Grubb & Ellis Forms Daymark to Manage NNN Realty's 33M SF Portfolio
Posted February 10, 2011
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Grubb & Ellis Company has established a new wholly-owned and separately managed subsidiary to manage its nationwide tenant-in-common (TIC) portfolio of commercial real estate properties managed by NNN Realty Advisors, Inc. (NNNRA), another subsidiary. NNNRA will be a direct wholly-owned subsidiary of Daymark.
In addition to managing NNNRA's 33 million square-foot property portfolio, Daymark intends to provide similar services for unaffiliated third party owners, including strategic asset management, property management, structured finance and loan advisory services to third party owners.
Daymark will be led by Steven M. Shipp, Daymark's President and Chief Executive, Paul E. Henderson, Daymark's Executive Vice President and Chief Financial Officer, and Jeffrey A. Gregor, Daymark's Executive Vice President and General Counsel.
Shipp previously served as Executive Vice President of Portfolio Management for Grubb & Ellis Realty Investors, LLC ("GERI"), a wholly-owned subsidiary of NNNRA, and before that was a regional vice president with Bank of America. Henderson previously served as senior controller at LNR Property Corporation ("LNR"), an investment, finance and management company. Prior to working at LNR, Henderson held various senior finance positions with Conexant Systems Inc. and Hyperion Solutions Corporation, both of which are public companies listed on the NASDAQ. Gregor previously served as vice president and senior securities counsel of GERI, and prior to joining Grubb & Ellis in 2007, Gregor was a senior associate with Hirschler Fleischer in Richmond, Virginia.
The establishment of Daymark is intended to help Grubb & Ellis's bring increased focus to its business segments. As such, it will enable the Company to separate the disclosure and management of its TIC business from its other investment management businesses, as well as from its other third party real estate services, such as transaction, facilities management and property management.
NNNRA Net Worth
NNNRA is required to maintain a specified level of minimum net worth under loan documents related to certain TIC programs that it has sponsored. As of December 31, 2010, NNNRA's net worth was below the contractually specified level of $10 or $15 million with respect to approximately 30 percent of its managed TIC programs. While this circumstance does not, in and of itself, create any direct recourse liability for NNNRA, failure to meet the minimum net worth on these programs could result in the imposition of an event of default under these TIC loan agreements and NNNRA potentially becoming liable for up to $6 million. To date, no events of default have been declared and the Company and NNNRA are exploring a number of measures to increase NNNRA's net worth to the requisite amount required under the TIC loan arrangements.
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