2009. The adoption of the requirements of the amended Topic did not have a material impact on the consolidated financial statements.

In April 2008, the FASB issued an amendment to the requirements of Intangibles-Goodwill and Other Topic. The requirements of the amended Topic are intended to improve the consistency between the useful life of recognized intangible assets and the period of expected cash flows used to measure the fair value of the assets. The amendment changes the factors an entity should consider in developing renewal or extension assumptions in determining the useful life of recognized intangible assets. In addition the amended Topic requires disclosure of the entity’s accounting policy regarding costs incurred to renew or extend the term of recognized intangible assets, the weighted average period to the next renewal or extension, and the total amount of capitalized costs incurred to renew or extend the term of recognized intangible assets. The requirements of the amended Topic are effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. The Company adopted the requirements of the amended Topic on January 1, 2009. The adoption of the requirements of the amended Topic did not have a material impact on the consolidated financial statements.

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

In June 2008, the FASB issued an amendment to the requirements of the Earnings Per Share Topic, which addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the computation of earnings per share under the two-class method which apply to the Company because it grants instruments to employees in share-based payment transactions that meet the definition of participating securities, is effective retrospectively for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. The Company adopted the requirements of the amended Topic in the first quarter of 2009. The adoption of the requirements of the amended Topic did not have a material impact on the consolidated financial statements.

In April 2009, the FASB issued an amendment to the requirements of the Financial Instruments Topic. The amended Topic relates to fair value disclosures for any financial instruments that are not currently reflected on the balance sheet at fair value. Prior to issuing the requirements of the amended Topic, fair values for these assets and liabilities were only disclosed once a year. The amended Topic now requires these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value. The adoption of the requirements of the amended Topic did not have a material impact on the consolidated financial statements.

The requirements of the Investments-Debt and Equity Securities Topic, is intended to bring greater consistency to the timing of impairment recognition, and provide greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold. The Topic also requires increased and more timely disclosures regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. The adoption of the requirements of the Topic did not have a material impact on the consolidated financial statements.

In April 2009, the FASB issued an amendment to the requirements of the Fair Value Measurements and Disclosures Topic. The Topic relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales. It states that the objective of fair value measurement is to reflect how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions. Specifically, the requirements of the Topic reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive. The adoption of the amended Topic did not have a material impact on the consolidated financial statements.

In April 2009, the FASB issued an amendment to the requirements of the Business Combinations Topic. The requirements of the Business Topic clarifies to address application issues on the accounting for contingencies in a business combination. The requirements of the amended Topic is effective for assets or liabilities arising from contingencies in business combinations acquired on or after January 1, 2009. The adoption of the requirements of the amended Topic did not have a material impact on the consolidated financial statements.

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

In June 2009, the FASB issued an amendment to the requirements of the Transfers and Servicing Topic, which addresses the effects of eliminating the qualifying SPE concept and redefines who the primary beneficiary is for purposes of determining which variable interest holder should consolidated the variable interest entity. The requirements of the amended Topic become effective for annual periods beginning after November 15, 2009. The Company is reviewing any impact this may have on the consolidated financial statements.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles — a Replacement of FASB Statement No. 162 (“SFAS No. 168”). SFAS No. 168 established that the FASB Accounting Standards Codification (“the Codification”) became the single official source of authoritative U.S. GAAP, other than guidance issued by the SEC. Following this statement, the FASB will not issue new standards in the form of Statements, Staff Positions or Emerging Issues Task Force Abstracts. Instead, the FASB will issue Accounting Standards Updates. All guidance contained in the Codification carries an equal level of authority. The GAAP hierarchy was modified to include only two levels of GAAP: authoritative and non-authoritative. All non-grandfathered, non-SEC accounting literature not included in the Codification became non-authoritative. The Codification, which changes the referencing of financial standards, became effective for interim and annual periods ending on or after September 15, 2009. The adoption of SFAS No. 168 did have a material impact on the consolidated financial statements.

The Company has adopted the requirements of the Subsequent Events Topic effective beginning with the quarter ended September 30, 2009 and has evaluated for disclosure subsequent events that have occurred up through November 13, 2009, the date of issuance of these financial statements.

2. MARKETABLE SECURITIES

The historical cost and estimated fair value of the available-for-sale marketable securities held by the Company are as follows:

		As of September 30, 2009																As of December 31, 2008
														Fair																Fair
		Historical				Gross Unrealized								Market				Historical				Gross Unrealized								Market
(In thousands)		Cost				Gains				Losses				Value				Cost				Gains				Losses				Value
		(Unaudited)
Equity securities		$	532			$	—			$	(43	)		$	489			$	—			$	—			$	—			$	—

There were no sales of marketable equity securities during the three and nine month periods ended September 30, 2009. Sales of marketable equity securities resulted in realized losses of approximately $200,000 and $1.8 million during the three and nine months ended September 30, 2008, respectively. The Company recognized $1.6 million of these losses during the six months ended June 30, 2008, prior to the sale of the securities, as the Company believed that the decline in value of these securities was other than temporary.

Investments in Limited Partnerships

The Company acquired Grubb & Ellis Alesco Global Advisors, LLC (“Alesco”) in 2007 and through this subsidiary the Company serves as general partner and investment advisor to one hedge fund limited partnership and as investment advisor to three mutual funds as of September 30, 2009. The limited partnership is required to be consolidated in accordance with the requirements of the Consolidation Topic. As of December 31, 2008, Alesco served as general partner and investment advisor to five hedge fund limited partnerships and as investment advisor to one mutual fund. During the nine months ended September 30, 2009, four of the hedge fund limited partnerships were liquidated.

For the three and nine months ended September 30, 2009, Alesco had investment income of approximately $274,000 and $629,000, respectively, which is reflected in other income (expense) and offset in noncontrolling interest in loss of consolidated entities on the statements of operations. For the three and nine months ended September 30, 2008, Alesco had investment losses of approximately $325,000 and $1.6 million, respectively, which are reflected in other expense and offset in noncontrolling interest in loss of consolidated entities on the statements of operations. Alesco earned approximately $25,000 and $99,000 of management fees based on ownership interest under the agreements for the nine months ended September 30, 2009 and 2008, respectively. As of September 30, 2009 and December 31, 2008, these limited partnerships had assets of approximately $142,000 and $1.5 million, respectively, primarily consisting of exchange traded marketable securities, including equity securities and foreign currencies.

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

The following table reflects trading securities and their original cost, gross unrealized appreciation and depreciation, and estimated market value:

		As of September 30, 2009																As of December 31, 2008
														Fair																Fair
		Historical				Gross Unrealized								Market				Historical				Gross Unrealized								Market
(In thousands)		Cost				Gains				Losses				Value				Cost				Gains				Losses				Value
		(Unaudited)
Equity securities		$	170			$	—			$	(28	)		$	142			$	1,933			$	12			$	(435	)		$	1,510

		For the Three Months Ended September 30, 2009																For the Three Months Ended September 30, 2008
		Investment																Investment
(In thousands)		Income				Realized				Unrealized				Total				Income				Realized				Unrealized				Total
		(Unaudited)																(Unaudited)
Equity securities		$	15			$	45			$	220			$	280			$	108			$	(568	)		$	212			$	(248	)
Less investment expenses			(6	)			—				—				(6	)			(77	)			—				—				(77	)
		$	9			$	45			$	220			$	274			$	31			$	(568	)		$	212			$	(325	)
		For the Nine Months Ended September 30, 2009																For the Nine Months Ended September 30, 2008
		Investment																Investment
(In thousands)		Income				Realized				Unrealized				Total				Income				Realized				Unrealized				Total
		(Unaudited)																(Unaudited)
Equity securities		$	206			$	(191	)		$	640			$	655			$	237			$	(2,172	)		$	622			$	(1,313	)
Less investment expenses			(26	)			—				—				(26	)			(244	)			—				—				(244	)
		$	180			$	(191	)		$	640			$	629			$	(7	)		$	(2,172	)		$	622			$	(1,557	)

3. RELATED PARTIES

Related party balances are summarized below:

Accounts Receivable

Accounts receivable from related parties consisted of the following:

		September 30,				December 31,
(In thousands)		2009				2008
Accrued property management fees		$	16,492			$	23,298
Accrued lease commissions			8,755				7,720
Accounts receivable from sponsored REITs			4,545				4,768
Accrued asset management fees			2,048				1,725
Other accrued fees			1,997				3,372
Accrued real estate acquisition fees			698				1,834
Other receivables			178				647
Total			34,713				43,364
Allowance for uncollectible receivables			(13,138	)			(9,662	)
Accounts receivable from related parties — net			21,575				33,702
Less portion classified as current			(7,756	)			(22,630	)
Non-current portion		$	13,819			$	11,072

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

Advances to Related Parties

The Company makes advances to affiliated real estate entities under management in the normal course of business. Such advances are uncollateralized, have payment terms of one year or less unless extended by the Company, and generally bear interest at a range of 6.0% to 12.0% per annum. The advances consisted of the following:

		September 30,				December 31,
(In thousands)		2009				2008
Advances to properties of related parties		$	15,663			$	14,714
Advances to related parties			3,281				2,937
Total			18,944				17,651
Allowance for uncollectible advances			(12,021	)			(3,170	)
Advances to related parties — net			6,923				14,481
Less portion classified as current			(26	)			(2,982	)
Non-current portion		$	6,897			$	11,499

As of September 30, 2009, accounts receivable totaling $310,000 is due from a program 30.0% owned and managed by Anthony W. Thompson, the Company’s former Chairman who subsequently resigned in February 2008. The receivable of $310,000 has been fully reserved for and is included in the allowance for uncollectible advances. On November 4, 2008, the Company made a formal written demand to Mr. Thompson for these monies.

As of December 31, 2008, advances to a program 40.0% owned and, as of April 1, 2008, managed by Mr. Thompson, totaled $983,000, which includes $61,000 in accrued interest. As of September 30, 2009, the total outstanding balance of $983,000, inclusive of $61,000 in accrued interest, was past due. The total amount of $983,000 million has been reserved for and is included in the allowance for uncollectible advances. On November 4, 2008 and April 3, 2009, the Company made formal written demands to Mr. Thompson for these monies.

Notes Receivable From Related Party

In December 2007, the Company advanced funds to Grubb & Ellis Apartment REIT, Inc. (“Apartment REIT”) on an unsecured basis. The unsecured note required monthly interest-only payments which began on January 1, 2008. The balance owed to the Company as of December 31, 2007 which consisted of $7.6 million in principal was repaid in full in the first quarter of 2008.

In June 2008, the Company advanced $3.7 million to Apartment REIT on an unsecured basis. The unsecured note originally had a maturity date of December 27, 2008 and bore interest at a fixed rate of 4.95% per annum. On November 10, 2008, the Company extended the maturity date to May 10, 2009 and adjusted the interest rate to a fixed rate of 5.26% per annum. The note required monthly interest-only payments beginning on August 1, 2008 and provided for a default interest rate in an event of default equal to 2.00% per annum in excess of the stated interest rate. Effective May 10, 2009 the Company entered into a second extension agreement with Apartment REIT, extending the maturity date to November 10, 2009. The new terms of the extension continue to require monthly interest-only payments beginning May 1, 2009 and bears interest at a fixed rate of 8.43% with the original default rate.

In September 2008, the Company advanced an additional $5.4 million to Apartment REIT on an unsecured basis. The unsecured note originally had a maturity date of March 15, 2009 and bore interest at a fixed rate of 4.99% per annum. Effective March 9, 2009, the Company extended the maturity date to September 15, 2009 and adjusted the interest rate to a fixed rate of 5.00% per annum. The note requires monthly interest-only payments beginning on October 1, 2008 and provides for a default interest rate in an event of default equal to 2.00% per annum in excess of the stated interest rate.

There were no advances to or repayments made by Apartment REIT during the nine months ending September 30, 2009. As of September 30, 2009, the balance owed by Apartment REIT to the Company on the two unsecured notes totaled $9.1 million in principal with no interest outstanding.

On November 10, 2009, the Company consolidated the aforementioned $3.7 million and 5.4 million unsecured notes into the Consolidated Promissory Note with Apartment REIT whereby the two unsecured promissory notes receivable were cancelled and consolidated the outstanding principal amounts of the promissory notes into the Consolidated Promissory Note. The Consolidated Promissory Note has an outstanding principal amount of $9,100,000, an interest rate of 4.5% per annum, a default interest rate of 2.0% in excess of the interest rate then in effect, and a maturity date of January 1, 2011. The interest rate payable under the Consolidated Promissory Note is subject to a one-time adjustment to a maximum rate of 6.0% per annum, which will be evaluated and may be adjusted by the Company, in its sole discretion, on July 1, 2010.

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

4. VARIABLE INTEREST ENTITIES

The determination of the appropriate accounting method with respect to the Company’s variable interest entities (“VIEs”), including joint ventures, is based on the requirements of the Consolidation Topic. The Company consolidates any VIE for which it is the primary beneficiary.

The Company determines if an entity is a VIE under the requirements of the Consolidation Topic based on several factors, including whether the entity’s total equity investment at risk upon inception is sufficient to finance the entity’s activities without additional subordinated financial support. The Company makes judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, then a quantitative analysis, if necessary. In a quantitative analysis, the Company incorporates various estimates, including estimated future cash flows, asset hold periods and discount rates, as well as estimates of the probabilities of various scenarios occurring. If the entity is a VIE, the Company then determines whether to consolidate the entity as the primary beneficiary. The Company is deemed to be the primary beneficiary of the VIE and consolidates the entity if the Company will absorb a majority of the entity’s expected losses, receive a majority of the entity’s expected residual returns or both. As reconsideration events occur, the Company will reconsider its determination of whether an entity is a VIE and who the primary beneficiary is to determine if there is a change in the original determinations and will report such changes on a quarterly basis.

The Company’s Investment Management segment is a sponsor of TIC Programs and related formation LLCs. As of September 30, 2009 and December 31, 2008, the Company had investments in seven LLCs that are VIEs in which the Company is the primary beneficiary. These seven LLCs hold interests in the Company’s TIC investments. The carrying value of the assets and liabilities for these consolidated VIEs as of September 30, 2009 was $2.3 million and $17,000, respectively. The carrying value of the assets and liabilities for these consolidated VIEs as of December 31, 2008 was $3.7 million and $309,000, respectively. In addition, each consolidated VIE is joint and severally liable, along with the other investors in each respective TIC, on the non-recourse mortgage debt related to the VIE’s interests in the respective TIC investment. This non-recourse mortgage debt totaled $277.2 million and $277.8 million as of September 30, 2009 and December 31, 2008, respectively. This non-recourse mortgage debt is not consolidated as the LLCs account for the interests in the Company’s TIC investments under the equity method and the non recourse mortgage debt does not meet the criteria under the requirements of the Transfers and Servicing Topic for recognizing the share of the debt assumed by the other TIC interest holders for consolidation. The Company does consider the third party TIC holders’ ability and intent to repay their share of the joint and several liability in evaluating the recovery.

If the interest in the entity is determined to not be a VIE under the requirements of the Consolidation Topic, then the entity is evaluated for consolidation under the requirements of the Investments-Equity Method and Joint Ventures Topic, as amended by the requirements of the Consolidation Topic.

As of September 30, 2009 and December 31, 2008 the Company had certain entities that were determined to be VIEs that did not meet the consolidation requirements of the Consolidation Topic. The unconsolidated VIEs are accounted for under the equity method. The aggregate investment carrying value of the unconsolidated VIEs was $1.0 million and $5.0 million as of September 30, 2009 and December 31, 2008, respectively, and was classified under Investments in Unconsolidated Entities in the consolidated balance sheet. The Company’s maximum exposure to loss as a result of its investments in unconsolidated VIEs is typically limited to the aggregate of the carrying value of the investment and future funding commitments. During the nine months ended September 30, 2009, the Company funded a total of $2.6 million related to TIC Program reserves. Future funding commitments as of September 30, 2009 for the unconsolidated VIEs totaled $1.5 million to fund TIC Program reserves. In addition, as of September 30, 2009 and December 31, 2008, these unconsolidated VIEs are joint and severally liable on non-recourse mortgage debt totaling $395.1 million and $385.3 million, respectively. Although the mortgage debt is non-recourse to the VIE that holds the TIC interest, the Company has full recourse guarantees on a portion of such mortgage debt totaling $3.5 million as of September 30, 2009 and December 31, 2008, respectively, for which the Company has recorded no liability as of September 30, 2009 and December 31, 2008, respectively. This mortgage debt is not consolidated as the LLCs account for the interests in the Company’s TIC investments under the equity method and the non recourse mortgage debt does not meet the requirements of Transfers and Servicing Topic for recognizing the share of the debt assumed by the other TIC interest holders for consolidation. The Company considers the third party TIC holders’ ability and intent to repay their share of the joint and several liability in evaluating the recovery. In evaluating the recovery of the TIC investment, the Company evaluated the likelihood that the lender would foreclose on the VIEs’ interest in the TIC to satisfy the obligation. See Note 5 — Investments in Unconsolidated Entities for additional information.

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

5. INVESTMENTS IN UNCONSOLIDATED ENTITIES

As of September 30, 2009 and December 31, 2008, the Company held investments in five joint ventures totaling $0.5 million and $3.8 million, which represent a range of 5.0% to 10.0% ownership interest in each property. In addition, pursuant to the requirements of the Consolidation Topic, the Company has consolidated seven LLCs which have investments in unconsolidated entities totaling $2.3 million and $3.7 million as of September 30, 2009 and December 31, 2008, respectively. The remaining amounts within investments in unconsolidated entities are related to various LLCs, which represent ownership interests of less than 1.0%.

At December 31, 2007, Legacy Grubb & Ellis owned approximately 5.9 million shares of common stock of Grubb & Ellis Realty Advisors, Inc. (“GERA”), which was a publicly traded special purpose acquisition company, which represented approximately 19% of the outstanding common stock. Legacy Grubb & Ellis also owned approximately 4.6 million GERA warrants which were exercisable into additional GERA common stock, subject to certain conditions. As part of the Merger, the Company recorded each of these investments at fair value on December 7, 2007, the date they were acquired, at a total investment of approximately $4.5 million.

All of the officers of GERA were also officers or directors of Legacy Grubb & Ellis, although such persons did not receive any compensation from GERA in their capacity as officers of GERA. Due to the Company’s ownership position and influence over the operating and financial decisions of GERA, the Company’s investment in GERA was accounted for within the Company’s consolidated financial statements under the equity method of accounting.

On February 28, 2008, a special meeting of the stockholders of GERA was held to vote on, among other things, a proposed transaction with the Company. GERA failed to obtain the requisite consents of its stockholders to approve the proposed business transaction and at a subsequent special meeting of the stockholders of GERA held on April 14, 2008, the stockholders of GERA approved the dissolution and plan of liquidation of GERA. The Company did not receive any funds or other assets as a result of GERA’s dissolution and liquidation.

As a consequence, the Company wrote off its investment in GERA and other advances to that entity in the first quarter of 2008 and recognized a loss of approximately $5.8 million which is recorded in equity in losses on the consolidated statement of operations and is comprised of $4.5 million related to stock and warrant purchases and $1.3 million related to operating advances and third party costs, which included an unrealized loss previously reflected in accumulated other comprehensive loss.

6. PROPERTY HELD FOR INVESTMENT

Property held for investment consisted of the following:

				September 30,				December 31,
(In thousands)		Useful Life		2009				2008
Building and capital improvement		39 years		$	73,712			$	79,315
Tenant improvement		1–12 years			6,653				5,612
Accumulated depreciation					(7,037	)			(6,519	)
Total					73,328				78,408
Land					9,480				10,291
Property held for investment — net				$	82,808			$	88,699

The Company recognized $576,000 of depreciation expense related to the properties held for investment for the three and nine months ended September 30, 2009. The Company holds two properties for investment. Both of these properties were previously held for sale and one was reclassified as held for investment as of June 30, 2009 and the other was reclassified as held for investment as of September 30, 2009. During the periods each property was held for sale, the Company did not record any depreciation expense related to the property. In accordance with the provisions of the Property, Plant, and Equipment Topic, management determined that, for properties held for investment, the carrying value of each property before the property was classified as held for sale adjusted for any depreciation and amortization expense and impairment losses that would have been recognized had the asset been continuously classified as held for investment was greater than the carrying value of the property at the date of the subsequent decision not to sell. As such, the Company made no additional adjustments to the carrying value of either asset as of September 30, 2009.

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

7. IDENTIFIED INTANGIBLE ASSETS

Identified intangible assets consisted of the following:

				September 30,				December 31,
(In thousands)		Useful Life		2009				2008
Contract rights
Contract rights, established for the legal right to future disposition fees of a portfolio of real estate properties under contract		Amortize per disposition transactions		$	11,342			$	11,924
Accumulated amortization					(4,700	)			(4,700	)
Contract rights, net					6,642				7,224
Other identified intangible assets
Trade name		Indefinite			64,100				64,100
Affiliate agreement		20 years			10,600				10,600
Customer relationships		5 to 7 years			5,400				5,436
Internally developed software		4 years			6,200				6,200
Other contract rights		5 to 7 years			1,163				1,418
Non-compete and employment agreements		3 to 4 years			97				97
					87,560				87,851
Accumulated amortization					(5,890	)			(3,548	)
Other identified intangible assets, net					81,670				84,303
Identified intangible assets — property
In place leases and tenant relationships		1 to 104 months			11,510				11,807
Above market leases		1 to 92 months			2,364				2,364
					13,874				14,171
Accumulated amortization					(5,731	)			(5,067	)
Identified intangible assets, net — property					8,143				9,104
Total identified intangible assets, net				$	96,455			$	100,631

Amortization expense recorded for contract rights was approximately $193,000 and $1.2 million for the three and nine months ended September 30, 2008. No amortization expense was recognized during the three and nine months ended September 30, 2009 related to the contract rights. Amortization expense is charged as a reduction to investment management revenue in the applicable period. During the period of future real property sales, the amortization of the contract rights for intangible assets will be applied based on the net relative value of disposition fees realized. The intangible contract rights represent the legal right to future disposition fees of a portfolio of real estate properties under contract. As a result of the current economic environment, a portion of these disposition fees may not be recoverable. Based on our analysis for the current and projected property values, condition of the properties and status of mortgage loans payable associated with these contract rights, the Company determined that there are certain properties for which receipt of disposition fees was improbable. As a result, the Company recorded an impairment charge of approximately $583,000 related to the impaired intangible contract rights as of September 30, 2009.

Amortization expense recorded for the other identified intangible assets was approximately $796,000 and $869,000 for the three months ended September 30, 2009 and 2008, respectively, and approximately $2.4 million and $2.6 million for the nine months ended September 30, 2009 and 2008, respectively. Amortization expense is included as part of operating expense in the accompanying consolidated statement of operations.

Amortization expense recorded for the in place leases and tenant relationships was approximately $343,000 and $1.1 million for the three and nine months ended September 30, 2008, respectively. The Company recorded approximately $280,000 of amortization expense for the three and nine months ended September 30, 2009 related to in place leases and tenant relationships. Amortization expense is included as part of operating expense in the accompanying consolidated statement of operations.

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

Amortization expense recorded for the above market leases was approximately $119,000 and $136,000 for the three months ended September 30, 2009 and 2008, respectively, and approximately $384,000 and $416,000 for the nine months ended September 30, 2009 and 2008, respectively. Amortization expense is charged as a reduction to rental related revenue in the accompanying consolidated statement of operations.

8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

		September 30,				December 31,
(In thousands)		2009				2008
Accounts payable		$	15,256			$	14,323
Salaries and related costs			13,977				13,643
Accrued liabilities			11,922				11,502
Bonuses			9,131				9,741
Broker commissions			7,489				14,002
Property management fees and commissions due to third parties			2,699				2,940
Severance			207				2,957
Interest			468				651
Other			30				463
Total		$	61,179			$	70,222

Notes payable and capital lease obligations consisted of the following:

		September 30,				December 31,
(In thousands)		2009				2008
Mortgage debt payable to a financial institution collateralized by real estate held for investment. Fixed interest rate of 6.29% per annum as of September 30, 2009. The note is non-recourse up to $60 million with a $10 million recourse guarantee and matures in February 2017. As of September 30, 2009, note requires monthly interest-only payments		$	70,000			$	70,000
Mortgage debt payable to financial institution collateralized by real estate held for investment. Fixed interest rate of 6.32% per annum as of September 30, 2009. The non-recourse note matures in July 2014. As of September 30, 2009, note requires monthly interest-only payments			37,000				37,000
Capital lease obligations			1,937				536
Total			108,937				107,536
Less portion classified as current			(984	)			(333	)
Non-current portion		$	107,953			$	107,203

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

Notes payable of properties held for sale consisted of the following:

		September 30,				December 31,
(In thousands)		2009				2008
Mortgage debt payable to a financial institution collateralized by real estate held for sale. The non-recourse mortgage note charges variable interest rate based on the higher of LIBOR plus 3.00% or 6.00%. The applicable interest rate was 6.00% per annum as of September 30, 2009. The notes require monthly interest-only payments and matured on July 9, 2009		$	31,613			$	30,677
Mortgage debt payable to a financial institution collateralized by real estate held for sale. The non-recourse mortgage note charges variable interest rate based on the London Interbank Offered Rate (“LIBOR”) plus 2.50%			—				78,000
Unsecured notes payable to third-party investors with fixed interest at 6.00% per annum and matures on December 2011. Principal and interest payments are due quarterly			—				282
Total		$	31,613			$	108,959

The mortgage note payable of $31.6 million related to properties held for sale at September 30, 2009 million matured on July 9, 2009. There is no assurance that the loan will be extended. However, the Company does not expect any significant impact to the financial condition or cash flows of the Company should the loan not be renewed due to the non-recourse nature of the loan.

11. LINE OF CREDIT

On December 7, 2007, the Company entered into a $75.0 million credit agreement by and among the Company, the guarantors named therein, and the financial institutions defined therein as lender parties, with Deutsche Bank Trust Company Americas, as lender and administrative agent (the “Credit Facility”). The Company was restricted to solely use the line of credit for investments, acquisitions, working capital, equity interest repurchase or exchange, and other general corporate purposes. The line bore interest at either the prime rate or LIBOR based rates, as the Company may choose on each of its borrowings, plus an applicable margin ranging from 1.50% to 2.50% based on the Company’s Debt/Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) ratio as defined in the credit agreement.

On August 5, 2008, the Company entered into the First Letter Amendment to its Credit Facility. The First Letter Amendment, among other things, provided the Company with an extension from September 30, 2008 to March 31, 2009 to dispose of the three real estate assets that the Company had previously acquired on behalf of GERA. Additionally, the First Letter Amendment also, among other things, modified select debt and financial covenants in order to provide greater flexibility to facilitate the Company’s TIC Programs.

On November 4, 2008, the Company amended its Credit Agreement (the “Second Letter Amendment”). The effective date of the Second Letter Amendment is September 30, 2008. (Certain capitalized terms set forth below that are not otherwise defined herein have the meaning ascribed to them in the Credit Facility, as amended.

The Second Letter Amendment, among other things, a) reduced the amount available under the Credit Facility from $75.0 million to $50.0 million by providing that no advances or letters of credit shall be made available to the Company after September 30, 2008 until such time as borrowings have been reduced to less than $50.0 million; b) provided that 100% of any net cash proceeds from the sale of certain real estate assets required to be sold by the Company shall permanently reduce the Revolving Credit Commitments, provided that the Revolving Credit Commitments shall not be reduced to less than $50.0 million by reason of the operation of such asset sales; and c) modified the interest rate incurred on borrowings by increasing the applicable margins by 100 basis points and by providing for an interest rate floor for any prime rate related borrowings.

Additionally, the Second Letter Amendment, among other things, modified restrictions on guarantees of primary obligations from $125.0 million to $50.0 million, modified select financial covenants to reflect the impact of the current economic environment on the Company’s financial performance, amended certain restrictions on payments by deleting any dividend/share repurchase limitations and modified the reporting requirements of the Company with respect to real property owned or held.

As of September 30, 2008, the Company was not in compliance with certain of its financial covenants related to EBITDA. As a result, part of the Second Letter Amendment included a provision to modify selected covenants. The Company was not in compliance with certain debt covenants as of March 31, 2009, all of which were effectively cured as of such date by the Third Amendment to the Credit Facility described below. As a consequence of the foregoing, and certain provisions of the Third Amendment, the $63.0 million outstanding under the Credit Facility has been classified as a current liability as of September 30, 2009.

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

On May 20, 2009, the Company further amended its Credit Facility by entering into the Third Amendment. The Third Amendment, among other things, bifurcated the existing credit facility into two revolving credit facilities, (i) a $38,000,000 Revolving Credit A Facility which was deemed fully funded as of the date of the Third Amendment, and (ii) a $29,289,245 Revolving Credit B Facility, comprised of revolving credit advances in the aggregate of $25,000,000 which were deemed fully funded as of the date of the Third Amendment and letters of credit advances in the aggregate amount of $4,289,245 which are issued and outstanding as of the date of the Third Amendment. The Third Amendment required the Company to draw down $4,289,245 under the Revolving Credit B Facility on the date of the Third Amendment and deposit such funds in a cash collateral account to cash collateralize outstanding letters of credit under the Credit Facility and eliminated the swingline features of the Credit Facility and the Company’s ability to cause the lenders to issue any additional letters of credit. In addition, the Third Amendment also changes the termination date of the Credit Facility from December 7, 2010 to March 31, 2010 and modified the interest rate incurred on borrowings by initially increasing the applicable margin by 450 basis points (or to 7.00% on prime rate loans and 8.00% on LIBOR based loans).

The Third Amendment also eliminated specific financial covenants, and in its place, the Company was required to comply with the approved budget, that has been agreed to by the Company and the lenders, subject to agreed upon variances. The approved budget related solely to the 2009 fiscal year (the “Budget”). The Budget was the Company’s operating cash flow budget, and encompassed all aspects of typical operating cash flows including revenues, fees and expenses, and such working capital components as receivables and accounts payables, taxes, debt service and any other identifiable cash flow items. Pursuant to the Budget, the Company was required to stay within certain variance parameters with respect to cumulative cash flow for the remainder of the 2009 year to remain in compliance with the Credit Facility. The Company was also required under the Third Amendment to effect the Recapitalization Plan, on or before September 30, 2009 and in connection therewith to effect the Partial Prepayment of the Revolving A Credit Facility. In the event the Company failed to effect the Recapitalization Plan and in connection therewith to reduce the Revolving Credit A Credit Facility by the Partial Prepayment amount, the (i) lenders would have had the right commencing on October 1, 2009, to exercise the Warrants, for nominal consideration, to purchase common stock of the Company equal to 15% of the common stock of the Company on a fully diluted basis as of such date, subject to adjustment, (ii) the applicable margin automatically increased to 11% on prime rate loans and increased to 12% on LIBOR based loans, (iii) the Company was required to amortize an aggregate of $10 million of the Revolving Credit A Facility in three (3) equal installments on the first business day of each of the last three (3) months of 2009, (iv) the Company was obligated to submit a revised budget by October 1, 2009, (v) the Credit Facility would have terminated on January 15, 2010, and (vi) no further advances were available to be drawn under the Credit Facility.

In the event the Company effected the Recapitalization Plan and the Partial Prepayment amount on or prior to September 30, 2009, the Warrants would have automatically expired and not become exercisable, the applicable margin would have automatically been reduced to 3% on prime rate loans and 4% on LIBOR based loans and the Company had the right, subject to the requisite approval of the lenders, to seek an extension to extend the term of the Credit Facility to January 5, 2011, provided the Company also paid a fee of .25% of the then outstanding commitments under the Credit Facility. The Company calculated the initial fair value of the Warrants to be $534,000 and has recorded such amount in stockholders’ equity with a corresponding debt discount to the line of credit balance. Such debt discount amount will be amortized into interest expense over the remaining term of the Credit Facility. As of September 30, 2009, the net debt discount balance was $291,000 and is included in the current portion of line of credit in the accompanying consolidated balance sheet.

As a result of the Third Amendment the Company was required to prepay Revolving Credit A Advances (and to the extent the Revolving Credit A Facility shall be reduced to zero, prepay outstanding Revolving Credit B Advances) in an amount equal to 100% (or, after the Revolving Credit A Advances are reduced by at least the Partial Prepayment amount, in an amount equal to 50%) of Net Cash Proceeds (as defined in the Credit Agreement) from:

	•		assets sales,
	•		conversions of Investments (as defined in the Credit Agreement),
	•		the refund of any taxes or the sale of equity interests by the Company or its subsidiaries,
	•		the issuance of debt securities, or
	•		any other transaction or event occurring outside the ordinary course of business of the Company or its subsidiaries;

provided, however, that (a) the Net Cash Proceeds received from the sale of the certain real property assets shall be used to prepay outstanding Revolving Credit B Advances and to the extent Revolving Credit B Advances shall be reduced to zero, to prepay outstanding Revolving Credit A Advances, (b) the Company shall prepay outstanding Revolving Credit B Advances in an amount equal to 100% of the Net Cash Proceeds from the sale of the Danbury Property unless the Company is then not in compliance with the Recapitalization Plan in which event Revolving Credit A Advances shall be prepaid first and (c) the Company’s 2008 tax refund was used to prepay outstanding Revolving Credit B Advances upon the closing of the Third Amendment.

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

The Third Amendment required the Company to use its commercially reasonable best efforts to sell four other commercial properties, including the two remaining GERA Properties, by September 30, 2009. The Company’s Line of Credit is secured by substantially all of the assets of the Company.

On September 30, 2009, the Company further amended its Credit Facility by entering into the First Credit Facility Letter Amendment. The First Credit Facility Letter Amendment, among other things, modified and provided the Company an extension from September 30, 2009 to November 30, 2009 (the “Extension”) to (i) effect its Recapitalization Plan and in connection therewith to effect a prepayment of at least seventy two (72%) percent of the Revolving Credit A Advances (as defined in the Credit Facility), and (ii) sell four commercial properties, including the two real estate assets the Company had previously acquired on behalf of Grubb & Ellis Realty Advisors, Inc.

The First Credit Facility Letter Amendment also granted the Company a one-time right, exercisable by November 30, 2009, to prepay the Credit Facility in full for a reduced principal amount equal to approximately 65% of the aggregate principal amount of the Credit Facility then outstanding (the “Discount Prepayment Option”).

In connection with the Extension, the warrant agreement was also amended to extend from October 1, 2009 to December 1, 2009, the time when the Warrants are first exercisable by its holders.

The First Credit Facility Letter Amendment also granted a one-time waiver from the covenant requiring all proceeds of sales of equity or debt securities to be applied to pay down the Credit Facility to facilitate the sale by the Company to an affiliate of the Company’s largest stockholder and Chairman of the Board of Directors of the Company, $5.0 million of subordinated debt or equity securities of the Company (the “Permitted Placement”) so long as (i) the Permitted Placement is junior, subject and subordinate to the Credit Facility, (ii) the net proceeds of the Permitted Placement are placed into an account with the lender, (iii) the disbursement of the funds in such account is in accordance with the approved budget that has been agreed to by the Company and the ledners, (iv) that the lenders be granted a security interest in the net proceeds of the Permitted Placement, and (v) the Permitted Placement is otherwise satisfactory to the Lenders. In addition, if the Permitted Placement is in the form of subordinated debt, the Company and the entity making the $5.0 million loan are required to enter into a subordination agreement with the lenders.

Finally, the First Credit Facility Letter Amendment also provided that $4.3 million that was deposited in a cash collateral account to cash collateralize outstanding letters of credit under the Credit Facility would instead be used to pay down the Credit Facility.

The Company’s Credit Facility is secured by substantially all of the Company’s assets. The outstanding balance on the Credit Facility was $63.0 million as of September 30, 2009 and December 31, 2008 and carried a weighted average interest rate of 8.37% and 4.51%, respectively.

On November 6, 2009, a portion of proceeds from the offering of preferred stock (see Note 20) were used to pay in full borrowings under the Credit Facility then outstanding of $66.8 million for a reduced amount equal to $43.4 million and the Credit Facility was terminated.

12. SEGMENT DISCLOSURE

Management has determined the reportable segments identified below according to the types of services offered and the manner in which operations and decisions are made. The Company operates in the following reportable segments:

Management Services — Management Services provides property management and related services for owners of investment properties and facilities management services for corporate owners and occupiers.

Transaction Services — Transaction Services advises buyers, sellers, landlords and tenants on the sale, leasing and valuation of commercial property and includes the Company’s national accounts group and national affiliate program operations.

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

Investment Management — Investment Management includes services for acquisition, financing and disposition with respect to the Company’s investment programs, asset management services related to the Company’s programs, and dealer-manager services by its securities broker-dealer, which facilitates capital raising transactions for its investment programs.

The Company also has certain corporate level activities including interest income from notes and advances, property rental related operations, legal administration, accounting, finance and management information systems which are not considered separate operating segments.

The Company evaluates the performance of its segments based upon operating income (loss). Operating income (loss) is defined as operating revenue less compensation and general and administrative costs and excludes other rental related, rental expense, interest expense, depreciation and amortization, allocation of overhead and other operating and non-operating expenses.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In thousands)		2009				2008				2009				2008
Management Services
Revenue		$	67,456			$	63,479			$	199,636			$	185,855
Compensation costs			9,315				8,118				27,702				28,550
Transaction commissions and related costs			2,192				2,062				7,346				6,625
Reimbursable salaries, wages, and benefits			48,333				44,391				142,601				131,084
General and administrative			2,357				2,033				8,043				6,356
Segment operating income (loss)			5,259				6,875				13,944				13,240
Transaction Services
Revenue			46,321				57,502				118,793				173,191
Compensation costs			11,216				11,743				32,986				36,423
Transaction commissions and related costs			29,376				37,103				77,981				111,337
Reimbursable salaries, wages, and benefits			1				—				1				—
General and administrative			7,705				8,466				25,459				26,975
Segment operating income (loss)			(1,977	)			190				(17,634	)			(1,544	)
Investment Management
Revenue			14,829				24,116				43,912				84,480
Compensation costs			6,229				7,289				20,888				22,944
Transaction commissions and related costs			6				18				31				18
Reimbursable salaries, wages, and benefits			2,376				1,946				7,077				4,372
General and administrative			10,250				22,103				32,593				31,524
Segment operating income (loss)			(4,032	)			(7,240	)			(16,677	)			25,622
Reconciliation to net loss attributable to Grubb & Ellis Company:
Total segment operating (loss) income			(750	)			(175	)			(20,367	)			37,318
Non-segment:
Rental operations, net of rental related expenses			2,537				3,782				6,595				9,918
Corporate overhead (compensation, general and administrative costs)			(12,447	)			(15,751	)			(43,165	)			(43,667	)
Other operating expenses			(10,221	)			(45,266	)			(38,056	)			(68,615	)
Other income (expense)			236				(6,133	)			(769	)			(13,646	)
Loss from continuing operations before income tax (provision) benefit			(20,645	)			(63,543	)			(95,762	)			(78,692	)
Income tax (provision) benefit			(277	)			15,943				(587	)			23,124
Loss from continuing operations			(20,922	)			(47,600	)			(96,349	)			(55,568	)
Loss from discontinued operations, net of taxes			(535	)			(15,126	)			(1,005	)			(18,690	)
Net loss		$	(21,457	)		$	(62,726	)		$	(97,354	)		$	(74,258	)
Less: Net (loss) income from noncontrolling interests			(98	)			(6,444	)			(1,686	)			(6,298	)
Net loss attributable to Grubb & Ellis Company		$	(21,359	)		$	(56,282	)		$	(95,668	)		$	(67,960	)

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

13. PROPERTIES HELD FOR SALE

A summary of the properties and related LLC’s held for sale balance sheet information is as follows:

		September 30,				December 31,
(In thousands)		2009				2008
Restricted cash			828				23,459
Properties held for sale — net			22,468				78,708
Identified intangible assets and other assets held for sale — net			4,823				25,751
Total assets		$	28,119			$	127,918
Notes payable of properties held for sale		$	31,613			$	108,959
Liabilities of properties held for sale — net			2,376				9,257
Total liabilities		$	33,989			$	118,216

During 2008, the Company initiated a plan to sell the properties it classified as real estate held for investment in its financial statements. As of September 30, 2009, the Company has a covenant within its Credit Facility which requires the Company to use its commercially reasonable best efforts to sell four commercial properties. The recent downturn in the global capital markets significantly lessened the probability that the Company would be able to achieve relief from this covenant through amendment or other financial resolutions. Pursuant to the requirements of the Property, Plant, and Equipment Topic, the Company assessed the value of the assets. In addition, the Company reviewed the valuation of its other owned properties and real estate investments. The Company generally uses a discounted cash flow model to estimate the fair value of its properties held for sale unless better market comparable data is available. Management uses its best estimate in determining the key assumptions, including the expected holding period (between 5 and 7 years), capitalization rates (between 9.0% and 9.2%), discount rates (between 10.1% and 10.5%), rental rates, future occupancy levels, lease-up periods and capital expenditure requirements. The estimated fair value is further adjusted for anticipated selling expenses. Generally, if a property is under contract, the contract price adjusted for selling expenses is used to estimate the fair value of the property. This valuation review resulted in the Company recognizing no impairment charges against the carrying value of the properties and real estate investments held for sale for the nine months ending September 30, 2009. Although the Company is using its commercially reasonable best efforts to sell the four remaining commercial properties, at the current time it appears that it is unlikely that two of the remaining properties will be sold. Accordingly, and in light of the foregoing, these properties no longer meet the held for sale criteria under the requirements of the Topic as of September 30, 2009 and the properties were reclassified to properties held for investment in the consolidated balance sheet with the operations of these properties included in continuing operations in the consolidated statements of operations for all periods presented.

On October 31, 2008, the Company entered into that certain Agreement for the Purchase and Sale of Real Property and Escrow Instructions to effect the sale of the Corporate Center located at 39 Old Ridgebury Road, Danbury, Connecticut, to an unaffiliated entity for a purchase price of $76.0 million. This agreement was amended and restated in its entirety by that certain Danbury Merger Agreement dated as of January 23, 2009, as amended by the First Amendment to Danbury Merger Agreement dated as of January 23, 2009 which reduced the purchase price to $73.5 million. On June 3, 2009, the Company completed the sale of the Danbury Property for $72.4 million.

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

The investments in unconsolidated entities held for sale represent the Company’s interest in certain real estate properties that it holds through various limited liability companies. In accordance with the requirements of the Real Estate-Retail Land Topic, and the requirements of the Property, Plant, and Equipment Topic, the Company treats the disposition of these interests similar to the disposition of real estate it holds directly. In addition, pursuant to the requirements of the Consolidation Topic, when the Company is no longer the primary beneficiary of the LLC, the Company deconsolidates the LLC.

In instances when the Company expects to have significant ongoing cash flows or significant continuing involvement in the component beyond the date of sale, the income (loss) from certain properties held for sale continue to be fully recorded within the continuing operations of the Company through the date of sale.

The net results of discontinued operations and the net gain on dispositions of properties sold or classified as held for sale as of September 30, 2009, in which the Company has no significant ongoing cash flows or significant continuing involvement, are reflected in the consolidated statements of operations as discontinued operations. The Company will receive certain fee income from these properties on an ongoing basis that is not considered significant when compared to the operating results of such properties.

The following table summarizes the income and expense components that comprised discontinued operations, net of taxes, for the three and nine months ended September 30, 2009 and 2008:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(In thousands)		2009				2008				2009				2008
Rental income		$	1,299			$	5,101			$	8,983			$	15,844
Rental expense			(1,695	)			(3,511	)			(7,469	)			(11,489	)
Interest expense (including amortization of deferred financing costs)			(484	)			(1,463	)			(2,387	)			(4,606	)
Real estate related impairments			—				(22,703	)			250				(22,703	)
Depreciation and amortization			—				(2,134	)			—				(8,057	)
Tax (provision) benefit			345				9,769				244				12,140
(Loss) from discontinued operations-net of taxes			(535	)			(14,941	)			(379	)			(18,871	)
Gain (loss) on disposal of discontinued operations — net of taxes			—				(185	)			(626	)			181
Total income (loss) from discontinued operations		$	(535	)		$	(15,126	)		$	(1,005	)		$	(18,690	)

14. COMMITMENTS AND CONTINGENCIES

Operating Leases — The Company has non-cancelable operating lease obligations for office space and certain equipment ranging from one to ten years, and sublease agreements under which the Company acts as a sublessor. The office space leases often times provide for annual rent increases, and typically require payment of property taxes, insurance and maintenance costs.

Rent expense under these operating leases was approximately $6.0 million and $5.8 million for the three months ended September 30, 2009 and 2008, respectively, and approximately $18.5 million and $17.4 million for the nine months ended September 30, 2009 and 2008, respectively. Rent expense is included in general and administrative expense in the accompanying consolidated statements of operations.

Operating Leases — Other — The Company is a master lessee of seven multifamily properties in various locations under non-cancelable leases. The leases, which commenced in various months and expire from June 2015 through March 2016, require minimum monthly payments averaging $795,000 over the 10-year period. Rent expense under these operating leases was approximately $2.3 million and $2.4 million for three months ended September 30, 2009 and 2008, respectively, and approximately $6.9 million and $7.0 million for nine months ended September 30, 2009 and 2008, respectively.

The Company subleases these multifamily spaces to third parties. Rental income from these subleases was approximately $3.8 million and $4.2 million for the three months ended September 30, 2009 and 2008, respectively, and approximately $11.3 million and $12.4 million for the nine months ended September 30, 2009 and 2008, respectively. As multifamily leases are executed for no more than one year, the Company is unable to project the future minimum rental receipts related to these leases.

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

As of September 30, 2009, the Company had recorded liabilities totaling $8.4 million related to such master lease arrangements, consisting of $4.6 million of cumulative deferred revenues relating to acquisition fees and loan fees received from 2004 through 2006 and $3.8 million of additional loss reserves which were recorded in 2008.

The Company is also a 50% joint venture partner of four multifamily residential properties in various locations under non-cancelable leases. The leases, which commenced in various months and expire from November 2014 through January 2015, require minimum monthly payments averaging $372,000 over the 10-year period. Rent expense under these operating leases was approximately $1.1 million, for both the three months ended September 30, 2009 and 2008, and approximately $3.4 million, for both the nine months ended September 30, 2009 and 2008.

The Company subleases these multifamily spaces to third parties. Rental income from these subleases was approximately $2.2 million and $2.3 million for the three months ended September 30, 2009 and 2008, respectively, and approximately $6.7 million and $6.8 million for the nine months ended September 30, 2009 and 2008, respectively. As multifamily leases are executed for no more than one year, the Company is unable to project the future minimum rental receipts related to these leases.

TIC Program Exchange Provision — Prior to the Merger, NNN entered into agreements in which NNN agreed to provide certain investors with a right to exchange their investment in certain TIC Programs for an investment in a different TIC program. NNN also entered into an agreement with another investor that provided the investor with certain repurchase rights under certain circumstances with respect to their investment. The agreements containing such rights of exchange and repurchase rights pertain to initial investments in TIC programs totaling $31.6 million. In July 2009 the Company received notice from an investor of their intent to exercise such rights of exchange and repurchase with respect to an initial investment totaling $4.5 million. The Company is currently evaluating such notice to determine the nature and extent of the right of such exchange and repurchase, if any.

The Company deferred revenues relating to these agreements of $86,000 and $246,000 for the three months ended September 30, 2009 and 2008, respectively. The Company deferred revenues relating to these agreements of $281,000 and $492,000 for the nine months ended September 30, 2009 and 2008, respectively. Additional losses of $14.3 million and $4.5 million related to these agreements were recorded during the quarter ended December 31, 2008 and during the nine months ended September 30, 2009, respectively, to reflect the decline in value of properties underlying the agreements with investors. As of September 30, 2009, the Company had recorded liabilities totaling $22.6 million related to such agreements, consisting of $3.8 million of cumulative deferred revenues and $18.8 million of additional losses related to these agreements.

Capital Lease Obligations — The Company leases computers, copiers and postage equipment that are accounted for as capital leases (see Note 9 of the Notes to Consolidated Financial Statements for additional information).

General — The Company is involved in various claims and lawsuits arising out of the ordinary conduct of its business, as well as in connection with its participation in various joint ventures and partnerships, many of which may not be covered by the Company’s insurance policies. In the opinion of management, the eventual outcome of such claims and lawsuits is not expected to have a material adverse effect on the Company’s financial position or results of operations.

Guarantees — From time to time the Company provides guarantees of loans for properties under management. As of September 30, 2009, there were 147 properties under management with loan guarantees of approximately $3.5 billion in total principal outstanding with terms ranging from one to 10 years, secured by properties with a total aggregate purchase price of approximately $4.8 billion. As of December 31, 2008, there were 151 properties under management with loan guarantees of approximately $3.5 billion in total principal outstanding with terms ranging from one to 10 years, secured by properties with a total aggregate purchase price of approximately $4.8 billion. In addition, each consolidated VIE is joint and severally liable, along with the other investors in each relative TIC, on the non-recourse mortgage debt related to the VIE’s interests in the relative TIC investment. This non-recourse mortgage debt totaled $277.2 million and $277.8 million as of September 30, 2009 and December 31, 2008, respectively.

The Company’s guarantees consisted of the following as of September 30, 2009 and December 31, 2008:

		September 30,				December 31,
(In thousands)		2009				2008
Non-recourse/carve-out guarantees of debt of properties under management(1)		$	3,438,375			$	3,414,433
Non-recourse/carve-out guarantees of the Company’s debt(1)		$	107,000			$	107,000
Recourse guarantees of debt of properties under management		$	39,717			$	42,426
Recourse guarantees of the Company’s debt		$	10,000			$	10,000

GRUBB & ELLIS COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (continued)

	•		a voluntary bankruptcy or similar insolvency proceeding of any borrower;
	•		a “transfer” of the property or any interest therein in violation of the loan documents;
	•		a violation by any borrower of the special purpose entity requirements set forth in the loan documents;
	•		any fraud or material misrepresentation by any borrower or any guarantor in connection with the loan;
	•		the gross negligence or willful misconduct by any borrower in connection with the property, the loan or any obligation under the loan documents;
	•		the misapplication, misappropriation or conversion of (i) any rents, security deposits, proceeds or other funds, (ii) any insurance proceeds paid by reason of any loss, damage or destruction to the property, and (iii) any awards or other amounts received in connection with the condemnation of all or a portion of the property;
	•		any waste of the property caused by acts or omissions of borrower of the removal or disposal of any portion of the property after an event of default under the loan documents; and
	•		the breach of any obligations set forth in an environmental or hazardous substances indemnification agreement from borrower.