Colony in talks with Grubb & Ellis over ‘strategic’ deal

Tom Barrack’s firm is locked in exclusive 60-day talks with global property broker Grubb & Ellis over a tie-up, having already extended $18m of financing to the company.

Colony Capital is in exclusive talks with Grubb & Ellis over what was described yesterday as a ‘larger strategic investment’ having extended $18 million of financing to the property services giant.

The two firms, both of which are based in Los Angeles but have global operations, are locked in a 60-day negotiating period during which Colony can evaluate a possible larger transaction, according to a statement by Grubb & Ellis to the New York Stock Exchange yesterday. However, the property services firm also opened up the prospect of other suitors entering the fray as it said it retained the right to “solicit competing strategic transactions” for 25 days even if it struck a definitive agreement with Colony.

News of the talks sent shares in the company up 5.5 percent as the markets opened and comes just weeks after it emerged JMP Securities had been hired to explore strategic alternatives for Grubb & Ellis, including the potential sale or merger of the company.

The firm has been evaluating options after suffering a torrid 5 years in which its share price has crashed almost 95 percent to 75 cents having reached highs of $14.20 in the middle of 2006. It has been reducing liabilities and cutting overheads in recent times, according to figures from its 2010 annual report.

Nevertheless, it still employs more than 5,200 professionals in more than 100 offices, and owns an array of real estate advisory services in fields including investment, leasing, capital markets, debt and equity finance and asset, construction and project management. It also manages a series of REITs across various real estate asset classes, although that accounts for a minority of its revenue.

In its statement to the New York stock exchange, Thomas D'Arcy, the firm’s president and chief executive officer, said: “Colony Capital is a premier real estate investment and advisory firm with a strong track record of identifying undervalued real estate and corporate investment opportunities, and we welcome their support and the confidence they have shown in Grubb & Ellis.”

“We will work with Colony over the next 60 days as they focus on a possible larger strategic transaction. With this show of support by Colony, our clients and partners should feel confident that our experienced team of professionals will continue to provide the same outstanding service that they have come to expect from us.”