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Executives

Michael Rispoli - Senior Vice President, Investor Relations

Scott D. Peters - President, Chief Executive Officer and Director

Richard W. Pehlke - Executive Vice President and Chief Financial Officer

Jack Van Berkel - Executive Vice President and Chief Operating Officer

Analysts

Analyst for Brandt Sakakeeny - Deutsche Bank Securities

William Marks - JMP Securities

Analyst for Brandon Dobell - William Blair & Company, L.L.C.

Grubb & Ellis Company (GBE) Q1 2008 Earnings Call May 6, 2008 11:00 AM ET

Operator

Welcome to the first quarter 2008 Grubb and Ellis earning conference call. (Operator Instructions) I would not like to turn the presentation over to Mike Rispoli, Senior Vice President, Investor Relations.

Michael Rispoli

Good morning and welcome to Grubb and Ellis’s first quarter earnings conference call. Thank you for joining us today. This morning we issued a press release announcing our financial results for the first quarter of 2008. This release is posted on our website at www.grubb-ellis.com.

This call is being webcast live and will be archived and available for replay. The replay may be accessed from the Investor Relations section of our website. In just a moment we will provide commentary on our results and then we will open up the call for Q&A. First I would like to remind you that comments made during this call may include certain forward-looking statements. Actual results and the timing of certain events could differ from forward-looking information discussed on this call.

Factors that may cause such results to differ are set forth in this morning’s press release and the company’s filings with the Securities Exchange Commission. The merger between Grubb and Ellis and NNN Realty Advisors was completed on December 7, 2007. As required by general accepted accounting principles, the transaction was accounted for as a reverse merger with NNN Realty Advisors as the accounting acquirer. Accordingly, the company’s results of operations from December 7, 2007 forward include the operations of the combined entity. Results of operations prior to that date including first quarter 2007 results are based solely on the operations of NNN Realty Advisors.

In an effort to present a more complete financial and narrative description of the results of operations, the company has also provided non-GAAP financial measures. The non-GAAP financial measures are intended to reflect the company’s results of operations on a combined basis exclusive of the total financial or accounting impact associated with the merger transaction, such as amortization associated with purchase price adjustments or identified intangible assets.

These financial measures also exclude the impact of non-cash stock based compensation, rental related operations, and other non- cash items. The non-GAAP combined results for the three months ended March 31, 2007 do not purport to show the results as if the companies were merged as of January 1, 2007 but rather represent an arithmetic combination of the results of the two companies.

Results do not reflect the elimination of transactions between the companies in certain estimated synergies and expenses related to the combination for the periods presented. As required by SEC regulations, we have provided reconciliations of these non-GAAP measures to what we believe are the most directly comparable GAAP measures in our earnings release and related 8-K filing.

With that I will turn the call over to Scott Peters, our Chief Executive Officer for opening remarks.

Scott D. Peters

We are pleased to have the opportunity to review our first quarter performance and update you on the progress at Grubb and Ellis Company. Although it is our second earning conference call since the close of the merger, it is the first time we are reporting full quarter results for the combined company.

With me on today’s call is Rich Pehlke, our Chief Financial Officer and Jack Van Berkel, our Chief Operating Officer. Rich will discuss our financial results and Jack will provide an update on our merger integration, review some of our recent announcements, and discuss how they relate to our overall strategy of making Grubb and Ellis one of the leading global real estate services and investment firms.

First I’d like to provide a little color on the quarter. As noted in our earnings release, Grubb and Ellis’s first quarter 2008 results exceeded combined companies 2007 first quarter results. For the first quarter of 2008, Grubb and Ellis reported revenue of $160.6 million and adjusted EBITDA of $7.7 million for costs associated with the merger and certain other non- cash and non- reoccurring items. The companies, on a combined basis, reported first quarter 2007 revenue of $147.2 million and adjusted EBITDA of $6.7 million before non-cash and non-reoccurring items. On this basis, revenue increased 9% and adjusted EBITDA was up more than 15% year-over-year.

Due to the seasonality of the commercial real estate brokerage business, the first quarter is traditionally Grubb and Ellis’s slowest quarter from a revenue perspective. The current economic environment and specifically, the unstable debt markets have impacted transaction velocity and certainly affect the timing of transactions for both buyers and sellers. These factors have resulted in a reduction in velocity of transactions from levels we’ve experienced in prior years, industry wide.

Our first quarter results demonstrated the value of the diversified revenue streams created by the merger of NNN Realty Advisors and Grubb and Ellis. Market conditions impacted our first quarter results and we expect this to continue until the debt markets improve. However, despite the current market conditions, we expect that based on our expanded platform, under the Grubb and Ellis brand, the cost in revenue synergies created by the merger, and the new revenue we expect to generate from our strategic initiatives in our new business platforms, Grubb and Ellis’ 2008 adjusted EBITDA will meet or exceed the adjusted EBITDA reported by the combined companies for 2007.

With those market comments as a back drop, I would like to briefly review the performance of our business platforms. Immediately following the merger, we renamed all of our investment management products under the Grubb and Ellis brand.

During the first quarter of 2008 our tenant in common and 1031 exchange public non- traded REITs and wealth management programs raised an aggregate of $264 million of equity. This compares favorably to a total equity raise of $144.4 million a year ago. The growth in equity raise was lead by our newly introduced wealth management platform. During the first quarter of 2008, we received commitments of $180 million to this platform and placed $137.4 million in a variety of high-quality real estate assets on behalf of high net worth individuals and corporations.

Grubb and Ellis Health Care REITs and Grubb and Ellis Apartment REITs are public, non- traded REITs raised $74.2 million during the first quarter, nearly double the equity raised in the first quarter of 2007. The equity raised reflects both the strong investment appeal of our REITs products under the Grubb and Ellis brand and the strength of our proprietary REITs in the alternative investment sector.

Our traditional tenant in common and 1031 exchange programs raised $52.1 million during the first quarter of 2008, compared with $103.8 million a year ago. The first quarter 2008 equity raise reflects not only current market conditions that have prevailed but more importantly the disciplined and conservative approach we’ve taken during the current environment. We believe it is critical to be both selective and prudent with our acquisitions of the 1031 programs we offered during the first quarter.

The first quarter was a period in which market dynamics were constantly changing, as such, we are now well positioned to take advantage of a very different landscape, one that is far less competitive offers improved yields for our new tenant in common programs and an environment where investors are seeking a sponsor with a strong balance sheet and a commitment to long term service. Recently, several of our traditional lenders have reemerged as sources of debt for our 1031 tenant in common programs. These lenders are seeking a long term relationship with Grubb and Ellis and a long term relationship with our investors.

During the first quarter of 2008 Grubb and Ellis realty investors completed 20 acquisitions valued in excess of $350 million. Assets under management increased to $6.1 billion, from $5.8 billion at December 31, 2007. Given the market conditions, we delayed several sales in our 1031, tenant in common exchange programs in order to benefit our investors for later in the year.

As one of the leading real estate service providers and investment product sponsors, all of our investors receive the same high quality institutional property management services that we deliver to our world class corporate and institutional clients. As of March 31, 2008, approximately 26 million square feet of property from Grubb and Ellis realty investors, captive management portfolio has been transitioned to our management services subsidiary, Grubb and Ellis management services. At March 31, 2008, Grubb and Ellis managed more than 218 million square feet of property.

Like our investment programs, our corporate service business generated reoccurring revenue. I’m pleased to report that during the first quarter, we continued to gain traction in this important arena. We continue to expand relationships with several existing key clients. Delivering value added real estate services to corporate clients is a top priority for driving revenue through both the management and transaction businesses in the future.

Our pipeline for new business from existing clients as well as new corporate relationships remains extremely healthy for the remainder of 2008. As I mentioned earlier, transaction velocity was down considerably during the first quarter of 2008. This impacted the results of our transaction services business.

Despite a 6% decrease in fees year-over-year, our transactions services platform continues to grow in depth, quality, and talent and we continue to make the necessary investments to further strengthen our footprint. The offices we’ve invested in continue to be positioned well for when the market conditions return to a more normal level.

As Jack will explain in a few minutes, we are implementing a go-to-market strategy that encourages cross selling but also flattens our organization, resulting in cost savings and operating efficiencies. We’re focusing on a standard for productivity in performance for all brokers throughout our network.

In fact, we recently implemented various deferred compensation programs for our managing directors and transaction professionals as part of our strategy to align their interests with the long term success of Grubb and Ellis and its shareholders. All these actions were critical to our vision at that time of the merger.

Finally, before I turn the call over to Rich, I think it is important to remind everyone that we are focused on recapturing the equity from the real estate assets on our balance sheet through a sale or a joint venture as originally intended over the next three to six months.

Richard W. Pehlke

As I begin, I want to remind you that the reported results for the first quarter of 2007 are based solely on the operations of NNN Realty Advisors. Mike indicated earlier that for comparative purposes our press release contains supplemental disclosures that combine the 2007 operating results of Grubb and Ellis Company and NNN Realty Advisors. We believe these results combined provide a more meaningful way to review and put in context our company’s performance. Most of my comments will reflect that comparison.

Revenue for the quarter ended March 31 was $160.6 million compared with revenue $147.2 million in 2007. The increase in revenue from management services combined with the operating revenue from the property held for sale offset lower revenue transaction services and investment management segments.

The company reported a pretax operating loss of $4.1 million and a net loss of $5.9 million for the quarter. The losses were largely attributable to a number of expense factors, most of which were one time in nature or directly related to the assets held for sale. Specifically we recorded $2.9 million in merger related costs, $5 million of interest expense for the assets held for sale, and $1.5 million of amortization from the assets held for sale and merger intangibles.

These expenses were partially offset by the net operating income of the assets held for sale. Absent these items, the company would have been at a comparable level of performance for last year’s combined results. Which means, our results will break even on an operating basis when compared to the prior quarter. Given the difficult economic and market environment we are in, we are satisfied with the result and it shows we’re making progress at our cost structure.

The company reported a net loss for the quarter of $5.9 million which includes also the write off of the investment of Grubb and Ellis Realty Advisors of $5.8 million pretax and $3.4 million after tax. You may recall that Realty Advisors was a special purpose acquisition corporation formed by Grubb and Ellis in 2006.

In February, the stockholders of Realty Advisors failed to approve the company’s business combination which is required under [SPAK] rules, resulting in the liquidation of Realty Advisors which is now in process. Based on 63.5 million shares outstanding at the end of the first quarter, our reported results have been an earnings per share of negative $0.09.

EBITDA calculated from the reported GAAP numbers was $548,000 for the quarter. Adjusted EBITDA which excludes certain charges, specifically non- cash stock compensation and the impact of assets held for sale, was $7.7 million, which compares favorably to the $6.7 million of adjusted EBITDA for the combined companies in the prior year period. We finished the quarter with $24.8 million of cash and cash equivalents, down from the $49.1 million at December 31.

During the first quarter we used $24.3 million of our cash and another $30 million of our credit facility to fund working capital needs and retire mezzanine debt on certain investment products. The first quarter of the year is always the period where our cash flow is challenged. This is due to lower revenue from a seasonal basis, the payments of prior years deferred commissions, taxes, and bonds incentives. This is a manageable and expected occurrence. As of March 31, we had $38 million drawn on our outstanding credit facility.

I’d like now to spend a moment to talk about the revenue contributions from each segment from the combined operations. Transactions services include brokerage and leasing commissions, consulting and evaluations services. For the quarter revenue was $59.1 million, down from the $63.2 million in the year earlier. The decrease can be attributed to a significant drop in investment sales reflecting in the market conditions as Scott mentioned earlier. In contrast, our leasing business experienced good growth over the prior year period. The investment management site net includes the transaction management and dealership management businesses.

First quarter investment management revenue totaled $26.1 million, which included transaction fees of $13.1 million, captive management fees of $10.3 million, and dealer manager fees of $2.7 million. This position fees decreased by $3.2 million year-over-year.

Last year’s first quarter included higher fees due primarily to the resulting liquidation of G-REIT and sponsored non-traded REITs and the sale of its properties, which began in the first quarter of 2007. Management services are the property and facility management fees for the third party and captive assets. Revenue was $61.8 million for the quarter, a solid increase over the prior year that was driven by increased assets under management.

Let’s briefly return to the expenses. As you can see from this schedules, the majority of our expenses are related to compensation and reimbursable costs are directly related to our revenue productions. Combined GandA was 13.5% of the combined revenues for the quarter. More importantly GandA costs are lower compared to both prior year and the fourth quarter of ’07 when you look at the combined company results. We have targeted $12.5 million of expense center Gs in the first 12 months following the merger.

As I mentioned earlier, we’re talking about the operating loss, we were impacted by the overall expense burden of the assets currently warehoused for sale. There are three assets that Grubb and Ellis purchased and warehoused on behalf of the Grubb and Ellis Realty Advisors strategy, and two assets from the strategic office fund. These assets are performing at or above expected level on an operating basis and we have added back in our EBITDA reconciliation their operating income.

Now that the Realty Advisors is in the process of being liquidated, we are actively pursuing the disposal of all these assets, and at the same time seeking to achieve fair value because we do believe these strategies of these assets do have value in the strategies for which they were acquired. We anticipate that these assets will be moved off our financials in the next six months, at which time our income statement will become more representative of our business platform.

I would like to now turn it over to Jack Van Berkel, our Chief Operating Officer.

Jack Van Berkel

For those of you who don’t know me, I joined NNN Realty Advisors shortly before the close of the merger. I was named Chief Operating Officer in January. This is the first time I have participated in a Grubb and Ellis conference call, and it’s a pleasure to have the opportunity to update you on our progress.

One of our top priorities since the close of the merger has been to integrate NNN Realty Advisors and Grubb and Ellis Company. This process is integral to the success of the merger, not only from a client service standpoint but also from a cost and revenue perspective.

As we’ve stated previously, we estimated the integration process would take 12 to 18 months and we would generate expense synergies of $10 million in the first 12 months. I’m pleased to report that the integration is ahead of schedule both from timing and a cost savings standpoint. Today we have identified and taken action to generate $16.5 million in annualized cost saving synergies of which approximately $12.5 million will be recognized calendar ’08.

Our focus has been to flatten and streamline our organization as we implement the go-to-market strategy that is designed to leverage the complementary nature of our businesses as well as the expanded platform which we now operate. As far as this process, we have looked at every aspect of the organization. The result has been dramatic. By more closely integrating our service delivery, we have significantly reduced the management structure throughout our network and improved our ability to service our clients.

We’ve talked a lot about our go-to-market strategy and I think it’s important to take a few minutes to explain it and how it relates to our overall goal of repositioning our current platform to more effectively service our clients as well as better insulate Grubb and Ellis from the types of conditions we are seeing today. As our industry evolves, our clients are increasing looking for service provider to view their business holistically and have the capacity to handle all their real estate needs. This is the basis of our new structure, which is designed to seamlessly integrate our transaction, global client services and investment platforms. Our broad footprint supports this structure.

Our local managing directors have overall responsibility for the profit of their regions, not simply a business line and will be supported by senior management and corporate services directors to ensure that our clients are best served. This structure will be further supported by an operation infrastructure focused on reporting metrics and data. Our goal is to ensure that our professionals have the support necessary to provide best in class solution.

We are upgrading our tool kits, significantly enhancing our marketing efforts and leveraging our already strong research platform to provide greater information to the market place and specifically to our clients. We have already produced a series of new marketing materials including a corporate brochure that highlights the new Grubb and Ellis. We are committed to building our brand and are focused on increasing our image in the market place. As a service company, our focus must always be on having the right people in place. We are aggressively recruiting top talent in both leadership and sales positions.

Last week on Thursday we announced that we hired Brent Hunsaker, one of the most respected business development professionals in our industry. Brent fills the newly created position of Executive Vice President, Business Development and is responsible for overseeing Grubb and Ellis business development, marketing and training programs for our brokerage operations. So national role, one that we believe is critical to the success of our go-to-market strategy. Brett’s extensive contacts and reputation for being one of the best sales trainers in the brokerage business make him an ideal person for this position.

At the end of last month Moody Younger rejoined Grubb and Ellis as Executive Vice President, Managing Director. Prior to leaving Grubb and Ellis in 2006, Moody spent nearly three years with Grubb and Ellis as managing director of our Dallas office, and grew that office’s market share and profitability. In his new role, Moody has overall responsibility for our operations in Texas, including services, revenue and client relations. This illustrates our new go-to-market strategy and expanded responsibility of our market leaders, both from a geographic and service platform. We couldn’t be more pleased that Moody is once again at Grubb and Ellis. He characterizes the type of quality professional we are looking to attract into our organization.

We also to continue to fill our corporate services platform to deliver seamless service and best in class solutions to our corporate clients. In February we added Conrad Anderson and Larry Lawrence to our corporate services team. Both Conrad and Larry are senior industry veterans, with considerable experience servicing the needs of corporate clients. We also added key personnel to our project management and lease administration groups.

As we continue to refine our go-to-market strategy, we will continue to recruit to fill gaps in our organization. We’re also focused on the productivity of our brokerage professionals. In addition to retaining our top talent, we are aggressively recruiting high quality professional into our brokerage operation as a way to drive additional revenue and increase profitability across our business platforms.

In March, we introduced the deferred compensation program through which phantom stock was awarded to our top producers. We see this program as an important retention tool that directly links their success to the success of the company and aligns their interests with the interest of our shareholders.

Before I turn the call back over to Scott for concluding remarks, I want to reiterate how pleased I am with the progress we have made. Our integration is on track and we continue to recruit new talent into Grubb and Ellis daily. It is clear that Grubb and Ellis has not only become the company to watch, but is being recognized as the place to build a career.

Scott D. Peters

The most compelling benefit of the merger continues to be the complementary nature of our businesses. We’re focused on leveraging the strength of our diversified platform and the Grubb and Ellis brand to create a best in class global real estate services and investment firm, with the ability to service the needs of the individuals, institutional investors, and corporate users. From the beginning, we identified four focus areas that directly support our business plan. They are (1) structure the organization for growth, flatten it, and make it more efficient, (2) invest in our service and investment program platforms, (3) leverage the strength of our brand, and (4) manage costs without compromising quality.

I’m pleased to report we have made progress in each area. Our go-to-market strategy, the management hires we are making, and the realignment of our compensation programs are all initiatives we have executed on through the first quarter. They all support our focus on structuring the new Grubb and Ellis for long term growth.

Our second priority is to invest in our service and investment platforms. We introduced our wealth management platform and initiated a security licensing program that allows selected Grubb and Ellis brokers the opportunity to obtain the necessary security licenses to become registered 1031 sales reps.

Our third priority is to leverage the strength of the Grubb and Ellis brand. We have already seen the benefits with aligning our products with the Grubb and Ellis name and being a public company sponsor. In April, we entered a new selling group with LPL, one of the largest and most respected independent broker dealers in the country.

As a result of this settling agreement, and several others, the Grubb and Ellis Health Care REIT will now be marketed by more than 30,000 registered representatives. The Grubb and Ellis brand is unquestionably one of the most recognized in the industry and we are focused on protecting and growing it. To this end, we are directing resources to raise our profile and keep Grubb and Ellis in the forefront of the industry.

Our fourth priority is to manage cost without compromising quality. Although cutting costs is a priority, we will not implement cost savings that compromise the quality of service. Instead we are using these savings to invest in the people, products, and technology solutions that will allow us to set the standard for service excellence.

During the first quarter we expanded our relationships with some of our largest clients and we are increasingly winning more and more business from existing clients. To illustrate this success, we were retained by one of our largest facilities management clients to manage their new campuses in China.

Although the market environment has changed since we first announced our merger nearly a year ago, our rationale for combining our companies and our long term objective have not; in fact developments in both the credit and real estate markets since this time last year reinforces the wisdom of the merger. We are managing Grubb and Ellis for the long term and I am proud of the considerable progress we have made in building and strengthening our platform, brand, and broker dealer relationships in just five months.

At this point I would like to open up the caller your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question will come from Analyst for Brandt Sakakeeny - Deutsche Bank.

Analyst for Brandt Sakakeeny - Deutsche Bank Securities

On wealth management, could you maybe talk a little bit more about what's driving the early momentum in that business, especially given these tough, tough market conditions in real estate and credit? And then also, how do the economics on those burgeons differ from say your tip or your non-traded REITS?

Scott D. Peters

I think one of the examples of where we are in this particular cycle is in fact our wealth management program. Just briefly, for those folks who may not be aware, our wealth management program offers individuals or corporations the opportunity to invest with us, and we manage their opportunity to diversify their portfolio. We've had the opportunity to see what you would expect to see in this environment. Folks who have cash, who have had a transaction, have come to the marketplace and looked to put themselves back out as cash buyers. The wealth management transactions that we've completed have actually been 100% cash, no debt.

I think over time, of course, this will certainly change. It will also change as it relates to the economics, because our tenant-in common traditional programs have a leverage of typically 60% to 65%. These transactions, I would think, going forward in the wealth management program will have somewhat more modified debt, but certainly investors will take advantage of debt in order to increase their returns. But one of the things that we have seen is that people are seeing the opportunity with cash to make very good acquisitions in this particular marketplace.

Analyst for Brandt Sakakeeny - Deutsche Bank Securities

Do your reps need to be licensed in the same way to sell those burgeons as they do for TIC?

Scott D. Peters

We have the opportunity to do it both ways, one as a real estate investment, and the other as a securities investment. So it really depends upon the focus of the transaction coming from the investor.

Analyst for Brandt Sakakeeny - Deutsche Bank Securities

Can you give us an update on your broker headcount?

Scott D. Peters

We have licensed about 11 brokers in the system. It is a selective basis. Our focus, the focus of the Grubb and Ellis brokerage is still on transaction, transaction services, but this does give some brokers the opportunity to have another quiver in their arsenal if they find that they can, in fact, take advantage of it.

Analyst for Brandt Sakakeeny - Deutsche Bank Securities

What would be the comparable number to the 927 from the December quarter?

Richard W. Pehlke

That would be 895, Chris.

Analyst for Brandt Sakakeeny - Deutsche Bank Securities

On the MandA environment, I know you said that the environment has gotten less competitive given what's happened in dislocation in the markets. Are there any other smaller TIC providers out there that would be worth you buying?

Scott D. Peters

Well, I think this is a very challenging environment for the tenant-in common sector. This is the environment that we had thought was going to take place maybe a year, a year and a half ago when we started upon this journey, both as NNN and then when the merger with Grubb and Ellis. I think those opportunities continue to present themselves.

It may be an opportunity for us as a company to get additional assets under management. Take advantage of the market, take advantage of sponsors who don't want to be in the business on a long-term basis but rather who are focused on a transaction basis. I think that we as a company are going to continue to look at those opportunities and if one presents itself and presents itself in the right format, and of course with the right costs associated with it, we would move forward.

Operator

Your next question comes from Will Marks - JMP Securities.

William Marks - JMP Securities

On the wealth management business, what should we expect in terms of fee? Should we look at a percentage of the capital raised?

Scott D. Peters

Well I think on the wealth management, it again gets back to what the investor is looking to do in the form of the component of debt associated with cash on the acquisition that we're able to transact for them. Our fees in the wealth management program will be modified somewhat to our traditional tenant-in common fees and certainly modified a little bit as it would relate to our non-traded REIT fees.

We still think they're very positive. They will be a strong indication of additional growth within our revenue stream, and it is, of course, the first quarter that we've rolled this out. But we think this program allows either individuals or corporations through either the Grubb and Ellis brokerage side or through the broker dealer side, when they run into individuals who are continuing to look for opportunities, who have large amounts of money from a transaction, it gives them the opportunity to use all of the Grubb and Ellis services.

The property management, world class that we have, the research that we can help them with and assist them with, the due diligence process, the sourcing of assets, the asset management strength that we have that fills the country... We have 130 offices, we have a footprint, so we are very excited about being able to come forth and offer this as another additional platform for investors.

William Marks - JMP Securities

So someone that puts money in, assuming you buy real estate, you're going to pay an acquisition fee, they're going to pay an asset management fee, but I would assume that the total fees aren't going to come close to what a TIC investor pays, or am I wrong?

Scott D. Peters

Well these fees are structured really on a modified basis, meaning that the fees aren't the same as they would be for a tenant-in common program. Depending upon the size of the investment, depending on what the customer, the investor is looking to achieve, the relationship that we have with either just this program or perhaps a fuller involvement with that investor, we will modify the fees.

But there will be an investment, an acquisition fee. The acquisition fee will not be that substantially different than a fee that we would expect. We do a tremendous amount of service. We think we bring tremendous inputs to this investor that they won't get anywhere else. We're a one shop service that delivers state of the art ability to get what they are looking for, whether it's type of asset, type of yield, diversification, depending upon where they want to invest in, depending on the asset that they're looking at. So we are able to sit down and give them a whole breadth of what we have at Grubb and Ellis. So again, it is an individual based discussion with that investor.

William Marks - JMP Securities

You gave the restated or the adjusted EBITDA number for '07 for the first quarter. Could you give us the next three quarters as well so we can look forward and know what to compare it to?

Richard W. Pehlke

Yes. For the second quarter, that number was $27.4 million. Q3 was, I believe, $18.4 million, and $22.5 million for the fourth quarter. It should add up to about $74.8 million, which is what we reported in our year end numbers.

William Marks - JMP Securities

In order to hit your goal of topping that $74.8 million, are you assuming much in, or can we break out these expense synergies and the revenue synergies?

Richard W. Pehlke

Well, I think what we've said is we expect that an annualized rate right now is somewhere in excess of $12 million. That won't all happen obviously in the first 12 months, but it's really started underway. So I think it's going to be spread. Right now I can estimate that I think it's more even through the year, and grows a little bit towards the end of the year as things kick in.

We are reinvesting some of those dollars as Scott indicated because this business is all about talent, but we're using it to grow the business intelligently, so it's going to be a combination of building off the expense synergies, the momentum of the core business, and really building on some of the platforms that Scott indicated that are newer that are going to be driving revenue, which is really wealth management and particularly the non-traded REITs as we increase the distribution building off the Grubb and Ellis brand.

William Marks - JMP Securities

So is it safe to say that you could see large declines in certain businesses but still top last year's number?

Scott D. Peters

I think what we're looking at is, as we have mentioned, this is a more diverse revenue platform. We are going to experience, as we have indicated in the first quarter, where transaction services has had a very stiff wind in its forefront. We expect, frankly, that that wind will continue for the rest of 2008, and hopefully we'll be judged wrong a little bit and it will be better sooner.

But 2009 is when we would look to see a little bit of improvement. Other sections of our performance in our non-traded REITs, we're doing extremely well. We think we're very well positioned to have an extremely good year in that sector. Tenant-in common, we expect that the tenant-in common will continue to be impacted through 2008, but we expect to pick up market share.

We have seen some traditional lenders come back to the marketplace to offer opportunities that are favorable for our program. So we think that there will continue to be opportunities in the tenant-in common side. Our corporate services, as we mentioned, we have experienced some existing clients who have retained us in other areas that have added to and improved from our 2007 performance.

And then assets under management, we're going to continue to add assets under management from year-over-year. Dispositions, we still believe that dispositions in 2008 for our different programs will continue to be somewhat modified from last year, but we are in a good position as we move through 2008 to execute on some very favorable returns for investors, and in fact, we need to do that.

So if you put all those four or five things together, we think that in 2008 we will be able to achieve or meet or exceed where we were in 2007. That's the benefit of having an expanded revenue base, compared to either NNN last year, being in two markets only, or the legacy Grubb and Ellis being in transaction in corporate services.

Operator

Your last question comes from Analyst for Brandon Dobell - William Blair and Company.

Analyst for Brandon Dobell - William Blair and Company, L.L.C.

During the quarter, you mentioned the tough market in sales but it sounded like there was a little bit of upside in leasing. Can you just touch on your expectations for leasing for the rest of the year?

Scott D. Peters

Well leasing transactions tend to have longer lead times. So what I think you're seeing the benefit of, in the early part of the year for leasing, is the fact that a lot of good groundwork was done in early to mid last year in terms of our folks building their book of business and decisions that carry through. I think if we continue in the headwinds that we saw at the end of last year and the first quarter of this year, you'll probably see leasing taper off a touch. It would not be surprising.

A lot of the revenue that the leasing groups are working on is really things that impact late '08, early '09 and mid '09 because of just lead time of those types of transactions. Having said that, our core strength has always been bread and butter leasing and sales transactions. So our people are doing a good job as we pull the offices.

As we indicated in our remarks earlier, many of the offices where we've made significant investments, particularly some of them, still are in relatively strong markets. We're seeing some better traction in some of our eastern markets versus our western markets. So we're still hopeful that we have a decent momentum going in that business, and that it can maintain a satisfactory level as we get through these pretty tough times.

Analyst for Brandon Dobell - William Blair and Company, L.L.C.

For the sales on the transactions that are getting done, can you point to an average size of the building or the sale that's taking place?

Richard W. Pehlke

I don't have that at the top of my head. I don't think we've seen major... We've seen some price deterioration on some transactions but as Scott indicated on the investment side, a lot of the transactions that are getting done are by a different type of buyer. A lot of times it's an asset lender or a cash deal. There's maybe been a little bit of price reductions in terms of, again, average size, but we haven't seen a significant change in our mix of business that way. It's just been more volume that it's just gone down.

Analyst for Brandon Dobell - William Blair and Company, L.L.C.

And then going back to acquisitions, you mentioned a couple of the opportunities, maybe in the TIC space. Are there any other acquisitions that you're looking to consider based on expanding into different geographies, different business lines? Any opportunities there?

Scott D. Peters

Well I think that one of the nice things about having a slowing market is that the opportunities that present themselves seem to be quite numerous. We're going to be very prudent and very systematic about how we go through '08 and improve our footprint both here and if we move overseas.

Also on acquisitions as it relates to our investment side. I would think that we will do things that make sense for the long-term growth of the company, but we have what we've always said is we take care of what we've got here on an integration basis; if we improve our fundamental business lines, if we continue to put in the work that it takes to put this merger together for the first 12 months, we will show and be able to give investors a very good return and a reward for their commitment and investment in Grubb and Ellis. So we've got a lot on our plate now, but we certainly won't lead a blind eye to something that comes along that is beneficial.

Analyst for Brandon Dobell - William Blair and Company, L.L.C.

You mentioned the 11 licensed brokers. Can you point to any examples of wins in terms of cross selling the TIC programs, the investment management programs, among those brokers?

Scott D. Peters

We have. Of the money that we indicated came into the wealth management program, 75% of it actually came from the broker side of the equation. What we see is that when we get opportunities in that arena, they are for large dollars. They are relationship clients, there's clients that these brokers, investment brokers have had for some time. And it gives them an opportunity to present an alternative or another way for these investors to look at deploying their funds. So we expect not to see huge amounts of velocity, but we do expect to see some volume and take advantage of the opportunities as we see them.

Operator

At this time, there are no more questions in the queue.

Scott D. Peters

I would like to thank everybody who participated in today's call. Thank you very much for the questions in our question and answer session. And we appreciate your interest in Grubb and Ellis, and we look forward to updating you on a continued basis as we end the second quarter and look forward to this next second quarter conference call. Thank you very much. Operator Ladies and gentlemen, this concludes your presentation. You may now disconnect, and have a great day.

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Source: Grubb & Ellis Company Q1 2008 Earnings Call Transcript
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