Company Also Files for Extension to File 10-K for 2008 Fiscal YearSANTA ANA, CA, Mar. 18, 2009 – Grubb & Ellis Company (NYSE: GBE), a leading real estate services and investment firm, today announced that it had filed a Current Report on Form 8-K disclosing that certain previously issued financial statements will be restated to correct accounting errors related to the timing of revenue recognition relating to certain tenant-in-common investment programs sponsored by NNN Realty Advisors prior to the company’s merger with NNN Realty Advisors in December 2007.
Specifically, the company’s previously issued financial statements for the years ended December 31, 2006 and 2007, the interim financial statements for the quarters ended March 31, June 30 and September 30, 2008 and selected financial data derived from the company’s previously issued financial statements for the fiscal year ended December 31, 2005 will be restated.As a result of the recognition by NNN of the applicable fee revenue in the wrong accounting period, the company currently anticipates reducing retained earnings as of January 1, 2006 by approximately $5 million; increasing revenue in 2006 by approximately $2 million; and increasing revenue in 2007 by approximately $500,000.
The company is currently evaluating the impact on its quarterly and annual financial results for 2008.
The review of NNN’s accounting treatment was prompted by the Audit Committee being made aware in mid-December 2008 of the existence of a letter agreement, wherein NNN agreed to provide certain investors with a right to exchange their investment in certain tenant-in-common programs.
The review of NNN’s accounting treatment was prompted by the Audit Committee being made aware in mid-December 2008 of the existence of a letter agreement, wherein NNN agreed to provide certain investors with a right to exchange their investment in certain tenant-in-common programs.
+handcuffs.JPG)
As a consequence, the Board of Directors formed a Special Committee, which retained independent outside counsel, to investigate the facts and circumstances surrounding the letter agreement and to determine whether there were any other similar agreements.In the course of the special investigation, the Audit Committee and management became aware of additional letter agreements, some providing for a similar right of exchange and others in which NNN committed to provide certain investors in certain tenant-in-common programs a specified rate of return.
Upon review of the accounting treatment for these letter agreements, management concluded that NNN had not accounted for some of the letter agreements and that NNN had incorrectly recognized revenue as it related to other of these letter agreements.
Management also concluded that, as a result of the incorrect accounting treatment, the results of operations of certain entities to which these letter agreements referred should have been consolidated into the company’s financial statements.
As a consequence of the restatement, the company filed a Notification of Late Filing on Form 12b-25 with the Securities and Exchange Commission on March 17, 2009 relating to the company’s Annual Report on Form 10-K for the year ended December 31, 2008. The company intends to file its 2008 Form 10-K on or before March 31, 2009 and effect the restatement of its financial statements in the 2008 Form 10-K.
In the Form 12b-25, the company also indicated that due to the disruptions in the credit markets, the severe and extended general economic recession, and the significant decline in the commercial real estate market in 2008, the company anticipates that it will report a significant decline in operating earnings and net income for the fourth calendar quarter
of 2008 as compared to the fourth quarter of 2007 and for fiscal 2008 as compared to fiscal 2007.
In the Form 12b-25, the company also indicated that due to the disruptions in the credit markets, the severe and extended general economic recession, and the significant decline in the commercial real estate market in 2008, the company anticipates that it will report a significant decline in operating earnings and net income for the fourth calendar quarter
of 2008 as compared to the fourth quarter of 2007 and for fiscal 2008 as compared to fiscal 2007.In addition, the company anticipates that it will recognize significant impairment charges to goodwill, impairments on the value of real estate assets held as investments and additional charges related to the company’s activities as a sponsor of investment programs in the quarter ended December 31, 2008.
The company’s findings remain subject to further review by the company, an audit of the company’s 2008 and restated 2007 financial statements by Ernst & Young, the company’s independent registered public accounting firm, and an audit of the company’s restated 2006 financial statements by Deloitte & Touche LLP, the independent registered public accounting firm for NNN. The completion of this process could result in further adjustmen
ts of the respective financial statements and may be different from what is set forth above.
ts of the respective financial statements and may be different from what is set forth above. There can be no assurance that the amount of any further adjustments will not be material, either individually or in the aggregate. As a result of this review, the company also is assessing the effectiveness of its internal controls over financial reporting.
Contact: Janice McDill, 312.698.6707, janice.mcdill@grubb-ellis.com
No comments:
Post a Comment