Published:
Anthony W. Thompson, CEO of Thompson National Properties, Harold A. Ellis, Jr. and Stuart A. Tanz Mail Letter to Grubb & Ellis Shareholders
IRVINE, Calif., Nov. 21 /PRNewswire/ -- Mssrs. Anthony W. Thompson, Harold
A. Ellis, Jr. and Stuart A. Tanz, who will stand for election as directors at
Grubb & Ellis Company's December 3, 2008 Annual Meeting of Shareholders, today
made arrangements to mail all of the company's shareholders a letter
encouraging them to vote for their slate.
The full text of the letter to shareholders follows below:
TIME IS SHORT!! IGNORE THE DISTRACTIONS AND
FOCUS ON THE KEY CHALLENGES FACING GRUBB & ELLIS!!
November 21, 2008
Dear fellow shareholder:
The Grubb & Ellis Company annual meeting of shareholders is fast
approaching and we are writing to remind you to focus your attention squarely
on the central challenges faced by the company. During these perilous times
for Grubb & Ellis, we believe that shareholders cannot afford to be distracted
by the incumbent Board's overheated campaign rhetoric, which we view as little
more than an attempt to change the subject from the company's disappointing
results.
WE URGE YOU TO SEE THROUGH THE BOARD'S CUNNING
ELECTIONEERING AND RECOGNIZE THAT OUR COMPANY IS NOT WELL
Let's show the Board that it cannot obscure the fact that Grubb & Ellis
faces profound challenges by simply levying wild, insupportable charges
against us and heaping unfounded self-congratulatory praise on itself. No
amount of wishful thinking or campaign spin will change the fact that the
following damaging developments have occurred on the incumbent Board's watch:
-- FINANCIAL PERFORMANCE HAS DETERIORATED: Grubb & Ellis is deeply in
the red, recently reporting a net loss of $55 million for the nine months
ended September 30, 2008 as compared to net income of $14.4 million during the
same period in 2007, representing a stunning -481.9% swing for a period in
which it also underperformed its competitors. In addition, during the same
comparison period, the company's EBITDA nosedived by 201.9%.
-- STOCK PRICE HAS PLUNGED: Since Mr. Thompson's departure from the
Board in February of this year, Grubb & Ellis' stock price has shed in excess
of 82% of its value, underperforming its industry peers.
-- NO CEO AT THE HELM TO NAVIGATE THE CHOPPY WATERS: Since the
resignation of Scott Peters as CEO over 4 months ago, the Board has not named
a permanent replacement. We had hoped that the Board would execute a
transparent and expeditious CEO search process, but it has been over 4 months
since Peters' resignation and the Board has, in our opinion, said very little
publicly about its effort to fill the company's most important management
position. In our view,Rome is burning and this is hardly the time for the
Board to fiddle.
-- TURNOVER IN KEY MANAGEMENT POSITIONS AND IN BROKERAGE DIVISION: We
believe that Grubb & Ellis has suffered an alarming amount of turnover
recently. Numerous press accounts confirm this view. Shouldn't we strive to
put behind us newspaper articles that mark the "latest chapter in a long saga
of management changes for the once-powerful brokerage"?(1)
These are several of the core issues on which we believe you should focus
when you vote. Isn't it your duty to yourself as an investor to hold this
Board accountable for its record? The Board has tried things its way. Now
it's time for you to take a look at its record -- not to mention Grubb &
Ellis' depressed stock price and anemic financial performance -- and ask
yourself whether the incumbent slate has really earned another 3 years in
office.
THE BOARD'S MUD-SLINGING MISSES THE POINT AND WON'T FIX OUR COMPANY
As you may have noticed, the Board is spending hundreds of thousands of
dollars of Grubb & Ellis' funds in what we see as a last-ditch attempt to
discredit us. Some of the Board's charges, which seem like naked scare
tactics to us, would be almost comical if the stakes weren't so high. We
firmly believe that Grubb & Ellis is in need of a muscular rescue effort
rooted in a candid, fresh approach to the company's mounting challenges, not
the toxic cocktail of denial and invective that we believe the Board has
served up in its November 18 attack letter and subsequent similar attacks.
Rather than provide a point-by-point rebuttal of each of the half-truths
that we believe are sprinkled throughout the Board's recent missive, we will
quickly dispel several of its most incendiary charges:
-- THOMPSON NATIONAL PROPERTIES IS NOT A DIRECT COMPETITOR OF GRUBB &
ELLIS: The Board derisively dismisses Thompson National Properties in one
breath as "fledgling," but then in the next sniffles that it is terribly
concerned that this "fledgling" company poses a direct competitive threat to
Grubb & Ellis. Let's consider the facts: Unlike Grubb & Ellis, Thompson
National Properties does not offer tenant-in-common programs, a corporate
services platform, real estate advisory services or third party management
services. Nor does Thompson National Properties have any leasing agents or
investment brokers on its payroll. Instead, Thompson National Properties has
been a good customer of Grubb & Ellis' brokers, purchasing 3 buildings through
them for more than $33 million in 2008 and consequently producing commissions
of nearly $1 million for Grubb & Ellis. Does this seem like the behavior of a
"direct competitor?"
In reality, Grubb & Ellis and Thompson National Properties are very
different companies with very different missions. The Board's claims to the
contrary represent, in our view, a carefully choreographed effort to entrench
its members in office by unfairly vilifying Mr. Thompson. Ask yourself why
Mr. Thompson would found Thompson National Properties to directly compete with
Grubb & Ellis, a company in which he holds an approximately 14% stake. Does
that make any sense? Mr. Thompson's motives in this proxy contest are hardly
conspiratorial. Like you, he is watching helplessly from the sidelines with
deepening chagrin as the value of his investment in Grubb & Ellis plummets
under the watch of the incumbent Board. Mr. Thompson is simply seeking to
help the Board right the company's course in order to maximize shareholder
value. Nothing more. Nothing less.
-- WHO'S REALLY CONFLICTED?: Further confusing the Board's argument that
Mr. Thompson has some sort of conflict of interest, Mr. Harold Greene -- one
of the Board's own nominees -- currently serves as a director and member of
the audit committee of Paladin Realty Income Properties, Inc., a company that
offers a program that directly competes with Grubb & Ellis' non-traded public
real estate investment trust programs. In addition, incumbent director Mr.
Michael Kojaian, who is a member of the Board's compensation and corporate
governance and nominating committees, serves as executive vice president and a
shareholder of Kojaian Management Corporation, a company that received
approximately $3.1 million from Grubb & Ellis for asset management services in
fiscal 2007. Certain affiliates of Kojaian Management Corporation are also
party to a leasing agreement with Grubb & Ellis. An independent proxy
advisory firm has openly questioned Grubb & Ellis' arrangements with Mr.
Kojaian. Armed with these facts, shareholders can decide for themselves who's
really conflicted.
-- MR. THOMPSON WILL NOT CAUSE GRUBB & ELLIS TO ACQUIRE THOMPSON NATIONAL
PROPERTIES: In another bizarre claim advanced by the Board, it is suggested
that Mr. Thompson, following his election to office as a director, will
somehow compel Grubb & Ellis to acquire Thompson National Properties. Aside
from the fact that Mr. Thompson has no desire for Grubb & Ellis to absorb
Thompson National Properties (the Board has apparently simply invented the
idea), the Board also seems to conveniently overlook the fact that Mr.
Thompson couldn't compel this outcome even if he wanted to do so. If each of
us is elected, we will still only control a minority of the Board and will not
be able to force the company to do anything, much less consummate the imagined
acquisition of Thompson National Properties, especially since Mr. Thompson
would no doubt recuse himself from the consideration of any such transaction.
In addition (and it pains us that we are obliged to remind the Board of this
fact), directors are bound by fiduciary duties and certainly cannot approve a
transaction simply because it benefits them or their fellow Board members
personally. What does the Board's determination to advance this tall tale
about Mr. Thompson's motives say about its forthrightness?
We also believe that several other claims made by the Board in its attack
letter deserve a closer look:
-- A COSTLY PROXY CONTEST THE BOARD COULD HAVE AVOIDED: The Board tries,
in our view, to sound righteous when it complains about the cost of the proxy
contest. However, what the Board fails to mention is that a mere 6 days after
it received a letter from Mr. Thompson indicating his desire for the annual
shareholder meeting to be held inOrange County, California, it instead
scheduled the meeting at the opulent Four Seasons Hotel inWashington, D.C.,
thousands of miles from the company's headquarters (and Mr. Thompson). This
decision will result in the needless expenditure of scarce company resources
to fly executives and a number of directors across the country from
California. Most importantly, however, the Board has rejected at every turn
the olive branch that we extended to it in an effort to avert a full-fledged
proxy contest. To date, despite our public expression of willingness to reach
a consensual accommodation, the Board has not made a single effort to
peaceably settle its differences with us through compromise. Who then is
really to blame for this expensive proxy contest?
-- CREDIT FACILITY AMENDMENT HARDLY A TRIUMPH: The Board ballyhoos the
company's recent execution of a credit agreement amendment as an impressive
victory, yet it fails to mention that the amendment had the effect of reducing
available borrowings under the facility from $75 million to $50 million and
increasing the interest rate on the facility by 1.00%. Moreover, the covenant
relief that Grubb & Ellis obtained under the amendment is, by the company's
own admission, a short-lived stop-gap measure that will disappear in the first
quarter of 2009, at which time the principal financial maintenance covenants
under the credit facility will return to the tighter levels the company was
unable to satisfy as of the end of the third quarter of 2008. But you don't
have to take our word for it. In a regulatory filing made by Grubb & Ellis
recently, the company itself confessed that "there is uncertainty as to the
Company's ability to meet the covenants over the next twelve months." Why
then should shareholders celebrate the credit facility amendment as some kind
of resounding accomplishment? It looks like just another belated half-measure
to us.
We had hoped that this proxy contest would result in a frank, albeit
difficult, conversation about the company's precarious position and how
creative leadership might address the many challenges ahead. In other words,
we had hoped it would be a campaign of ideas. Instead, after reading the
Board's attack letter, it seems to us that the Board has opted for the low
road of mud-slinging and character assassination. Ask yourself whether this
serves your interests as a shareholder or simply enables the Board to avoid
answering the tough questions that its record raises. We firmly believe that
the Board should be offering shareholders a compelling program to return the
company to profitability -- as we have -- not taking potshots at the
messengers delivering it a dose of reality.
SHAREHOLDERS ARE THE REAL TARGET OF THE BOARD'S ATTACKS
Although we are the immediate targets of the Board's recent attacks, they
are really aimed directly at YOU!! We firmly believe that Grubb & Ellis' goal
in firing its latest shot across our bow is to distract you from the painful
reality of the company's present problems in the hope that you will somehow,
in the face of the company's dismal financial performance, give management's
slate another 3 years in office. We can endure the Board's attacks for
another couple of days, but ask yourself whether your portfolio can endure
another year or more of this Board's performance?
OUR COMMITMENT TO SHAREHOLDERS
We share your fundamental interest in reversing the slide in Grubb &
Ellis' operating performance and committing the Board to a genuine search for
ways to enhance shareholder value. While we regret that the Board has adopted
a shrill tone in its proxy campaign, if we are elected, we will stand firmly
committed to working constructively with the legacy Board members to help turn
our company around. We trust that you will cut through the rhetoric to focus
on the real issues and will agree with us that there is a need for meaningful
change in the company's board room.
We urge you, in your self-interest and in the interest of all
shareholders, to support our call for operational reform and our efforts to
foster improved corporate governance at Grubb & Ellis. Now is the time to
insist on a Board that is willing to roll up its sleeves and work for all of
us.
It is no exaggeration to say that the future of your investment in Grubb &
Ellis is at stake. We urge you to sign, date and return the enclosed GREEN
proxy card immediately. Do not sign the white proxy card from Grubb & Ellis.
If you have already done so, you may revoke your proxy by delivering a
later-dated GREEN proxy card in the enclosed postage-prepaid envelope.
If you have any questions about voting, or for more information, please
call our proxy solicitor, D.F. King, toll-free at (888) 542-7446.
ANTHONY W. THOMPSON HAROLD A. ELLIS, JR. STUART A. TANZ
(1) Reference in article is to Grubb & Ellis. See ''Grubb & Ellis Seeks
New CEO Amid Challenging Marketplace,'' Ben Johnson, August 21,
2008, National Real Estate Investor. Permission to excerpt herein
was neither sought nor obtained.
SOURCE Thompson National Properties
Copyright © 2009, PRNewswire
Copyright © 2009, NewsBlaze,
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