UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2007
Commission file number:
001-32753
GRUBB & ELLIS REALTY
ADVISORS, INC.
(Exact name of registrant as
specified in its charter)
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Delaware
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20-3426353
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(State or other jurisdiction
of
Incorporation or organization)
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(IRS Employer
Identification No.
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)
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500 West Monroe Street, Suite 2800,
Chicago, IL 60661
(Address of principal executive
offices) (Zip Code)
(312) 698-6700
(Registrants telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Class:
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Name of Each Exchange on Which Registered:
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Units
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American Stock Exchange
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Common Stock, $0.0001 par value
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American Stock Exchange
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Common Stock Purchase Warrants
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American Stock Exchange
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Securities registered pursuant to Section 12(g) of the
Act: None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act.
Yes
o
No
þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act.
Yes
o
No
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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 if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein and will not be contained, to the best
of registrants knowledge, in its definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K.
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Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated
filer
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Accelerated
filer
þ
Non-accelerated
filer
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange Act).
Yes
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No
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The aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price
at which the common equity was last sold, or the average bid and
asked price of such common equity, as of December 31, 2006
was $125,947,918.
The number of shares outstanding of the registrants common
stock as of September 6, 2007 was 29,834,403 shares.
GRUBB &
ELLIS REALTY ADVISORS, INC.
FORM 10-K/A
TABLE OF
CONTENTS
2
GRUBB &
ELLIS REALTY ADVISORS, INC.
Certain
Terms
Throughout this document, unless otherwise specified or if the
context otherwise requires:
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The Company, we, us,
our, GERA and GAV refers to
Grubb & Ellis Realty Advisors, Inc. a blank check
company organized under the laws of the State of Delaware on
September 7, 2005.
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Grubb & Ellis and GBE refer to
Grubb & Ellis Company a corporation formed under the
laws of the State of Delaware in 1980.
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Forward-Looking
Statements
This Annual Report contains statements that are forward looking
and as such are not historical facts. Rather, these statements
constitute projections, forecasts or forward-looking statements
within the meaning of the Private Securities Litigation Reform
Act of 1995. The statements are not guarantees of performance.
They involve known and unknown risks, uncertainties, assumptions
and other factors which may cause the actual results,
performance or achievements of the Company to be materially
different from any future results, performance or achievements
expressed or implied by these statements. Such statements can be
identified by the fact that they do not relate strictly to
historical or current facts. These statements use words such as
believe, expect, should,
strive, plan, intend,
estimate, anticipate or similar
expressions. When the Company discusses its strategies or plans,
it is making projections, forecasts or forward-looking
statements. Actual results and stockholders value will be
affected by a variety of risks and factors, including, without
limitation, international, national and local economic
conditions and real estate risks and financing risks and acts of
terror or war. Many of the risks and factors that will determine
these results and stockholder values are beyond the
Companys ability to control or predict. These statements
are necessarily based upon various assumptions involving
judgment with respect to the future.
All such forward-looking statements speak only as of the date of
this Annual Report. The Company expressly disclaims any
obligation or undertaking to release publicly any updates or
revisions to any forward-looking statements contained herein to
reflect any change in the Companys expectations with
regard thereto or any change in events, conditions or
circumstances on which any such statement is based.
3
GRUBB &
ELLIS REALTY ADVISORS, INC.
General
Grubb & Ellis Realty Advisors, Inc. was formed to
acquire, through a purchase, or other business combination (a
Business Combination), commercial real estate
properties
and/or
assets. To-date GERAs efforts were limited to
organizational activities, completion of its initial public
offering (IPO), the evaluation of possible Business
Combinations and the negotiation of the LLC Acquisition
Agreement with GBE as described below.
On March 3, 2006, the Company closed its IPO of
23,958,334 units (the Units). Of the Units
offered, 22,291,667 Units were sold to the public and 1,666,667
Units were sold to Kojaian Ventures, L.L.C., an entity
affiliated with the Chairman of the Board of both the Company
and its corporate sponsor, Grubb & Ellis. Each Unit
consists of one share of common stock and two warrants. Each
warrant will entitle the holder to purchase one share of common
stock for $5.00. The Units were sold at an offering price of
$6.00 per unit, generating total gross proceeds of approximately
$143.8 million. After deducting the underwriting fees and
offering expenses, the total net proceeds to the Company were
approximately $133.4 million of which approximately $132.3
was placed in a trust account (Trust Account)
along with the initial capital from Grubb & Ellis
($2.5 million) and a deferred underwriting discount
(approximately $2.7 million). The net proceeds that were
deposited into the Trust Account, which totaled
approximately $137.5 million, were invested in
U.S. Treasury Bills and continue to be invested in such
type of securities through the ensuing months. As of
June 30, 2007, there was approximately $143.8 million,
including accrued interest of approximately $157,000 and net of
taxes of approximately $2.6 million, held in the
Trust Account. As of August 22, 2007, there was
approximately $144.4 million held in the Trust Account.
The Company intends to focus its acquisition efforts primarily
on the industrial and office market sector of the
U.S. commercial real estate industry. The Company will not
limit itself geographically, except that, the Company will not
initially seek to effect a Business Combination with a target
acquisition located in the central business district of a major
metropolitan area. Rather, the Company intends to focus its
efforts on secondary and tertiary geographic markets throughout
the United States, as well as the suburban regions of the
central business districts of major metropolitan markets. The
Company believes that the industrial and office sector in these
geographic markets offers the Company an opportunity to acquire
underperforming properties that the Company believes it has the
capability of turning around and repositioning, thereby
increasing cash flow, profitability and asset value. The Company
believes it can successfully identify such a potential target
acquisition based upon the depth and the breadth of the industry
experience, nationwide contacts and proprietary industry data of
Grubb & Ellis, the Companys publicly-traded
corporate sponsor and founding stockholder, and the core
competencies of the Companys executive management team.
The Companys executive officers and directors have
extensive experience in the real estate industry as executive
officers, principals or directors in various real estate
enterprises throughout the United States. Moreover, the
Companys corporate stockholder, Grubb & Ellis,
is an established, publicly traded global integrated real estate
services firm which, between its company-owned offices and
affiliate network, includes nearly 5,500 professionals located
in 40 states throughout the country. Although the Company
does not have any preferential arrangements to consider business
opportunities identified by Grubb & Ellis, the Company
expects to leverage the extensive industry expertise, network of
approximately 90 research professionals, nationwide contacts and
experience of the Companys corporate stockholder as well
as the Companys officers and directors in connection with
the Companys efforts to identify prospective target
acquisitions.
The Company anticipates that other than executive oversight and
direction provided by its Chief Executive Officer, Chief
Financial Officer and Board of Directors, at least until the
consummation of a Business Combination, and if one occurs,
possibly thereafter, the Companys day to day operations
will be conducted primarily by employees of the Companys
corporate stockholder, Grubb & Ellis.
4
Properties
Acquisition Proposal
Summary
of Terms of the Properties Acquisition Proposal
GBE is the corporate sponsor and an affiliate of GERA. On
October 2, 2006, GBE formed GERA Property Acquisition, LLC
(Property Acquisition), a wholly owned subsidiary of
GBE. Property Acquisition was formed as a holding company, which
in turn established three separate wholly owned special purpose
entities (the SPEs), to acquire Abrams Centre
located in Dallas, Texas (Abrams Centre), 6400
Shafer Court located in Rosemont, Illinois (6400
Shafer), and Danbury Corporate Center located in Danbury,
Connecticut (the Corporate Center) (collectively the
Properties) with the intention of re-selling them to
GERA on a basis that is cost neutral to GBE.
On June 18, 2007, the Company entered into a membership
interest purchase agreement (the LLC Acquisition
Agreement) to acquire all of the issued and outstanding
membership interests of Property Acquisition from GBE. The LLC
Acquisition Agreement provides for a business combination
transaction in which GERA will acquire Property Acquisition,
which, in turn, owns 100% of the SPEs that own the Properties.
On closing of the acquisition, GERA will acquire the Properties
through its ownership of Property Acquisition. The consideration
to be paid by GERA for the acquisition of Property Acquisition
will represent the amounts invested in or advanced to Property
Acquisition or any of the SPEs by GBE to fund the
aggregate purchase price paid by Property Acquisition for the
Properties plus interest expense, imputed interest on cash
advanced to Property Acquisition by GBE and costs and expenses
associated with the evaluation, acquisition, financing and
operation of the Properties.
GBEs
Investment in Property Acquisition
As of July 15, 2007, GBEs investment in Property
Acquisition was approximately $163.9 million. The
investment in Property Acquisition consists of
$120.5 million of mortgage debt secured by the Properties
and an aggregate equity investment of approximately
$43.4 million.
Property Acquisition purchased the Properties for an aggregate
contract purchase price of $122.2 million
($20.0 million for the Dallas Property, $21.45 million
for the Rosemont Property and $80.75 million for the
Danbury Property) and as a result of adjustments at the closings
of the purchases of the Properties received aggregate credits
against the purchase prices of approximately $6.6 million.
In addition, through July 15, 2007, Property Acquisition
paid an aggregate of approximately $0.9 million in other
direct acquisition costs. Imputed interest on amounts advanced
by GBE to Property Acquisition through July 15, 2007 was
approximately $1.6 million. In addition, Property
Acquisition funded approximately $43.6 million of reserves
and paid approximately $2.4 million in fees in connection
with the mortgage loans discussed below for a total investment
of approximately $163.9 million.
On June 15, 2007, simultaneously with the acquisition of
the Danbury Property by GERA Danbury, LLC, Property
Acquisitions SPEs, have entered into mortgage loans from
Wachovia Bank, N.A. totaling $120.5 million secured by the
Properties. One mortgage loan is in the amount of
$42.5 million, which is secured jointly by the Dallas
Property and the Rosemont Property (the Dallas and
Rosemont Wachovia Loan) (GBE has internally allocated
approximately $22 million to the Rosemont Property and
approximately $20.5 million to the Dallas Property), and
the other mortgage loan is in the amount of $78 million
which is secured by the Danbury Property (the Danbury
Wachovia Loan; the Dallas and Rosemont Wachovia Loan and
the Danbury Wachovia Loan, collectively, the Wachovia
Mortgage Loans). The aggregate proceeds of the Wachovia
Mortgage Loans were $120.5 million of which were used:
(i) $72.3 million to pay the purchase price of the
Danbury Property (net of closing adjustments);
(ii) $43.6 million to fund required tax, insurance,
interest, engineering, debt and leasing reserves which are held
by Wachovia; (iii) $2.4 million to pay the
lenders fees and costs; and (iv) $2.2 million to
reduce GBEs aggregate equity in the Properties.
Purchase
Price of Property Acquisition
If the Business Combination was consummated on July 15,
2007, the aggregate amount of consideration paid by GERA would
be approximately $163.9 million consisting of cash of
approximately $43.4 million (which is the amount of
GBEs equity in Property Acquisition as of such date) plus
the indirect assumption of $120.5 million in debt under the
Wachovia Mortgage Loans. The amount of cash consideration paid
to GBE at the closing of the Business Combination will be
adjusted pursuant to LLC Acquisition Agreement to reflect
additional amounts
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invested in or advanced to Property Acquisition by GBE to fund
the aggregate purchase price paid by Property Acquisition for
the Properties plus interest expense, imputed interest through
the closing date on cash advanced to Property Acquisition or any
of the SPEs by GBE and additional costs and expenses
associated with the evaluation, acquisition, financing and
operation of the Properties.
In addition, GERA and GBE have agreed that pursuant to the
Services Agreement, GERA will pay GBE an acquisition fee equal
to one percent of the acquisition price for each of the
Properties. Accordingly, in addition to the LLC Purchase Price,
at the closing of the LLC Acquisition Agreement, GERA shall pay
GBE an acquisition fee of $1,222,000 with respect to the
Properties.
Approval
of the Properties Acquisition Proposal
GERA plans to complete the Business Combination promptly after
the GERA special meeting provided that:
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the requisite GERA stockholders have approved the Properties
Acquisition Proposal;
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holders of fewer than 20% of the shares of common stock issued
in the IPO have voted against the Properties Acquisition
Proposal and demanded conversion of their shares into
cash; and
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the other conditions specified in the LLC Acquisition Agreement
have been satisfied or waived.
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The Company refers to this proposal as the Properties
Acquisition Proposal. GBE has already approved and adopted
the LLC Acquisition Agreement. The Properties Acquisition
Proposal has been approved by the Companys Board of
Directors and is subject to shareholder vote. The Properties
Acquisition Proposal is one of several proposals included in a
preliminary proxy statement on Schedule 14A filed and
currently under review with the Unites States Securities and
Exchange Commission.
Description
of the Properties
Abrams Centre located in Dallas, Texas is comprised of a fifteen
story, multi-tenant, Class B Property which was originally
constructed in 1983 and was acquired by GERA Abrams Centre LLC
on February 20, 2007. It consists of 325,616 square
feet of rentable space and a parking ratio of 3.53 per
1,000 square feet. The propertys location has
excellent regional accessibility with direct access to
Dallas major highway systems. Currently, the property has
a 54.2% occupancy rate. The purchase price of the property was
$20,000,000.
6400 Shafer Court located in Rosemont, Illinois consists of
a seven story, multi-tenant, Class B Property which was
originally constructed in 1979 and renovated in 1990 and again
in 2006. The property was acquired by GERA 6400 Shafer LLC on
February 28, 2007. It consists of 179,343 square feet
of rentable space with a parking ratio of 3.07 per
1,000 square feet. The property is easily accessible to
OHare International Airport and Interstates 294 and 90.
Currently, the property has an occupancy rate of 61%, 43% of
which is comprised of three major tenants whose average
remaining lease term is nine years. The purchase price of the
property was $21,450,000.
The Danbury Corporate Center located in Danbury, Connecticut is
comprised of fifteen four story, multi-tenant, Class A
Properties which were constructed in 1981. The property is the
former headquarters of Union Carbide, which made significant
investments in improvements to the buildings on the property.
The buildings have a total rentable space of
1,046,800 square feet and a parking ratio of 2.83 per
1,000 square feet. The Corporate Center has direct access
to five major highway systems servicing New York, New York, New
Haven, Connecticut and Rhode Island. Currently, the property has
an occupancy rate of 65.3%, 58% of which consists of five major
tenants with an average remaining lease term of eight years. The
purchase price of the property was $80,750,000. At closing,
$2,000,000 of the purchase price paid to Buildings Co. was
placed in escrow to cover the cost of certain environmental
remediation work on the Corporate Center, and upon completion of
such remediation work, any remaining balance in such escrow
account shall be remitted to Buildings Co. Furthermore, in
addition to the LLC Purchase Price and acquisition fee GBE is to
receive from GERA at the closing of the transactions
contemplated by the LLC Acquisition Agreement, GBE received a
commission from Buildings Co. (the seller of the Corporate
Center) in an amount equal to 1% of the purchase price of the
Corporate Center ($807,500) at the time of GBEs
acquisition of the Corporate Center.
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The Company believes that at the time of acquisition, each of
the Properties was under-leased. Additionally, the Properties
were not managed to a level of similarly situated Class A
Properties and Class B Properties. In connection with its
due diligence review of the Properties, GBE identified that as a
result of under management by the prior owners there were areas
of significant operational under-management, such as, lack of
attention to cleanliness, landscaping, tenant service and
retention, and items of deferred maintenance on property
operating systems (which we budgeted to update in our original
underwriting and for loans which we believe adequate reserves
have been reestablished in connection with the Wachovia Mortgage
Loans). Furthermore, as part of the plan to reposition the
Properties, the Company has budgeted to undertake certain
cosmetic renovations at the Dallas Property and the Danbury
Property (including lobby renovations, restroom upgrades and
common area upgrades) and certain upgrades or replacements of
original mechanical systems (including chillers, cooling towers,
roofs and some elevator components) over a five-year period. The
Company has also budgeted to replace the roof at the Rosemont
Property within the first five years after consummation of the
Business Combination.
Wachovia
Mortgage Loans
Dallas
and Rosemont Wachovia Loan
GERA Abrams Centre LLC and GERA 6400 Shafer LLC have received
from Wachovia Bank, N.A. a mortgage loan in the amount of
$42,500,000, which is secured by the Dallas Property and the
Rosemont Property. In the event that the GERA stockholders
approve the Properties Acquisition Proposal, GERA Abrams Centre
LLC and GERA 6400 Shafer LLC will become our indirect wholly
owned subsidiaries and the mortgage loan will remain in
existence and continue to be secured by the Dallas Property and
the Rosemont Property. The expected cash flows from the
Properties together with a debt service reserve of approximately
$5.6 million established under the Wachovia Mortgage Loans,
which will be drawn over the term of the loans, result in a 1.0
debt service coverage during the life of the initial term of the
loans. Upon maturity of the loans, if the Properties remain in
their current condition, we will be able to repay the principal
of the loans assuming that we can sell the Properties for what
we paid for them. We have assumed that we expect to be able to
sell the Properties at a price based on the then increased net
operating income and assumed residual capitalization rates which
are 150 basis points higher than the estimated residual
capitalization rates for the Properties today. We would have the
ability to repay the principal of the loans through a refinance
or sale of the Properties. Certain principle terms of the Dallas
and Rosemont Wachovia Loan are summarized below.
Initial Term and Extensions.
The mortgage loan has
an initial term of two (2) years with three extension
options, each one year in length, subject to the satisfaction of
certain conditions, including the purchase of an interest rate
cap on
30-day
LIBOR
with a LIBOR strike price of 6%. Subject to the satisfaction of
certain conditions, each of the extension options may be
exercised without payment by Property Acquisition or any of its
subsidiaries of any fee to the lender, provided that the
borrower will be responsible for the payment of all costs and
expenses (including reasonable attorneys fees) incurred by
the lender in connection with any extension and for the payment
of any costs incurred in connection with the extension or
replacement of the interest rate cap.
Interest Rate and Fees; Interest Rate Cap; Prepayment
Rights.
Interest on the mortgage loan will be paid and
adjusted monthly at a floating rate of interest per annum equal
to the
30-day
LIBOR
plus a spread of 250 basis points. GERA Abrams Centre LLC
and GERA 6400 Shafer LLC have purchased an interest rate cap on
30-day
LIBOR
with a LIBOR strike price of 6%, thereby locking the maximum
interest rate on borrowings under the mortgage loan at 7.70% for
the initial two year term of the mortgage loan. Prepayments of
borrowings under the mortgage loan may not be made during the
first year of the term.
Reserves.
Pursuant to the mortgage loan, reserves in
the amount of approximately $15.2 million have been
established for the cost of certain capital expenditures,
maintenance and repairs, leasing commissions and tenant
improvements, rent concessions and debt service coverage. The
reserves were funded from the proceeds of the Wachovia Mortgage
Loans. The reserves are held by Wachovia and, in accordance with
the terms of the Wachovia Mortgage Loans, may be drawn upon from
time to time to fund the items for which the reserves were
established. The reserves are assets that GERA will indirectly
acquire as a result of its acquisition of Property Acquisition.
Security; Non-Recourse.
All obligations under the
mortgage loan are secured by, among other things, (i) a
first mortgage lien encumbering the fee-simple of the Dallas
Property and the Rosemont Property, (ii) an assignment of
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all related leases, rents, deposits, letters of credit, income
and profits with respect to such properties, (iii) an
assignment of the interest rate cap described above, and
(iv) an assignment of all other contracts, agreements and
personal property relating to such properties. Liability under
the mortgage loan is limited to GERA Abrams Centre LLC and GERA
6400 Shafer LLC which will have liability only for non-recourse
carve-outs which are customary for credit facilities similar in
type and size to the mortgage loan. Property Acquisition has no
contractual personal liability for the repayment of borrowings
under the mortgage loan.
Covenants and Other Terms.
The mortgage loan
contains other customary covenants, closing conditions,
representations and warranties and events of default for a loan
of this type.
Danbury
Wachovia Loan
GERA Danbury LLC has received from Wachovia Bank, N.A. a
mortgage loan in an amount of $78,000,000, which is secured by
the Danbury Property. In the event that the GERA stockholders
approve the Property Acquisition Proposal, GERA Danbury LLC will
become our indirect wholly owned subsidiary and the mortgage
loan will remain in existence and continue to be secured by the
Danbury Property. The expected cash flows from the Property
together with a debt service reserve of approximately
$5.2 million established under the Wachovia Mortgage Loans,
which will be drawn over the term of the loans, result in a 1.0
debt service coverage during the life of the initial term of the
loans. Upon maturity of the loans, if the Property remains in
its current condition, we expect to be able to repay the
principal of the loans assuming that we can sell the Property
for what we paid for them. We have assumed that we will be able
to sell the Property at a price based on the then increased net
operating income and assumed residual capitalization rates which
are 150 basis points higher than the estimated residual
capitalization rates for the Property today, we would have the
ability to repay the principal of the loans through a refinance
or sale of the Property. Certain principle terms of the Danbury
Wachovia Loan are summarized below.
Initial Term and Extensions.
The mortgage loan has
an initial term of two (2) years with three extension
options, each one year in length, subject to the satisfaction of
certain conditions, including the purchase of an interest rate
cap on
30-day
LIBOR
with a LIBOR strike price of 6%. Subject to the satisfaction of
certain conditions, each of the extension options may be
exercised without payment by Property Acquisition or any of its
subsidiaries of any fee to the lender, provided that the
borrower will be responsible for the payment of all costs and
expenses (including reasonable attorneys fees) incurred by
the lender in connection with any extension and for the payment
of any costs incurred in connection with the extension or
replacement of the interest rate cap.
Interest Rate and Fees; Interest Rate Cap; Prepayment
Rights.
Interest on the mortgage loan will be paid and
adjusted monthly at a floating rate of interest per annum equal
to the
30-day
LIBOR
plus a spread of 250 basis points. GERA Danbury LLC has
purchased an interest rate cap on
30-day
LIBOR
with a LIBOR strike price of 6%, thereby locking the maximum
interest rate on borrowings under the mortgage loan at 7.70% for
the initial two year term of facility. Prepayments of borrowings
under the mortgage loan may not be made during the first year of
the term.
Reserves.
Pursuant to the mortgage loan, reserves in
the amount of approximately $28.4 million have been
established for the cost of certain capital expenditures,
maintenance and repairs, leasing commissions and tenant
improvements, rent concessions and debt service coverage. The
reserves were funded from the proceeds of the Wachovia Mortgage
Loans. The reserves are held by Wachovia and, in accordance with
the terms of the Wachovia Mortgage Loans, may be drawn upon from
time to time to fund the items for which the reserves were
established. The reserves are assets that GERA will indirectly
acquire as a result of its acquisition of Property Acquisition.
Security; Non-Recourse.
All obligations under the
mortgage loan are secured by, among other things, (i) a
first mortgage lien encumbering the fee-simple of the Danbury
Property, (ii) an assignment of all related leases, rents,
deposits, letters of credit, income and profits with respect to
such property, (iii) an assignment of the interest rate cap
described above, and (iv) an assignment of all other
contracts, agreements and personal property relating to such
property. Liability under the mortgage loan is limited to GERA
Danbury LLC which will have liability only for non-recourse
carve-outs which are customary for credit facilities similar in
type and size to the mortgage loan. Property Acquisition has no
contractual personal liability for the repayment of borrowings
under the mortgage loan.
Covenants and Other Terms.
The mortgage loan
contains other customary covenants, closing conditions,
representations and warranties and events of default for a loan
of this type.
8
Effecting
a Business Combination
Fair
Market Value of Target Business
Pursuant to GERAs certificate of incorporation, the
initial target business or properties that GERA acquires must
have a fair market value equal to at least 80% of GERAs
net assets at the time of such acquisition. GERAs board of
directors determined that this test was met in connection with
its acquisition of the Properties. In making this determination,
GERAs board considered the value of the Properties held by
GBEs wholly owned subsidiaries.
Stockholder
Approval of Business Combination
GERA will proceed with the acquisition contemplated by the LLC
Acquisition Agreement only if a majority of the GERA shares
issued in the IPO, present in person or represented by proxy and
entitled to vote at the special meeting, are voted in favor of
the Properties Acquisition Proposal and holders of 20% or more
of GERAs common stock issued in the IPO do not vote
against the Properties Acquisition Proposal and do not properly
demand that GERA convert their shares into their pro rata share
of the trust account. The GERA Inside Stockholders have agreed
to vote their shares of common stock issued prior to the IPO on
the Properties Acquisition Proposal in accordance with the vote
of holders of a majority of the GERA shares issued in the IPO
present in person or represented by proxy and entitled to vote
at the special meeting. In the event that the Properties
Acquisition Proposal is not approved, GERA will be forced to
liquidate if the contemplated Business Combination is not
consummated by March 3, 2008.
Liquidation
If No Business Combination
GERAs certificate of incorporation provides for mandatory
liquidation of GERA if GERA does not consummate a Business
Combination within 18 months from the date of consummation
of the IPO, or 24 months from the consummation of the IPO
if certain extension criteria have been satisfied. Such dates
are September 3, 2007 and March 3, 2008, respectively.
GERA signed the LLC Acquisition Agreement with GBE on
June 18, 2007. As a result of having signed the LLC
Acquisition Agreement, GERA satisfied the extension criteria and
now has until March 3, 2008 to complete this acquisition.
If GERA does not complete this acquisition by March 3, 2008
GERA will be dissolved pursuant to Section 275 of the
Delaware General Corporation Law. In connection with such
dissolution GERA will distribute to all of its public
stockholders, in proportion to their respective equity
interests, an aggregate sum equal to the amount in the trust
account, inclusive of any interest (but excluding taxes on such
interest), plus remaining assets of GERA. GERAs
stockholders who obtained their GERA stock prior to the IPO have
waived their rights to participate in any liquidation
distribution with respect to shares of common stock owned by
them immediately prior to the IPO. There will be no distribution
from the trust account with respect to GERAs warrants.
We expect that all costs associated with the implementation and
completion of a plan of dissolution and liquidation will be
funded by any remaining net assets not held in the trust
account, although we cannot assure you that there will be
sufficient funds for such purpose.
We will not liquidate the trust account unless and until our
stockholders approve our plan of dissolution and liquidation.
Accordingly, the dissolution procedures may result in
substantial delays in our liquidation and the distribution to
our public stockholders of the funds in our trust account and
any remaining net assets as part of our plan of dissolution and
liquidation.
If GERA were to expend all of the net proceeds of the IPO, other
than the proceeds deposited in the trust account, the per-share
liquidation price would be less than the
per-unit
offering price of $6.00 in the IPO. The proceeds deposited in
the trust account could, however, become subject to the claims
of GERAs creditors We cannot assure you that the per-share
distribution from the trust fund, if we liquidate, will not be
less than $6.00, plus interest, due to claims of creditors.
Additionally, if we are forced to file a bankruptcy case or an
involuntary bankruptcy case is filed against us that is not
dismissed, the proceeds held in the trust account could be
subject to applicable bankruptcy law, and may be included in our
bankruptcy estate and subject to the claims of third parties
with priority over the claims of our
9
stockholders. Also, in any such case, any distributions received
by stockholders in our dissolution might be viewed under
applicable debtor/creditor
and/or
bankruptcy laws as either a preferential transfer or
a fraudulent conveyance. As a result, a bankruptcy
court could seek to recover all amounts received by our
stockholders in our dissolution. Furthermore, because we intend
to distribute the proceeds held in the trust account to our
public stockholders as soon as possible after our dissolution,
this may be viewed or interpreted as giving preference to our
public stockholders over any potential creditors with respect to
access to or distributions from our assets. In addition, our
board of directors may be viewed as having breached their
fiduciary duties to our creditors
and/or
may
have acted in bad faith, thereby exposing itself and our company
to claims of punitive damages, by paying public stockholders
from the trust account prior to addressing the claims of
creditors
and/or
complying with certain provisions of the Delaware General
Corporation Law with respect to our dissolution and liquidation.
We cannot assure you that claims will not be brought against us
for these reasons.
Under Sections 280 through 282 of the Delaware General
Corporation Law, stockholders may be held liable for claims by
third parties against a corporation to the extent of
distributions received by them in dissolution. Pursuant to
Section 280, if the corporation complies with certain
procedures intended to ensure that it makes reasonable provision
for all claims against it, including a
60-day
notice period during which any third-party claims can be brought
against the corporation, a
90-day
period during which the corporation may reject any claims
brought, and an additional
150-day
waiting period before any liquidating distributions are made to
stockholders, any liability of a stockholder with respect to a
liquidating distribution is limited to the lesser of such
stockholders pro rata share of the claim or the amount
distributed to the stockholder, and any liability of the
stockholder would be barred after the third anniversary of the
dissolution. Although we will seek stockholder approval to
liquidate the trust account to our public stockholders as part
of our plan of dissolution and liquidation, we will seek to
conclude this process as soon as possible and as a result do not
intend to comply with those procedures. Because we will not be
complying with the foregoing provisions, Section 281(b) of
the Delaware General Corporation Law requires us to adopt a plan
that will provide for our payment, based on facts known to us at
such time, of (i) all existing claims, (ii) all
pending claims and (iii) all claims that may be potentially
brought against us within the subsequent 10 years. However,
because we are a blank check company, rather than an operating
company, and our operations have been limited to searching for
prospective target businesses to acquire, the only likely claims
to arise would be from our vendors and service providers to whom
we owe money and potential target businesses, all of whom
weve received agreements waiving any right, title,
interest or claim of any kind they may have in or to any monies
held in the trust account. As a result, the claims that could be
made against us will be significantly limited and the likelihood
that any claim would result in any liability extending to the
trust is remote. Nevertheless, such agreements may or may not be
enforceable. Because we will not be complying with those
procedures, we are required, pursuant to Section 281 of the
Delaware General Corporation Law, to adopt a plan that will
provide for our payment, based on facts known to us at such
time, of (i) all existing claims, (ii) all pending
claims and (iii) all claims that may be potentially brought
against us within the subsequent 10 years. Accordingly, we
would be required to provide for any creditors known to us at
that time or those that we believe could be potentially brought
against us within the subsequent 10 years prior to
distributing the funds held in the trust to stockholders. We
cannot assure you that we will properly assess all claims that
may be potentially brought against us. As such, our stockholders
could potentially be liable for any claims to the extent of
distributions received by them in dissolution (but no more) and
any liability of our stockholders may extend well beyond the
third anniversary of such dissolution. Accordingly, we cannot
assure you that third parties will not seek to recover from our
stockholders amounts owed to them by us.
Business
of the Company Upon Completion of the Business
Combination
In the event the Properties Acquisition Proposal is approved by
the Companys stockholders and consummated, it is the
present intention of the Company to continue its current
business plan, which it is to manage the Properties acquired and
seek to acquire other commercial real estate properties. As
such, following the consummation of the Business Combination,
the Company intends to continue to be externally managed on a
day to day basis by GBE upon the same terms and conditions as it
was prior to the Business Combination, except that
Mr. Mark Rose, the Companys current chief
executive officer, will be replaced in that capacity by the
Companys chairman of the board, Mr. C. Michael
Kojaian on the closing of the proposed merger of GBE and NNN
Realty Advisors. See the section entitled GBE Proposed Merger
with NNN Realty Advisors, Inc.
10
Trademarks
On June 18, 2007, GBE and GERA entered into a trademark
license agreement (the Trademark Agreement) whereby
GBE granted to GERA a perpetual, nonexclusive, nontransferable,
and royalty-free license to use GBEs trademarks, trade
names, emblems, and logos (the Licensed Marks).
Although GERA has been using the Licensed Marks, with GBEs
express knowledge and consent, and in such a manner in which GBE
fully approves, the parties never memorialized their
understanding in regards to the use of such marks. The Trademark
Agreement formally sets forth the terms and conditions on which
GERA shall continue to use the Licensed Marks.
Employees
The Company has two executive officers, both of who are also
executive officers of the Companys corporate stockholder,
Grubb & Ellis. The Company also anticipates that it
will have access to the services of other key personnel of the
Companys corporate stockholder on an as-needed basis,
although there can be no assurances that any such personnel will
be able to devote sufficient time, effort or attention to the
Company when the Company needs it. Neither the Companys
officers nor any of these other personnel, all of who the
Company will be dependant upon prior to effecting a Business
Combination, have entered into employment agreements with the
Company and none are obligated to devote any specific number of
hours to the Companys matters and intend to devote only as
much time as they deem necessary to the Companys affairs.
The amount of time they will devote in any time period will vary
based on whether a target acquisition has been selected for the
Business Combination and where the Company is in the Business
Combination process. Accordingly, once management locates a
suitable target acquisition to acquire they will spend more time
investigating such target acquisition and negotiating and
processing the Business Combination (and consequently more time
to the Companys affairs) than they would prior to locating
a suitable target acquisition. The Company does not intend to
have any full time employees prior to the consummation of a
Business Combination.
Business
Strategy
The Company believes that industrial and office assets and
properties located outside of the central business districts of
major metropolitan markets provide it an opportunity to identify
and acquire an under-performing target acquisition that can be
turned around or repositioned through such traditional
value-enhancing services as superior marketing of real estate
properties, improved tenant management, and the structuring of
flexible leasing arrangements. The Company believes it can
identify such acquisitions by utilizing the extensive nationwide
experience, contacts and proprietary market data of its publicly
traded corporate stockholder (Grubb & Ellis), the core
competencies of the Companys management personnel, and the
Companys access to holders of corporate and institutional
portfolios. Grubb & Ellis is a leading provider of a
full range of real estate services, including transaction,
property and facilities management and consulting services to
users and investors worldwide. As such, it has extensive and
longstanding relationships with owners and occupiers of
commercial real estate through its nearly 5,500 professionals
located in 40 states throughout the country. The Company
will seek to leverage these relationships of its corporate
stockholder to source opportunities before they are widely
marketed in an attempt to effect so-called off market
transactions. Through the Companys corporate stockholder,
the Company intends to identify and source a potential target
acquisition, conduct preliminary risk return analysis and
perform asset, market, tenant and financial analysis to evaluate
relevant demographic, industry, real estate and market trends
with respect to the particular properties or assets. In doing so
the Company will leverage the proprietary market data routinely
compiled, analyzed and updated by Grubb & Ellis and
its approximately 90 research professionals. In the event that
the Company is able to consummate its Business Combination, it
believes that it can add value to the acquired properties by
stabilizing and repositioning the properties and improving
occupancy, increasing rental rates and reducing operating
expenses, thereby causing these under-performing properties to
generate improved income streams. In order to assist the Company
in evaluating potential target acquisitions (and if a Business
Combination is consummated, potential acquisitions thereafter),
the Company has formed an Investment Committee comprised of its
Chairman of the Board, Chief Executive Officer and Chief
Financial Officer along with the Executive Vice President of
Acquisitions of Grubb & Ellis. The Investment
Committee will report directly to the Companys Board of
Directors. The Company believes that the majority of its revenue
will be derived from rents collected from the leasing of its
properties and that the Company will also derive additional
revenue from the resale of certain of its
11
properties in a timely and efficient manner. The Company
believes that it will lease its properties to office and
industrial tenants and that such leases will typically be for
5-10 year terms. The Company believes that its ability to
make such timely and efficient dispositions of properties will
be enhanced by its access to the proprietary database of market
information that is maintained by the Companys corporate
stockholder. However, due to numerous factors, including but not
limited to then existing local and national market conditions,
the then current cost of capital, and the Companys then
current acquisition and disposition strategy, all of which can
vary from property to property and from time to time, the
Company cannot assess how long it may hold a particular property
before it disposes of it.
Overview
of Industrial and Office Markets
Industrial
Market
The Companys management believes that industrial markets
are typically viewed as the property type with the lowest
investment risk due to relatively low construction costs, few
tenant improvements required, and a construction cycle that is
short enough to be able to halt before over supply becomes a
significant issue. Nonetheless, industrial property is not
without risk, as industrial properties typically have the
shortest lifecycle. Moreover, a recent surge in construction in
industrial properties is presently limiting rental rate
increases in many markets throughout the United States. Overall,
investor demand for industrial properties was stable in the
first half of 2007 as a consequence of relatively low interest
rates and availability of capital. Transactions totaled
$22.4 billion in the first half of 2007, 2% ahead of the
same time for the prior year. Funds, syndicators, REITs and
foreign investors comprised the majority of the net purchasers
of industrial properties during this period. Institutions and
owner-users were the largest net sellers. Unleveraged total
return (which is income plus appreciation) for institutionally
owned industrial properties tracked by the National Council of
Real Estate Investment Fiduciaries was 5.14% for the second
quarter of 2007. The capitalization rate for the second quarter
of 2007 was 6.8% for industrial properties, which was
60 basis points less than for such properties for the same
period in 2006.
Office
Market
Various macro-economic forces have been exerting downward
pressure on demand for office space, such as off-shoring,
corporate cost cutting, productivity gains, shrinking office
space per employee, and the use of technology. However, the
office market has been performing in the current real estate
cycle about the same as it has in previous cycles, absorbing
space in response to increasing employment in the office sector.
More so than most other sectors of real estate, risk in the
office market sector tends to be more closely related to
employment growth, which totaled approximately 955,000 net
new payroll jobs during the first seven months of 2007. Office
investment transactions for the first half of 2007 were
$130.6 billion, more than double the comparable period for
2006 due to the sale of Equity Office Properties to Blackstone
and the subsequent flipping of many former EOP properties to
third-party investors. Funds were the largest net buyers in the
first half of 2007 by far while REITS (primarily EOP) were the
largest net sellers. The unleveraged total return for
institutional office properties tracked by the National Council
of Real Estate Investment Fiduciaries was 5.93% in the second
quarter of 2007. The average sales price was $359 per square
foot for central business district assets and $248 per square
foot for suburban office assets. The capitalization rate for the
second quarter of 2007 for suburban office assets was 6.7%,
which represented a 70 basis-point decline for such assets from
the year-ago period.
Regulations
Environmental
Regulations
Federal, state and local laws and regulations impose
environmental controls, disclosure rules and zoning restrictions
which directly impact the management, development, use,
and/or
sale
of real estate. Such laws and regulations tend to discourage
sales and leasing activities and mortgage lending with respect
to some properties, and may therefore adversely affect the
Company specifically, and the real estate industry in general.
Failure by the Company to uncover and adequately protect against
environmental issues in connection with a target acquisition may
subject the Company to liability as buyer of such property or
asset. Environmental laws and regulations impose liability on
current or previous real property owners or operators for the
cost of investigating, cleaning up or
12
removing contamination caused by hazardous or toxic substances
at the property. The Company may be held liable for such costs
as a subsequent owner of such property. Liability can be imposed
even if the original actions were legal and the Company had no
knowledge of, or were not responsible for, the presence of the
hazardous or toxic substances. Further, the Company may also be
held responsible for the entire payment of the liability if the
Company is subject to joint and several liability and the other
responsible parties are unable to pay. The Company may also be
liable under common law to third parties for damages and
injuries resulting from environmental contamination emanating
from the site, including the presence of asbestos containing
materials. Insurance for such matters may not be available.
Additionally, new or modified environmental regulations could
develop in a manner which could adversely affect the Company.
Certain laws and regulations govern the removal, encapsulation
or disturbance of asbestos containing materials (ACMs), when
those materials are in poor condition or in the event of
building renovation or demolition, impose certain worker
protection and notification requirements and govern emissions of
and exposure to asbestos fibers in the air. These laws may also
impose liability for a release of ACMs and may enable third
parties to seek recovery against the Company for personal injury
associated with ACMs. There may be ACMs at certain of the
properties the Company acquires.
Americans
with Disabilities Act
Any properties the Company acquires will be required to comply
with the Americans with Disabilities Act of 1990, or the ADA.
The ADA has separate compliance requirements for public
accommodations and commercial facilities, but
generally requires that buildings be made accessible to people
with disabilities. Compliance with the ADA requirements could
require removal of access barriers and non-compliance could
result in imposition of fines by the U.S. government or an
award of damages to private litigants, or both. While the
tenants to whom the Company leases properties will be obligated
by law to comply with the ADA provisions, and under the
Companys net leases will typically be obligated to cover
costs associated with compliance, if required changes involve
greater expenditures than anticipated, or if the changes must be
made on a more accelerated basis than anticipated, the ability
of such tenants to cover costs could be adversely affected and
the Company could be required to expend its own funds to comply
with the provisions of the ADA, which could adversely affect the
Companys results of operations and financial condition and
its ability to make distributions to shareholders. In addition,
the Company will be required to operate its properties in
compliance with fire and safety regulations, building codes and
other land use regulations, as they may be adopted by
governmental agencies and bodies and become applicable to the
Companys properties. The Company may be required to make
substantial capital expenditures to comply with those
requirements.
Investment
Policies
The Company intends to focus its acquisitions efforts primarily
in the industrial and office market sector of the
U.S. commercial real estate industry. The Company does not
intend to make investments in real estate mortgages or other
real estate securities (except for investments in securities of
entities that own commercial real estate). The Company will not
limit itself geographically. Rather, the Company intends to
focus its efforts on secondary and tertiary geographic markets
throughout the United States, as well as the suburban regions of
major metropolitan markets. The Company believes that it will
derive the majority of its revenue from the leasing and
management of its properties and that the Company will also
derive additional revenue from the resale of certain properties
in a timely and efficient manner.
Agreements
with GBE
The Company engaged GBE to provide brokerage services, pursuant
to the Services Agreement, and GEMS, its wholly owned
subsidiary, to provide property management and project
management services following the consummation of a Business
Combination pursuant to the Property Management. Pursuant to the
Services Agreement, GBE will act as our exclusive agent with
respect to commercial real estate brokerage and consulting
services relating to real property acquisitions, dispositions as
well as agency leasing at the customary prevailing rates in the
market where the applicable property is located. The Services
Agreement has an initial term of five years. Furthermore, GERA
and GBE have agreed, pursuant to the Services Agreement, that
GERA will pay GBE an
13
acquisition fee equal to one percent of the acquisition price
for each of the Properties. Accordingly, in addition to the LLC
Purchase Price, at the closing, GERA shall pay GBE an
acquisition fee of $1,222,000 with respect to the Properties.
Pursuant to the Property Management Agreement, GEMS will serve
as our sole exclusive managing agent for all real property we
acquire. The Property Management Agreement has an initial term
of 12 months from the date of consummation of a Business
Combination and shall be automatically renewed for successive
terms, each with durations of one (1) year unless otherwise
terminated in accordance with the terms of the agreements. The
Property Management Agreement also entitles GEMS to a monthly
management fee equal to the greater of (a) three percent
(3%) of a propertys monthly gross cash receipts from the
operations of the property, or (b) a minimum monthly fee
determined by mutual agreement based upon then current market
prices and subject to the approval of a majority of the
independent members of GERAs Board of Directors, plus
reimbursement for salaries and other expenses that are directly
related to managing the asset or assets.
GBE has also been retained by us to perform at our request
project management services pursuant to the Project Management
Agreement, including consulting and project management of
interior office space
and/or
building infrastructure improvements. The Project Management
Agreement will remain in effect until terminated by either party
with or without cause upon sixty (60) days prior written
notice. For each project under the Project Management Agreement,
GEMS will receive a fee equal to five percent (5%) of the total
project costs, including without limitation, all costs of
architects, engineers, consultants involved in design and
construction, and all construction costs and, under certain
circumstances, reimbursement for salaries and benefits of staff
assigned to such project along with their travel expenses and
project management software costs.
Each SPE has entered into an exclusive agency agreement with GBE
whereby GBE has been retained as each SPEs exclusive
leasing agent with a right to lease tenant space at the
Properties. As consideration for its services, GBE shall receive
a commission for each new lease of space, and for certain
renewals and expansions, as follows:
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For new leases and tenant expansions at the Abrams Center, not
involving an outside broker, GBE shall be paid 4.5% of the Basic
Rental (the fixed rents excluding certain specified charges),
and for renewals at the Abrams Center not involving an outside
broker GBE shall be paid 3.5% of the Basic Rental.
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For new leases, expansions and renewals at the Abrams Center
involving an outside broker, GBE shall be paid 2.25% of the
Basic Rental.
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For new leases, expansions and renewals at 6400 Shafer Court not
involving an outside broker, GBE shall be paid a commission
equal to $1.00 per rentable square foot of leased space per
lease year.
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For new leases, expansions and renewals at 6400 Shafer Court in
which an outside broker is involved, GBE shall be paid an amount
equal to 50% of the amount payable to the outside procuring
broker under a separate agreement between the SPE and the
Procuring Broker, and the SPE shall be responsible for all
payments to the Procuring Broker.
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For new leases, expansions and renewals at the Danbury Corporate
Center not involving an outside procuring broker, GBE shall be
paid 5% of the rents for the first five lease years, 2.5% of the
rents for lease years 6 through 10, and 1% of the rents for any
lease years thereafter for the balance of the term.
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For new leases, expansions and renewals at the Danbury Corporate
Center involving an outside broker as procuring broker, GBE
shall be paid an amount equal to 150% of the amount which would
have been paid had there been no outside broker involved in the
transaction, with the proviso that GBE shall be responsible for
paying two-thirds of that amount to the outside broker, so that
GBE shall retain an amount equal to 50% of what it would have
received had no outside broker been involved in the transaction.
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The agency leasing agreement for the Rosemont Property shall
remain in effect through May 1, 2009, unless sooner
terminated in accordance with the terms of the agreement. The
term of the agency leasing agreement for the Dallas Property
shall, unless sooner terminated, remain in effect through
March 1, 2010. The term of the agency leasing agreement for
the Danbury Property shall, unless sooner terminated, remain in
effect through June 14, 2008. Each of the agency leasing
agreements may be terminated by either the owner or the broker
by providing thirty days advance written notice of termination
to the other party.
14
Additionally, each SPE has entered into Management Agreements
with GEMS. The Management Agreements appoint GEMS as each
SPEs sole exclusive management agent for the Properties.
For its services, GEMS will receive for the Dallas Property a
fee equal to three percent (3%) of the propertys monthly
gross cash receipts from the operations of such property plus
reimbursement for salaries and other expenses that are directly
related to managing the asset. Under the Management Agreements
for the Rosemont Property and the Danbury Property, GEMS is to
receive a monthly management fee equal to the greater of
(a) three percent (3%) of a propertys monthly gross
cash receipts from the operations of the property, or (b) a
minimum monthly fee determined by mutual agreement based upon
then current market prices and subject to the approval of a
majority of the independent members of GERAs Board of
Directors plus reimbursement for salaries and other expenses
that are directly related to managing the asset or assets. The
Management Agreements have an initial term of twelve
(12) months from the effective date of the agreements and
shall be automatically renewed for successive terms, each with a
duration of one (1) year unless otherwise terminated in
accordance with the terms of the agreements.
We will reimburse GBE, subject to board approval, all reasonable
out-of-pocket business expenses incurred by it in connection
with activities on our behalf. GBE advanced an aggregate of
approximately $511,000 to us as of the effective date of the
registration statement to cover expenses related to the IPO .
The loans were repaid without interest on March 3, 2006
from net proceeds upon the closing of the IPO. In addition, as
of June 30, 2007, the Company has paid approximately
$96,000 to GBE to reimburse it for third party expenses incurred
in connection with activities completed on the Companys
behalf (such as identifying potential target businesses and
performing due diligence on suitable Business Combinations) and
GBE has requested reimbursement from the Company with respect to
approximately an additional $203,000 for similar expenses.
GBE
Proposed Merger with NNN Realty Advisors, Inc.
On May 22, 2007, GBE entered into a definitive Agreement
and Plan of Merger (the Merger) by and among GBE,
NNN Realty Advisors, Inc. and B/C Corporate Holding, Inc., a
wholly owned subsidiary of GBE. The Merger is expected to have
little impact on GERA except that upon the consummation of the
Merger the chairman of the board, Mr. C. Michael Kojaian,
will assume the duties of chief executive officer of the
Company, replacing Mr. Mark E. Rose in that capacity. GBE
will remain the largest stockholder of the Company, and each of
the Services Agreement, the Property Management Agreement and
the Project Management Agreement will not be affected by the
Merger.
Factors that could adversely affect the Companys ability
to obtain favorable results and maintain or increase stockholder
value include, among other things:
Risks
Related to our Business and Operations
The Company is a development stage
company with no operating history and, accordingly, there is no
basis on which to evaluate the Companys ability to achieve
its business objective
.
The Company is a
development stage company with no operating results to date.
Since the Company does not have an operating history, there is
no basis upon which to evaluate the Companys ability to
achieve its business objective, which is to effect a Business
Combination. The Company will not generate any revenue until, at
the earliest, after the consummation of a Business Combination.
If third parties bring claims against
the Company, the proceeds held in trust could be reduced and the
per-share liquidation price received by stockholders will be
less than the amounts currently held in trust
.
The
Companys placing of funds in the Trust Account may
not protect those funds from third party claims against the
Company. Although the Company will seek to have all vendors and
other entities the Company engages, and all prospective target
acquisitions the Company negotiates with, execute agreements
with the Company waiving any right, title, interest or claim of
any kind in or to any monies held in the Trust Account for
the benefit of the Companys public stockholders, there is
no guarantee that they will execute such agreements. Nor is
there any guarantee that such entities will agree to waive any
claims they may have in the future as a result of, or arising
out of, any negotiations, contracts or agreements with the
Company and will not seek recourse against the
Trust Account. Accordingly, the proceeds held in the
Trust Account could be subject to claims which could take
priority over those of the Companys public stockholders.
The Company cannot provide assurance that the per-share
distribution from the Trust Account will not be less than
amounts currently
15
held in the trust, due to such claims. If the Company liquidates
before the completion of a Business Combination and distributes
the proceeds held in trust to its public stockholders, the
Companys corporate stockholder has agreed that it will be
liable to ensure that the proceeds in the Trust Account are
not reduced by the claims of target acquisitions or vendors or
other entities that are owed money by the Company for services
rendered or contracted for or products sold to the Company.
However, the Company cannot provide assurance that they will be
able to satisfy those obligations.
If the net proceeds that the Company
raised in its initial public offering not being placed in trust
are insufficient to allow the Company to operate for at least
24 months, the Company may not be able to complete a
Business Combination
.
The Company has used a
portion of the funds not being placed in trust to pay due
diligence costs in connection with a potential Business
Combination and to pay fees to consultants to assist the Company
with its search for a target acquisition. The Company has
accrued costs in connection with a potential Business
Combination which exceed the funds not placed in trust. The
Companys corporate stockholder has paid these costs with
the expectation that, if a Business Combination is completed,
the Companys corporate stockholder will be reimbursed.
However, the Company cannot provide assurance that the
Companys corporate stockholder will continue to satisfy
these obligations.
The Companys ability to
successfully effect a Business Combination and to be successful
thereafter will be totally dependent upon the efforts of the
Companys key personnel certain of who will not be
employees of the Companys and others who may not continue
with the Company following a Business
Combination
.
The Companys ability to
successfully effect a Business Combination is dependent upon the
efforts of its key personnel. The Companys key personnel,
other than its executive officers, will be various employees of
the Companys corporate stockholder who the Company
anticipates it will have access to on an as needed basis,
although there are no assurances that any such personnel will be
able to devote either sufficient time, effort or attention to
the Company when the Company needs it. None of the
Companys key personnel, including Mark Rose, the
Companys chief executive officer and secretary, Richard
Pehlke, the Companys chief financial officer, and Mark
Chrisman, a member of the Companys Investment Committee,
have entered into employment or consultant agreements with the
Company. Upon the consummation of GBEs merger with NNN
Realty Advisors, Inc., the chairman of the board, Mr. C.
Michael Kojaian, will assume the duties of chief executive
officer of the Company, replacing Mr. Mark E. Rose in that
capacity. Further, although the Company presently anticipates
that Mr. Pehlke and Mr. Chrisman will remain
associated in senior management, advisory or other positions
with the Company following a Business Combination, some or all
of the management associated with a target acquisition may also
remain in place. As such, other than Mr. Pehlke and
Mr. Chrisman, certain of the Companys key personnel
may not continue to provide services to the Company, including
those individuals who are currently employees of the
Companys corporate stockholder, after the consummation of
a Business Combination if the Company is unable to negotiate
employment or consulting agreements with them in connection with
or subsequent to the Business Combination, the terms of which
would be determined at such time between the respective parties.
Such negotiations would take place simultaneously with the
negotiation of the Business Combination and could provide for
such individuals to receive compensation in the form of cash
payments
and/or
the
Companys securities for services they would render to the
Company after the consummation of the Business Combination.
While the personal and financial interests of such individuals
may influence their motivation in identifying and selecting a
target acquisition, the ability of such individuals to remain
with the Company after the consummation of a Business
Combination will not be the determining factor in the
Companys decision as to whether or not the Company will
proceed with any potential Business Combination. While the
Company intends to closely scrutinize any individuals the
Company engages after a Business Combination, the Company cannot
provide assurance that its assessment of these individuals will
prove to be correct. These individuals may be unfamiliar with
the requirements of operating a public company which could cause
the Company to have to expend time and resources helping them
become familiar with such requirements. This could be expensive
and time-consuming and could lead to various operational issues
which may adversely affect the Companys operations.
The Company has entered into a long term
brokerage services agreement, a long term facilities management
agreement and a long term project management agreement with
Grubb & Ellis, the Companys corporate
stockholder, and due to the fact that all of the Companys
current officers are employed by the Companys corporate
stockholder and certain of the Companys directors also
serve on the board of directors of the Companys corporate
stockholder, a conflict of interest may arise in determining
whether a particular target acquisition is appropriate for a
Business
16
Combination
.
The Company has entered into a
long term brokerage services agreement, a long term facilities
management agreement and a long term project management
agreement with its corporate stockholder, Grubb &
Ellis. Pursuant to these agreements, the Companys
corporate stockholder will serve as the Companys exclusive
agent with respect to commercial real estate brokerage and
facilities management, and will perform project management
services at the Companys request. As a result, the
Companys corporate stockholder will stand to earn
substantial fees and revenues in accordance with the terms and
conditions of these agreements. The discretion of the
Companys officers, all of whom are also officers of the
Companys corporate stockholder, and the discretion of
certain of the Companys directors who are also directors
of the Companys corporate stockholder, in identifying and
selecting a suitable target acquisition may result in a conflict
of interest when determining whether the terms, conditions and
timing of a particular Business Combination are appropriate and
in the Companys stockholders best interest. In
addition, the Companys corporate stockholder, as a
commercial real estate broker, has relationships with a
significant number of clients pursuant to which they would be
expected to provide certain business opportunities that could be
appropriate for presentation to the Company. The Company does
not have preferential rights to be presented with any such
opportunities. Accordingly, although the Companys
corporate stockholder is the Companys exclusive agent with
respect to commercial real estate brokerage and facilities
management, it provides such services to the Company on a
non-exclusive basis.
The Companys officers, directors
and advisors will allocate some portion of their time to other
businesses thereby causing conflicts of interest in their
determination as to how much time to devote to the
Companys affairs
.
This conflict of interest
could have a negative impact on the Companys ability to
consummate a Business Combination. The Companys officers,
directors and advisors are not required to commit their full
time to the Companys affairs, which could create a
conflict of interest when allocating their time between the
Companys operations and their other commitments. The
Company does not intend to have any full time employees prior to
the consummation of a Business Combination. All of the
Companys executive officers and advisors are currently
employed by the Companys corporate stockholder and are not
obligated to devote any specific number of hours to the
Companys affairs. If the Companys corporate
stockholder requires them to devote more substantial amounts of
time to its business and affairs, it could limit their ability
to devote time to the Companys affairs and could have a
negative impact on the Companys ability to consummate a
Business Combination. The Company cannot provide assurance that
these conflicts will be resolved in the Companys favor.
The Companys officers, directors,
advisors and their affiliates currently are, and may in the
future become affiliated with additional entities that are,
engaged in business activities similar to those intended to be
conducted by the Company and accordingly, may have conflicts of
interest in determining to which entity a particular business
opportunity should be presented
.
None of the
Companys officers, directors, advisors or their affiliates
has been or currently is a principal of, or affiliated or
associated with, a blank check company. However, all of the
Companys officers, directors and advisors currently are,
and may in the future become affiliated with additional
entities, including other blank check companies or
real estate entities that are, engaged in business activities
similar to those intended to be conducted by the Company. In
particular, Mr. Rose, Mr. Pehlke and Mr. Chrisman
are the Chief Executive Officer, Chief Financial Officer and
Executive Vice President of Acquisitions, respectively, of
Grubb & Ellis. In such capacities, Mr. Rose,
Mr. Pehlke and Mr. Chrisman have a fiduciary
obligation to cause Grubb & Ellis to continue to
present real estate leasing and acquisition opportunities that
may be suitable for the Company to current and future clients of
Grubb & Ellis. Additionally, the Companys
officers, directors and advisors may become aware of business
opportunities which may be appropriate for presentation to the
Company and the other entities to which they owe fiduciary
duties. Accordingly, Mr. Rose, Mr. Pehlke and
Mr. Chrisman may have conflicts of interest in determining
to which entity a particular business opportunity should be
presented. The Company cannot provide assurance that any of
these conflicts will be resolved in the Companys favor.
The real estate market in general is
subject to a number of economic conditions that are not within
our control
.
The commercial real estate market is
subject to various risks and fluctuations and cycles in value
and demand for real estate in local markets, many of which are
beyond our control. Changes in one or more of these factors
could either favorably or unfavorably impact the volume of
transactions and prices or lease terms for real estate.
Consequently, our revenue and our corresponding cash flow and
financial condition could be materially and adversely impacted
by changes in these factors. These factors include:
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adverse changes in international, national, regional or local
economic, demographic and market conditions;
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adverse changes in financial conditions of buyers, sellers and
tenants of properties;
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competition from other real estate investors with significant
capital;
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reductions in the level of demand for commercial space, and
changes in the relative popularity of properties;
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fluctuations in interest rates, which could adversely effect our
ability, or the ability of buyers and tenants of properties, to
obtain financing on favorable terms or at all;
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unanticipated increases in operating expenses, including,
without limitation, insurance costs, labor costs, construction
cost, energy prices and costs of compliance with laws,
regulations and governmental policies;
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unanticipated additional real estate developments which increase
overall market supply and competition;
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changes in, and changes in enforcement of, laws, regulations and
governmental policies, including, without limitation, health,
safety, environmental, zoning and tax laws and governmental
fiscal policies, and changes in the related costs of compliance
with laws, regulations and governmental polices; and
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civil unrest, acts of God, including earthquakes, floods and
other natural disasters and acts of war or terrorism, including
the consequences of terrorist acts such as those that occurred
on September 11, 2001, which may result in uninsured losses.
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Major unexpected mechanical or building
system failures may result in adverse changes in the performance
of our properties and harm our financial
condition
.
Major unexpected mechanical or building
system failures may result in the disruption of building
operations resulting in loss of rents as well as require us to
make significant, unbudgeted capital expenditures. Such
expenditures and loss of rents could reduce our cash flows and
funds available for future dividends.
Increasing competition for the
acquisition of real estate may impede our ability to make future
acquisitions, which could adversely affect our operating results
and financial condition
.
The commercial real estate
industry is highly competitive on an international, regional and
local level. We will face competition from REITs, institutional
pension funds, and other public and private real estate
companies and private real estate investors. Although many of
our competitors are local or regional firms that are
substantially smaller than we are as a whole, some of these
firms are substantially larger than we are in the local or
regional area in which we actually compete with these firms.
These competitors may prevent us from acquiring desirable
properties or increase the price we must pay for real estate.
Our competitors may have greater resources than we do, and may
be willing to pay more or may have a more compatible operating
philosophy with our acquisition targets. In particular, REITs
may enjoy significant competitive advantages that result from,
among other things, a lower cost of capital and enhanced
operating efficiencies. Our competitors may also adopt
transaction structures similar to ours, which would decrease our
competitive advantage in offering flexible transaction terms. In
addition, the number of entities and the amount of funds
competing for suitable investment properties may increase,
resulting in increased demand and increased prices paid for such
properties. If we pay higher prices for properties, our
profitability may decrease and we may experience a lower return
on our investments. Increased competition for properties may
also preclude us from acquiring those properties that would
generate the most attractive returns to us.
Illiquidity of real estate investments
could significantly impede our ability to respond to adverse
changes in the performance of our properties and harm our
financial condition
.
Because real estate
investments are relatively illiquid, our ability to promptly
sell one or more properties or investments in our portfolio in
response to changing economic, financial and investment
conditions may be limited. In particular, these risks could
arise from weakness in or even the lack of an established market
for a property, changes in the financial condition or prospects
of prospective purchasers, changes in national or international
economic conditions, and changes in laws, regulations or fiscal
policies of jurisdictions in which the property is located. We
may be unable to realize our investment objectives by sale,
other disposition or to refinance at attractive prices within
any given period of time or may otherwise be unable to complete
any exit strategy.
Increasing interest rates could have a
negative impact our real estate investments in multiple
ways
.
An environment of rising interest rates
creates the risk of incurring increased interest rate payments
on any current
18
financings, such as the Wachovia Mortgage Loans, new financings
or re-financings that we may pursue or higher interest rates if
an interest rate adjustment occurs as a term of an existing loan
on any of the properties.
Rising interest rates also may be accompanied by weakening
economic conditions, which will typically lead to constrained
business expansion by companies. Such a condition may have a
direct impact on the commercial real estate market. Businesses
that would otherwise accommodate their growth by leasing space
in commercial buildings may no longer pursue an expansion
strategy.
In addition, higher interest rates may create financial
pressures on existing tenants causing them to vacate or reduce
the amount of space they occupy or cause a tenant to delay
paying its rent or cause them to default on their rental
payments. Under such a situation a tenant may ask for rent
forgiveness. In extreme situations a tenant may decide to
declare bankruptcy.
Reduced demand for space and increasing vacancy resulting from
increasing interest rates may affect our ability to achieve our
leasing objectives in terms of occupancy, rental rates and
leasing concessions. When tenant demand for leased space falls,
rental rates may follow suit. Weakening market conditions can
trigger higher tenant concessions that may become necessary to
provide a financial inducement to attract new tenants to lease
vacant space in the properties and to entice existing tenants to
renew their leases. These incentives usually take the form of
free rent and tenant improvement allowances of a higher amount
than we had otherwise planned on providing.
Under each of the scenarios described above there could be a
reduction in the amount of cash flow available to fund
operations, improve the properties or to distribute as dividends
to stockholders. If the conditions become too severe, there is
always the risk that we may not be able to meet debt service
payments resulting in the lender initiating foreclosure
proceedings on the loan. When the property has been offered as
collateral for the loan the lender would acquire title to the
property as a result of the foreclosure and we would lose our
ownership interests and rights in the property.
A rising interest rate environment combined with deteriorating
real estate market fundamentals could also affect investor
demand for real estate and ultimately the value of real estate.
Higher interest rates affect our ability to underwrite
transactions and may impair our ability to meet future targeted
returns. When debt becomes more costly, buyers relying on
financing to fund their acquisitions will either leave the
market or they will be forced to submit offers at lower prices,
making them less competitive. The absence of this group of
buyers may reduce the competition among buyers, which may affect
the price the remaining active buyers will bid for a property.
Deteriorating market fundamentals may cause buyers to modify how
they underwrite their purchases. If they are more cautious in
their interpretation of market trends, the value of our
properties when we sell them may be less than what we paid for
them. In addition to the risk of a loss on the sale of a
property there is the further risk of the value being
insufficient to repay the principal on any loans that may be
outstanding.
Rising operating expenses and decrease
in rents at our properties could reduce our cash flow and funds
available for future dividends
.
Our properties will
likely be subject to operating risks common to real estate in
general, any or all of which may negatively affect us. In
addition, the Properties are subject to certain floating
operating expenses for market based purchases (such as,
electricity, gas and other utilities) that have short term
fluctuation risk. Furthermore, if any property is not fully
occupied or if rents are being paid in an amount that is
insufficient to cover operating expenses, we could be required
to expend funds for that propertys operating expenses. If
our competitors offer space at rental rates below market rates,
or below the rental rates we charge our tenants, we may lose
existing or potential tenants and we may be pressured to reduce
our rental rates below those we charge in order to retain
tenants when our tenants leases expire. Our properties
could also be subject to increases in real estate and other tax
rates, utility costs, operating expenses, insurance costs,
repairs and maintenance and administrative expenses. Increases
in operating expenses and loss of rents could reduce our cash
flows and funds available for future dividends.
Our ability to pay dividends is limited
and we may be unable to pay future dividends
.
GERA
has not paid cash dividends in the past and does not expect to
pay dividends in the foreseeable future. The holders of our
common stock are entitled to receive dividends when and if
declared by our board of directors out of funds available
therefore. As part of our consideration to pay cash dividends,
we intend to retain adequate funds from future earnings to
support the development and growth of our business. Furthermore,
the payment of future dividends is at
19
the discretion of GERAs board of directors and is subject
to a number of factors, including results of operations, general
business conditions, growth, financial condition, contractual
restrictions and other factors deemed relevant by GERAs
board of directors. Such factors may also prevent GERA from
issuing dividends in the foreseeable future.
Environmental regulation and issues,
over certain of which we may have no control, may adversely
impact our business
.
Federal, state and local laws
and regulations impose environmental controls, disclosure rules
and zoning restrictions which directly impact the management,
development, use,
and/or
sale
of real estate. Such laws and regulations tend to discourage
sales and leasing activities and mortgage lending with respect
to some properties, and may therefore adversely affect us
specifically, and the real estate industry in general. Failure
by us to uncover and adequately protect against environmental
issues in connection with a target acquisition may subject us to
liability as buyer of such property or asset. Environmental laws
and regulations impose liability on current or previous real
property owners or operators for the cost of investigating,
cleaning up or removing contamination caused by hazardous or
toxic substances at the property. We may be held liable for such
costs as a subsequent owner of such property. Liability can be
imposed even if the original actions were legal and we had no
knowledge of, or were not responsible for, the presence of the
hazardous or toxic substances. Further, we may also be held
responsible for the entire payment of the liability if we are
subject to joint and several liability and the other responsible
parties are unable to pay. We may also be liable under common
law to third parties for damages and injuries resulting from
environmental contamination emanating from the site, including
the presence of asbestos containing materials. Insurance for
such matters may not be available. Additionally, new or modified
environmental regulations could develop in a manner which could
adversely affect us.
Our properties may contain or develop
harmful mold, which could lead to liability for adverse health
effects and costs of remediating the problem
.
When
excessive moisture accumulates in buildings or on building
materials, mold growth may occur, particularly if the moisture
problem remains undiscovered or is not addressed over a period
of time. Some molds may produce airborne toxins or irritants.
Concern about indoor exposure to mold has been increasing as
exposure to mold may cause a variety of adverse health effects
and symptoms, including allergic or other reactions. As a
result, the presence of significant mold at any of our
properties could require us to undertake a costly remediation
program to contain or remove the mold from the affected
property. In addition, the presence of significant mold could
expose us to liability from our tenants, employees of our
tenants and others if property damage or health concerns arise.
Our properties may contain asbestos
which could lead to liability for adverse health effects and
costs of remediating asbestos
.
Certain laws and
regulations govern the removal, encapsulation or disturbance of
asbestos containing materials (or ACMs), when those materials
are in poor condition or in the event of building renovation or
demolition, impose certain worker protection and notification
requirements and govern emissions of and exposure to asbestos
fibers in the air. These laws may also impose liability for a
release of ACMs and may enable third parties to seek recovery
against us for personal injury associated with ACMs. There may
be ACMs at certain of the properties we acquire.
Compliance with the Americans with
Disabilities Act and fire, safety and other regulations may
require us to make substantial unintended
expenditures
.
Any properties we acquire will be
required to comply with the Americans with Disabilities Act of
1990, or the ADA. The ADA has separate compliance requirements
for public accommodations and commercial
facilities, but generally requires that buildings be made
accessible to people with disabilities. Compliance with the ADA
requirements could require removal of access barriers and
non-compliance could result in imposition of fines by the
U.S. government or an award of damages to private
litigants, or both. While the tenants to whom we lease
properties will be obligated by law to comply with the ADA
provisions, and the tenants under our net leases will typically
be obligated to cover costs associated with compliance, if
required changes involve greater expenditures than anticipated,
or if the changes must be made on a more accelerated basis than
anticipated, the ability of such tenants to cover costs could be
adversely affected and we could be required to expend our own
funds to comply with the provisions of the ADA, which could
adversely affect our results of operations and financial
condition. In addition, we will be required to operate our
properties in compliance with fire and safety regulations,
building codes and other land use regulations, as they may be
adopted by governmental agencies and bodies and become
applicable to our properties. We may be required to make
substantial capital expenditures to comply with those
requirements.
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Failure of our tenants to pay rent could
seriously harm our operating results and financial
condition
.
We will rely on rental payments from
tenants of a target acquisition as a source of cash. At any
time, any of our tenants may experience a downturn in its
business that may weaken its financial condition. As a result, a
tenant may delay lease commencement, fail to make rental
payments when due, decline to extend a lease upon its
expiration, become insolvent or declare bankruptcy. Any tenant
bankruptcy, insolvency, or failure to make rental payments when
due could result in the termination of the tenants lease
and material losses to our company. A default by a large tenant
on one of these properties could have a material adverse effect
on our operating results and financial condition.
In particular, if any of our significant tenants becomes
insolvent, suffers a downturn in its business and decides not to
renew its lease or vacates a property and prevents us from
leasing that property by continuing to pay base rent for the
balance of the term, it may seriously harm our business. Failure
on the part of a tenant to comply with the terms of a lease may
give us the right to terminate the lease, repossess the
applicable property and enforce the payment obligations under
the lease; however, we would be required to find another tenant.
We cannot assure you that we would be able to find another
tenant without incurring substantial costs, or at all, or that,
if another tenant was found, we would be able to enter into a
new lease on favorable terms.
The bankruptcy or insolvency of our
tenants under their leases could seriously harm our operating
results and financial condition
.
Any bankruptcy
filings by or relating to one of our tenants could bar us from
collecting pre-bankruptcy debts from that tenant or its
property. A tenant bankruptcy could delay our efforts to collect
past due balances under the relevant leases, and could
ultimately preclude full collection of these sums. If a lease is
assumed by the tenant in bankruptcy, all pre-bankruptcy balances
due under the lease must be paid to us in full. However, if a
lease is rejected by a tenant in bankruptcy, we would have only
a general unsecured claim for damages. Any unsecured claim we
hold against a bankrupt entity may be paid only to the extent
that funds are available and only in the same percentage as is
paid to all other holders of unsecured claims. We may recover
substantially less than the full value of any unsecured claims,
which would harm our operating results and financial condition.
Increases in our property taxes could
adversely affect our cash flow and financial
condition
.
Each of our properties will be subject
to real and personal property taxes. These taxes on our
properties may increase as tax rates change and as the
properties are assessed or reassessed by taxing authorities.
Many U.S. states and localities are considering increases
in their income
and/or
property tax rates (or increases in the assessments of real
estate) to cover revenue shortfalls. If property taxes increase,
it may adversely affect our cash flow and financial condition.
Uninsured and underinsured losses may
adversely affect operations
.
We, or in certain
instances, tenants of our properties, are likely to carry
commercial general liability, fire and extended coverage
insurance with respect to our properties. We plan to obtain
coverage that has policy specifications and insured limits that
we believe are customarily carried for similar properties.
However, certain types of losses, generally of a catastrophic
nature, such as earthquakes and floods, may be either
uninsurable or not economically insurable. Should a property
sustain damage, we may incur losses due to insurance
deductibles, to co-payments on insured losses or to uninsured
losses. In the event of a substantial property loss, the
insurance coverage may not be sufficient to pay the full current
market value or current replacement cost of the property. In the
event of an uninsured loss, we could lose some or all of our
capital investment, cash flow and anticipated profits related to
one or more properties. Inflation, changes in building codes and
ordinances, environmental considerations, and other factors also
might make it not feasible to use insurance proceeds to replace
a property after it has been damaged or destroyed. Under such
circumstances, the insurance proceeds we receive might not be
adequate to restore our economic position with respect to such
property.
In the event of an underinsured loss with respect to a property
relating to a title defect, the insurance proceeds we receive
might not be adequate to restore our economic position with
respect to such property. In the event of a significant loss at
one or more of the properties covered by the blanket policy, the
remaining insurance under our policy, if any, could be
insufficient to adequately insure our remaining properties. In
this event, securing additional insurance, if possible, could be
significantly more expensive than our current policy.
If we are unable to promptly relet or
renew leases as they expire, our cash flow and ability to
service our indebtedness, may be adversely
affected
.
We are subject to the risks that upon
expiration of leases for space located in our buildings
(a) such leases may not be renewed, (b) such space may
not be relet or (c) the terms of renewal or reletting,
taking into account the cost of required renovations, may be
less favorable than the current lease terms. If we are unable to
promptly relet, or renew the leases for, a substantial portion
of the space located in our buildings, or if the
21
rental rates upon such renewal or reletting are significantly
lower than expected rental rates, or if our reserves for these
purposes prove inadequate, our cash flow and ability to service
our indebtedness may be adversely affected.
Risks
Related to the Acquisition
Our working capital will be reduced if
GERA stockholders exercise their right to convert their shares
into cash. This would reduce our cash reserve after the
acquisition
.
Pursuant to our certificate of
incorporation, holders of shares issued in the IPO may vote
against the acquisition and demand that we convert their shares,
calculated as of two business days prior to the anticipated
consummation of the acquisition, into a pro rata share of the
trust account where a substantial portion of the net proceeds of
the IPO are held. We will not consummate the acquisition if
holders of 4,791,667 or more shares of common stock issued in
the IPO exercise these conversion rights. To the extent the
acquisition is consummated and holders have demanded to so
convert their shares, there will be a corresponding reduction in
the amount of funds available to us following the acquisition.
As of August 22, 2007, assuming the Properties Acquisition
Proposal is approved, the maximum amount of funds that could be
disbursed to our stockholders upon the exercise of their
conversion rights is approximately $28.9 million, or
approximately 20% of the funds held in the trust account. Any
payment upon exercise of conversion rights will reduce our cash
after the acquisition, which may limit our ability to implement
our business plan.
If we do not consummate the acquisition
and are forced to dissolve and liquidate, payments from the
trust account to our public stockholders may be
delayed
.
In the event that the LLC Acquisition
Agreement is not consummated, and GERA does not enter into a
letter of intent, agreement in principle or a definitive
agreement to consummate another Business Combination or
acquisition of assets by September 3, 2007, or executes
such an agreement but the contemplated Business Combination is
not consummated by March 3, 2008, GERA must be liquidated.
We anticipate that, if we are forced to liquidate, the following
will occur:
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our board of directors will convene and adopt a specific plan of
dissolution and liquidation, which it will then vote to
recommend to our stockholders; at such time it will also cause
to be prepared a preliminary proxy statement setting out such
plan of dissolution and liquidation as well as the boards
recommendation of such plan;
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we will promptly file our preliminary proxy statement with the
SEC;
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if the SEC does not review the preliminary proxy statement,
then, 10 days following the filing of such preliminary
proxy statement, we will mail the definitive proxy statement to
our stockholders, and, 20 days following the mailing of
such definitive proxy statement, we will convene a special
meeting of our stockholders, at which they will vote on our plan
of dissolution and liquidation; and
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if the SEC does review the preliminary proxy statement, we
currently estimate that we will receive their comments
30 days after the filing of such proxy statement. We would
then mail the definite proxy statement to our stockholders
following the conclusion of the comment and review process (the
length of which we cannot predict with any certainty, and which
may be substantial) and we will convene a special meeting of our
stockholders at which they will vote on our plan of dissolution
and liquidation.
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We expect that all costs associated with the implementation and
completion of our plan of dissolution and liquidation will be
funded by any remaining net assets not held in the trust
account, although we cannot assure you that there will be
sufficient funds for such purpose.
We will not liquidate the trust account unless and until our
stockholders approve our plan of dissolution and liquidation.
Accordingly, the foregoing procedures may result in substantial
delays in our liquidation and the distribution to our public
stockholders of the funds in our trust account and any remaining
net assets as part of our plan of dissolution and liquidation.
Our stockholders may be held liable for
claims by third parties against us to the extent of
distributions received by them
.
If we are unable to
complete the acquisition of Property Acquisition, we will
dissolve and liquidate pursuant to Section 275 of the DGCL.
Under Sections 280 through 282 of the DGCL, stockholders
may be held liable for claims by third parties against a
corporation to the extent of distributions received by them in
dissolution. Pursuant to Section 280, if the corporation
complies with certain procedures intended to ensure that it
makes reasonable provisions for all claims against it, including
a
60-day
notice period during which any third-party claims can be
22
brought against the corporation, a
90-day
period during which the corporation may reject any claims
brought, and an additional
150-day
waiting period before any liquidating distributions are made to
stockholders, any liability of a stockholder with respect to a
liquidating distribution is limited to the lesser of such
stockholders pro rata share of the claim or the amount
distributed to the stockholder, and any liability of the
stockholder would be barred after the third anniversary of the
dissolution. Although we will seek stockholder approval to
liquidate the trust account to our public stockholders as part
of our plan of dissolution and liquidation, we will seek to
conclude this process as soon as possible and as a result do not
intend to comply with those procedures. Because we will not be
complying with those procedures, we are required, pursuant to
Section 281 of the DGCL, to adopt a plan that will provide
for our payment, based on facts known to us at such time, of
(i) all existing claims, (ii) all pending claims and
(iii) all claims that may be potentially brought against us
within the subsequent 10 years. Accordingly, we would be
required to provide for any creditors known to us at that time
or those that we believe could be potentially brought against us
within the subsequent 10 years prior to distributing the
funds held in the trust to stockholders. We cannot assure you
that we will properly assess all claims that may be potentially
brought against us. As such, our stockholders could potentially
be liable for any claims to the extent of distributions received
by them in dissolution (but no more) and any liability of our
stockholders may extend well beyond the third anniversary of
such dissolution. Accordingly, we cannot assure you that third
parties will not seek to recover from our stockholders amounts
owed to them by us.
Additionally, if we are forced to file a bankruptcy case or an
involuntary bankruptcy case is filed against us that is not
dismissed, any distributions received by stockholders in our
dissolution might be viewed under applicable debtor/creditor
and/or
bankruptcy laws as either a preferential transfer or
a fraudulent conveyance. As a result, a bankruptcy
court could seek to recover all amounts received by our
stockholders in our dissolution. Furthermore, because we intend
to distribute the proceeds held in the trust account to our
public stockholders as soon as possible after our dissolution,
this may be viewed or interpreted as giving preference to our
public stockholders over any potential creditors with respect to
access to or distributions from our assets. Furthermore, our
board of directors may be viewed as having breached their
fiduciary duties to our creditors
and/or
may
have acted in bad faith, and thereby exposing itself and our
company to claims of punitive damages, by paying public
stockholders from the trust account prior to addressing the
claims of creditors
and/or
complying with certain provisions of the DGCL with respect to
our dissolution and liquidation. We cannot assure you that
claims will not be brought against us for these reasons.
Certain environmental conditions exist
at the Danbury Property that will require remediation in
accordance with applicable state law
.
Environmental
assessments conducted at the Danbury Property revealed that
certain additional remediation will be required in connection
with two underground heating oil storage tanks removed from the
property in 1992. The Danbury Property is subject to the
Connecticut Transfer Act (the Transfer Act) which
requires that environmental conditions at the property be
assessed and remediated in connection with a sales transaction.
Buildings Co., the sellers of the Danbury Property, are
responsible for compliance with the Transfer Act and have agreed
to perform and pay all costs associated with completing, in
accordance with the requirements of the Transfer Act, all
required assessments and remediation of any environmental
conditions (including conditions related to the removal of the
underground storage tanks) existing at the property prior to
closing identified by such assessments. In addition, to secure
the performance of its obligations, at the closing, Buildings
Co. deposited $2,000,000 in an escrow account which will remain
in place until the completion of the Transfer Act requirements,
and Buildings Co., together with Buckeye Casa Grande, L.P. and
Bridgewater Investments, Inc. have agreed to indemnify Property
Acquisition with respect to substantially all liabilities which
may be incurred under the Transfer Act in connection with the
remediation of existing hazardous substances at the Danbury
Property or caused by Building Co.s remediation
activities. A Phase I Environmental Site Assessment revealed
that in addition to conditions related to the removal of the
underground storage tanks, additional investigation may be
required with respect to potential environmental impacts from
visible staining and leakage of hydraulic oil in the area of a
trash compactor and loading docks adjacent to a trench drain,
and visible staining within the chauffer garage adjacent to a
storm drain. The remediation of the conditions related to the
removal of the underground storage tanks and the remaining
assessment work will be completed at the expense of Buildings
Co. If Buildings Co. fails to perform its obligations under the
Transfer Act and Buckeye Casa Grande, L.P. and Bridgewater
Investments, Inc. do not satisfy their indemnification
obligations, Property Acquisition may incur such liability as
the current owner of the Danbury Property. Furthermore, any
subsequent transfer of the Danbury Property prior to the
completion of the Transfer Act requirements will also be subject
to the requirements of the Transfer Act. Transfer of the Danbury
Property subsequent to completion of the
23
Transfer Act requirements may also be subject to the Transfer
Act if certain hazardous materials activities occur at the
Danbury Property thereafter.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None.
The Company maintains its principal executive offices at
500 West Monroe Street, Suite 2800, Chicago, Illinois
60661. The cost for this space is included in the $7,500
per-month fee Grubb & Ellis charges the Company for
general and administrative services. The Company believes, based
on rents and fees for similar services in the Chicago
metropolitan area, that the fee charged by the Companys
corporate stockholder is at least as favorable as the Company
could have obtained from an unaffiliated person. The Company
considers its current office space, combined with the other
office space otherwise available to its executive officers,
adequate for the Companys current operations.
|
|
Item 3.
|
Legal
Proceedings
|
There is no litigation currently pending or, to the knowledge of
management, contemplated against the Company or any of its
officers or directors in their capacity as such.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
No matters were submitted to a vote of security holders during
the fourth quarter of fiscal year 2007.
24
GRUBB &
ELLIS REALTY ADVISORS, INC.
|
|
Item 5.
|
Market
for Registrants Common Equity and Related Stockholder
Matters
|
Market
and Price Information
The Companys units, common stock and warrants are traded
on AMEX under the symbols GAV.U, GAV and GAV.WS, respectively.
The following table sets forth for each calendar year the range
of high and low closing bid prices for the units, common stock
and warrants for the periods indicated since the units commenced
public trading on February 28, 2006 and since the common
stock and warrants commenced public trading on March 27,
2006. The AMEX quotations reflect inter-dealer prices, without
retail
mark-up,
mark-down or commission and may not necessarily reflect actual
transactions.
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Units
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|
Common Stock
|
|
|
Warrants
|
|
|
|
High
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|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
2007:
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|
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|
|
|
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|
|
First Quarter
|
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$
|
6.50
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|
|
$
|
6.05
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|
|
$
|
5.75
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|
|
$
|
5.55
|
|
|
$
|
0.43
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|
|
$
|
0.28
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|
Second Quarter
|
|
$
|
6.80
|
|
|
$
|
6.26
|
|
|
$
|
5.87
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|
|
$
|
5.67
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|
|
$
|
0.56
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|
|
$
|
0.39
|
|
2006:
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|
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|
|
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|
First Quarter (commencing March 27, 2006)
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|
$
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6.60
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|
|
$
|
6.05
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|
|
$
|
5.55
|
|
|
$
|
5.45
|
|
|
$
|
0.65
|
|
|
$
|
0.49
|
|
Second Quarter
|
|
$
|
6.95
|
|
|
$
|
6.20
|
|
|
$
|
5.80
|
|
|
$
|
5.45
|
|
|
$
|
0.65
|
|
|
$
|
0.45
|
|
Third Quarter
|
|
$
|
6.63
|
|
|
$
|
6.31
|
|
|
$
|
5.63
|
|
|
$
|
5.40
|
|
|
$
|
0.49
|
|
|
$
|
0.36
|
|
Fourth Quarter
|
|
$
|
6.55
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|
|
$
|
6.00
|
|
|
$
|
5.70
|
|
|
$
|
5.10
|
|
|
$
|
0.40
|
|
|
$
|
0.24
|
|
As of September 6, 2007, there were seven registered
holders of the Companys common stock and
29,834,403 shares of common stock outstanding. Sales of
substantial amounts of common stock, including shares issued
upon the exercise of warrants or options, or the perception that
such sales might occur, could adversely affect prevailing market
prices for the common stock.
Grubb &
Ellis Realty Advisors Stock Performance
The following section entitled, Grubb & Ellis
Realty Advisors Stock Performance is not to be deemed to
be soliciting material or to be filed
with the SEC or subject to Regulation 14A or 14C or to the
liabilities of Section 18 of the Exchange Act, except to
the extent that the Company specifically requests that such
information be treated as soliciting material or specifically
incorporates it by reference into any filing under the
1933 Act or the Exchange Act.
The graph below matches the cumulative
15-month
total return of holders Grubb & Ellis Realty Advisors,
Incs common stock with the cumulative total returns of the
S&P 500 index, and a customized peer group of ten companies
listed in footnote 1 below. The graph assumes that the value of
the investment in the companys common stock, in the peer
group, and the index (including reinvestment of dividends) was
$100 on
3/27/2006
and tracks it through
6/30/2007.
(1.) The ten companies included in the customized peer
group are: Ascend Acquisition Corp., Asia Automotive Acquisition
Corp., Global Logistics Acquisition Corp., Global Services
Partners Acquisition, Good Harbor Partners Acquisition, Jaguar
Acquisition Corp., North American Insurance Leaders Inc, Oracle
Healthcare Acquisition Corp., Phoenix India Acquisition Corp.
and Shang-hai Century Acquisition.
25
COMPARISON
OF 15 MONTH CUMULATIVE TOTAL RETURN*
Among Grubb & Ellis Realty Advisors, Inc, The S&P 500
Index and a Peer Group
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3/06
|
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|
3/06
|
|
|
4/06
|
|
|
5/06
|
|
|
6/06
|
|
|
7/06
|
|
|
8/06
|
|
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9/06
|
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|
10/06
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11/06
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|
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12/06
|
|
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1/07
|
|
|
2/07
|
|
|
3/07
|
|
|
4/07
|
|
|
5/07
|
|
|
6/07
|
Grubb & Ellis Realty Advisors, Inc
|
|
|
|
100.00
|
|
|
|
|
99.64
|
|
|
|
|
100.72
|
|
|
|
|
100.90
|
|
|
|
|
99.10
|
|
|
|
|
100.00
|
|
|
|
|
99.10
|
|
|
|
|
100.72
|
|
|
|
|
100.54
|
|
|
|
|
100.18
|
|
|
|
|
101.80
|
|
|
|
|
100.36
|
|
|
|
|
101.80
|
|
|
|
|
102.52
|
|
|
|
|
103.24
|
|
|
|
|
103.60
|
|
|
|
|
103.78
|
|
S&P 500
|
|
|
|
100.00
|
|
|
|
|
101.25
|
|
|
|
|
102.60
|
|
|
|
|
99.65
|
|
|
|
|
99.79
|
|
|
|
|
100.40
|
|
|
|
|
102.79
|
|
|
|
|
105.44
|
|
|
|
|
108.88
|
|
|
|
|
110.95
|
|
|
|
|
112.50
|
|
|
|
|
114.21
|
|
|
|
|
111.97
|
|
|
|
|
113.22
|
|
|
|
|
118.24
|
|
|
|
|
122.37
|
|
|
|
|
120.33
|
|
Peer Group
|
|
|
|
100.00
|
|
|
|
|
100.40
|
|
|
|
|
100.20
|
|
|
|
|
100.39
|
|
|
|
|
98.43
|
|
|
|
|
97.25
|
|
|
|
|
97.71
|
|
|
|
|
98.89
|
|
|
|
|
98.01
|
|
|
|
|
99.27
|
|
|
|
|
99.95
|
|
|
|
|
101.31
|
|
|
|
|
102.26
|
|
|
|
|
102.46
|
|
|
|
|
102.77
|
|
|
|
|
103.99
|
|
|
|
|
105.98
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
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|
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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|
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|
|
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|
|
|
|
|
|
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|
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|
* $100 invested on 3/27/06 in stock or on 2/28/06 in
index-including reinvestment of dividends. Fiscal year ending
June 30.
Copyright
©
2007, Standard & Poors, a division of The McGraw-Hill
Companies, Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
The stock price performance included in this graph is not
necessarily indicative of future stock price performance.
Sales of
Unregistered Securities
The Company sold 5,876,069 shares of common stock to its
corporate sponsor, Grubb & Ellis, for
$2.5 million prior to the sale of its common stock to the
public.
Sale of
Registered Securities
As of March 3, 2006, the Company had sold 23,958,334 Units,
which includes 3,125,000 additional Units sold to cover
over-allotments pursuant to a public offering. Of the 23,958,334
Units offered, 22,291,667 Units were sold to the public and
1,666,667 Units were sold to Kojaian Holdings, L.L.C., an entity
affiliated with the Chairman of the Board of both the Company
and its corporate sponsor. Each Unit consists of one share of
common stock and two warrants. Each warrant will entitle the
holder to purchase one share of common stock for $5.00. The
Units were sold at an offering price of $6.00 per unit,
generating total gross proceeds of $143,750,004. The securities
sold in the offering were registered under the Securities Act of
1933 on a registration statement on
Form S-1
(No. 333-129190).
The Securities and Exchange Commission declared the registration
statement effective on February 27, 2006.
The Company incurred $9,362,500 in underwriting fees and
approximately $998,000 for costs and expenses related to the
public offering. After deducting the underwriting fees and
offering expenses, the total net proceeds to the Company were
approximately $133,400,000. A portion of the net proceeds from
the public offering
26
($132,325,004) was placed in a Trust Account along with the
initial capital from the founding stockholder ($2,500,000) and
the deferred underwriting discount ($2,675,000). The remaining
net proceeds may be used to pay for business, legal, and
accounting due diligence on potential acquisitions, for a
Business Combination and for continuing general and
administrative expenses.
From March 3, 2006 through June 30, 2007, the Company
used approximately $1.5 million of the net proceeds that
were not deposited into the Trust Account to fund operating
activities that consisted primarily of expenses related to
pursuing a Business Combination, professional fees and the
monthly administrative fee of $7,500 paid to Grubb and Ellis. As
of June 30, 2007, there was $143,827,551, including accrued
interest of $157,436, held in the Trust Account.
Securities
Authorized for Issuance Under Equity Compensation Plan
Information
None.
Repurchases
of Equity Securities
The Company did not purchase any of its equity securities during
the three fiscal months ended June 30, 2007.
The following table presents information with respect to
purchases of the Companys equity securities by Kojaian
Ventures, L.L.C., an entity affiliated with the Chairman of the
Board of the Company, during the three fiscal months ended
June 30, 2007. Although the Company does not believe that
Kojaian Ventures, L.L.C. is an affiliated purchaser
of the Company, as that term is defined in
section 10b-18(a)(3)
of the Securities Exchange Act of 1934, the Company is
disclosing the purchases set forth below.
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|
Maximum Number
|
|
|
|
|
|
|
|
|
|
|
|
|
(or Approximate
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Dollar Value) of
|
|
|
|
|
|
|
|
|
|
Shares (or Units)
|
|
|
Shares (or Units)
|
|
|
|
Total Number
|
|
|
Average
|
|
|
Purchased as
|
|
|
That May Yet
|
|
|
|
of Shares
|
|
|
Price Paid
|
|
|
Part of Publicly
|
|
|
be Purchased
|
|
|
|
(or Units)
|
|
|
Per Share
|
|
|
Announced Plans
|
|
|
Under the Plans
|
|
Period
|
|
Purchased(1)(2)
|
|
|
(or Unit)(1)(2)
|
|
|
or Programs
|
|
|
or Programs
|
|
|
April 1, 2007 through April 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 1, 2007 through May 31, 2007
|
|
|
1,667,667
|
(1)
|
|
$
|
6.00
|
(1)
|
|
|
|
|
|
|
|
|
June 1, 2007 through June 30, 2007
|
|
|
200,000
|
(2)
|
|
$
|
5.86
|
(2)
|
|
|
|
|
|
|
|
|
Total (units)
|
|
|
1,667,667
|
(1)
|
|
$
|
6.00
|
(1)
|
|
|
|
|
|
|
|
|
Total (shares)
|
|
|
200,000
|
(2)
|
|
$
|
5.86
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
On May 14, 2007, Kojaian Ventures, L.L.C. purchased
1,666,667 Units from Kojaian Holdings LLC at a price per Unit of
$6 in a private transaction. Each Unit includes one share of
Common Stock and two Redeemable Common Stock Purchase Warrants
(each a Warrant). Each Warrant entitles the holder
to purchase one share of Common Stock at a price of $5.00. Each
Warrant will become exercisable on the later of the
Companys completion of a business combination or
February 27, 2007, and each Warrant will expire on
February 27, 2010 or earlier upon redemption. Kojaian
Ventures, L.L.C. and Kojaian Holdings LLC are each affiliates of
C. Michael Kojaian.
|
|
(2)
|
|
On June 21, 2007, Kojaian Ventures, LLC. purchased
200,000 shares of Common Stock in the open market at a
price of $5.86 per share. Kojaian Ventures, L.L.C. is an
affiliate of C. Michael Kojaian.
|
27
|
|
Item 6.
|
Selected
Financial Data
|
The following selected data has been derived from the historical
financial statements and related notes for the Period from
September 7, 2005 (Date of Inception) through June 30,
2006 and the year ended June 30, 2007. Certain prior
amounts have been reclassified to conform to the current
years presentation. The information presented here is only
a summary, and it should be read together with our consolidated
financial statements and related notes and with
Item 7 Managements Discussion and
Analysis of Financial Condition and Results of Operations.
Grubb &
Ellis Realty Advisors, Inc.
(a corporation in the development stage)
Selected Financial Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
Period from
|
|
|
|
|
|
|
September 7, 2005
|
|
|
September 7, 2005
|
|
|
|
Year Ended
|
|
|
(Date of Inception)
|
|
|
(Date of Inception)
|
|
|
|
June 30, 2007
|
|
|
Through June 30, 2006
|
|
|
Through June 30, 2007
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
$
|
1,331,673
|
|
|
$
|
308,336
|
|
|
$
|
1,640,009
|
|
Interest on investments held in trust
|
|
|
6,906,187
|
|
|
|
2,128,360
|
|
|
|
9,034,547
|
|
Net income
|
|
|
3,653,183
|
|
|
|
1,201,216
|
|
|
|
4,854,399
|
|
Deferred interest, net of taxes attributable to common stock
subject to possible redemption
|
|
|
(911,181
|
)
|
|
|
(280,783
|
)
|
|
|
(1,191,964
|
)
|
Net income allocable to common stock
|
|
|
2,742,002
|
|
|
|
920,433
|
|
|
|
3,662,435
|
|
Net income per weighted average common share outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.11
|
|
|
$
|
0.07
|
|
|
$
|
0.19
|
|
Diluted
|
|
$
|
0.11
|
|
|
$
|
0.07
|
|
|
$
|
0.19
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
25,045,132
|
|
|
|
12,709,081
|
|
|
|
19,520,970
|
|
Diluted
|
|
|
25,045,132
|
|
|
|
12,709,081
|
|
|
|
19,520,970
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
June 30, 2007
|
|
|
June 30, 2006
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and investments held in trust
|
|
$
|
143,670,115
|
|
|
$
|
139,628,364
|
|
Total assets
|
|
|
144,106,090
|
|
|
|
140,529,137
|
|
Deferred underwriting discount
|
|
|
2,675,000
|
|
|
|
2,675,000
|
|
Total liabilities
|
|
|
3,273,518
|
|
|
|
3,349,748
|
|
Common stock, subject to possible redemption
|
|
|
26,951,518
|
|
|
|
26,951,518
|
|
Total stockholders equity
|
|
|
112,689,090
|
|
|
|
109,947,088
|
|
28
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
Basis of
Presentation
The Companys financial statements have been prepared in
accordance with U.S. generally accepted accounting
principles, which require the Company to make estimates and
judgments that affect the reported amount of assets,
liabilities, revenues and expenses, and the related disclosure.
Actual results could differ from those estimates.
Cash,
Cash Equivalents and Investments Held in Trust
Amounts held in the Trust Account are primarily invested in
U.S. Treasury Bills of various maturities ranging from
thirty to ninety days. At June 30, 2007 the fair market
value of the U.S. Treasury Bills approximated their
carrying amount, which includes interest accrued through that
date. As of June 30, 2007, the Company had invested
approximately $143.7 million in U.S. Treasury Bills
with a maturity date of August 23, 2007.
RESULTS
OF OPERATIONS
For the year ended June 30, 2007, the Company generated net
income of approximately $2.7 million, primarily due to
interest earned on investments held in trust. This income was
partially offset by operating expenses incurred during the
period, which consisted primarily of costs incurred in
connection with the Properties Acquisition Proposal, audit fees
and the provision for income taxes.
For the period from September 7, 2005 (inception) through
June 30, 2006, the Company generated net income of
approximately $920,000, primarily due to interest earned on
investments held in trust. This income was partially offset by
operating expenses incurred during the period, which consisted
primarily of audit fees, stock-based compensation expense and
insurance expense, and the provision for income taxes.
LIQUIDITY
AND CAPITAL RESOURCES
The registration for the Companys initial public offering
(the Offering) was declared effective by the
Securities and Exchange Commission on February 27, 2006.
The Company closed the Offering on March 3, 2006 and
received net proceeds of approximately $133,400,000 after
payment of related offering costs. A portion of the net proceeds
from the Offering ($132,325,004) was placed in a
Trust Account along with the initial capital from the
founding stockholder ($2,500,000) and the deferred underwriting
discount ($2,675,000). The amounts held in the
Trust Account have been and will continue to be invested in
government securities until the earlier of (i) the
consummation of a Business Combination or (ii) the
distribution of the Trust Account as described in
Item 1 of this report. The remaining net proceeds from the
Offering have been and may be used to pay for business, legal,
and accounting due diligence on potential acquisitions, for a
Business Combination and for continuing general and
administrative expenses.
For the year ended June 30, 2007, the Company used cash and
cash equivalents of approximately $725,000. Cash from operations
of approximately $3.3 million includes approximately
$6.9 million of interest earned on investments held in
trust which was partially offset by federal income tax payments
of approximately $2.6 million and operating expenses
related to costs incurred in connection with the Properties
Acquisition Proposal and audit fees. The Company reinvested
approximately $4.0 million of interest earned on
investments held in trust into U.S. Treasury Bills.
For the period from September 7, 2005 (date of inception)
through June 30, 2006, the Company generated cash and cash
equivalents of approximately $784,000. Financing activities
provided cash of approximately $138.6 million, primarily
through the sale of common stock via the public offering and the
initial sale to the corporate sponsor, as described above. The
Company placed a significant portion of these funds into the
Trust Account, which invested approximately
$137.5 million into U.S. Treasury Bills. Cash used in
operating activities, which totaled
29
approximately $280,000, related primarily to insurance and audit
fees and the monthly fee paid to Grubb & Ellis
described below.
Grubb & Ellis, the Companys corporate sponsor,
had agreed that, commencing on February 27, 2006, the
effective date of the registration statement, through the
closing of a Business Combination, it would make available to
the Company a small amount of office space and certain office
and secretarial services, as may be required from time to time.
The Company pays Grubb & Ellis $7,500 per month for
these services. This arrangement is solely for the
Companys benefit and is not intended to provide
compensation in lieu of fees. The Company will reimburse certain
out of pocket expenses incurred by Grubb & Ellis in
connection with seeking to effect a Business Combination. In
addition, as of March 2, 2006, Grubb & Ellis had
loaned the Company $510,842 during the initial phase through
direct payment of certain costs on behalf of the Company
associated with the Offering. The loan was repaid without
interest on March 3, 2006 from net proceeds upon the
closing of the Offering. As of June 30, 2007,
Grubb & Ellis had loaned the Company approximately
$203,000 through direct payment of certain operating costs.
|
|
Item 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Market risk is the sensitivity of income to changes in interest
rates, foreign exchanges, commodity prices, equity prices, and
other market-driven rates or prices. The Company is not
presently engaged in and, if a suitable Business Combination is
not identified prior to the prescribed liquidation date of the
trust account, the Company may not engage in any substantive
commercial business. Accordingly, the Company is not exposed to
risks associated with foreign exchange rates, commodity prices,
equity prices or other market-driven rates or prices until such
time as a Business Combination is consummated. The net proceeds
of the Companys initial public offering held in the trust
account have been invested only in U.S. Treasury Bills.
Given the limited risk inherent with U.S. Treasury Bills,
the Company does not view its interest rate risk to be
significant.
30
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
Grubb & Ellis Realty Advisors, Inc.
We have audited the accompanying balance sheets of
Grubb & Ellis Realty Advisors, Inc. (a development
stage company) as of June 30, 2007 and 2006, and the
related statements of income, stockholders equity, and
cash flows for the year ended June 30, 2007 and for the
period September 7, 2005 (date of inception) through
June 30, 2006 and for the period September 7, 2005
(date of inception) through June 30, 2007. These financial
statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Grubb & Ellis Realty Advisors, Inc. at
June 30, 2007 and 2006, and the results of its operations
and its cash flows for the year ended June 30, 2007 and for
the period September 7, 2005 (date of inception) through
June 30, 2006 and for the period September 7, 2005
(date of inception) through June 30, 2007, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of Grubb & Ellis Realty Advisors,
Inc.s internal control over financial reporting as of
June 30, 2007, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our
report dated September 11, 2007 expressed an unqualified
opinion thereon.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
September 11, 2007
31
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders of
Grubb & Ellis Realty Advisors, Inc.
We have audited Grubb & Ellis Realty Advisors,
Inc.s internal control over financial reporting as of
June 30, 2007, based on criteria established in Internal
Control Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (the COSO
criteria). Grubb & Ellis Realty Advisors, Inc.s
management is responsible for maintaining effective internal
control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting
included in the accompanying Managements Report on
Internal Control Over Financial Reporting. Our responsibility is
to express an opinion on the companys internal control
over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Grubb & Ellis Realty Advisors, Inc.
maintained, in all material respects, effective internal control
over financial reporting as of June 30, 2007, based on the
COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
balance sheets as of June 30, 2007 and 2006, and the
related statements of operations, stockholders equity, and
cash flows for the year ended June 30, 2007 and for the
period September 7, 2005 (date of inception) through
June 30, 2006 and for the period September 7, 2005
(date of inception) through June 30, 2007 of
Grubb & Ellis Realty Advisors, Inc. and our report
dated September 11, 2007 expressed an unqualified opinion
thereon.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
September 11, 2007
32
GRUBB &
ELLIS REALTY ADVISORS, INC.
(a corporation in the development stage)
BALANCE SHEETS
as of June 30, 2007 and June 30, 2006
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
59,620
|
|
|
$
|
784,327
|
|
Cash, cash equivalents and investments held in trust
|
|
|
143,670,115
|
|
|
|
139,628,364
|
|
Interest receivable on investments held in trust
|
|
|
157,436
|
|
|
|
|
|
Prepaid expenses
|
|
|
218,919
|
|
|
|
116,446
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
144,106,090
|
|
|
$
|
140,529,137
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
598,518
|
|
|
$
|
55,940
|
|
Income taxes payable
|
|
|
|
|
|
|
618,808
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
598,518
|
|
|
|
674,748
|
|
Deferred underwriting discount
|
|
|
2,675,000
|
|
|
|
2,675,000
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
3,273,518
|
|
|
|
3,349,748
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies:
|
|
|
|
|
|
|
|
|
Common stock, subject to possible redemption;
4,789,271 shares at $5.63 per share
|
|
|
26,951,518
|
|
|
|
26,951,518
|
|
Deferred interest attributable to common stock subject to
possible redemption (net of taxes of $614,042 and $144,656 as of
June 30, 2007 and 2006, respectively)
|
|
|
1,191,964
|
|
|
|
280,783
|
|
|
|
|
|
|
|
|
|
|
Total Commitments and Contingencies
|
|
|
28,143,482
|
|
|
|
27,232,301
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock $0.0001 par value;
120,000,000 shares authorized; 29,834,403 issued and
outstanding (including 4,789,721 shares of common stock
subject to possible redemption)
|
|
|
2,983
|
|
|
|
2,983
|
|
Preferred stock $0.0001 par value;
5,000,000 shares authorized; 0 issued and outstanding
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
109,023,672
|
|
|
|
109,023,672
|
|
Earnings accumulated during the development stage
|
|
|
3,662,435
|
|
|
|
920,433
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
112,689,090
|
|
|
|
109,947,088
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
144,106,090
|
|
|
$
|
140,529,137
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
33
GRUBB &
ELLIS REALTY ADVISORS, INC.
(a corporation in the development stage)
STATEMENTS OF OPERATIONS
for the period from September 7, 2005 (date of
inception) through June 30, 2007,
for the period from September 7, 2005 (date of
inception) through June 30, 2006
and for the Year Ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
|
|
|
|
|
|
|
September 7, 2005
|
|
|
|
|
|
|
Period from
|
|
|
(date of inception)
|
|
|
|
|
|
|
September 7, 2005
|
|
|
(date of inception)
|
|
|
|
Year Ended
|
|
|
Through
|
|
|
Through
|
|
|
|
June 30, 2007
|
|
|
June 30, 2006
|
|
|
June 30, 2007
|
|
|
Cost and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
$
|
1,331,673
|
|
|
$
|
308,336
|
|
|
$
|
1,640,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on investments held in trust
|
|
|
6,906,187
|
|
|
|
2,128,360
|
|
|
|
9,034,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income
|
|
|
6,906,187
|
|
|
|
2,128,360
|
|
|
|
9,034,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes
|
|
|
5,574,514
|
|
|
|
1,820,024
|
|
|
|
7,394,538
|
|
Provision for income taxes
|
|
|
(1,921,331
|
)
|
|
|
(618,808
|
)
|
|
|
(2,540,139
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
3,653,183
|
|
|
|
1,201,216
|
|
|
|
4,854,399
|
|
Deferred interest, net of taxes, attributable to common stock
subject to possible redemption
|
|
|
(911,181
|
)
|
|
|
(280,783
|
)
|
|
|
(1,191,964
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocable to common stock
|
|
$
|
2,742,002
|
|
|
$
|
920,433
|
|
|
$
|
3,662,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per weighted average common share outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic-
|
|
$
|
0.11
|
|
|
$
|
0.07
|
|
|
$
|
0.19
|
|
Diluted-
|
|
$
|
0.11
|
|
|
$
|
0.07
|
|
|
$
|
0.19
|
|
Weighted average common shares outstanding exclusive of shares
subject to possible redemption:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic-
|
|
|
25,045,132
|
|
|
|
12,709,081
|
|
|
|
19,520,970
|
|
Diluted-
|
|
|
25,045,132
|
|
|
|
12,709,081
|
|
|
|
19,520,970
|
|
The accompanying notes are an integral part of the financial
statements.
34
GRUBB &
ELLIS REALTY ADVISORS, INC.
(a corporation in the development stage)
STATEMENTS
OF STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
during the
|
|
|
|
|
|
|
|
|
|
Par
|
|
|
Paid-In
|
|
|
Development
|
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
Capital
|
|
|
Stage
|
|
|
Total
|
|
|
Stock issuance on September 7, 2005 at $0.43
|
|
|
5,876,069
|
|
|
$
|
588
|
|
|
$
|
2,499,412
|
|
|
|
|
|
|
$
|
2,500,000
|
|
Stock issuance on March 3, 2006 at $6.00
|
|
|
23,958,334
|
|
|
|
2,395
|
|
|
|
143,747,609
|
|
|
|
|
|
|
|
143,750,004
|
|
Proceeds from issuance of option to underwriters
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
|
|
|
|
|
100
|
|
Expenses of offering
|
|
|
|
|
|
|
|
|
|
|
(10,360,576
|
)
|
|
|
|
|
|
|
(10,360,576
|
)
|
Net proceeds subject to possible redemption of
4,789,271 shares
|
|
|
|
|
|
|
|
|
|
|
(26,951,518
|
)
|
|
|
|
|
|
|
(26,951,518
|
)
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
88,645
|
|
|
|
|
|
|
|
88,645
|
|
Net income allocable to common stock for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
920,433
|
|
|
|
920,433
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2006
|
|
|
29,834,403
|
|
|
|
2,983
|
|
|
|
109,023,672
|
|
|
|
920,433
|
|
|
|
109,947,088
|
|
Net income allocable to common stock for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,742,002
|
|
|
|
2,742,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2007
|
|
|
29,834,403
|
|
|
$
|
2,983
|
|
|
$
|
109,023,672
|
|
|
$
|
3,662,435
|
|
|
$
|
112,689,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
35
GRUBB &
ELLIS REALTY ADVISORS, INC.
(a corporation in the development stage)
STATEMENTS
OF CASH FLOWS
for the period from September 7, 2005 (date of inception)
through June 30, 2006 and
for the Year Ended June 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from
|
|
|
Period from
|
|
|
|
|
|
|
September 7, 2005
|
|
|
September 7, 2005
|
|
|
|
Year Ended
|
|
|
(Date of Inception)
|
|
|
(Date of Inception)
|
|
|
|
June 30, 2007
|
|
|
Through June 30, 2006
|
|
|
Through June 30, 2007
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocable to common stock
|
|
$
|
2,742,002
|
|
|
$
|
920,433
|
|
|
$
|
3,662,435
|
|
Adjustments to reconcile net income allocable to common stock to
net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax benefit
|
|
|
(91,631
|
)
|
|
|
(22,509
|
)
|
|
|
(114,140
|
)
|
Increase in deferred tax valuation allowance
|
|
|
91,631
|
|
|
|
22,509
|
|
|
|
114,140
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
88,645
|
|
|
|
88,645
|
|
Deferred interest attributable to common stock subject to
possible redemption
|
|
|
911,181
|
|
|
|
280,783
|
|
|
|
1,191,964
|
|
Accrued interest on investments held in trust
|
|
|
(157,436
|
)
|
|
|
(2,128,360
|
)
|
|
|
(2,285,796
|
)
|
Increase in prepaid expenses
|
|
|
(102,473
|
)
|
|
|
(116,446
|
)
|
|
|
(218,919
|
)
|
Increase in accounts payable
|
|
|
542,578
|
|
|
|
55,940
|
|
|
|
598,518
|
|
(Decrease)/increase in income taxes payable
|
|
|
(618,808
|
)
|
|
|
618,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash generated by/(used in) operating activities
|
|
|
3,317,044
|
|
|
|
(280,197
|
)
|
|
|
3,036,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of investments held in trust, net
|
|
|
(4,041,751
|
)
|
|
|
(137,500,004
|
)
|
|
|
(141,541,755
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash used in investing activities
|
|
|
(4,041,751
|
)
|
|
|
(137,500,004
|
)
|
|
|
(141,541,755
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from public offering, net
|
|
|
|
|
|
|
133,900,270
|
|
|
|
133,900,270
|
|
Proceeds from sale of common stock to founders
|
|
|
|
|
|
|
2,500,000
|
|
|
|
2,500,000
|
|
Proceeds from issuance of underwriters option
|
|
|
|
|
|
|
100
|
|
|
|
100
|
|
Deferral of underwriting fees
|
|
|
|
|
|
|
2,675,000
|
|
|
|
2,675,000
|
|
Repayment to corporate sponsor of loan for offering expenses
|
|
|
|
|
|
|
(510,842
|
)
|
|
|
(510,842
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
|
|
|
|
138,564,528
|
|
|
|
138,564,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents
|
|
|
(724,707
|
)
|
|
|
784,327
|
|
|
|
59,620
|
|
Cash and cash equivalents beginning of period
|
|
|
784,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents end of period
|
|
$
|
59,620
|
|
|
$
|
784,327
|
|
|
$
|
59,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
2,630,541
|
|
|
$
|
|
|
|
$
|
2,630,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the financial
statements.
36
GRUBB &
ELLIS REALTY ADVISORS, INC.
(a corporation in the development stage)
NOTES TO FINANCIAL STATEMENTS
|
|
1.
|
Organization
and Business Operations
|
Grubb & Ellis Realty Advisors, Inc. (the
Company) is a blank check company organized for the
purpose of acquiring, through a purchase, asset acquisition or
other business combination (Business Combination),
one or more United States commercial real estate properties
and/or
assets, principally industrial and office properties. The
Company was incorporated in Delaware on September 7, 2005
and is a taxable C corporation under the Internal Revenue Code
with a fiscal-year end of June 30. The Company is
considered in the development stage and is subject to the risks
associated with development stage companies.
The registration for the Companys initial public offering
(the Offering) was declared effective by the
Securities and Exchange Commission on February 27, 2006.
The Company closed the Offering on March 3, 2006 and
received net proceeds of approximately $133.4 million after
payment of related offering costs. The Business Combination must
be a target acquisition with fair value of at least 80%
(excluding the amount held in the trust representing a portion
of the fees of the underwriters) of the net assets of the
Company at the time of acquisition. Furthermore, there is no
assurance the Company will be able to successfully effect a
Business Combination. A portion of the net proceeds from the
Offering (approximately $132.3 million) was placed in a
trust account (Trust Account) along with the
initial capital from the founding stockholder
($2.5 million) and the deferred underwriting discount
(approximately $2.7 million). The net proceeds deposited
into the Trust Account totaled approximately
$137.5 million and will be invested in government
securities until the earlier of (i) the consummation of a
Business Combination or (ii) the distribution of the
Trust Account as described below. The remaining net
proceeds from the Offering may be used to pay for business,
legal, and accounting due diligence on potential acquisitions,
for a Business Combination and for continuing general and
administrative expenses. As of June 30, 2007, there was
approximately $143.8 million, including accrued interest of
$157,000 and net of taxes of approximately $2.6 million,
held in the Trust Account.
The Company will submit the Business Combination to its
stockholders for approval. The Company will proceed with a
Business Combination only if (i) a majority of the shares
of common stock voted by the public stockholders are voted in
favor of the Business Combination and (ii) public
stockholders owning less than 20% of the shares sold in the
offering both exercise their conversion rights and vote against
a Business Combination. Public stockholders voting against a
Business Combination will be entitled to convert their common
stock into an amount of cash equal to their pro rata share of
the Trust Account, including net interest earned but
exclusive of the deferred underwriting discount, if the Business
Combination is approved and completed. Such approval and
completion of a Business Combination would result in the payment
of the deferred underwriting discount of $2,675,000 to the
underwriters. The initial stockholders will not have such
conversion rights with respect to any shares of common stock
owned by them, directly or indirectly, prior to the Offering.
Public stockholders who convert their common stock into their
pro rata share of the Trust Account will continue to have
the right to exercise any warrants they may hold.
In the event the Company does not complete a Business
Combination within 18 months after the consummation of the
Offering, or within 24 months after the consummation of the
Offering based on certain criteria, the Company will be
dissolved. Upon dissolution, the Company will distribute to all
of the public stockholders, in proportion to their respective
equity interests, an aggregate sum equal to the entire amount in
the Trust Account, inclusive of the deferred underwriting
discount and any interest earned (net of taxes) from the trust
assets, plus any remaining net assets of the Company. The
Companys initial stockholders have waived their rights to
participate in any such liquidation distribution with respect to
shares of common stock owned by them immediately prior to the
Offering. There will be no distribution from the
Trust Account with respect to the warrants which will
expire worthless. The Company will pay the costs of liquidation
and dissolution from its remaining assets outside of the
Trust Account.
On June 18, 2007, the Company entered into a membership
interest purchase agreement with GBE to acquire all of the
issued and outstanding membership interests of GERA Property
Acquisition, LLC from GBE (see Note 10 for more
information).
37
GRUBB &
ELLIS REALTY ADVISORS, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
Basis of
Presentation
The financial statements have been prepared in conformity with
U.S. generally accepted accounting principles, which
require management to make estimates and assumptions that affect
the reported amounts of assets and liabilities (including
disclosure of contingent assets and liabilities) at 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.
Cash and
cash equivalents
The Company considers all highly liquid investments with
maturities of three months or less to be cash equivalents.
Income
taxes
Deferred income taxes are recorded based on enacted statutory
rates to reflect the tax consequences in future years of the
differences between the tax bases of assets and liabilities and
their financial reporting amounts. Deferred tax assets, such as
net operating loss carryforwards, which will generate future tax
benefits are recognized to the extent that realization of such
benefits through future taxable earnings or alternative tax
strategies in the foreseeable short term future is more likely
than not.
Cash,
cash equivalents and investments held in trust
Amounts held in the Trust Account are primarily invested in
U.S. Treasury Bills of various maturities ranging from
thirty to ninety days. At June 30, 2007 the fair market
value of the U.S. Treasury Bills approximated their
carrying amount, which includes interest of approximately
$157,000 accrued through that date. As of June 30, 2007,
the Company had invested $143,666,946 in U.S. Treasury
Bills with a maturity date of August 23, 2007.
Reclassifications
Certain amounts in prior periods have been reclassified to
conform to the 2007 presentation. This reclassification has no
material effect on the consolidated balance sheets or statement
of operations of the Company.
|
|
3.
|
Recently
Issued Accounting Pronouncements
|
In December 2004, the Financial Accounting Standards Board
(FASB) issued SFAS No. 123 (revised 2004),
Share based payment (SFAS 123(R)).
SFAS 123(R)requires all share-based payments to employees,
including grants of employee stock options, to be recognized in
the financial statements based on their fair values. The Company
adopted SFAS 123(R) upon formation, the adoption of which
did not have a material impact on the financial statements of
the Company. During the period ended June 30, 2006, the
Companys directors received, in the aggregate,
208,350 shares of the Companys common stock from the
initial shares acquired by the founding stockholder, at a price
of $0.43 per share, which is equal to the consideration paid for
the initial common stock issuance. Compensation expense related
to these awards totaled $88,645.
The Financial Accounting Standards Board issued Interpretation
No. 48, Accounting for Uncertainty in Income Taxes
(FIN 48). FIN 48 prescribes a
recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return.
FIN 48 also provides guidance on accounting for
derecognition, interest, penalties, accounting in interim
periods, disclosure and classifications of matters related to
uncertainty in income taxes, and transitional requirements upon
adoption of FIN 48. The provisions of FIN 48 are
effective for fiscal years beginning after December 15,
2006. The Company does not expect that the adoption of
FIN 48 will have a material impact on its financial
position or results of operations.
38
GRUBB &
ELLIS REALTY ADVISORS, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
|
|
4.
|
Initial
Public Offering
|
As of March 3, 2006, the Company had sold
23,958,334 units (Units), which includes
3,125,000 additional Units sold to cover over-allotments
pursuant to a public offering. Of the 23,958,334 Units offered,
22,291,667 Units were sold to the public and 1,666,667 Units
were sold to Kojaian Holdings, L.L.C., an entity affiliated with
the Chairman of the Board of both the Company and corporate
sponsor. Each Unit consists of one share of common stock and two
warrants. Each warrant will entitle the holder to purchase one
share of common stock for $5.00. Warrants are exercisable on the
later of (a) one year from the effective date of the
registration statement, or (b) the completion of a Business
Combination. The warrants expire four years from the effective
date of the registration statement. The warrants will be
redeemable at a price of $0.01 per warrant upon 30 days
prior notice and after the warrants become exercisable, only in
the event the last sales price of the common stock is at least
$8.50 per share for any 20 trading days within a 30 day
trading period ending on the third day prior to the date on
which notice of redemption is given.
The Company has authorized 120,000,000 shares of common
stock at a par value of $0.0001 per share and
5,000,000 shares of preferred stock with a par value of
$0.0001 per share. There are 29,834,403 shares of common
stock issued and outstanding as of both June 30, 2007 and
June 30, 2006 after giving effect to the stock splits noted
below. There are no shares of preferred stock outstanding as of
both June 30, 2007 and June 30, 2006. The Company sold
to Deutsche Bank Securities Inc. (Underwriter) for
$100, as additional compensation, an option to purchase up to
958,333 Units at $6.60 per Unit, with warrants issued as part of
the units exercisable at $6.25 per share. The Company
determined, based upon a Black-Scholes model, that the fair
value of the option on the date of sale was approximately
$1.4 million using an expected life of five years,
volatility of 20.9% and a risk-free interest rate of 4.51%. At
that time, the Company had no trading history, and as a result
it was not possible to value this option based on historical
trades. To estimate the value of this option, the Company
considered a basket of U.S. commercial real estate
companies. Management believes that this volatility is a
reasonable benchmark to use in estimating the value of this
option. The actual volatility of this option depended on many
factors that cannot be precisely valued. The Company accounted
for the fair value of the option, inclusive of the receipt of
the $100 cash payment, as an expense of the public offering
resulting in a charge directly to stockholders equity.
All common stock and common stock related information has been
adjusted to give retroactive effect to a 1 for 1.441932 reverse
stock split of the Companys common stock effected
February 3, 2006 and subsequent retroactive effect to a
1.25 for 1 forward stock split of the Companys common
stock effected February 23, 2006.
The provision for income taxes for the year ended June 30,
2007 and period from September 7, 2005 (date of inception)
through June 30, 2006 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 7, 2005
|
|
|
|
|
|
|
(Date of Inception)
|
|
|
|
Year Ended
|
|
|
Through
|
|
|
|
June 30, 2007
|
|
|
June 30, 2006
|
|
|
Current provision
|
|
$
|
(1,921,331
|
)
|
|
$
|
(618,808
|
)
|
Deferred benefit
|
|
|
91,631
|
|
|
|
22,509
|
|
Increase in valuation allowance
|
|
|
(91,631
|
)
|
|
|
(22,509
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,921,331
|
)
|
|
$
|
(618,808
|
)
|
|
|
|
|
|
|
|
|
|
The Company has recorded deferred tax assets totaling $114,140
related to state net operating loss carryforwards, which expire
through 2019; however, the Company fully reserved these deferred
tax assets due to the uncertainty in regards to the realization
of these assets in future periods.
39
GRUBB &
ELLIS REALTY ADVISORS, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
|
|
7.
|
Earnings
per Common Share
|
The following table sets forth the computation of basic and
diluted earnings per common share from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 7, 2005
|
|
|
September 7, 2005
|
|
|
|
|
|
|
(Date of Inception)
|
|
|
(Date of Inception)
|
|
|
|
Year Ended
|
|
|
Through
|
|
|
Through
|
|
|
|
June 30, 2007
|
|
|
June 30, 2006
|
|
|
June 30, 2007
|
|
|
Net income to common stockholders
|
|
$
|
2,742,002
|
|
|
$
|
920,433
|
|
|
$
|
3,662,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding exclusive of shares
subject to possible redemption:
|
|
|
25,045,132
|
|
|
|
12,709,081
|
|
|
|
19,520,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share basic
|
|
$
|
0.11
|
|
|
$
|
0.07
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
25,045,132
|
|
|
|
12,709,081
|
|
|
|
19,520,970
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding exclusive of shares
subject to possible redemption:
|
|
|
25,045,132
|
|
|
|
12,709,081
|
|
|
|
19,520,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share diluted
|
|
$
|
0.11
|
|
|
$
|
0.07
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company has approximately 47.9 million warrants
outstanding, which are not reflected as dilutive securities
since their exercisability is contingent upon the later of
February 27, 2007 or a successful Business Combination.
|
|
8.
|
Related
Party Transactions
|
Grubb & Ellis Company (Grubb &
Ellis) is the Companys corporate sponsor. For an
initial investment of $2,500,000, Grubb & Ellis, on
behalf of itself and all directors, purchased an aggregate
5,876,069 shares of common stock. Grubb & Ellis
also agreed to purchase up to $3,500,000 of warrants in the open
market place if the market price was less than $0.70 during the
period commencing May 3, 2006 through June 28, 2006.
On June 28, 2006, the Company agreed to a
sixty-day
extension of this agreement. Pursuant to the agreement,
Grubb & Ellis purchased 4,645,521 warrants through
August 27, 2006, the new expiration date of the agreement,
for an aggregate purchase price excluding commissions of
$2,178,297, or approximately $0.47 per warrant.
Grubb & Ellis had loaned the Company $510,842 during
its initial phase through direct payment on behalf of the
Company of certain costs associated with the Offering. The loan
was repaid without interest on March 3, 2006 from net
proceeds upon the closing of the Offering. As of June 30,
2007, Grubb & Ellis had loaned the Company
approximately $203,000 through direct payment of certain
operating costs.
All of the officers of the Company are also officers of
Grubb & Ellis. The officers and directors of the
Company will not initially receive compensation from the
Company; however, each of the directors of the Company received
41,670 shares from the initial shares purchased by
Grubb & Ellis. In the event the Company effects a
Business Combination, the Company has agreed to grant $250,000
worth of restricted shares of common stock to Mark W. Chrisman
that will vest over three years based on certain conditions.
40
GRUBB &
ELLIS REALTY ADVISORS, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
|
|
8.
|
Related
Party Transactions(Continued)
|
Grubb & Ellis has agreed that, commencing on
February 27, 2006, the effective date of the registration
statement, through the closing of a Business Combination, it
will make available to the Company a small amount of office
space and certain office and secretarial services, as may be
required from time to time. The Company pays Grubb &
Ellis $7,500 per month for these services. This arrangement is
solely for the Companys benefit and is not intended to
provide compensation in lieu of fees. As of June 30, 2007,
the Company had incurred cumulative such fees totaling $135,000
to Grubb & Ellis. The Company will reimburse certain
out of pocket expenses incurred by Grubb & Ellis in
connection with seeking to effect a Business Combination.
The Company has entered into a Master Agreement for Services
(MSA) with Grubb & Ellis, whereby
Grubb & Ellis will serve as the exclusive agent with
respect to commercial real estate brokerage and consulting
services relating to real property acquisitions, dispositions as
well as agency leasing. The initial term of the MSA is five
years and is cancelable based on certain conditions as defined.
The Company also entered into a Property Management Agreement
(PMA) with Grubb & Ellis wholly
owned subsidiary, Grubb & Ellis Management Services
(GEMS), whereby GEMS will serve as sole exclusive
managing agent for all real property acquired. The initial term
of the PMA is 12 months and will automatically renew unless
notice is given within 30 days prior to the end of the
term. Either party can terminate with 60 days notice and
based on various conditions as defined within the PMA.
|
|
9.
|
Selected
Quarterly Financial Data (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended June 30, 2006
|
|
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
Operating loss
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(83,627
|
)
|
|
$
|
(224,709
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocable to common stock
|
|
$
|
|
|
|
$
|
|
|
|
$
|
215,343
|
|
|
$
|
705,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share:
|
|
$
|
|
|
|
$
|
|
|
|
$
|
0.02
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
11,839,777
|
|
|
|
25,045,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended June 30, 2007
|
|
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
Operating loss
|
|
$
|
(91,255
|
)
|
|
$
|
(123,353
|
)
|
|
$
|
(412,192
|
)
|
|
$
|
(704,873
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income allocable to common stock
|
|
$
|
821,723
|
|
|
$
|
857,831
|
|
|
$
|
623,941
|
|
|
$
|
438,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share:
|
|
$
|
0.03
|
|
|
$
|
0.03
|
|
|
$
|
0.02
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, net
|
|
|
25,045,132
|
|
|
|
25,045,132
|
|
|
|
25,045,132
|
|
|
|
25,045,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On October 2, 2006, GBE formed GERA Property Acquisition,
LLC (Property Acquisition), a wholly owned
subsidiary of GBE. GBE formed Property Acquisition as a holding
company, which in turn established three separate wholly owned
special purpose entities (the SPEs), to
acquire Abrams Centre located in Dallas, Texas (Abrams
Centre), 6400 Shafer Court located in Rosemont, Illinois
(6400 Shafer), and Danbury Corporate Center located
in Danbury, Connecticut (the Corporate Center)
(collectively the Properties) with the intention of
re-selling them to the Company on a basis that is cost neutral
to GBE.
41
GRUBB &
ELLIS REALTY ADVISORS, INC.
NOTES TO
FINANCIAL STATEMENTS (Continued)
|
|
10.
|
Material
Contract(Continued)
|
On June 18, 2007, the Company entered into a membership
interest purchase agreement (the LLC Acquisition
Agreement) to acquire all of the issued and outstanding
membership interests of Property Acquisition from GBE. The LLC
Acquisition Agreement provides for a Business Combination
transaction in which GERA will acquire Property Acquisition,
which, in turn, owns 100% of the SPEs that own the
Properties. This will be accomplished through a purchase by GERA
of all the issued and outstanding membership interests of
Property Acquisition from GBE in exchange for the LLC Purchase
Price as described in the LLC Acquisition Agreement.
|
|
11.
|
Concentration
of Credit Risk
|
Financial instruments that potentially subject the Company to
credit risk consist principally of the Companys interest
bearing investments. Substantially all of the Companys
interest bearing investments are in U.S. Treasury Bills.
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None.
|
|
Item 9A.
|
Controls
and Procedures
|
Evaluation
of Disclosure Controls and Procedures
The Company has established controls and procedures to ensure
that material information relating to the Company is made known
to the officers who certify the Companys financial reports
and to the members the Board of Directors.
Based on managements evaluation as of June 30, 2007,
the Chief Executive Officer and the Chief Financial Officer have
concluded that the Companys disclosure controls and
procedures (as defined in
Rules 13a-15(c)
and
15d-15(e)
under the Securities Exchange Act of 1934) are effective to
ensure that information required to be disclosed by the Company
is recorded, processed, summarized, and reported within the time
periods specified in the SECs rules and forms.
Managements
Report on Internal Control Over Financial
Reporting
The Companys management is responsible for establishing
and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act
Rules 13a-15(f)
and
15d-15(f).
Under the supervision and with the participation of our
management, including our principal executive officer, we
conducted an evaluation of the effectiveness of our internal
control over financial reporting based on the framework in
Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Therefore, even those systems determined to be effective can
only provide reasonable assurance with respect to financial
statement preparation and presentation.
Based on our evaluation under the Internal Control-Integrated
Framework, our management concluded that our internal control
over financial reporting was effective as of June 30, 2007.
Changes
in Internal Controls Over Financial Reporting
There were no changes to the Companys controls over
financial reporting during the fourth quarter ended
June 30, 2007 that have materially affected, or are
reasonably likely to materially affect, the Companys
internal controls over financial reporting.
42
GRUBB &
ELLIS REALTY ADVISORS, INC.
(a corporation in the development stage)
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
Directors
and Executive Officers of the Company
The board of directors and executive officers of the Company are
as follows:
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
C. Michael Kojaian
|
|
|
45
|
|
|
|
Chairman of the Board
|
|
Mark E. Rose
|
|
|
43
|
|
|
|
Chief Executive Officer and Director
|
|
Richard W. Pehlke
|
|
|
54
|
|
|
|
Chief Financial Officer
|
|
William H. Downey
|
|
|
62
|
|
|
|
Director
|
|
Melvin F. Lazar
|
|
|
68
|
|
|
|
Director
|
|
Alan M. Stillman
|
|
|
45
|
|
|
|
Director
|
|
C. Michael Kojaian
has served as the
Companys Chairman of the Board since the Companys
inception. Mr. Kojaian has been chairman of the board of
directors of GBE since June 2002. He has been the president of
Kojaian Ventures, L.L.C. and also executive vice president, a
director and a shareholder of Kojaian Management Corporation,
both of which are investment firms headquartered in Bloomfield
Hills, Michigan, for more than five (5) years. He has also
been a director of Arbor Realty Trust, Inc., since June 2003.
Mark E. Rose
has served as the Companys
Chief Executive Officer and as a member of the board of
directors since the Companys inception. Mr. Rose has
served as the chief executive officer of GBE since March 2005.
From 1993 to 2005, Mr. Rose served in various positions
with Jones Lang LaSalle, including serving as chief innovation
officer from 2000 to 2002, as chief financial officer from 2002
to 2003, and as chief operating officer and chief financial
officer of the Americas in 2003 through his departure in 2005.
Prior to joining Jones Lang LaSalle, Mr. Rose was the
chairman and chief executive officer of the U.S. Real
Estate Investment Trust of the British Coal Corporation Pension
Funds, where he oversaw the management and subsequent disposal
of a $1 billion portfolio real estate assets. Mr. Rose
serves on the board of directors of the Chicago Shakespeare
Theater, Chicago Botanic Garden, and the Chicago Central Area
Committee.
Richard W. Pehlke
has served as the Companys
Chief Financial Officer since March of 2007. Mr. Pehlke has
served as the executive vice president and chief financial
officer of GBE since February 2007. He spent the three previous
years at Hudson Highland Group, a publicly held global
professional staffing and recruiting business, as its executive
vice president and chief financial officer and a member of its
board of directors. In this role, he was responsible for all of
the firms financial functions worldwide. From 2001 to
2003, Pehlke operated his own consulting business specializing
in financial strategy and leadership development. In 2000, he
was executive vice president and chief financial officer of ONE,
Inc. a privately held software implementation business. From
1986 to 1999, Pehlke served as vice president, treasurer and
vice president, investor relations at Ameritech Corporation.
Earlier, he was director of investor relations at Household
International and director of investor relations, financial
planning and financial reporting at Beatrice Companies. Pehlke
currently serves on the boards of Edward Health Services
Corporation in Naperville, Ideal Industries and Valparaiso
University.
William H. Downey
has served as a member of the
Companys board of directors since October 2005. Since
October 2003, Mr. Downey has served as the president, chief
operating officer and member of the board of directors of Great
Plains Energy Incorporated, a NYSE listed company based in
Kansas City, Missouri. In 2000, Mr. Downey joined Kansas
City Power & Light Company, a full-service energy
provider, where he initially served as executive vice president
and president of KCPL Delivery. In May 2002, KCPL became part of
Great Plains Energy, a holding company where Mr. Downey
served as executive vice president and president of KCPL. In
October 2003, Mr. Downey was promoted to president and
chief operating officer of Great Plains Energy and president and
chief executive officer of Kansas City Power & Light,
and was also elected to Great Plains Energys board of
43
directors. Since 2002, Mr. Downey has served on the board
of directors of Enterprise Financial Services Corp., a publicly
traded financial holding company.
Melvin F. Lazar
has served as a member of the
Companys board of directors since October 2005.
Mr. Lazar is the founder of Lazar Levine & Felix
LLP, a certified public accounting firm that also provides
business consultations. Mr. Lazar retired as a partner of
Lazar Levine & Felix LLP on October 1, 2002.
Mr. Lazar is currently a member of the board of directors
and chairman of the audit committee of Arbor Realty Trust, Inc.,
a New York Stock Exchange listed real estate investment trust
and a member of the board of directors and chairman of the audit
committee of Enzo Biochem, Inc., a New York Stock Exchanged
listed biotechnology company specializing in gene identification
and regulation technologies for diagnostic and therapeutic
applications.
Alan M. Stillman
has served as a member of the
Companys board of directors since November 2005.
Mr. Stillman joined the Southfield, Michigan law firm of
Seyburn Kahn Ginn Bess and Serlin, P.C. in 1989 as an
associate, and has been a shareholder of the firm since 1994.
The Companys board of directors consists of five directors
and is divided into three classes with only one class of
directors being elected in each year and each class serving a
three-year term. The Companys bylaws provide that the
number of directors which may constitute the board of directors
shall not be less than one or more than nine. The term of office
of the first class of directors, consisting of William H.
Downey, will expire at the first annual meeting of stockholders.
The term of office of the second class of directors, consisting
of Melvin F. Lazar and Alan M. Stillman, will expire at the
second annual meeting of stockholders. The term of the third
class of directors, consisting of C. Michael Kojaian, the
chairman of the board, and Mark E. Rose, will expire at the
third annual meeting of stockholders.
Other
Significant Employees
Mark W. Chrisman
has served as executive vice
president of acquisitions of GBE since January 2006 and serves
on the Companys investment committee. During 2005,
Mr. Chrisman was a principal at Sterling Real Estate
Partners. During the more than eight year period prior to
joining Sterling Real Estate Partners, Mr. Chrisman served
in the capital transactions group at Trizec Properties, Inc.
serving as vice president from 2000 to 2005 and director of the
Western Region from 1997.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934,
as amended (the Exchange Act), requires the
Companys directors, officers and persons owning more than
10% of the Companys common stock to file reports of
ownership and changes of ownership with the Securities and
Exchange Commission (SEC). Based on its review of
the copies of such reports furnished to the Company, or
representations from certain reporting persons that no other
reports were required, the Company believes that all applicable
filing requirements were complied with during the fiscal year
ended June 30, 2007.
Code of
Ethics
The Company has adopted a code of ethics that applies to the
Companys principal executive officers and principal
financial officer and complies with the required standards of
the Sarbanes-Oxley Act of 2002. Accordingly, the Companys
code of ethics is designed to deter wrongdoing, and to promote,
among other things, honest and ethical conduct, full, timely,
accurate and clear public disclosures, compliance with all
applicable laws, rules and regulations, the prompt internal
reporting of violations of the code, and accountability. A copy
of the Companys code of ethics is available upon request
and without charge by contacting the Company
c/o Investor
Relations, 500 W. Monroe Street, Suite 2800,
Chicago, IL 60661.
Audit
Committee
The Audit Committee of the Board of Directors is a
separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act and
the rules thereunder. The current members of the Audit Committee
are Mr. Lazar, as chairman, and Messrs. Downey and
Stillman. The Board of
44
Directors has determined that the members of the Audit Committee
are independent under the American Stock Exchange listing
requirements and the Exchange Act and the rules thereunder. The
Audit Committee will at all times be composed exclusively of
independent directors who are financially
literate, meaning they are able to read and understand
fundamental financial statements, including a companys
balance sheet, income statement and cash flow statement. In
addition, the Audit Committee has, and will continue to have, at
least one member who has past employment experience in finance
or accounting, requisite professional certification in
accounting, or other comparable experience or background that
results in the individuals financial sophistication. The
Board of Directors has determined that Mr. Lazar satisfies
the definition of financial sophistication and also qualifies as
an audit committee financial expert, as defined
under the SECs rules and regulations.
|
|
Item 11.
|
Executive
Compensation.
|
No executive officer of GERA has received any cash or non-cash
compensation for services rendered to GERA. Each executive
officer has agreed not to take any compensation prior to the
consummation of a business combination, and there are no present
intentions to provide compensation to any officers of the
Company.
In the event GERA effects a business combination, the Company
has agreed to grant Mark W. Chrisman, a member of GERAs
investment committee and executive vice president of
acquisitions of GBE $250,000 worth of restricted shares of
GERAs common stock based on the per share price that is
equal to the average of the high and low market price of GERA
common stock on the date the business combination is
consummated. Such shares shall vest in three equal installments
of thirty-three and one-third percent
(33
1
/
3
%)
on the date the business combination is consummated and on the
second and third anniversaries of such date, subject to
Mr. Chrisman continuing to be employed by GBE or the
Company on such dates. Mr. Chrisman does not have an
employment agreement with the Company and the Company is under
no obligation to enter into an employment agreement with
Mr. Chrisman or any other individuals. However, in the
event Mr. Chrisman remains employed by GBE or the Company,
it is presently anticipated that he would be providing services
to the Company. If a business combination is not completed by
March 3, 2008, Mr. Chrisman will not be issued the
stock discussed above.
In addition, provided that the business combination is approved,
GBE has agreed to transfer to Ms. Maureen Ehrenberg,
executive vice president of GBE and president of GBEs
Global Client Services, $150,000 worth of its Original Shares
(which were issued to the GERA Inside Stockholders prior to the
IPO and which are subject to all of the terms and conditions of
such Original Shares) for services to GBE in connection with
GERAs IPO. Ms. Ehrenberg has not provided any other
services to GBE with respect to the Company and has not provided
any other services to or on behalf of the Company, and it is not
anticipated that Ms. Ehrenberg will do so upon the
consummation of the business combination.
Commencing February 27, 2006, GERA has and will continue to
pay GBE, GERAs sponsor and affiliate, a fee of $7,500 per
month fee for providing GERA with office space and certain
office and secretarial services. GBE may also earn fees pursuant
to the MSA, PMA and the Project Management Agreement for
providing the Company certain services prior to and following
the consummation of the business combination. Other than the
restricted stock to be issued to Mr. Chrisman, the fees
payable to GBE pursuant to the MSA, PMA and the Project
Management Agreement, and the $7,500 per-month office and
secretarial services fee, no compensation of any kind, including
finders and consulting fees, have been or prior to the Business
Combination, will be paid to any of GERAs officers. GERA
reimburses its officers and directors for any reasonable
out-of-pocket expenses incurred by them in connection with
certain activities on GERAs behalf such as identifying and
investigating possible target businesses and business
combinations. However, from GERAs inception in September
2005, through June 30, 2007, GERA has made no
reimbursements for expense incurred by them on its behalf,
including travel, meals and entertainment.
GERAs directors do not currently receive any cash
compensation for their service as members of the board of
directors. However, in the future, non-employee directors may
receive certain cash fees and stock awards that the GERA board
of directors may determine to pay, although at the present time
no determination of any such compensation has been made.
45
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
|
Security
Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding the
beneficial ownership of the Companys common stock as of
September 20, 2007:
|
|
|
|
|
each person known by the Company to be the beneficial owner of
more than 5% of the Companys outstanding shares of common
stock on September 20, 2007;
|
|
|
|
each of the Companys current executive officers and
directors; and
|
|
|
|
all of the Companys current executive officers and
directors as a group.
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership of Our Common Stock on
September 20, 2007
|
|
|
|
Number of
|
|
|
Percent of
|
|
Name and Address of Beneficial Owner(1)
|
|
Shares(2)(3)
|
|
|
Class
|
|
|
Grubb & Ellis Company
|
|
|
5,667,719
|
|
|
|
19.00
|
%
|
Fir Tree Inc.(4)
|
|
|
2,952,400
|
|
|
|
9.90
|
%
|
The Baupost Group, L.L.C.(5)
|
|
|
2,948,100
|
|
|
|
9.88
|
%
|
SAK Corporation(5)
|
|
|
2,948,100
|
|
|
|
9.88
|
%
|
Seth A. Klarman(5)
|
|
|
2,948,100
|
|
|
|
9.88
|
%
|
Wellington Management Company, LLP(6)
|
|
|
2,521,700
|
|
|
|
8.45
|
%
|
Sapling, LLC(4)
|
|
|
2,018,686
|
|
|
|
6.77
|
%
|
Michael Kojaian(7)
|
|
|
1,908,337
|
|
|
|
6.40
|
%
|
Kojaian
Ventures-MM,
Inc.(7)(8)
|
|
|
1,866,667
|
|
|
|
6.26
|
%
|
Kojaian Ventures, L.L.C.(7)(8)
|
|
|
1,866,667
|
|
|
|
6.26
|
%
|
D.B. Zwirn & Co., L.P.(9)
|
|
|
1,638,380
|
|
|
|
5.49
|
%
|
DBZ GP, LLC(9)
|
|
|
1,638,380
|
|
|
|
5.49
|
%
|
Zwirn Holdings, LLC(9)
|
|
|
1,638,380
|
|
|
|
5.49
|
%
|
Daniel B. Zwirn(9)
|
|
|
1,638,380
|
|
|
|
5.49
|
%
|
Mark E. Rose
|
|
|
91,670
|
|
|
|
*
|
|
William Downey
|
|
|
41,670
|
|
|
|
*
|
|
Alan M. Stillman
|
|
|
41,670
|
|
|
|
*
|
|
Melvin F. Lazar
|
|
|
41,670
|
|
|
|
*
|
|
Richard W. Pehlke
|
|
|
0
|
|
|
|
*
|
|
All Directors and Additional Officers as a Group
|
|
|
2,125,017
|
|
|
|
7.12
|
%
|
|
|
|
*
|
|
Less than 1%
|
|
(1)
|
|
Unless otherwise indicated, the business address of each of the
stockholders is 500 West Monroe Street, Suite 2800,
Chicago, Illinois 60661.
|
|
(2)
|
|
Unless otherwise indicated, all ownership is direct beneficial
ownership.
|
|
(3)
|
|
Beneficially owned shares do not include any shares of common
stock issuable upon exercise of warrants which are exercisable
upon the successful completion of a Business Combination.
|
|
(4)
|
|
Sapling, LLC (Sapling) and Fir Tree Recovery Master
Fund, L.P. (Fir Tree Recovery) are the beneficial
owners of 2,018,686 shares of GERA common stock and
933,714 shares of GERA common stock, respectively. Fir Tree
Inc. may be deemed to beneficially own the shares of GERA common
stock held by Sapling and Fir Tree Recovery as a result of being
the investment manager of Sapling and Fir Tree Recovery. Fir
Tree Recovery may direct the vote and disposition of
933,714 shares of Company common stock and Sapling may
direct the vote and disposition of 2,018,686 shares of
Company common stock. The address of each of these shareholders
is 535 Fifth Avenue, 31st Floor, New York City, New York
10017. Jeff Tannenbaum is the president of each Fir Tree Inc.
and Fir Tree Recovery.
|
46
|
|
|
(5)
|
|
The Baupost Group, L.L.C. (Baupost) is a registered
investment advisor. SAK Corporation (SAK) is the
manager of Baupost. Seth A. Klarman (Klarman), as
sole director of SAK Corporation and a controlling person of
Baupost, may be deemed to have beneficial ownership of the
securities beneficially owned by Baupost. Securities
beneficially owned by Baupost, SAK and Klarman include
securities purchase on behalf of various investment limited
partnerships. The address for each of Baupost, SAK and Klarman
is 10 St. James Avenue, Suite 2000, Boston, Massachusetts,
02116.
|
|
(6)
|
|
Wellington Management, LLP, (Wellington) in its
capacity as investment advisor, may be deemed to beneficially
own 2,521,700 shares of GERA common stock which are held of
record by clients of Wellington. Wellingtons clients have
the right to receive, or the power to direct the receipt of,
dividends from, or the proceeds from the sale of, such
securities. The address for Wellington is 75 State Street,
Boston, Massachusetts, 02109. Perry Traquina is the chief
executive officer of Wellington.
|
|
(7)
|
|
C. Michael Kojaian, the chairman of the Companys board of
directors, is affiliated with Kojaian Ventures, L.L.C. and
Kojaian
Ventures-MM,
Inc. Pursuant to the rules established under Securities Exchange
Act of 1934, the foregoing parties may be deemed to be a
group, as defined in Section 13(d) of such Act.
|
|
(8)
|
|
Kojaian
Ventures-MM,
Inc. is the managing member of Kojaian Ventures, L.L.C. The
address for each of Kojaian Ventures, L.L.C. and Kojaian
Ventures-MM,
Inc. is 39400 Woodward Ave., Suite 250, Bloomfield Hills,
Michigan 48304.
|
|
(9)
|
|
D.B. Zwirn & Co., L.P., DBZ GP, LLC, Zwirn Holdings,
LLC, and Daniel B. Zwirn may each be deemed the beneficial owner
of (i) 534,752 shares of GERA common stock owned by
D.B. Zwirn Special Opportunities Fund, L.P.,
(ii) 930,628 shares of GERA common stock owned by D.B.
Zwirn Special Opportunities Fund, Ltd. and
(iii) 173,000 shares of GERA common stock owned by
HCM/Z Special Opportunities, LLC (each entity referred to in
(i) through (iii) is herein referred to as a
Fund and, collectively, as the Funds).
D.B. Zwirn & Co., L.P. is the manager of each of the
Funds, and consequently has voting control and investment
discretion over the GERA common stock held by each of the Funds.
Daniel B. Zwirn is the managing member of an thereby controls,
Zwirn Holdings, LLC, which in turn is the managing member of and
thereby controls D.B. Zwirn & Co., L.P. The address of
each D.B. Zwirn & Co., L.P., DBZ GP, LLC, Zwirn
Holdings, LLC, and Daniel B. Zwirn is 745 Fifth Avenue,
18th Floor, New York, NY 10151.
|
Securities
Authorized for Issuance Under Equity Compensation
Plans
None.
|
|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence.
|
Related
Party Transaction Review Policy
The Company recognizes that transactions between the Company and
any of its directors, officers and significant stockholders or
other related parties can present potential or actual conflicts
of interest and create the appearance that Company decisions are
based on considerations other than the best interests of the
Company and its stockholders. Accordingly, any transactions with
related parties that preceded or occurred in connection with the
IPO were approved by the Companys board of directors, a
majority of which are independent directors. In addition, the
Companys board of directors established a special
committee of independent directors to consider all transactions
between the Company and related parties that relate to the
proposed Business Combination. Further, at the request of the
special committee, the Companys board of directors
executed a unanimous written consent, dated as of June 18,
2007, which provides that, subject to limited exceptions,
neither the Company nor any subsidiary thereof will enter into
any agreement, arrangement or other transaction after
June 18, 2007 that is between the Company or any subsidiary
thereof, on the one hand, and any affiliate of the Company or
any subsidiary thereof (other than the Company or a subsidiary
thereof), on the other hand, unless and until such agreement,
arrangement or other transaction has been reviewed by, and
received the prior approval of, a majority of the independent
directors of the Company. In addition, under the terms of this
resolution, neither the Company nor any subsidiary thereof will
amend, modify, supplement, extend or terminate (other than at
the stated expiration date) any agreement, arrangement or other
transaction between the Company or any subsidiary thereof, on
the one hand, and any affiliate of the Company or any subsidiary
thereof (other than the Company or a subsidiary thereof), on the
other hand, that is in existence on or before June 18,
2007, unless and until such amendment, modification,
47
supplementation, extension or termination has been reviewed by,
and received the prior approval of, a majority of the
independent directors of the Company. For purposes of the
resolution, so long as GBE or any of its affiliates or
successors owns beneficially more than 5% of the outstanding
shares of common stock of the Company, GBE and its affiliates
and successors will be deemed affiliates of the Company and its
subsidiaries. In addition, the resolution may not be amended,
modified, supplemented, revoked or repealed without the vote of
the majority of independent directors of the Company. In
connection with the adoption of the resolution, the
Companys board of directors amended and restated the
Companys bylaws to give effect to the resolution.
GERA
Related Party Transactions
In October 2005, the Company issued 5,876,069 shares of its
common stock to GBE, a sponsor and affiliate of the Company, for
$2,500,000 in cash, at an average purchase price of
approximately $0.43 per share. GBE subsequently transferred
shares of our common stock to the individuals and in the amounts
set forth below:
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
Name
|
|
Shares
|
|
|
Relationship to Us
|
|
C. Michael Kojaian
|
|
|
41,670
|
|
|
Chairman of the Board
|
Mark E. Rose
|
|
|
41,670
|
|
|
Director and Chief Executive Officer
|
William Downey
|
|
|
41,670
|
|
|
Director
|
Melvin F. Lazar
|
|
|
41,670
|
|
|
Director
|
Alan M. Stillman
|
|
|
41,670
|
|
|
Director
|
Pursuant to an escrow agreement between GERA, the GERA Inside
Stockholders (defined herein as Messrs. Kojaian, Rose,
Downey, Lazar and Stillman, and GBE), and Continental Stock
Transfer & Trust Company, all of the GERA Inside
Stockholders shares purchased prior to the IPO
(Inside Shares) were placed in escrow, with
Continental acting as escrow agent until the earliest of:
|
|
|
|
|
February 27, 2009;
|
|
|
|
the Companys liquidation; or
|
|
|
|
the consummation of a liquidation, acquisition, stock exchange
or other similar transaction which results in all of the
Companys stockholders having the right to exchange their
shares of common stock for cash, securities or other property
subsequent to the Company consummating a business combination
with a target business.
|
During the escrow period, the shares placed in escrow cannot be
sold, but the GERA Inside Stockholders will retain all other
rights as stockholders, including, without limitation, the right
to vote their shares of common stock and the right to receive
cash dividends, if declared. Additionally, if dividends are
declared and payable in shares of common stock, such dividends
will also be placed in escrow.
If GERA is unable to effect a business combination and
liquidates, none of the stockholders who purchased common stock
prior to the IPO will receive any portion of the liquidation
proceeds with respect to common stock owned by them prior to the
IPO.
GERA also entered into a registration rights agreement with the
GERA Inside Stockholders pursuant to which the holders of the
majority of the Inside Shares will be entitled to make up to two
demands that GERA register these shares. The holders of the
majority of these shares may elect to exercise these
registration rights at any time after the date on which these
shares of common stock are released from escrow. In addition,
these stockholders have certain piggy-back
registration rights on registration statements filed subsequent
to the date on which these shares of common stock are released
from escrow. GERA will bear the expenses incurred in connection
with the filing of any such registration statements.
Each GERA Inside Stockholder also entered into a letter
agreement with GERA and Deutsche Bank Securities, Inc. pursuant
to which, among other things:
|
|
|
|
|
each agreed to vote all Inside Shares owned by him in accordance
with the holders of a majority of the shares of GERAs
common stock sold in the IPO present in person or represented by
proxy and entitled to vote at the special meeting if GERA
solicits approval of its stockholders for a business combination;
|
48
|
|
|
|
|
if GERA fails to consummate a business combination by
September 3, 2007 or by March 3, 2008 each agreed to
take all reasonable actions within his power to cause GERA to
liquidate as soon as reasonably practicable;
|
|
|
|
each agreed that he and his affiliates will not be entitled to
receive and will not accept any compensation for services
rendered to GERA prior to the consummation of GERAs
business combination; and
|
|
|
|
Other then with respect to the Services Agreement described
below, each agreed that he and his affiliates will not be
entitled to receive or accept a finders fee or any other
compensation in the event he or his affiliates originate a
business combination.
|
As part of the IPO, GERA sold 1,666,667 units to Kojaian
Ventures, L.L.C., an entity affiliated with C. Michael Kojaian,
the Chairman of the Board of Directors and the chairman of the
board of directors of GERAs corporate stockholder, at a
per unit price of $6.00.
For a description of the proposed business combination between
GERA and Properties Acquisition, see Item 1,
Properties Acquisition Proposal.
For a description of agreements entered into between GERA and
GBE and between the SPEs and GBE, see Item 1,
Agreements with GBE, and Note 8 to the
Financial Statements.
For a description of other related party transactions, see
Item 11, Executive Compensation, and Note 8 to the
Financial Statements.
Independence
of Directors
GERAs Board of Directors has determined that William H.
Downey, Melvin F. Lazar and Alan M. Stillman, a majority of the
directors on the Board, are independent directors as
defined in the American Stock Exchange listing standards and
Rule 10A-3
of the Exchange Act. By independent director, the
Board of Directors means a person other than an officer or
employee of GERA or any other individual having a relationship,
which, in the opinion of the Board of Directors would interfere
with the directors exercise of independent judgment in
carrying out the responsibilities of a director. GERAs
independent directors will have regularly scheduled meetings at
which only independent directors are present.
|
|
Item 14.
|
Principal
Accounting Fees and Services.
|
Ernst & Young LLP (Ernst &
Young), independent public accountants, served as the
Companys auditors for the 2007 fiscal year and for the
period from September 7, 2005 through June 30, 2006.
Ernst & Young billed the Company the fees and costs
(fees) set forth below for services rendered during
the fiscal year ended June 30, 2007 and for the period from
September 7, 2005 through June 30, 2006, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 7, 2005
|
|
|
|
For the Fiscal
|
|
|
(Date of Inception)
|
|
|
|
Year Ended
|
|
|
through
|
|
|
|
June 30, 2007(1)
|
|
|
June 30, 2006(1)
|
|
|
Audit Fees(2)
|
|
$
|
190,000
|
|
|
$
|
219,100
|
|
Audit Related Services Fees
|
|
|
|
|
|
|
|
|
Tax Related Services Fees
|
|
|
|
|
|
|
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
190,000
|
|
|
$
|
219,100
|
|
|
|
|
(1)
|
|
All fees were approved by the audit committee of the
Companys board of directors.
|
|
(2)
|
|
$47,100 of these fees was paid by GBE on behalf of the Company.
The Company repaid these fees without interest to GBE on
March 3, 2006 from net proceeds upon the closing of the IPO.
|
49
GRUBB &
ELLIS REALTY ADVISORS, INC.
(a corporation in the development stage)
|
|
Item 15.
|
Exhibits
and Financial Statement Schedules
|
|
|
|
|
|
|
(a)
|
|
|
The following documents are filed as part of this report:
|
|
1
|
.
|
|
The following Report of Independent Registered Public Accounting
Firm and Financial Statements are submitted herewith:
|
Report of Independent Registered Public Accounting Firm
Balance Sheets as of June 30, 2007 and June 30, 2006
Statements of Operations for the Year Ended June 30, 2007, for
the period from September 7, 2005 through June 30, 2006 and for
the period from September 7, 2005 through June 30, 2007
Statements of Stockholders Equity for the Year Ended June
30, 2007 and for the period from September 7, 2005 through June
30, 2006
Statements of Cash Flows for the Year Ended June 30, 2007, for
the period from September 7, 2005 through June 30, 2006 and for
the period from September 7, 2005 through June 30, 2007
Notes to the Financial Statements
|
|
|
|
|
|
2
|
.
|
|
All schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under the related instructions, are
inapplicable, or the information is contained in the Notes to
Financial Statements and therefore have been omitted.
|
|
3
|
.
|
|
Exhibits required to be filed by Item 601 of Regulation S-K:
|
|
|
(3)
|
Articles
of Incorporation and Bylaws
|
|
|
|
|
|
|
3
|
.1
|
|
Third Amended and Restated Certificate of Incorporation,
incorporated by reference to Exhibit 3.1 to Amendment No. 5 to
the Registrants Registration Statement on Form S-1 filed
on February 24, 2006 (File No. 333-129190).
|
|
3
|
.2
|
|
Amended and Restated By-laws, incorporated by reference to
Exhibit 3.2 to Amendment No. 4 to the Registrants
Registration Statement on Form S-1 filed on February 6, 2006
(File No. 333-129190).
|
|
|
(4)
|
Instruments
Defining the Rights of Security Holders, including
Indentures.
|
|
|
|
|
|
|
4
|
.1
|
|
Specimen Unit Certificate, incorporated by reference to
Exhibit 4.1 to Amendment No. 3 to the
Registrants Registration Statement on
Form S-1
filed on January 9, 2006 (File
No. 333-129190).
|
|
4
|
.2
|
|
Specimen Common Stock Certificate, incorporated by reference to
Exhibit 4.2 to Amendment No. 3 to the
Registrants Registration Statement on
Form S-1
filed on January 9, 2006 (File
No. 333-129190).
|
|
4
|
.3
|
|
Specimen Warrant Certificate, incorporated by reference to
Exhibit 4.3 to Amendment No. 3 to the
Registrants Registration Statement on
Form S-1
filed on January 9, 2006 (File
No. 333-129190).
|
|
4
|
.4
|
|
Form of Warrant Agreement between Continental Stock
Transfer & Trust Company and the Registrant,
incorporated by reference to Exhibit 4.4 to Amendment
No. 5 to the Registrants Registration Statement on
Form S-1
filed on February 24, 2006 (File
No. 333-129190).
|
|
4
|
.5
|
|
Form of Underwriters Unit Purchase Option, incorporated by
reference to Exhibit 4.5 to Amendment No. 5 to the
Registrants Registration Statement on
Form S-1
filed on February 24, 2006 (File
No. 333-129190).
|
|
|
|
|
|
|
10
|
.1
|
|
Letter Agreement between the Registrant and Grubb &
Ellis Company, incorporated by reference to Exhibit 10.1 to
Amendment No. 6 to the Registrants Registration
Statement on
Form S-1
filed on February 27, 2006 (File
No. 333-129190).
|
50
|
|
|
|
|
|
10
|
.2
|
|
Letter Agreement between the Registrant and C. Michael Kojaian,
incorporated by reference to Exhibit 10.2 to Amendment
No. 6 to the Registrants Registration Statement on
Form S-1
filed on February 27, 2006 (File
No. 333-129190).
|
|
10
|
.3
|
|
Letter Agreement between the Registrant and Mark E. Rose,
incorporated by reference to Exhibit 10.3 to Amendment
No. 6 to the Registrants Registration Statement on
Form S-1
filed on February 27, 2006 (File
No. 333-129190).
|
|
10
|
.4
|
|
Letter Agreement between the Registrant and William H. Downey,
incorporated by reference to Exhibit 10.5 to Amendment
No. 3 to the Registrants Registration Statement on
Form S-1
filed on January 9, 2006 (File
No. 333-129190).
|
|
10
|
.5
|
|
Letter Agreement between the Registrant and Melvin F. Lazar,
incorporated by reference to Exhibit 10.6 to Amendment
No. 3 to the Registrants Registration Statement on
Form S-1
filed on January 9, 2006
(File No. 333-129190).
|
|
10
|
.6
|
|
Letter Agreement between the Registrant and Alan M. Stillman,
incorporated by reference to Exhibit 10.7 to Amendment
No. 6 to the Registrants Registration Statement on
Form S-1
filed on February 27, 2006 (File
No. 333-129190).
|
|
10
|
.7
|
|
Form of Investment Management Trust Agreement between
Continental Stock Transfer & Trust Company and
the Registrant, incorporated by reference to Exhibit 10.8
to Amendment No. 5 to the Registrants Registration
Statement on
Form S-1
filed on February 24, 2006 (File
No. 333-129190).
|
|
10
|
.8
|
|
Form of Stock Escrow Agreement between the Registrant,
Continental Stock Transfer & Trust Company and
the Initial Stockholders, incorporated by reference to
Exhibit 10.9 to Amendment No. 5 to the
Registrants Registration Statement on
Form S-1
filed on February 24, 2006 (File
No. 333-129190).
|
|
10
|
.9
|
|
Form of Letter Agreement between Grubb & Ellis Company
and Registrant regarding administrative support, incorporated by
reference to Exhibit 10.10 to Amendment No. 3 to the
Registrants Registration Statement on
Form S-1
filed on January 9, 2006 (File
No. 333-129190).
|
|
10
|
.10
|
|
Form of Registration Rights Agreement among the Registrant and
the Initial Stockholders, incorporated by reference to
Exhibit 10.12 to Amendment No. 4 to the
Registrants Registration Statement on
Form S-1
filed on February 6, 2006 (File
No. 333-129190).
|
|
10
|
.12
|
|
Form of Warrant Purchase Agreement between Grubb &
Ellis Company and Deutsche Bank Securities Inc., incorporated by
reference to Exhibit 10.13 to Amendment No. 3 to the
Registrants Registration Statement on
Form S-1
filed on January 9, 2006 (File
No. 333-129190).
|
|
10
|
.13
|
|
Master Agreement for Services, dated February 27, 2006,
between Registrant and Grubb & Ellis Company,
incorporated by reference to Exhibit 10.14 to Amendment
No. 3 to the Registrants Registration Statement on
Form S-1
filed on January 9, 2006 (File
No. 333-129190).
|
|
10
|
.14
|
|
Property Management Agreement, dated February 27, 2006,
between Registrant and Grubb & Ellis Management
Services, Inc., incorporated by reference to Exhibit 10.15
to Amendment No. 5 to the Registrants Registration
Statement on
Form S-1
filed on February 24, 2006 (File
No. 333-129190).
|
|
10
|
.15
|
|
Master Agreement for Project Management Services, dated
February 27, 2006, between Registrant and Grubb &
Ellis Management Services, Inc., incorporated by reference to
Exhibit 10.16 to Amendment No. 3 to the
Registrants Registration Statement on
Form S-1
filed on January 9, 2006 (File
No. 333-129190).
|
|
10
|
.16
|
|
Form of Underwriters Unit Purchase Options, incorporated
by reference to Exhibit 10.17 to Amendment No. 4 to
the Registrants Registration Statement on
Form S-1
filed on February 6, 2006
(File No. 333-129190).
|
|
10
|
.17
|
|
Membership Interest Purchase Agreement, dated June 18,
2007, by and among Grubb & Ellis Company, GERA
Property Acquisitions, LLC and Grubb & Ellis Realty
Advisors, Inc., incorporated by reference to Exhibit 2.1 in
the Registrants
Form 8-K
filed on June 19, 2007 (File
No. 001-32753).
|
|
10
|
.18
|
|
Trademark License Agreement, dated June 18, 2007, by and
among Grubb & Ellis Company, GERA Property
Acquisitions, LLC and Grubb & Ellis Realty Advisors,
Inc., incorporated by reference to Exhibit 10.1 in the
Registrants
Form 8-K
filed on June 19, 2007 (File
No. 001-32753).
|
51
|
|
(23)
|
Consent
of Independent Registered Public Accounting Firm
|
|
|
(31)
|
Section 302
Certifications
|
|
|
|
|
|
|
99
|
.1
|
|
Registrants Code of Ethics, incorporated by reference to
Exhibit 99.1 to Amendment No. 3 to the
Registrants Registration Statement on
Form S-1
filed on January 9, 2006 (File
No. 333-129190).
|
|
99
|
.2
|
|
Registrants Audit Committee Charter, incorporated by
reference to Exhibit 99.2 to Amendment No. 3 to the
Registrants Registration Statement on
Form S-1
filed on January 9, 2006 (File
No. 333-129190).
|
|
99
|
.3
|
|
Registrants Nominating Committee Charter, incorporated by
reference to Exhibit 99.3 to Amendment No. 3 to the
Registrants Registration Statement on
Form S-1
filed on January 9, 2006 (File
No. 333-129190).
|
52
GRUBB &
ELLIS REALTY ADVISORS, INC.
(a corporation in the development stage)
Pursuant to the requirements of Section 13 or 15
(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
|
|
|
|
|
|
|
|
Grubb & Ellis Realty Advisors, Inc. (Registrant)
|
|
|
|
|
|
|
|
|
|
/s/ Mark
E. Rose
Mark
E. Rose
Chief Executive Officer
(Principal Executive Officer)
|
|
October 29, 2007
|
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Mark
E. Rose
Mark
E. Rose
Chief Executive Officer and Director
(Principal Executive Officer)
|
|
October 29, 2007
|
|
|
|
|
|
|
|
/s/ Richard
W. Pehlke
Richard
W. Pehlke
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
October 29, 2007
|
|
|
|
|
|
|
|
*
William
H. Downey, Director
|
|
October 29, 2007
|
|
|
|
|
|
|
|
*
C.
Michael Kojaian, Director
|
|
October 29, 2007
|
|
|
|
|
|
|
|
*
Melvin
F. Lazar, Director
|
|
October 29, 2007
|
|
|
|
|
|
|
|
*
Alan
M. Stillman, Director
|
|
October 29, 2007
|
|
|
|
|
|
|
|
/s/ Mark
E. Rose
|
|
|
|
|
|
|
|
|
|
*By: Mark E. Rose,
Attorney-in-Fact,
pursuant to Powers Of Attorney
|
53
GRUBB &
ELLIS REALTY ADVISORS, INC.
(a corporation in the development stage)
EXHIBIT INDEX
(A)
for the year ended June 30, 2007
Exhibit
|
|
|
|
|
|
(24)
|
|
|
Powers of Attorney
|
|
(31)
|
|
|
Section 302 Certifications
|
54
Grubb & Ellis Realty Advisors, (AMEX:GAV)
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