Grubb & Ellis Bows Out, Prosky, Hanson Get a Payday

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Joined: Wed Nov 09, 2011 2:14 pm

Grubb & Ellis Bows Out, Prosky, Hanson Get a Payday

Post by Occupythis » Wed Nov 09, 2011 2:29 pm

Grubb & Ellis Healthcare REIT II investors woke up this morning to learn that their company has left its parent and is now called Griffin-American Healthcare REIT Inc. By now you've probably seen the 8-K the Grubb & Ellis Healthcare REIT filed this morning, announcing that they are transitioning the advisory and distribution of the fund to a new sponsor and dealer manager.(" onclick=";return false;) The new sponsor will be a company owned and controlled by Jeff Hanson and Danny Prosky and the new dealer manager will be Griffin Capital.

In the words of Gordon Gecko, this turkey is totally brain-dead.

Since Tony Thompson left GBE they have lost Grubb & Ellis Healthcare REIT, Grubb & Ellis Apartment REIT and now they are losing Grubb & Ellis Healthcare REIT II. Each of these funds were providing much needed fees to the ailing real estate giant, yet they have not been able to hold onto these cash cows due to their incompetant management.

This particular departure defies all explanation. When Grubb & Ellis Healthcare (the original, since known as Healthcare Trust of America) left GBE in 2009 they had already raised $1B, internalized the management and worked in cooperation with the board of GBE to coordinate their exit. However, GBE Healthcare II did not take this approach. This move came without notification, other than filing a 424B3 a few weeks ago warning that problems with their parent company GBE could create issues for the REIT. As Prosky and Hanson are going to be the primary owners of the new advisor to the REIT, they have left Grubb and Ellis effective immediately. It is unclear, in Hanson and Prosky's absence, who will continue to run the day-to-day operations of this fund, its acquisitions, dispositions and leasing. The changes are subject to extensive regulatory review before they become effective, and there is no gurantee that this can be completed in the 60 day window the press release references. There's no gurantee that it will ever happen, in fact. It is also now apparent that their loudly-trumpeted decision to receive some or all of their compensation in the form of shares was in no way altruistic, but was, instead, a smoke-screen to ensure that, ultimately, they would enjoy the benefit of the 2.6% of every dollar put into acquisitions that is paid to the advisor. They are obviously stealing the company and the cash flow it provides to its advisor. This move creates NO VALUE WHATSOEVER for the investors. When the first Healthcare REIT left GBE at least they internalized the management and got rid of something like $20M a year in overhead costs. But not this time. The fact that Hanson is the chairman of the board for the REIT and controls the new advisor makes him the largest single beneficiary of the move should be a huge red-flag, as it is a gigantic conflict of interest. Further, the contract with the new advisor contains NO performance hurdles or performance based incentives. Scott Peters at least still has to answer to a board of directors and has compensation that is capped at nowhere near the $20M a year the advsior could be earning in fees, presumably most of which would flow to Hanson and Prosky. It is unclear how and when this transition will occur, or how it may be impacted by the ongoing negotiations with Colony and Island Capital, or how regulatory delays may hinder the possibility of the fund ever raising another dollar in the market again.

Turning attention to the announcement that Griffin Capital will be the dealer manager leads to even more questions. Griffin Capital currently distributes one product that, according to a 424B3 filed 9/14/11, since its inception raised only $38.4M in over two years, and is propped up by over $26M in OP units that are owned by the president, Kevin Shields. That means that the once-mighty Grubb & Ellis REIT has elected, as its sole distributor, a company that has managed to raise less than $40M in two years! As part of the change in management company and dealer manager, the fund will have to go through SEC and FINRA approval and be required to obtain all new selling agreements, a process that can take many months and be very costly. Further, this REIT has already filed an extention of their offering, but it is scheduled to close in August of 2012, merely 10 months from now.

Before all the dust settles and before the broker dealers sell another share, this company needs to be revalued so that no one is suprised when it is worth less than $10/share, and existing and potential new investors need a full accounting of what the new Griffin-American Healthcare Trust, Inc will look like from a management and financial perspective. If the portfolio is as strong as the management claims, they shouldn't move the offering, but instead seek to sell the company in whole right now. Due to the terrible liquidity options offered, it doesn't matter much to the existing investors (they can't sell even if they want to) but future investors and brokers should be privledged to a complete airing of all the potential problems resulting from this transaction before they invest.

This event signals the end of a dynasty. The TIC business killed NNN, has mortally wounded GBE and is now maiming Grubb & Ellis Healthcare REIT. It seems that tne destruction it has wrought knows no bounds. Investors should be cautious immediately, as the existing management is gone and the sales team has only 60 days left to live and will waste no time making every last dime they can before the axe falls.

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Joined: Wed Nov 16, 2011 2:47 pm

Re: Grubb & Ellis Bows Out, Prosky, Hanson Get a Payday

Post by Believethis » Wed Dec 07, 2011 9:01 am

What's anonymous source known as Occupythis came up with this crud. They've hidden their identity from the public because their statements would be quickly discredited.

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