Ten top executives at Grubb & Ellis Co., the nation's biggest independent commercial brokerage firm, have taken a 15% pay cut, The Times has learned.
Linda Greenlee, vice president of corporate communications for the San Francisco-based firm, said the officials--including Hal Ellis, the company's chairman and chief executive officer whose compensation package last year was worth $257,000--took the cuts voluntarily "to demonstrate their concern over the company's financial situation."
The executives received stock options in exchange, she added, which signifies "their belief in the company's future profitability."
Grubb & Ellis suffered its first loss in the firm's 18-year history in the first quarter of this year. In the first half of this year, the company lost $2.27 million, compared with a $3.76-million profit in last year's first half.
Part of Grubb & Ellis' problems stem from the acquisition binge it began in 1982. Since then, the company has acquired 22 brokerage firms, and many of them haven't fared as well as the firm had expected.
The company's woes have been compounded by the soft market for commercial office space in some parts of the nation, Greenlee said. Faced with weakened demand and overbuilt markets, many building owners in major metropolitan areas have been making concessions--such as one-year's free rent on a five-year lease--to lure new tenants and keep existing ones.
Such concessions lower the commissions brokerages such as Grubb & Ellis receive. Margins have also been squeezed by increased competition, potential buyers' unwillingness to make transactions in an uncertain tax environment and poor economies in many parts of the nation.
Gained in Revenues
Although Grubb & Ellis' overall financial health is suffering, its operations in the Pacific Southwest are doing well, said Keith Karpe, the region's vice president of public relations.
He said Grubb & Ellis' Pacific Southwest region recorded $34.8 million in revenue in the first eight months of this year, a 13% increase over the $30.85 million in revenue the division logged in the same period last year. However, its net profit of $4 million during the period was flat with a year earlier.
The division--comprised of Southern California, Arizona, Hawaii and Nevada--has benefited from a strong regional economy and the expansion of many eastern-based firms into the west, Karpe said.