Forward-Looking Statements
This Interim Report contains statements that are not historical facts and constitute projections, forecasts or forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The statements are not guarantees of performance. They involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company (as defined below) in future periods to be materially different from any future results, performance or achievements expressed or suggested by these statements. You can identify such statements by the fact that they do not relate strictly to historical or current facts. These statements use words such as "believe," "expect," "should," "strive," "plan," "intend," "estimate" and "anticipate" or similar expressions. When we discuss strategy or plans, we are making projections, forecasts or forward-looking statements. Actual results and stockholder's value will be affected by a variety of risks and factors, including, without limitation, international, national and local economic conditions and real estate risks and financing risks and acts of terror or war. Many of the risks and factors that will determine these results and values are beyond the Company's ability to control or predict. These statements are necessarily based upon various assumptions involving judgment with respect to the future. All such forward-looking statements speak only as of the date of this Report. The Company expressly disclaims any obligation or undertaking to release publicly any updates of revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Factors that could adversely affect the Company's ability to obtain these results and value include, among other things:
(i) the slowdown in the volume and the decline in the transaction values of sales and leasing transactions, (ii) the general economic downturn and recessionary pressures on business in general, (iii) a prolonged and pronounced recession in real estate markets and values, (iv) the unavailability of credit to finance real estate transactions in general, and the Company's tenant-in-common programs in particular, (v) the reduction in borrowing capacity under the Company's current credit facility, and the additional limitations with respect thereto, (vi) the continuing ability to make interest and principal payments with respect to the Company's credit facility, (vii) an increase in expenses related to new initiatives, investments in people, technology, and service improvements, (viii) the success of current and new investment programs,
(ix) the success of new initiatives and investments, (x) the inability to attain expected levels of revenue, performance, brand equity and expense synergies resulting from the merger of Grubb & Ellis Company and NNN Realty Advisors in general, and in the current macroeconomic and credit environment in particular, and (xi) other factors described in the Company's Annual Report on Form 10-K/A for the fiscal year ended December 31, 2008, filed on June 1, 2009. Overview and Background
The Company reports its revenue by three business segments in accordance with the provisions of the Segment Reporting Topic of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("Codification"). Transaction Services, which comprises its real estate brokerage operations; Investment Management, which includes providing acquisition, financing and disposition services with respect to its investment programs, asset management services related to its programs, and dealer-manager services by its securities broker-dealer, which facilitates capital raising transactions for its TIC, REIT and other investment programs; and Management Services, which includes property management, corporate facilities management, project management, client accounting, business services and engineering services for unrelated third parties and the properties owned by the programs it sponsors. Additional information on these business segments can be found in Note 12 of Notes to Consolidated Financial Statements in Item 1 of this Report. Critical Accounting Policies
A discussion of the Company's critical accounting policies, which include principles of consolidation, revenue recognition, impairment of goodwill, deferred taxes, and insurance and claims reserves, can be found in its Annual Report on Form 10-K/A for the year ended December 31, 2008. There have been no material changes to these policies in 2009.

Recently Issued Accounting Pronouncements The Company follows the requirements of the Fair Value Measurements and Disclosures Topic of the FASB Accounting Standards Codification. The Topic defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value instruments. In February 2008, the FASB amended the Topic to delay the effective date of the Fair Value Measurements and Disclosures for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (that is, at least annually). There was no effect on the Company's consolidated financial statements as a result of the adoption of the Topic as of January 1, 2008 as it relates to financial assets and financial liabilities. For items within its scope, the amended Fair Value Measurements and Disclosures Topic deferred the effective date of Fair Value Measurements and Disclosures to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company adopted the requirements of the Topic as it relates to non-financial assets and non-financial liabilities in the first quarter of 2009, which did not have a material impact on the consolidated financial statements. In December 2007, the FASB issued an amendment to the requirements of the Business Combinations Topic. The amended Topic requires an acquiring entity to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. The Topic changed the accounting treatment and disclosure for certain specific items in a business combination. The Topic applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company adopted the requirements of the Topic on a prospective basis on January 1, 2009. The adoption of the requirements of the Topic will materially affect the accounting for any future business combinations.
In March 2008, the FASB issued an amendment to the requirements of the Derivatives and Hedging Topic. The requirements of the amended Topic are intended to improve financial reporting of derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. The requirements of the amended Topic achieve these improvements by requiring disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entity's liquidity by requiring disclosure of derivative features that are credit risk-related. Finally, it requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments. The requirements of the amended Topic became effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company adopted the requirements of the amended Topic in the first quarter of 2009. The adoption of the requirements of the amended Topic did not have a material impact on the consolidated financial statements. In April 2008, the FASB issued an amendment to the requirements of Intangibles-Goodwill and Other Topic. The requirements of the amended Topic are intended to improve the consistency between the useful life of recognized intangible assets and the period of expected cash flows used to measure the fair value of the assets. The amendment changes the factors an entity should consider in developing renewal or extension assumptions in determining the useful life of recognized intangible assets. In addition the amended Topic requires disclosure of the entity's accounting policy regarding costs incurred to renew or extend the term of recognized intangible assets, the weighted average period to the next renewal or extension, and the total amount of capitalized costs incurred to renew or extend the term of recognized intangible assets. The requirements of the amended Topic are effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. The Company adopted the requirements of the amended Topic on January 1, 2009. The adoption of the requirements of the amended Topic did not have a material impact on the consolidated financial statements.
In June 2008, the FASB issued an amendment to the requirements of the Earnings Per Share Topic, which addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the computation of earnings per share under the two-class method which apply to the Company because it grants instruments to employees in share-based payment transactions that meet the definition of participating securities, is effective retrospectively for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. The Company adopted the requirements of the amended Topic in the first quarter of 2009. The adoption of the requirements of the amended Topic did not have a material impact on the consolidated financial statements.

In April 2009, the FASB issued an amendment to the requirements of the Financial Instruments Topic. The amended Topic relates to fair value disclosures for any financial instruments that are not currently reflected on the balance sheet at fair value. Prior to issuing the requirements of the amended Topic, fair values for these assets and liabilities were only disclosed once a year. The amended Topic now requires these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value. The adoption of the requirements of the amended Topic did not have a material impact on the consolidated financial statements.
The requirements of the Investments-Debt and Equity Securities Topic, is intended to bring greater consistency to the timing of impairment recognition, and provide greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold. The Topic also requires increased and more timely disclosures regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. The adoption of the requirements of the Topic did not have a material impact on the consolidated financial statements.
In April 2009, the FASB issued an amendment to the requirements of the Fair Value Measurements and Disclosures Topic. The Topic relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales. It states that the objective of fair value measurement is to reflect how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions. Specifically, the requirements of the Topic reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive. The adoption of the amended Topic did not have a material impact on the consolidated financial statements.
In April 2009, the FASB issued an amendment to the requirements of the Business Combinations Topic. The requirements of the Business Topic clarifies to address application issues on the accounting for contingencies in a business combination. The requirements of the amended Topic is effective for assets or liabilities arising from contingencies in business combinations acquired on or after January 1, 2009. The adoption of the requirements of the amended Topic did not have a material impact on the consolidated financial statements.

In June 2009, the FASB issued an amendment to the requirements of the Transfers and Servicing Topic, which addresses the effects of eliminating the qualifying SPE concept and redefines who the primary beneficiary is for purposes of determining which variable interest holder should consolidated the variable interest entity. The requirements of the amended Topic become effective for annual periods beginning after November 15, 2009. The Company is reviewing any impact this may have on the consolidated financial statements. In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles - a Replacement of FASB Statement No. 162 ("SFAS No. 168"). SFAS No. 168 established that the FASB Accounting Standards Codification("the Codification") became the single official source of authoritative U.S. GAAP, other than guidance issued by the SEC. Following this statement, the FASB will not issue new standards in the form of Statements, Staff Positions or Emerging Issues Task Force Abstracts. Instead, the FASB will issue Accounting Standards Updates. All guidance contained in the Codification carries an equal level of authority. The GAAP hierarchy was modified to include only two levels of GAAP: authoritative and non-authoritative. All non-grandfathered, non-SEC accounting literature not included in the Codification became non-authoritative. The Codification, which changes the referencing of financial standards, became effective for interim and annual periods ending on or after September 15, 2009. The adoption of SFAS No. 168 did have a material impact on the consolidated financial statements. The Company has adopted the requirements of the Subsequent Events Topic effective beginning with the quarter ended September 30, 2009 and has evaluated for disclosure subsequent events that have occurred up through November 13, 2009, the date of issuance of these financial statements.
RESULTS OF OPERATIONS
Overview
The Company reported revenue of approximately $136.1 million for the three months ended September 30, 2009, compared with revenue of $153.2 million for the same period in 2008. The decrease was primarily the result of decreases in Transaction Services and Investment Management revenue of $11.2 million and $9.3 million, respectively, partially offset by increases in Management Services revenue of $4.0 million.
The net loss attributable to Grubb & Ellis Company for the third quarter of 2009 was $21.4 million, or $0.34 per diluted share, and includes a non-cash charge of $2.4 million for real estate related impairments and a $7.2 million charge, which includes an allowance for bad debt and write-offs of related party receivables and advances. In addition, the three month results included approximately $2.6 million of stock-based compensation and $1.9 million for amortization of other identified intangible assets.
The Company reported revenue of approximately $385.1 million for the nine months ended September 30, 2009, compared with revenue of $468.8 million for the same period in 2008. The decrease was primarily the result of decreases in Transaction Services and Investment Management revenue of $54.4 million and $40.6 million, respectively, partially offset by increases in Management Services revenue of $13.8 million.
The net loss attributable to Grubb & Ellis Company for the first nine months of 2009 was $95.7 million, or $1.51 per diluted share, and includes a non-cash charge of $16.6 million for real estate related impairments and a $21.6 million charge, which includes an allowance for bad debt and write-offs of related party receivables and advances. In addition, the nine month results included approximately $8.7 million of stock-based compensation and $5.7 million for amortization of other identified intangible assets.

Three Months Ended September 30, 2009 Compared to Three Months Ended
September 30, 2008
The following summarizes comparative results of operations for the periods
indicated.

                                          Three Months Ended
                                            September 30,                     Change
(In thousands)                           2009           2008             $              %
Revenue
Management services                    $  67,456      $  63,479      $   3,977            6.3 %
Transaction services                      46,321         57,502        (11,181 )        (19.4 )
Investment management                     14,829         24,116         (9,287 )        (38.5 )
Rental related                             7,498          8,119           (621 )         (7.6 )

Total revenue                            136,104        153,216        (17,112 )        (11.2 )

Operating Expense
Compensation costs                       116,339        120,765         (4,426 )         (3.7 )
General and administrative                24,531         40,258        (15,727 )        (39.1 )
Depreciation and amortization              3,504          4,884         (1,380 )        (28.3 )
Rental related                             4,961          4,337            624           14.4
Interest                                   3,741          2,947            794           26.9
Merger related costs                         933          2,657         (1,724 )        (64.9 )
Real estate related impairments            2,393         34,778        (32,385 )        (93.1 )
Goodwill and intangible assets
impairment                                   583              -            583          100.0

Total operating expense                  156,985        210,626        (53,641 )        (25.5 )

Operating Loss                           (20,881 )      (57,410 )       36,529           63.6

Other (Expense) Income
Equity in losses of unconsolidated
entities                                    (224 )       (5,859 )        5,635           96.2
Interest income                              188            234            (46 )        (19.7 )
Other income (loss)                          272           (508 )          780          153.5

Total other income (expense)                 236         (6,133 )        6,369          103.8

Loss from continuing operations
before income tax
(provision) benefit                      (20,645 )      (63,543 )       42,898           67.5
Income tax (provision) benefit              (277 )       15,943        (16,220 )       (101.7 )

Loss from continuing operations          (20,922 )      (47,600 )       26,678           56.0

Discontinued Operations
Gain (loss) from discontinued
operations, net of taxes                    (535 )      (14,941 )       14,406           96.4
(Loss) gain on disposal of
discontinued operations, net of
taxes                                          -           (185 )          185          100.0

Total loss from discontinued
operations                                  (535 )      (15,126 )       14,591           96.5

Net loss                                 (21,457 )      (62,726 )       41,269           65.8
Net (loss) income from
noncontrolling interests                     (98 )       (6,444 )        6,346           98.5

Net loss attributable to Grubb &
Ellis Company                          $ (21,359 )    $ (56,282 )    $  34,923           62.1 %

Revenue
Transaction and Management Services Revenue The Company earns revenue from the delivery of transaction and management services to the commercial real estate industry. Transaction fees include commissions from leasing, acquisition and disposition, and agency leasing assignments as well as fees from appraisal and consulting services. Management fees, which include reimbursed salaries, wages and benefits, comprise the remainder of the Company's services revenue, and include fees related to both property and facilities management outsourcing as well as project management and business services. The Company has typically experienced its lowest quarterly revenue from transaction services in the quarter ending March 31 of each year with higher and more consistent revenue in the quarters ending June 30 and September 30. The quarter ending December 31 has historically provided the highest quarterly level of revenue due to increased activity caused by the desire of clients to complete transactions by calendar year-end. As of September 30, 2009, the Company managed approximately 242.9 million square feet of property compared to 226.5 million square feet for the same period in 2008. Management Services revenue increased $4.0 million or 6.3% to $67.5 million for the three months ended September 30, 2009 which reflects an increase in square feet under management of 15.3 million or 7.4% to 221.2 million total square feet under management as of September 30, 2009. Management Services revenue, which is primarily property management fees and reimbursable salaries, also includes property management fee revenue of approximately $1.6 million and $1.9 million for the three months ended September 30, 2009 and 2008, respectively, from the management of a significant portion of GERI's captive property portfolio by Grubb & Ellis Managements Services.
Transaction Services revenue decreased $11.2 million or 19.4% to $46.3 million for the three months ended September 30, 2009. Transaction Services revenue primarily includes brokerage commission, valuation and consulting revenue. The Company's Transaction Services business was negatively impacted by the current economic environment, which has reduced commercial real estate transaction velocity, particularly investment sales. Investment Management Revenue
Investment Management revenue decreased $9.3 million or 38.5% to $14.8 million for the three months ended September 30, 2009. Investment Management revenue reflects revenue generated through the fee structure of the various investment products which included acquisition, loan and disposition fees of approximately $4.5 million and captive management fees of $7.9 million. Key drivers of this business are the dollar value of equity raised, the amount of transactions that are generated in the investment product platforms and the amount of assets under management.
In total, $112.0 million in equity was raised for the Company's investment programs for the three months ended September 30, 2009, compared with $245.0 million in the same period in 2008. The decrease was driven by a decrease in TIC equity raised and by a decrease in equity raised by the Company's public non-traded REITs. During the three months ended September 30, 2009, the Company's public non-traded REIT programs raised $111.5 million, a decrease of 39.2% from the $183.3 million equity raised in the same period in 2008. The Company's TIC 1031 exchange programs raised $500,000 in equity during the third quarter of 2009, compared with $46.2 million in the same period in 2008. The decrease in TIC equity raised for the three months ended September 30, 2009 reflects the continued decline in current market conditions. The decrease in equity raised by the Company's public non-traded REITs is a result of the transition to the Company's Healthcare REIT II program which commenced September 21, 2009.
Acquisition and loan fees decreased approximately $1.8 million, or 28.9%, to approximately $4.5 million for the three months ended September 30, 2009, compared to approximately $6.3 million for the same period in 2008. The quarter-over-quarter decrease in acquisition fees was primarily attributed a decrease of $2.3 million in fees from the TIC programs partially offset by a small increase in fees earned from the Company's non-traded REIT programs. During the three months ended September 30, 2009, the Company acquired one property on behalf of its sponsored programs for an approximate aggregate total of $162.8 million, compared to six properties for an approximate aggregate total of $240.3 million during the same period in 2008.
Disposition fees decreased approximately $502,000, or 100%, to zero for the three months ended September 30, 2009, compared to approximately $502,000 for the same period in 2008. Offsetting the disposition fees during the three months ended September 30, 2008 was approximately $193,000 of amortization of identified intangible contract rights associated with the acquisition of Triple Net Properties Realty, Inc. ("Realty") as they represent the right to future disposition fees of a portfolio of real properties under contract. No amortization of identified intangible contract rights was recorded for the three months ended September 30, 2009 because no disposition fees were recorded. Captive management decreased approximately $2.0 million or 19.8% to $7.9 million for the three months ended September 30, 2009 which primarily reflects an increase in the deferral of fees.

Rental Revenue
Rental revenue includes pass-through revenue for the master lease accommodations related to the Company's TIC programs. Rental revenue also includes revenue from two properties held for investment.
Operating Expense Overview
The Company's operating expenses decreased approximately $53.6 million, or 25.5%, to $157.0 million for the three months ended September 30, 2009, compared to approximately $210.6 million for the same period in 2008. This decrease reflects decreases in compensation costs from lower commissions paid and synergies created as a result of the Merger of $4.4 million and decreases of merger related costs of $1.7 million and general and administrative expense of $15.7 million. The Company recognized real estate impairments of $2.4 million during the three months ended September 30, 2009, a decrease of $32.4 million over the same period last year. Partially offsetting the overall decrease was an increase in interest expense of $794,000 for the three months ended September 30, 2009.
Compensation Costs
Compensation costs decreased approximately $4.4 million, or 3.7%, to $116.3 million for the three months ended September 30, 2009, compared to approximately $120.8 million for the same period in 2008 due to a decrease in commissions paid of approximately $7.6 million related to the Transactions Services portfolio as a result of decrease in activity and a decrease of approximately $1.3 million primarily related to the Investment Management business as a result of a reduction in headcount and decreases in salaries partially offset by an increase of $4.5 million as a result of an increase in reimbursable salaries, wages and benefits due to the growth in the Management Services portfolio.
General and Administrative
General and administrative expense decreased approximately $15.7 million, or 39.1%, to $24.5 million for the three months ended September 30, 2009, compared to approximately $40.3 million for the same period in 2008 due to a decrease of approximately $10.2 million in bad debt and related charges along with various decreases related to management's cost saving efforts.
General and administrative expense was 18.0% of total revenue for the three months ended September 30, 2009, compared with 26.3% for the same period in 2008.
Depreciation and Amortization . . .