When Scott Peters announced his resignation as CEO at Grubb & Ellis Co. in July, the sudden departure was the latest chapter in a long saga of management changes for the once-powerful brokerage. Since 2001, three CEOs have come and gone at the publicly traded firm (NYSE: GBE) and the search is on for a permanent replacement while outside director Gary Hunt holds the position on an interim basis.

So far, every CEO has tried in earnest to navigate the firm through increasingly choppy financial waters. The stock price of Grubb & Ellis has fallen from $14.20 per share in April 2006 to $3.50 in mid-August, a 75% drop.

In keeping with the recent negative results for other major service providers, Grubb & Ellis posted a loss of $5.1 million, or 8 cents per share, in the second quarter. That brought the net loss for the first six months of 2008 to $11 million, or 17 cents per share, compared with net income of $11.8 million for the same period last year.

In the near term, all signs are that Grubb & Ellis, based in Santa Ana, Calif., will struggle with weakening market conditions. “We expect that macroeconomic headwinds will continue to create challenges in transaction services for the remainder of 2008 with a potential deterioration in current market conditions serving as a risk in the second half of 2008,” says Brandon Dobell, senior analyst with William Blair & Co.

Despite the challenges, Dobell says he has faith in the company's ability to recover, since more than half of the year-to-date losses reflect costs associated with the December 2007 merger with NNN Realty Advisors.

“G&E is working through a restructuring process focused on gaining market share in investment management and driving broker productivity in transaction services,” says Dobell. “They have developed a solid group of managers to guide this process, with current market disruption providing a good opportunity to secure new talent.” In a show of support, William Blair & Co. recently maintained its “outperform” rating for Grubb & Ellis stock.

To help right the ship, Grubb & Ellis board of directors has authorized a share repurchase program of up to $25 million and suspended quarterly dividend payments following the payment of the second-quarter dividend on July 22. It also has identified $17.5 million in cost reductions for 2008 thanks to the NNN Realty merger, which the company is using to help attract new talent. And it continues to see success in raising funds for its non-traded REITs and in attracting clients to its new wealth management program.

The longer-term outlook is still hazy, given the empty CEO's chair. Dobell projects total 2008 revenue of $692.6 million, up from $687.1 million, as increased investment management fees and rental revenue overcome a notable reduction in revenue from transaction services revenue. “We will wait for a long-term hire before evaluating the firm's strategic direction,” he says.

He also predicts that revenue in the second half of 2008 will increase 15% over the first half of the year, in line with the low end of management's guidance.

In early August, Deutsche Bank reiterated its “buy” rating on Grubb & Ellis stock, despite the sour results of late. While Deutsche cut its 12-month price target from $12 to $10 a share, it noted that the company still offers “compelling value” and the stock could get a boost as Grubb & Ellis' $25 million buyback starts coming into play.

SHORT TENURE IN C-SUITE

Three CEOs have come and gone at Grubb & Ellis since 2001.

Barry Barovick 2001-2003

Mark Rose 2005-2007

Scott Peters 2008 (January-July)