Grubb & Ellis Company, a Delaware corporation organized in 1980 and founded nearly 50 years ago in Northern California, is one of the most recognized full service commercial real estate services firms in the United States. For the most recent fiscal year ended June 30, 2007, the Company generated revenue of $513.3 million and operating income of $2.5 million.

Drawing on the resources of nearly 5,500 real estate professionals, including a brokerage sales force of approximately 1,800 brokers nationwide in the Company’s and its affiliates’ offices, the Company and its affiliates combine local market knowledge with a national service network to provide innovative, customized solutions for real estate owners, corporate occupants and investors.

The Company, through its owned and affiliate locations, has one of the largest domestic footprints in the industry, with a network of over 115 offices (including over 50 owned by the Company and over 65 affiliate offices), allowing it to execute locally in all primary markets and key secondary and tertiary markets throughout the United States on behalf of its clients. This local market presence enables the Company to deliver a full range of commercial real estate services to corporate and institutional clients with multiple real estate needs, including complete outsourcing solutions.

The Company has the capability to provide services at every stage of the real estate process, including but not limited to, strategic planning, feasibility studies and site selection, leasing, property and facilities management, construction management, lease administration, acquisitions and dispositions. The Company’s clients include many Fortune 500 companies as well as institutional and private investors, retailers, government and academic institutions and other owners and occupiers of office and industrial space.

Whether executing for a client with a single location or one with facilities in multiple regions, the Company’s professionals offer local market expertise and strategic insight into real estate decisions. This advice is supported by a network of approximately 90 research professionals, who produce in-depth market research, plus additional market research generated by its affiliate offices. In addition, this advice is also supported by specialty practice groups focusing on industry segments including office, industrial, retail, private capital, institutional investment and land.

The Company provides a full range of real estate services, including transaction, management and consulting services, for both local and multi-location clients. The Company reports its revenue by two business segments, Transaction Services, which comprises its brokerage operations, and Management Services, which includes third-party property management, corporate facilities management, project management, client accounting, business services and engineering services. Additional information on these business segments can be found in Note 17 of Notes to Consolidated Financial Statements in Item 8 of this Report.

A significant portion of the services the Company provides are transaction-related services, in which the Company represents the interests of tenants, owners, buyers or sellers in leasing, acquisition and disposition transactions. These transaction services involve various types of commercial real estate, including office, industrial, retail, hospitality and land.

The Company typically receives fees for brokerage services based on a percentage of the value of the lease or sale transaction. Some transactions may stipulate a fixed fee or include an incentive bonus component based on the performance of the brokerage professional or client satisfaction. Although transaction volume can be subject to

In addition to traditional transaction services, the Company provides its clients with consulting services, including site selection, feasibility studies, exit strategies, market forecasts, appraisals, strategic planning and research services. For its larger corporate and institutional clients, these services are coordinated through an account management process that provides a single point of contact for the client.

The Company actively engages its brokerage force in the execution of its marketing strategy. Regional and metro-area managing directors, who are responsible for operations in each major market, facilitate the development of brokers. Through the Company’s specialty practice groups, known as “Specialty Councils,” key personnel share information regarding local, regional and national industry trends and participate in national marketing activities, including trade shows and seminars. This ongoing dialogue among brokers serves to increase their level of expertise as well as their network of relationships, and is supplemented by other more formal education, including recently expanded training programs offering sales and motivational training and cross-functional networking and business development opportunities.

The Company intends to aggressively recruit and hire (either individually or through acquisitions) additional brokerage professionals with experience primarily in the areas of investment sales, agency leasing and tenant representation. The Company believes that its strong brand recognition, platform of a full range of client services and the opportunity to deliver additional real estate services create an environment conducive to attracting the most experienced and capable brokers.

In some local markets where the Company does not have owned offices, it has affiliation agreements with independent real estate service providers that conduct business under the Grubb & Ellis brand. The Company’s affiliation agreements provide for exclusive mutual referrals in their respective markets, generating referral fees. The Company’s affiliation agreements are generally multi-year contracts. Through its affiliate offices, the Company has access to nearly 900 brokers and their local market research capabilities.

The Company has an agreement to provide exclusive commercial real estate brokerage and consulting services to its affiliate, Grubb & Ellis Realty Advisors, Inc. (“Realty Advisors”), related to its real property acquisitions, dispositions, project management and leasing.

Transaction Services has represented the larger portion of the Company’s operations, and in fiscal years 2007, 2006 and 2005, it represented 60.2%, 60.3% and 57.8% of the Company’s total revenue, respectively.

Management Services develops and implements property level strategies to increase investment value for real estate owners and optimize occupancy costs and strategies for corporate owners and occupiers of real estate. Management Services provides two primary service capabilities: property management for investment property owners and facilities management for corporate owners and occupiers.

The Company’s property management business is designed to enhance its clients’ investment values by maintaining high levels of occupancy and lowering property operating costs through a wide range of property management services. The property management services that the Company offers include: oversight of building management services such as maintenance, landscaping, security, energy management, owner’s insurance, life safety, environmental risk management and capital repairs; tenant relations services such as processing tenant work orders, lease administration services and promotional activities; interfacing with tenants’ development and construction services personnel in coordinating tenant finish; and financial management and asset services including financial reporting, analysis and development of value added strategies to improve operations and/or reposition assets within the market.

The Company’s facilities management business is designed to provide comprehensive portfolio and property management services to corporations and institutions that outsource their real estate management functions. The properties under management range from large corporate headquarters to industrial complexes, sales offices and data centers, often in geographically dispersed locations. Facilities management professionals create working

The Company has an agreement to be the exclusive managing agent for all real property acquired by its affiliate, Realty Advisors.

Management Services has represented 39.8%, 39.7% and 42.2% of the Company’s total revenue, in fiscal years 2007, 2006 and 2005, respectively. Reimbursed salaries, wages and benefits, where the owner of a property will reimburse the Company for on-site employee salaries and related benefit costs that are incurred on behalf of the owner, has comprised more than 70% of this segment’s cumulative revenue for these three fiscal years. The remaining revenue in this business segment is typically generated through monthly fees based on a percentage of rental revenue for property management services and negotiated monthly or annual fees for facilities management services. As of June 30, 2007, Management Services had approximately 178 million square feet of property under management. Including affiliate offices, total square feet of property under management was 229 million.

On April 28, 2006, the Company filed a registration statement on Form S-1 with the Securities and Exchange Commission (the “SEC”), proposing to offer to sell shares of the Company’s common stock on its own behalf and on behalf of Kojaian Ventures, L.L.C. (“KV”), an entity affiliated with the Chairman of the Board (the “Secondary Offering”). On June 29, 2006, the Company’s registration statement was declared effective by the SEC and the Company and KV agreed to sell an aggregate of ten million shares of the Company’s common stock, five million shares each, at a public offering price of $9.50 per share. The Secondary Offering subsequently closed on July 6, 2006 pursuant to which five million shares were sold by each of the Company and KV, generating aggregate gross proceeds to the Company, after underwriting discounts, of $44,412,500. The Company incurred additional costs and expenses related to the offering totaling approximately $1,004,000.

On April 28, 2006, the Company entered into an agreement with KV to exchange all 11,725 shares of the Series A-1 Preferred Stock owned by KV (the “Preferred Stock Exchange”), which represented all of the issued and outstanding shares of the Company’s preferred stock, for (i) 11,173,925 shares of the Company’s common stock, which is the common stock equivalent that the holder of the Series A-1 Preferred Stock was entitled to receive upon liquidation, merger, consolidation, sale or change in control of the Company, and (ii) a payment by the Company of approximately $10,057,000 (or $0.90 per share of newly issued shares of common stock). The Preferred Stock Exchange closed simultaneously with the closing of the Secondary Offering on July 6, 2006. The amount by which the fair value of the consideration transferred to KV, which totaled approximately $116.2 million, exceeded the carrying amount of the Series A-1 Preferred Stock in the Company’s financial statements, which totaled approximately $10.9 million, including issuance costs, was recorded as a charge to earnings totaling approximately $105.3 million, therefore reducing the amount of earnings available to common stockholders for such period. A substantial portion of this amount is related to a one-time, non-cash charge totaling approximately $95.2 million, as the cash portion of the amount is equal to the $10,057,000 payment described above.

In late July 2006, the Company repaid the $40.0 million borrowing that was outstanding under its revolving line of credit with Deutsche Bank Trust Company Americas. During February 2007, the Company amended its credit facility to provide the Company more flexibility with respect to its real property acquisitions and certain covenants. Pursuant to this amendment, the Company may invest up to $42.5 million of its funds (which may be borrowed under the credit facility) and obtain certain non-recourse debt to finance acquisitions of, and capital expenditures relating to, real property that it intends to hold for future sale to Realty Advisors. The non-recourse

This February 2007 amendment also reduced the term loan portion of the credit facility from $40 million to $20 million, thereby reducing the current total credit facility from $100 million to $80 million, but simultaneously provided that the revolving portion of the credit facility may be expanded from $60 million to $80 million at the request of the Company and subject to the approval of the lender. The term loan portion of the credit facility may now only be used for real property acquisitions. Previously, the term loan portion of the credit facility was available for acquisitions by the Company of real estate service companies. The Company’s covenants under the credit facility were also revised to provide the Company with more operational flexibility.

During late fiscal 2007, the Company, through wholly-owned subsidiaries, acquired three commercial properties for an aggregate contract price of $122,200,000, along with acquisition costs of approximately $1,325,000, and assumed obligations of approximately $542,000. (See Note 8 of Notes to Consolidated Financial Statements in Item 8 of this Report.) The Company funded its equity position in these acquisitions primarily with borrowings from its credit facility.

Simultaneous with the acquisition of the final property, the Company’s subsidiaries that hold the warehoused properties closed two non-recourse mortgage loan financings with Wachovia Bank, N.A. in an aggregate amount of $120.5 million. The proceeds of the mortgage loans were used to finance the purchase of the final property, to fund certain required reserves for the three properties, to pay the lender’s fees and costs and to repay certain amounts borrowed by the Company through its credit facility with respect to the first two properties purchased.

The Company acquired the three properties with the intention to hold them for future sale to Realty Advisors. On June 18, 2007, the Company entered into a definite Membership Interest Purchase Agreement (the “Acquisition Agreement”), among the Company, Realty Advisors and GERA Property Acquisition, LLC a wholly owned subsidiary of the Company (“Property Acquisition”). Pursuant to the Acquisition Agreement, Realty Advisors shall acquire all of the issued and outstanding membership interests of Property Acquisition held by Property Acquisition’s sole member, the Company (the “Acquisition”), on a “cost neutral basis” taking into account the costs and expenses paid by the Company with respect to the purchase of the properties and imputed interest on cash advanced by the Company with respect to the properties.

As a result of the Acquisition, Realty Advisors will indirectly acquire and own the properties. Prior to entering into the Acquisition Agreement, the Company and Realty Advisors did not have any agreement with respect to the properties and Realty Advisors did not have any obligation to purchase these properties from the Company. See Note 8 of Notes to Consolidated Financial Statements in Item 8 of this Report for additional information.

The Acquisition is subject to, among other things, the approval of the transaction by the holders of a majority of the common stock issued in the Realty Advisors IPO and the holders of less than 20 percent of the common stock

On May 22, 2007, the Company entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, NNN Realty Advisors, Inc. (“NNN Realty Advisors”) and B/C Corporate Holding, Inc. (“Merger Sub”), a wholly owned subsidiary of the Company. Pursuant to the Merger Agreement, NNN Realty Advisors will become a wholly owned subsidiary of the Company (the “Merger”).

The Merger will be effected through the issuance of 0.88 shares of the Company’s common stock for each share of NNN Realty Advisors common stock outstanding. Following the Merger, the Company stockholders will own approximately 41% of the combined company and NNN Realty Advisors stockholders will own approximately 59% of the combined company.

The merged companies will retain the Grubb & Ellis name and will continue to be listed on the NYSE under the ticker symbol “GBE”. The combined company will be headquartered in Santa Ana, CA and the Company’s Board of Directors will be increased to nine members. The Board will include six nominees from NNN Realty Advisors and three nominees from the Company. Anthony W. Thompson, Founder and Chairman of the Board of NNN Realty Advisors, will join the Company as Chairman of the Board. Each of C. Michael Kojaian, currently Chairman of the Board of Directors of the Company, Rodger D. Young and Robert J. McLaughlin will remain on the Board of Directors of the Company. Mr. Young will be Chairman of the combined company’s Governance and Nominating Committee and Mr. McLaughlin will be Chairman of the combined company’s Audit Committee. Scott D. Peters, President and Chief Executive Officer of NNN Realty Advisors will become Chief Executive Officer of the Company and will also join the Company’s Board of Directors.

The transaction is expected to close in the third or fourth quarter of 2007, subject to the approval by the stockholders of both companies and other customary closing conditions of transactions of this type. Certain entities affiliated with the Chairman of the Board of the Company, which collectively own approximately 39% of the outstanding shares of the Company common stock, have agreed to vote their shares in favor of the Merger. Similarly, certain members of management and the Board of Directors of NNN Realty Advisors who collectively own approximately 28% of the outstanding shares of NNN Realty Advisors common stock have agreed to vote their shares in favor of the Merger.

In connection with the proposed transaction, the Company and NNN Realty Advisors filed a preliminary joint proxy statement/prospectus with the Securities and Exchange Commission on July 3, 2007 as part of a registration statement on Form S-4 regarding the proposed merger.

Throughout fiscal 2007, the Company continued to execute the strategic initiatives identified in the Company’s five-year growth plan. The objectives of the five-year growth plan, which was initiated in January 2006, are designed to take advantage of the opportunities that exist in the commercial real estate services industry. Specifically, the objectives are to: raise client service to a new level by delivering innovative, integrated solutions; expand the Company’s domestic presence; enhance service offerings; and build a sustainable global platform.

The Company focused on its strategic initiatives throughout fiscal 2007. At June 30, 2007, the Company had 931 brokers, up from 906 at June 30, 2006. The Company’s recruiting gains were system-wide, with a particular focus on those markets in which the Company believes there is significant growth potential. In addition to growing its brokerage sales forces, the Company is committed to upgrading the quality of its brokers. During fiscal 2007 the Company attracted 199 professionals and 174 brokers transitioned out of the Company, of which 81 percent were lower-tier producers. The Company believes its proposed merger with NNN Realty Advisors will facilitate its continued ability to recruit and hire top talent to strengthen its presence in key markets.

The Company continues to enhance its products and service offerings. Its project management business, which was launched in January 2006 to provide construction management services to corporate clients, grew to 28 employees during fiscal 2007, from six at June 30, 2006, giving the group a presence in Atlanta, Chicago,

The Company also advanced its investment management strategy with the purchase through a warehousing strategy of three commercial real estate assets for future sale to its affiliate, Realty Advisors. The Company formed Realty Advisors in September 2005 for the purpose of acquiring underperforming assets in secondary, tertiary and suburban markets that can be repositioned and sold. In June 2007, the Company announced a definitive agreement with Realty Advisors to sell the properties to Realty Advisors on a “cost neutral” basis. Realty Advisors has filed a preliminary proxy statement with the Securities and Exchange Commission. The Company currently owns 19 percent of Realty Advisors, and if the business combination is approved, the Company expects to further benefit from the transaction and management fees earned through its relationship going forward.

The Company is committed to providing unparalleled client service. In addition to expanding the scope of products and services offered, it is also focused on ensuring that it can support client relationships with best-in-class service. During fiscal 2007, the Company continued to expand the number of client service relationship managers, which provide a single point of contact to corporate clients with multi-service needs. At June 30, 2007, the Company had 33 multi-service corporate accounts, up from 25 a year earlier. In addition, the Company experienced significant year-over-year growth in its management portfolio, ending fiscal 2006 with 178 million square feet under management, up from 158 million a year earlier. Approximately 62 percent of its new assignments came from existing clients, suggesting a high level of client satisfaction.

On May 22, 2007, the Company and NNN Realty Advisors entered into a definitive merger agreement to create a diversified real estate services company providing a complete range of transaction, management and consulting services. Following the merger, which requires stockholder approval of both companies and the satisfaction of other customary closing conditions, the combined company will retain the Grubb & Ellis name. The Company believes the merger will provide a much stronger financial platform from which to execute its growth strategy.

The U.S. commercial real estate services industry is large and highly fragmented, with thousands of companies providing asset management, investment management and brokerage services. In recent years the industry has experienced substantial consolidation, a trend that is expected to continue.

The top 25 brokerage companies collectively completed nearly $842 billion in investment sales and leasing transactions globally in 2006, according to a survey by National Real Estate Investor. The Company ranked 12th in this survey, including transactions in its affiliate offices.

Within the management services business, according to a recent survey by National Real Estate Investor, the top 25 companies in the industry manage over 7.5 billion square feet of commercial property. The Company ranks as the eighth largest property management company in this survey with 210 million square feet under management at year end 2006, including property under management in its affiliate offices. The largest company in the survey had 1.7 billion square feet under management.

The Company competes in a variety of service businesses within the commercial real estate industry. Each of these business areas is highly competitive on a national as well as local level. The Company faces competition not only from other regional and national service providers, but also from global real estate providers, boutique real estate advisory firms and appraisal firms. Although many of the Company’s competitors are local or regional firms that are substantially smaller than the Company, some competitors are substantially larger than the Company on a local, regional, national and/or international basis. The Company’s significant competitors include CB Richard Ellis, Jones Lang LaSalle and Cushman & Wakefield, all of which have global platforms. The Company believes that it needs such a platform in order to effectively compete for the business of large multi-national corporations that are increasingly seeking a single real estate services provider. While there can be no assurances that the Company will be able to continue to compete effectively, maintain current fee levels or margins, or maintain or increase its

Federal, state and local laws and regulations impose environmental zoning restrictions, use controls, disclosure obligations and other restrictions that impact the management, development, use, and/or sale of real estate. Such laws and regulations tend to discourage sales and leasing activities, as well as the willingness of mortgage lenders to provide financing, with respect to some properties. If transactions in which the Company is involved are delayed or abandoned as a result of these restrictions, the brokerage business could be adversely affected. In addition, a failure by the Company to disclose known environmental concerns in connection with a real estate transaction may subject the Company to liability to a buyer or lessee of property.

Various environmental laws and regulations also can impose liability for the costs of investigating or remediation of hazardous or toxic substances at sites currently or formerly owned or operated by a party, or at off-site locations to which such party sent wastes for disposal. As a property manager, the Company could be held liable as an operator for any such contamination, even if the original activity was legal and the Company had no knowledge of, or did not cause, the release or contamination. Further, because liability under some of these laws is joint and several, the Company could be held responsible for more than its share, or even all, of the costs for such contaminated site if the other responsible parties are unable to pay. The Company could also incur liability for property damage or personal injury claims alleged to result from environmental contamination, or from asbestos-containing materials or lead-based paint present at the properties that it manages. Insurance for such matters may not always be available, or sufficient to cover the Company’s losses. Certain requirements governing the removal or encapsulation of asbestos-containing materials, as well as recently enacted local ordinances obligating property managers to inspect for and remove lead-based paint in certain buildings, could increase the Company’s costs of legal compliance and potentially subject the Company to violations or claims. Although such costs have not had a material impact on the Company’s financial results or competitive position in fiscal year 2007, the enactment of additional regulations, or more stringent enforcement of existing regulations, could cause the Company to incur significant costs in the future, and/or adversely impact the brokerage and management services businesses. See Note 15 of Notes to Consolidated Financial Statements in Item 8 of this Report for additional information.

Since the majority of the Company’s revenues are derived from transaction services, which are seasonal in nature, the Company’s revenue stream and the related commission expense are also subject to seasonal fluctuations. However, the Company’s non-variable operating expenses, which are treated as expenses when incurred during the year, are relatively constant in total dollars on a quarterly basis. The Company has typically experienced its lowest quarterly revenue 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. Revenue in any given quarter during the years ended June 30, 2007, 2006 and 2005, as a percentage of total annual revenue, ranged from a high of 29.2% to a low of 22.3%.

The Company has registered trade names and service marks for the “Grubb & Ellis” name and logo and certain other trade names. The “Grubb & Ellis” brand name is considered an important asset of the Company, and the Company actively defends and enforces such trade names and service marks.

The Company’s business is highly dependent on the commercial real estate markets, which in turn are impacted by numerous factors, including but not limited to the general economy, interest rates and demand for real estate in local markets. Changes in one or more of these factors could either favorably or unfavorably impact the volume of transactions and prices or lease terms for real estate. Consequently, the Company’s revenue from

As of June 30, 2007, the Company’s network consisted of nearly 5,500 real estate professionals, including a brokerage sales forces of approximately 1,800 brokers nationwide in the Company’s and its affiliates’ offices. The Company had 4,200 employees and more than 900 transaction professionals working in over 50 owned offices. The Company has access to nearly 900 additional transaction professionals in over 65 affiliate offices. Nearly 2,400 employees serve as property and facilities management staff at the Company’s client-owned properties, and the Company’s clients reimburse the Company fully for their salaries and benefits. The Company considers its relationship with its employees to be good and has not experienced any interruptions of its operations as a result of labor disagreements.

The Company’s internet address is www.grubb-ellis.com. On the Investor Relations page on this web site, the Company posts its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q, its Current Reports on Form 8-K and its proxy statements as soon as reasonably practicable after it files them electronically with the Securities and Exchange Commission. All such filings on the Investor Relations web page are available to be viewed free of charge. In addition, a copy of this Annual Report on Form 10-K is available without charge by contacting Investor Relations, Grubb & Ellis Company, 500 W. Monroe Street, Suite 2800, Chicago, IL 60661.

The Company leases all of its office space through non-cancelable operating leases. The terms of the leases vary depending on the size and location of the office. As of June 30, 2007, the Company leased over 650,000 square feet of office space in 56 locations under leases which expire at various dates through February 28, 2017. For those leases that are not renewable, the Company believes that there are adequate alternatives available at acceptable rental rates to meet its needs, although there can be no assurances in this regard. See Note 15 of Notes to Consolidated Financial Statements in Item 8 of this Report for additional information, which is incorporated herein by reference.

Information with respect to legal proceedings can be found in Note 15 of Notes to Consolidated Financial Statements in Item 8 of this Report and is incorporated herein by reference.

No matters were submitted to a vote of security holders during the fourth quarter of fiscal year 2007.

The principal market for the Company’s common stock was the over-the-counter market (“OTC”) through June 29, 2006. As of June 30, 2006, the principal market is the New York Stock Exchange (“NYSE”). The following table sets forth the high and low sales prices of the Company’s common stock on the OTC for each quarter of the fiscal years ended June 30, 2007 and 2006.

As of August 24, 2007, there were 1,012 registered holders of the Company’s common stock and 25,914,120 shares of common stock outstanding. Sales of substantial amounts of common stock, including shares issued upon the exercise of warrants or options, or the perception that such sales might occur, could adversely affect prevailing market prices for the common stock.

No cash dividends were declared on the Company’s common stock during the fiscal years ended June 30, 2007 or 2006. Any such dividends declared and paid are restricted in amount by provisions contained in the credit agreement between the Company and various lenders to not more than 100% of Excess Cash Flow generated in the prior fiscal year, as that term is defined in the credit agreement.

On September 21, 2006, pursuant to the Company’s 2005 Restricted Share Program for Outside Directors, the Company granted to its outside directors an aggregate of 27,230 restricted shares of the Company’s common stock which vest one-third on each of the first, second and third anniversaries of the date of grant and had an aggregate fair market value of $250,000 on the trading day immediately preceding the date of grant. On November 15, 2006, as an inducement for an employee to extend his employment with the Company and pursuant to a Second Amendment to an Employment Agreement dated November 15, 2006 and a related Second Restricted Share Agreement dated November 15, 2006, the Company granted to an employee 31,964 restricted shares of the Company’s common stock which vest on December 29, 2009 and had a fair value of $350,000 on the trading day immediately preceding the date of grant. On February 15, 2007, as an inducement for an employee to accept employment with the Company and pursuant to an Employment Agreement dated February 9, 2007 and a related Restricted Share Agreement dated February 15, 2007, the Company granted to an employee restricted shares of the Company’s common stock which vest on February 14, 2011 and had a fair market value of $227,500 on the trading day immediately preceding the date of grant. On March 8, 2007, pursuant to an Employment Agreement dated March 8, 2005 and a Restricted Share Agreement dated March 8, 2005, the Company granted to its CEO 71,158 restricted shares of the Company’s common stock which vest in equal, annual installments of thirty-three and one-third percent (331/3%) on each of the first, second and third anniversaries of March 8, 2007 and had a fair market value of $750,000 on the trading day immediately preceding the date of grant. The issuances by the Company of restricted shares in the transactions described in this paragraph were exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended, as such transactions did not involve a public offering by the Company.

The following table provides information on equity compensation plans of the Company as of June 30, 2007.

The Grubb & Ellis 1998 Stock Option Plan was adopted without the approval of the Company’s security holders. In addition, restricted stock awards that were granted prior to the adoption of the 2006 Omnibus Equity Plan, which totaled 534,213 shares, were granted without the approval of the Company’s security holders. Of these shares, 386,444 remain available for future issuance. Additional information can be found in Note 13 of Notes to Consolidated Financial Statements in Item 8 of this Report and is incorporated herein by reference.

The following section entitled, “Grubb & Ellis Stock Performance” is not to be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C or to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically requests that such information be treated as soliciting material or specifically incorporates it by reference into any filing under the 1933 Act or the Exchange Act.

The following graph compares the cumulative 5-year total return to shareholders on Grubb & Ellis Company’s common stock relative to the cumulative total returns of the S&P 500 index, and a customized peer group of three companies that includes: CB Richard Ellis Group Inc, Grubb & Ellis Company and Jones Lang LaSalle Inc. The graph assumes that the value of the investment in the company’s common stock, in the peer group, and the index (including reinvestment of dividends) was $100 on 6/30/2002 and tracks it through 6/30/2007.

The stock price performance included in this graph is not necessarily indicative of future stock price performance.

Five-Year Comparison of Selected Financial and Other Data for the Company:

This Annual Report contains statements that are forward-looking and as such are not historical facts. Rather, these statements 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, assumptions and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by these statements. Such statements can be identified 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,” “anticipate” or similar expressions. When the Company discusses its strategies or plans, it is making projections, forecasts or forward-looking statements. Actual results and stockholders’ 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 stockholder 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 Annual Report. The Company expressly disclaims any obligation or undertaking to release publicly any updates or 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 favorable results and maintain or increase stockholder value include, among other things:

•  Decline in the Volume of Real Estate Transactions and Prices of Real Estate. Approximately 60% of the Company’s revenue is based on commissions from real estate transactions. As a result, a decline in the volume of real estate available for lease or sale, or in real estate prices, could have a material adverse effect on the Company’s revenues.

•  General Economic Slowdown or Recession in the Real Estate Markets. Periods of economic slowdown or recession, rising interest rates or declining demand for real estate, both on a general or regional basis, will adversely affect certain segments of the Company’s business. Such economic conditions could result in a general decline in rents and sales prices, a decline in the level of investment in real estate, a decline in the value of real estate investments and an increase in defaults by tenants under their respective leases, all of which in turn would adversely affect revenues from transaction services fees and brokerage commissions which are derived from property sales and aggregate rental payments, property management fees and consulting and other service fees.

•  The Company’s Ability to Attract and Retain Qualified Personnel. The growth of the Company’s business is largely dependent upon its ability to attract and retain qualified personnel in all areas of its business. If the Company is unable to attract and retain such qualified personnel, its business and operating results could be materially and adversely affected.

•  Liquidation and Dissolution of Realty Advisors, an Affiliate of the Company. The failure of Realty Advisors, an affiliate of the Company, to effect a business combination would require that entity to liquidate and dissolve, which could harm the Company because of the Company’s association with that entity. Some of the ways this could harm the Company are:

•  Increased Costs Associated with the Company’s Strategic Initiatives. The Company has commenced the process of implementing its growth strategy, and as such the Company is currently continuing to institute a number of strategic initiatives, including considering future strategic acquisitions. In connection with this process the Company has begun, and in the near term will continue, to incur costs prior to realizing corresponding revenues. In addition, during this period, the Company may experience fluctuations in its revenues and net income. Additionally, there can be no assurance that any or all of the Company’s strategic initiatives will be effective. Further, even if the Company is successful in some or all of its strategic initiatives, there can be no assurance that the Company’s success will result in a substantial increase in revenues, profitability or profit margins, or that the Company will be

•  Limitations Imposed by Senior Secured Credit Facility. The Company’s senior secured credit facility contains customary restrictions, subject to certain exceptions, on its ability to undertake certain actions. If the Company determines that it is in its best interest to undertake a restricted action, the Company will need to secure a waiver from its lenders before it can consummate such action. The Company may not be able to secure such waiver from its lenders, and thus the Company may be forced to refrain from taking such action even though the Company believes such action to be in its best interests. For instance, if the Company does not receive approval from its lenders, it may be difficult or impossible for the Company to make an acquisition, and the Company’s business, financial condition or results of operations may be harmed.

•  Risks Associated with Acquisitions. In connection with the Company’s strategic initiatives, it may undertake one or more additional strategic acquisitions. There can be no assurance that significant difficulties in integrating operations acquired from other companies and in coordinating and integrating systems will not be encountered, including difficulties arising from the diversion of management’s attention from other business concerns, the difficulty associated with assimilating groups of broad and geographically dispersed personnel and operations and the difficulty in maintaining uniform standards and policies. There can be no assurance that any integration will ultimately be successful, that the Company’s management will be able to effectively manage any acquired business or that any acquisition will benefit the Company overall.

•  Failure to complete the proposed merger with NNN Realty Advisors could negatively impact the stock prices and the future business and financial results of the Company. Grubb & Ellis may be adversely affected and subject to certain risks if the proposed merger is not completed. These risks include the following:

The failure to complete the merger and the occurrence of some, or all, of the above risks could have a material adverse effect on the business and results of operations of the Company.

•  Whether or not the proposed merger with NNN Realty Advisors is completed, the announcement and pendency of the merger could impact or cause disruptions in the Company’s business, which could have a material adverse effect on its results of operations and financial condition. Whether or not the merger is completed, the announcement and pendency of the merger could impact or cause disruption in the Company’s business. Specifically:

The Company may face additional challenges in competing for new business and retaining or renewing business. These disruptions could be exacerbated by a delay in the completion of the merger or termination of the merger agreement and could have an adverse effect on the businesses and results of operations or prospects of the Company if the merger is not completed or of the combined company if the merger is completed.

•  Social, Political and Economic Risks of Doing Business in Foreign Countries. Although the Company does not currently conduct significant business outside the United States, the Company desires to expand its business to include international operations. Circumstances and developments related to international operations that could negatively affect the Company’s business, financial condition or results of operations include, but are not limited to, the following factors: difficulties and costs of staffing and managing international operations; currency restrictions, which may prevent the transfer of capital and profits to the United States; adverse foreign currency fluctuations; changes in regulatory requirements; potentially adverse tax consequences; the responsibility of complying with multiple and potentially conflicting laws; the impact of regional or country-specific business cycles and economic instability; the geographic, time zone, language and cultural differences among personnel in different areas of the world; political instability; and foreign ownership restrictions with respect to operations in certain countries.

•  Industry Competition. Part I, Item I of this Annual Report under “Industry and Competition” discusses potential risks related to competition.

•  Seasonal Revenue. Part I, Item I of this Annual Report under “Seasonality” discusses potential risks related to the seasonal nature of the Company’s business.

•  Liabilities Arising from Environmental Laws and Regulations. Part I, Item I of this Annual Report under “Environmental Regulation” discusses potential risks related to environmental laws and regulations.

•  Other Factors. Other factors are described elsewhere in this Annual Report and in Exhibit 99.1. Certain additional risk factors, including risk factors related to the proposed merger with NNN Realty Advisors, are set forth in the preliminary proxy statement/prospectus filed with the SEC on July 3, 2007 with respect to the proposed merger.

The Company’s consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, which require the Company to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses, and the related disclosure. The Company believes that the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Real estate sales commissions are recognized at the earlier of receipt of payment, close of escrow or transfer of title between buyer and seller. Receipt of payment occurs at the point at which all Company services have been performed, and title to real property has passed from seller to buyer, if applicable. Real estate leasing commissions are recognized upon execution of appropriate lease and commission agreements and receipt of full or partial payment, and, when payable upon certain events such as tenant occupancy or rent commencement, upon occurrence of such events. All other commissions and fees are recognized at the time the related services have been performed by the Company, unless future contingencies exist. Consulting revenue is recognized generally upon the delivery of agreed upon services to the client.

In regard to management and facility service contracts, the owner of the property will typically reimburse the Company for certain expenses that are incurred on behalf of the owner, which are comprised primarily of employee

On July 1, 2002, the Company adopted Statements of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.” The Company completed the transitional impairment test of goodwill as of July 1, 2002 and the annual impairment test as of June 30, 2007 and 2006, and has determined that no goodwill impairment will impact the earnings and financial position of the Company as of those dates. Future events could occur which would cause the Company to conclude that impairment indicators exist and an impairment loss is warranted. The determination of impairment under FAS 142 requires the Company to estimate the fair value of reporting units. This fair value estimation involves a number of judgmental variables, including market multiples, which may change over time.

If necessary, the Company records a valuation allowance to reduce the carrying value of its deferred tax assets to an amount that the Company considers is more likely than not to be realized in future tax filings. In assessing this allowance, the Company considers future taxable earnings along with ongoing and potential tax planning strategies. Additional timing differences, future earnings trends and/or tax strategies may occur which could warrant a corresponding adjustment to the valuation allowance.

The Company has maintained partially self-insured and deductible programs for errors and omissions, general liability, workers’ compensation and certain employee health care costs. Reserves are based upon an estimate provided by an independent actuarial firm of the aggregate of the liability for reported claims and an estimate of incurred but not reported claims.

The Company is also subject to various proceedings, lawsuits and other claims related to commission disputes and environmental, labor and other matters, and is required to assess the likelihood of any adverse judgments or outcomes to these matters. A determination of the amount of reserves, if any, for these contingencies is made after careful analysis of each individual issue. New developments in each matter, or changes in approach such as a change in settlement strategy in dealing with these matters, may warrant an increase or decrease in the amount of these reserves.

The Company reported net income of $3.0 million for the year ended June 30, 2007, reflecting a decrease over fiscal 2006 primarily due to the Company’s investment in its growth initiatives along with costs of approximately $2.3 million related primarily to its proposed merger.

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.

Total services revenue of $513.3 million was recognized for fiscal year 2007 as compared to revenue of $490.1 million for the same period last year. The improvement for the year reflects the positive impact from the Company’s continued investment in its strategic initiatives.

Transaction fees increased by $13.4 million, or 4.5%, for fiscal year 2007 over the same period in 2006. These results reflect the ongoing transition taking place in the business as the Company focuses on broker productivity and recruiting experienced, high-quality brokerage professionals. The Company experienced continued significant year-over-year revenue improvements in New York, Washington D.C., Chicago and Atlanta, markets in which the Company has been investing heavily as part of its growth strategy. The increases were partially offset by decreased revenue from certain offices that produced significant performance in the prior fiscal year.

Management fees increased by $9.7 million, or 5.0%, in the current fiscal year over the same period in 2006 due to organic growth in the property and facilities management business, as square feet under management increased by approximately 20 million square feet. Net of reimbursable salaries expense, management fees increased 8.8% for fiscal year 2007 over the same period in 2006 as a result of an increase in square feet under management over the past twelve months. The Company also began recognizing revenues from certain of its new business service lines, such as project management, beginning in fiscal 2007.

Transaction commission expense has historically been the Company’s largest expense and is a direct function of gross transaction services revenue levels, which include transaction services commissions and other fees. Professionals receive transaction commissions at rates that increase upon achievement of certain levels of production. As a percentage of gross transaction revenue, related commission expense decreased slightly to 62.5% for fiscal year 2007, compared with 62.8% for the same period in 2006.

Certain salaries, wages and benefits for employees in the Company who are dedicated to client properties are reimbursed by those clients in accordance with the terms of their management contracts. These costs increased by $5.3 million, or 3.7% in the current fiscal year over the same period in 2006.

Salaries and other direct costs consist primarily of non-reimbursed expenses directly related to the management of properties. These costs increased by $2.8 million, or 7.5%, for fiscal year 2007 over fiscal year 2006 due primarily to the direct costs incurred that are related to the Company’s newly created project management business.

Salaries, wages and benefits increased by $6.2 million, or 10.7%, during fiscal year 2007, compared with 2006. This increase was driven by the Company’s continued investment in professionals, including key business leaders, to build and expand strategic offices and core services. Over the past year, the Company expanded its Transaction Services management structure to include an Eastern Region President and added new leaders in New York and Washington D.C. Selling, general and administrative expenses increased by $4.2 million, or 8.6%, for the same period. Investments in professional and client development, increased occupancy costs and additional insurance costs for directors and officers all contributed to the increase.

Depreciation and amortization expense for fiscal year 2007 increased 14.2% to $8.8 million from $7.7 million in the comparable period last year. The Company holds multi-year service contracts with certain key professionals, the costs of which are amortized over the lives of the respective contracts, which are generally two to five years. Amortization expense relating to these contracts increased to $4.7 million from $2.1 million in the prior year, as a result of signing new professionals as part of the Company’s growth strategy. In addition, certain leasehold improvements were fully amortized during the quarter ended December 31, 2005 due to the relocation of the New York City office as described below and unamortized deferred financing fees related to the Company’s previous credit facility totaling approximately $935,000 were written off during the quarter ended June 30, 2006. Both of these partially offset the increase in depreciation and amortization expense for the fiscal year resulting from the additional service contracts.

The Company relocated its New York City operations in January 2006 into newly leased office space in mid-town Manhattan and, as a result, incurred additional expenses totaling approximately $1,222,000 in fiscal year

During fiscal year 2007, the Company recorded approximately $2.3 million of expenses related primarily to the Company’s proposed merger with NNN Realty Advisors, Inc.

In December 2006, the Company sold all of its common shares of LoopNet, Inc. and received proceeds of approximately $3.9 million, which resulted in a realized gain on sale of marketable securities available for sale of approximately $3.8 million for fiscal year 2007.

Interest income decreased during fiscal year 2007, compared with fiscal year 2006 as average invested funds decreased over the prior year.

Interest expense incurred during fiscal years 2007 and 2006 was due primarily to the Company’s term loan borrowings under the credit facility. Borrowings under the credit facility increased by $15.0 million in April 2006 before being repaid in full in late July 2006. Additional borrowings totaling approximately $4.0 million were made in March 2007 and were subsequently repaid in June 2007. Other costs related to borrowings under the credit agreement were recorded as part of operations of real estate held for sale. (See Note 8 of Notes to Consolidated Financial Statements in Item 8 of this Report for additional information.) Interest expense incurred during fiscal year 2007 also included the change in value of the interest rate protection agreement. (See Note 2 of Notes to Consolidated Financial Statements in Item 8 of this Report for additional information.)

The Company incurred a tax provision of approximately $2,579,000 in fiscal year 2007. The Company also increased its valuation allowance against the Company’s deferred tax assets by approximately $674,000. This resulted in a net tax provision of approximately $3,253,000 for the 2007 fiscal year. Additionally, tax benefits recognized from reductions in the valuation allowance during fiscal 2006 partially offset the tax provision incurred and resulted in a net tax provision of approximately $2,487,000 for the 2006 fiscal year. See Note 12 of Notes to Consolidated Financial Statements in Item 8 of this Report for additional information.

The net loss to common stockholders for fiscal year 2007 was $102.2 million, or $4.00 per common share on a diluted basis, compared with net income of $4.9 million, or $0.40 per common share, for fiscal year 2006. A one-time charge totaling $105.3 million, or $4.12 per common share, related to the exchange of the Company’s preferred stock, significantly increased the amount of loss to common stockholders during the 2007 fiscal year. See Note 11 of Notes to Consolidated Financial Statements in Item 8 of this Report for additional information.

Total stockholders’ equity increased from $11.5 million to $48.0 million primarily as a result of the Company’s secondary offering completed in July 2006. See Note 10 of Notes to Consolidated Financial Statements in Item 8 of this Report for additional information. The book value per common share issued and outstanding increased to $1.85 at June 30, 2007 from $1.22 at June 30, 2006.

Total services revenue of $490.1 million was recognized for fiscal year 2006, compared with revenue of $463.5 million for the same period in 2005. Transaction fees increased by $27.9 million, or 10.4%, in fiscal 2006 over the same period in 2005 due to continued strong investment sales activity as well as increased commissions from office and retail leasing. Management fees decreased by $1.3 million, or 0.7%, during that same period.

As a percentage of gross transaction revenue, related commission expense increased to 62.8% for fiscal year 2006, compared with 61.8% for the same period in 2005, although the fourth fiscal quarter reflected an overall decline in this percentage. This annual increase resulted from higher overall transaction revenue in the fiscal year as well as increased transaction production levels in certain markets in the country.

Other costs and expenses were relatively flat, as reimbursable expenses, related to salaries, wages and benefits, increased slightly by $766,000, or 0.5% in the current fiscal year over the same period in 2005 and salaries and other direct costs increased by $692,000, or 1.9%, in the current fiscal period over the same period in 2005.

Salaries, wages and benefits increased by $4.9 million, or 9.2%, during fiscal year 2006, compared with 2005. The increase was driven by the Company’s growth strategy and investment in key professionals to build and expand strategic offices and core services. In addition, the Company recorded non-cash stock based compensation expense of $1.4 million in fiscal 2006 as a result of implementing a new accounting pronouncement effective July 1, 2005. Selling, general and administrative expenses increased by $3.9 million, or 8.7%, for the same period due in part to expenses related to strategic investment initiatives and the relocation of the New York office described above.

Depreciation and amortization expense for fiscal year 2006 increased 34.9% to $7.7 million from $5.7 million in the comparable year-ago period. The Company holds multi-year service contracts with certain key professionals, the costs of which are amortized over the lives of the respective contracts, which were generally two to four years. Amortization expense relating to these contracts increased to $2.1 million from $1.4 million in the prior year. In addition, certain leasehold improvements totaling approximately $665,000 were written off during the quarter ended December 31, 2005 due to the relocation of the New York City office as described above. Finally, unamortized deferred financing fees related to the Company’s previous credit facility totaling approximately $935,000 were written off during the quarter ended June 30, 2006.

Interest income increased during fiscal year 2006, compared with fiscal year 2005 as both average invested funds and interest rates earned on these funds increased over the prior year.

Interest expense incurred during fiscal years 2006 and 2005 was due primarily to the Company’s term loan borrowings under the credit facility, which borrowings increased by $15.0 million in April 2006. Interest rates on loan borrowings have also risen sharply over the past twelve months, and contributed to the increase in interest expense.

The Company incurred a tax provision of approximately $4.2 million in fiscal year 2006, which was partially offset by a tax benefit of approximately $1.7 million related to a reduction in the valuation allowance against the Company’s deferred tax assets. This resulted in a net tax provision of approximately $2.5 million for the 2006 fiscal year. Similarly, tax benefits recognized from reductions in the valuation allowance in fiscal year 2005 fully offset the tax provision incurred. See Note 12 of Notes to Consolidated Financial Statements in Item 8 of this Report for additional information.

Net income to common stockholders for fiscal year 2006 was $4.9 million, or $0.40 per common share on a diluted basis, compared with $12.4 million, or $0.81 per common share, for fiscal year 2005. Dividends accrued on the Series A Preferred Stock issued by the Company were $889,000 for fiscal year 2005. This preferential cumulative dividend on the Preferred Stock was eliminated in December 2004. Although revenue increased for fiscal year 2006, net income decreased by approximately $7.5 million due to incremental costs and expenses related to the Company’s investment in its growth initiatives, the relocation of the Company’s New York office and an increase in the tax provision.

Total stockholders’ equity declined to $11.7 million from $24.5 million primarily as a result of the Company’s repurchase of 5,861,902 shares of its common stock in December 2005 in a privately negotiated transaction. Net income generated during fiscal 2006 and an increase in the value of marketable equity securities held by the Company partially offset this decrease. The book value per common share issued and outstanding decreased to $1.22 at June 30, 2006 from $1.62 at June 30, 2005.

During fiscal year 2007, cash and cash equivalents decreased by $6.5 million. The Company generated $4.6 million from net operating activities as income from the Company’s operations was partially used to fund $14.6 million of multi-year service contracts as a result of signing new professionals as part of the Company’s growth strategy. The Company used $123.2 million for net investing activities related primarily to the purchase of the three office buildings that it is holding for potential future sale to Realty Advisors. Other net investing activities included purchases of $5.4 million of equipment, software and leasehold improvements, purchases of $2.1 million of warrants of Realty Advisors and the receipt of approximately $3.9 million from the sale of the Company’s common shares of LoopNet, Inc. Net financing activities provided cash of $112.1 million, primarily from the funding of $76.9 million through two non-recourse mortgage loans related to the real estate held for sale. Financing activities also included the receipt of approximately $43.4 million of net proceeds from the secondary offering, the payment of $10.1 million in connection with the exchange of the Series A-1 Preferred Stock and the repayment of $40.0 million of then outstanding credit facility debt in late July 2006. The Company also made subsequent borrowings on the credit facility debt in February and March 2007 totaling $45.5 million, primarily to fund the purchase of the two office buildings acquired in February 2007, of which $4.0 million was repaid in June 2007.

The Company has historically experienced the highest use of operating cash in the quarter ended March 31, primarily related to the payment of incentive and deferred commission payable balances which attain peak levels during the quarter ended December 31. Deferred commission balances of approximately $11.4 million, related to revenues earned in calendar year 2006, were paid in January 2007, and production and incentive bonuses of approximately $10.4 million were paid during the quarter ended March 31, 2007.

See Note 17 of Notes to Consolidated Financial Statements in Item 8 of this Report for information concerning earnings before interest, taxes, depreciation and amortization.

In late July 2006, the Company repaid the $40.0 million borrowing that was outstanding under its revolving line of credit with Deutsche Bank Trust Company Americas. During February 2007, the Company amended its credit facility to provide the Company more flexibility with respect to its real property acquisitions and certain covenants. Pursuant to this amendment, the Company may invest up to $42.5 million of its funds (which may be borrowed under the credit facility) and obtain certain non-recourse debt to finance acquisitions of, and capital expenditures relating to, real property that it intends to hold for future sale to Realty Advisors. The non-recourse debt used to finance such acquisitions may be collateralized by the acquired real property or the assets or securities of the limited purpose subsidiary of the Company that purchases such property (a “Limited Purpose Subsidiary”). To the extent of any net proceeds from non-recourse debt in excess of 75% of the cost of such real property and any capital expenditures related thereto, the Company must repay the principal amount borrowed under the credit facility. Each Limited Purpose Subsidiary will be disregarded for purposes of determining the Company’s compliance with its financial covenants under the credit facility. Although the Company has signed a definite Membership Interest Purchase Agreement with Realty Advisors, dated as of June 18, 2007, to sell the real property that it acquired to Realty Advisors, the sale is subject to, among other things, the approval of the transaction by the holders of a majority of the common stock issued in the Realty Advisors IPO and the holders of less than 20 percent of the common stock issued in the IPO voting against the transaction and electing to exercise their conversion rights. If the Company does not sell the acquired properties to Realty Advisors by September 30, 2007, the Company, on a quarterly basis, to the extent of Adjusted Excess Cash Flow (as defined in the amendment) for such quarter, is required to repay the principal amount borrowed under the credit facility to finance its real property acquisitions and the Company must sell such property to a third party by March 31, 2008. In addition, the net proceeds from any sale

This amendment also reduced the term loan portion of the credit facility from $40 million to $20 million, thereby reducing the current total credit facility from $100 million to $80 million, but simultaneously provided that the revolving portion of the credit facility may be expanded from $60 million to $80 million at the request of the Company and subject to the approval of the lender. The term loan portion of the credit facility may now only be used for real property acquisitions. Previously, the term loan portion of the credit facility was available for acquisitions by the Company of real estate service companies. The Company’s covenants under the credit facility were also revised to provide the Company with more operational flexibility.

As of June 30, 2007, the Company had $20.0 million outstanding under its term loan and $21.5 million outstanding under the revolving portion of the credit facility. The Company also has issued letters of credit for approximately $4.0 million, leaving approximately $34.5 million of the $60.0 million revolving line of credit available for future borrowings. The Company believes that it can meet its working capital needs with internally generated operating cash flow and, as necessary, additional borrowings under its revolving portion of the credit facility.

Interest on outstanding borrowings under the credit facility is based upon Deutsche Bank’s prime rate and/or a LIBOR based rate plus, in either case, an additional margin based upon a particular financial leverage ratio, and will vary depending upon which interest rate options the Company chooses to be applied to specific borrowings. The average interest rate the Company incurred on all credit facility obligations during fiscal years 2007 and 2006 was 8.82% and 7.75%, respectively.

Pursuant to an agreement with Deutsche Bank Securities Inc. the Company agreed to purchase, during the period commencing May 3, 2006 and continuing through June 28, 2006 and to the extent available, in the public marketplace, up to $3.5 million of Realty Advisors warrants in the open market if the public price per warrant was $0.70 or less. The Company agreed to purchase such warrants pursuant to an agreement in accordance with the guidelines specified by Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), through an independent broker-dealer registered under Section 15 of the Exchange Act that did not participate in Realty Advisors’ public offering. In addition, the Company further agreed that any such warrants purchased by it will not be sold or transferred until the completion of a business combination. On June 28, 2006, the Company agreed to a sixty-day extension of this agreement, through August 27, 2006. Pursuant to this warrant purchase program, the Company purchased an aggregate of approximately 4.6 million warrants of Realty Advisors through August 27, 2006 for an aggregate purchase price of approximately $2.2 million, or approximately $0.47 per warrant excluding commissions of approximately $186,000.

On April 28, 2006, the Company filed a registration statement on Form S-1 with the Securities and Exchange Commission (the “SEC”), proposing to offer to sell shares of the Company’s common stock on its own behalf and on behalf of Kojaian Ventures, L.L.C. (“KV”), an entity affiliated with the Chairman of the Board (the “Secondary Offering”). On June 29, 2006, the Company’s registration statement was declared effective by the SEC and the Company and KV agreed to sell an aggregate of ten million shares of the Company’s common stock, five million shares each, at a public offering price of $9.50 per share. The Secondary Offering subsequently closed on July 6, 2006 pursuant to which five million shares were sold by each of the Company and KV, generating aggregate gross proceeds to the Company, after underwriting discounts, of $44,412,500. The Company incurred additional costs and expenses related to the offering totaling approximately $1,004,000.

On April 28, 2006, the Company entered into an agreement with KV to exchange all 11,725 shares of the Series A-1 Preferred Stock owned by KV (the “Preferred Stock Exchange”), which represented all of the issued and outstanding shares of the Company’s preferred stock, for (i) 11,173,925 shares of the Company’s common stock, which is the common stock equivalent that the holder of the Series A-1 Preferred Stock was entitled to receive upon liquidation, merger, consolidation, sale or change in control of the Company, and (ii) a payment by the Company of approximately $10,057,000 (or $0.90 per share of newly issued shares of common stock). The Preferred Stock Exchange closed simultaneously with the closing of the Secondary Offering on July 6, 2006. The amount by which the fair value of the consideration transferred to KV, which totaled approximately $116.2 million, exceeded the carrying amount of the Series A-1 Preferred Stock in the Company’s financial statements, which totaled

On February 15, 2007, the Company, through GERA Abrams Centre LLC, acquired an office building, Abrams Office Center, located in Dallas, Texas, (the “Abrams Property”) for a contract price of $20,000,000, along with acquisition costs of approximately $369,000, for a net purchase price of $20,369,000. On February 28, 2007, the Company through GERA 6400 Shafer LLC, acquired commercial real property (the “Shafer Property”) located in Rosemont, Illinois, for a contract price of $21,450,000, along with acquisition costs of approximately $552,000, and assumed obligations of approximately $542,000, for a net purchase price of $22,544,000. On June 15, 2007, the Company, through GERA Danbury LLC, acquired an office complex, Danbury Corporate Center (the “Danbury Property”) for a contract price of $80,750,000, along with acquisition costs of approximately $404,000, for a net purchase price of $81,154,000. Each of these LLCs is a wholly owned subsidiary of GERA Property Acquisition, LLC which, in turn, is a wholly owned subsidiary of the Company.

Simultaneous with the acquisition of the Danbury Property, the Company’s subsidiaries that hold the warehoused properties closed two non-recourse mortgage loan financings with Wachovia Bank, N.A. (“Wachovia”) in the aggregate amount of $120.5 million. The majority of these mortgage loan financings, $78.0 million (the “Danbury Wachovia Loan”), is secured by the Danbury Property. The balance of the mortgage loan proceeds, $42.5 million (the “Abrams and Shafer Wachovia Loan”), is secured by the Abrams Property and the Shafer Property (collectively with the Danbury Property, the “Properties”). The proceeds of the mortgage loans were used to finance the purchase of the Danbury Property, to fund certain required reserves for the Properties held by Wachovia totaling $43.6 million, to pay the lender’s fees and costs and to repay certain amounts borrowed by the Company through its credit facility with respect to the Abrams Property and Shafer Property.

Each of the two non-recourse mortgage loans has an initial term of two years with three extension options, each one year in length, subject to the satisfaction of certain conditions, including with respect to the first extension option, the purchase of an interest rate cap on 30-day LIBOR with a LIBOR strike price of 6%. Interest on the mortgage loans will be paid and adjusted monthly at a floating rate of interest per annum equal to the 30-day LIBOR plus a spread of 170 basis points. The borrowers under each of the mortgage loans were required to purchase a two-year interest rate cap on 30-day LIBOR with a LIBOR strike price of 6%, thereby locking the maximum interest rate on borrowings under the mortgage loans at 7.70% for the initial two year term of the mortgage loans.

Pursuant to the Abrams and Shafer Wachovia Loan and the Danbury Wachovia Loan, reserves in the amount of approximately $15.2 million and $28.4 million, respectively, have been established and held by Wachovia for the costs of certain capital expenditures, maintenance and repairs, leasing commissions and tenant improvements, rent concessions and debt service coverage.

The Company acquired the three properties with the intention to hold them for future sale to Realty Advisors. On June 18, 2007, the Company announced the signing of a definite Membership Interest Purchase Agreement (the “Acquisition Agreement”), among the Company, Realty Advisors and GERA Property Acquisition, LLC (“Property Acquisition”). Pursuant to the Acquisition Agreement, Realty Advisors shall acquire all of the issued and outstanding membership interests of Property Acquisition held by Property Acquisition’s sole member, the Company (the “Acquisition”).

The Acquisition is subject to among other things, the approval of the transaction by the holders of a majority of the common stock issued in the Realty Advisors IPO and the holders of less than 20 percent of the common stock issued in the IPO voting against the transaction and electing to exercise their conversion rights. There is no assurance that the foregoing conditions for the approval of the Acquisition will occur.

As a result of the Acquisition, Realty Advisors will indirectly acquire and own the Properties. Prior to entering into the Acquisition Agreement, the Company and Realty Advisors did not have any agreement with respect to the Properties and Realty Advisors did not have any obligation to purchase these properties from the Company.

The Company acquired the Properties for an aggregate purchase price of approximately $122.2 million. Pursuant to the Acquisition Agreement, the Company will sell the Properties to Realty Advisors on a “cost neutral

In addition, upon the closing of the Acquisition, pursuant to an agreement with Realty Advisors and the Company at the time of Realty Advisors’ initial public offering in February 2006, Realty Advisors will pay the Company an acquisition fee equal to one percent of the purchase price paid by the Company for the Properties.

On May 22, 2007, the Company entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, NNN Realty Advisors, Inc. (“NNN Realty Advisors”) and B/C Corporate Holding, Inc. (“Merger Sub”), a wholly owned subsidiary of the Company. Pursuant to the Merger Agreement, NNN Realty Advisors will become a wholly owned subsidiary of the Company (the “Merger”). The Merger will be effected through the issuance of 0.88 shares of the Company’s common stock for each share of NNN Realty Advisors common stock outstanding. Following the Merger, the Company stockholders will own approximately 41% of the combined company and NNN Realty Advisors stockholders will own approximately 59% of the combined company.

The merged companies will retain the Grubb & Ellis name and will continue to be listed on the NYSE under the ticker symbol “GBE”. The combined company will be headquartered in Santa Ana, CA and the Company’s Board of Directors will be increased to nine members. The Board will include six nominees from NNN Realty Advisors and three nominees from the Company. Anthony W. Thompson, Founder and Chairman of the Board of NNN Realty Advisors, will join the Company as Chairman of the Board. Each of C. Michael Kojaian, currently Chairman of the Board of Directors of the Company, Rodger D. Young and Robert J. McLaughlin will remain on the Board of Directors of the Company. Mr. Young will be Chairman of the combined company’s Governance and Nominating Committee and Mr. McLaughlin will be Chairman of the combined company’s Audit Committee. Scott D. Peters, President and Chief Executive Officer of NNN Realty Advisors will become Chief Executive Officer of the Company and will also join the Company’s Board of Directors.

The Company leases office space throughout the country through non-cancelable operating leases, which expire at various dates through February 28, 2017.

In total, the Company’s lease and debt obligations as of June 30, 2007 which are due over the next five years, are as follows (in thousands):

The Company’s credit facility debt obligations and mortgage loan obligations are floating rate obligations whose interest rate and related monthly interest payments vary with the movement in LIBOR and/or prime lending rates. As of June 30, 2007, the outstanding principal balances on the credit facility debt obligations totaled $41.5 million and on the mortgage loan debt obligations totaled $120.5 million. Since interest payments on any future obligation will increase if interest rate markets rise, or decrease if interest rate markets decline, the Company will be subject to cash flow risk related to these debt instruments. In order to mitigate this risk, the terms of the amended credit agreement executed by the Company in April 2006 required the Company to maintain interest rate

The Company does not utilize financial instruments for trading or other speculative purposes, nor does it utilize leveraged financial instruments.

We have audited the accompanying consolidated balance sheets of Grubb & Ellis Company as of June 30, 2007 and 2006, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended June 30, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Grubb & Ellis Company at June 30, 2007 and 2006, and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 2007, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Grubb & Ellis Company’s internal control over financial reporting as of June 30, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 27, 2007 expressed an unqualified opinion thereon.

As discussed in Note 1 to the consolidated financial statements, in fiscal year 2006 the Company changed its method of accounting for stock-based employee compensation.

We have audited Grubb & Ellis Company’s internal control over financial reporting as of June 30, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Grubb & Ellis Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Grubb & Ellis Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2007, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of June 30, 2007 and 2006, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended June 30, 2007 of Grubb & Ellis Company and our report dated August 27, 2007 expressed an unqualified opinion thereon.