GRUBB & ELLIS CO, S-3, 1994-07-22

GRUBB & ELLIS CO
S-3, 1994-07-22
REAL ESTATE AGENTS & MANAGERS (FOR OTHERS)

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<PAGE>

As filed with the Securities and Exchange Commission on July 22, 1994

Registration No. 33-________

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------

FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------

GRUBB & ELLIS COMPANY
(Exact name of Registrant as specified in its charter)

Delaware 94-1424307
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification
Organization) Number)

One Montgomery Street
Telesis Tower
San Francisco, CA 94104
(Address, including ZIP code, and telephone number, including area code, of
Registrant's principal executive offices)

---------------

Robert J. Walner
Senior Vice President and Senior Counsel
One Montgomery Street
Telesis Tower
San Francisco, CA 94104
(415) 956-1990
(Address, including ZIP code, and telephone number,
including area code, of agent for service)

COPIES OF COMMUNICATIONS TO:

Scott R. Haber
Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, California 94111
(415) 391-0600
---------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
---------------

If the only securities being registered on this Form are being offered pursuant
to dividend or reinvestment plans, check the following box. / /

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum Amount of
Title of Each Class of Securities Amount to be Offering Aggregate Registration Fee(1)
to be Registered Registered Share Offering Price
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

Rights to Purchase Common Stock 4,418,540 -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Common Stock ($.01 par value) 4,418,540 $2.375 $10,494,033 $3,619

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- ------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Calculated in accordance with Rule 457.
</TABLE>

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.

<PAGE>

GRUBB & ELLIS COMPANY

RIGHTS TO PURCHASE
UP TO 4,418,540 SHARES OF
COMMON STOCK
EXPIRING OCTOBER 13, 1994

Grubb & Ellis Company (the "Company") will issue at no cost to
holders of record on September 13, 1994 (the "Record Date") of its common stock,
par value $0.01 per share (the "Common Stock"), one nontransferable right (a
"Right") for each share of Common Stock. Each Right entitles the holder to
purchase, at any time prior to 5:00 p.m. (Chicago time) on October 13, 1994 (the
"Expiration Time"), one share of Common Stock (the "Basic Subscription
Privilege") at a subscription price of $2.375 per share (the "Subscription
Price"). The Rights are nontransferable. See "The Rights Offering."

To the extent any shares of Common Stock offered hereby are not
purchased pursuant to the Basic Subscription Privilege, a holder who validly
exercises all of its Rights pursuant to the Basic Subscription Privilege may
oversubscribe at the Subscription Price for remaining shares of Common Stock up
to a maximum number equal to the number of shares of Common Stock held by such
holder as of the Record Date, subject to proration (the "Oversubscription
Privilege"). See "The Rights Offering -- Oversubscription Privilege."
---------------

THE COMMON STOCK OFFERED HEREBY INVOLVES
CERTAIN RISKS. SEE "RISK FACTORS."
---------------

Warburg, Pincus Investors, L.P. ("Warburg"), has entered into a
Standby Agreement pursuant to which it has agreed to purchase at the
Subscription Price shares of Common Stock reserved for issuance pursuant to the
exercise of Rights and not purchased pursuant to the Basic Subscription
Privilege or the Oversubscription Privilege, subject to a maximum number of
shares that will result in an aggregate purchase price paid by Warburg being
equal to $10 million plus accrued interest owed to Warburg by the Company under
the Loan and Security Agreement dated March 29, 1994 between the Company and
Warburg (the "Bridge Loan"). If common stockholders do not purchase any shares
of Common Stock in the Rights Offering, Warburg will purchase the maximum number
of shares it is committed to buy under the Standby Agreement, which would be
approximately 4,250,000 shares. See "Financing Transactions -- Summary of
Anticipated Effects of the Financing Transaction; Dilution," "The Rights
Offering -- Commitment of Warburg" and "Risk Factors."

(Cover continued on following page)
---------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Proceeds to Company(2)
Underwriting Discounts and
Subscription Price Commissions(1) Minimum(3) Maximum(4)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share $2.375 None $2.375 $2.375
- -----------------------------------------------------------------------------------------------------
Total $10,494,033 None $10,100,000 $10,494,033
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
<FN>
(1) The Shares are being offered and sold directly by the Company, and no
commissions or other remuneration is intended to be paid to any person for
soliciting purchases of the shares in this Offering. See "The Rights
Offering -- Method of Offering."
(2) Before deducting expenses payable by the Company estimated at $350,000.
(3) Approximate proceeds assuming the purchase of Common Stock only by Warburg
up to the maximum amount of its obligation. See "The Rights Offering --
Commitment of Warburg."
(4) Assumes the exercise of all Rights.
</TABLE>
THE DATE OF THIS PROSPECTUS IS SEPTEMBER __, 1994
<PAGE>

(Continued from previous page)

A nontransferable certificate evidencing the total number of
Rights to which a stockholder is entitled is being sent with this Prospectus to
each stockholder entitled to participate in this Rights Offering.

To the extent a stockholder does not exercise his Rights, his
percentage equity interest in the Company and his voting power will be reduced.
See "Financing Transactions -- Summary of Anticipated Effects of the Financing
Transactions; Dilution"

---------------

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement on Form S-3 (of which this
Prospectus is a part) under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Rights and the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits thereto. For further information
with respect to the Company, the Rights and the Common Stock, reference is
hereby made to such Registration Statement and exhibits filed therewith. The
Registration Statement, including the exhibits thereto, may be inspected without
charge at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. The statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference and the
exhibits thereto. Copies of each such contract or other document may be
obtained from the Commission at its principal office in Washington, D.C. upon
payment of the charges prescribed by the Commission.

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports, proxy and information statements
and other information with the Commission. The Registration Statement,
including the exhibits thereto, as well as such reports, proxy and information
statements and other information filed by the Company with the Commission, may
be inspected, without charge, and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
Room 1024; 7 World Trade Center, 13th Floor, New York, New York 10048; and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, Room 1024, at
prescribed rates. The Company's Common Stock is listed on the NYSE. Reports,
proxy and information statements and other information concerning the Company
may be inspected at the offices of the NYSE at 20 Broad Street, New York, New
York 10005.

---------------

ii
<PAGE>

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The documents listed below have been filed with the Commission
and are incorporated herein by reference:

a. Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 filed on March 31, 1994, as amended on
Form 10-K/A (Amendment No. 1) filed on April 29, 1994 and
Form 10-K/A (Amendment No. 2) filed July 21, 1994.

b. Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1994, as amended on Form 10-Q/A (Amendment No. 1)
filed on July 21, 1994.

c. Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1994.

d. Proxy Statement dated July __, 1994 in connection with the
1994 Annual Meeting of Stockholders.

e. Description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A declared
effective on April 15, 1981, except that the number of
authorized shares of capital and common stock have been
increased to 26,000,000 and 25,000,000, respectively.

All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering made by this Prospectus
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date of filing such documents.

Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein, or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.

The Company will furnish without charge to each person to whom
this Prospectus is delivered, on written or oral request of such person, a copy
of any or all documents incorporated by reference in this Prospectus, without
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Copies of this Prospectus, as amended or
supplemented from time to time, and any other documents (or parts of documents)
that constitute part of the Prospectus under Section 10(a) of the Securities Act
will also be provided without charge to each such person, upon written or oral
request. Requests should be directed to Investor Relations, Grubb & Ellis
Company, One Montgomery Street, Telesis Tower, San Francisco, California, 94104,
telephone number (415) 956-1990.

iii
<PAGE>

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO INCORPORATED
BY REFERENCE IN THIS PROSPECTUS. EACH INVESTOR IS URGED TO READ THIS PROSPECTUS
IN ITS ENTIRETY PRIOR TO MAKING AN INVESTMENT IN THE SHARES OF COMMON STOCK
OFFERED HEREBY.

THE COMPANY

Grubb & Ellis Company, a Delaware corporation organized in 1980,
is the successor by merger to a real estate brokerage company first established
in California in 1958. Grubb & Ellis Company and its wholly and majority owned
subsidiaries (the "Company") provide real estate services, including commercial
brokerage, residential brokerage, property and facilities management (through
its wholly owned operations and majority owned subsidiary, Axiom Real Estate
Management, Inc. ("Axiom")) and other services for real estate owners, investors
and tenants.

THE RIGHTS OFFERING

The Company is distributing at no cost to holders of record on
September 13, 1994 of its common stock, par value $0.01 per share (the "Common
Stock"), one nontransferable right (a "Right") for each share of Common Stock.

DESCRIPTION. Each Right entitles the holder to purchase at a subscription
price of $2.375 (the "Subscription Price") one share of
Common Stock (the "Basic Subscription Privilege"). On
_____________, 1994, the closing price of the Common Stock
on the NYSE was $_____ per share. See "The Rights
Offering."

RECORD DATE. September 13, 1994 (the "Record Date").

EXPIRATION
TIME. . . . 5:00 p.m. (Chicago time), October 13, 1994 (the "Expiration
Time").

OVERSUBSCRIPTION
PRIVILEGE. . To the extent any shares of Common Stock offered hereby are
not purchased pursuant to the Basic Subscription Privilege,
a stockholder who validly exercises all of its Rights may
oversubscribe at the Subscription Price for remaining shares
of Common Stock up to a maximum number equal to the number
of shares of Common Stock held by such holder on the Record
Date, subject to proration. See "The Rights Offering --
Subscription Privileges."

TRANSFER . . The Rights are nontransferable.

STANDBY COMMITMENT
TO PURCHASE
SHARES . . . The Company's principal stockholder, Warburg, Pincus
Investors, L.P. ("Warburg"), has entered into a Standby
Agreement pursuant to which it has agreed to purchase at the
Subscription Price shares of Common Stock reserved for
issuance pursuant to the exercise of Rights and not
purchased pursuant to the Basic Subscription Privilege or
the Oversubscription Privilege, subject to a maximum number
of shares that will result in an aggregate purchase price
paid by Warburg being equal to $10 million plus accrued
interest owed to Warburg by the Company under the Loan and
Security Agreement dated March 29, 1994 between the Company
and Warburg (the "Bridge Loan"). Warburg will pay for such
shares first through the cancellation of indebtedness under
the Bridge Loan and thereafter through payment of funds
directly to the Company. As of August

iv
<PAGE>

1, 1994, the Company had borrowed $6 million under the
Bridge Loan. If common stockholders do not purchase any
shares of Common Stock in the Rights Offering, Warburg will
purchase the maximum number of shares it is committed to buy
under the Standby Agreement, which would be approximately
4,250,000 shares. See "Financing Transactions--Summary of
Anticipated Effects of the Financing Transaction; Dilution,"
"The Rights Offering -- Commitment of Warburg" and "Risk
Factors."

DILUTION OF
EXISTING COMMON
STOCK. . . . To the extent a holder of Common Stock (a "Common
Stockholder") does not exercise its Rights, such Common
Stockholder's percentage interest in the Company's voting
power will be diluted. If Common Stockholders do not
purchase shares of Common Stock in the Rights Offering, and
Warburg purchases the maximum number of shares of Common
Stock that it is obligated to purchase, the ownership
interest of the Common Stockholders in the Company would
decrease from approximately 34% to approximately 25%, while
Warburg's ownership interest in the Company would increase
from approximately 37% to approximately 55%. On the other
hand, participation in the Rights Offering would give each
Common Stockholder the opportunity to maintain or increase
his or her voting power in the Company through the exercise
of the Rights. If Common Stockholders fully participate in
the Rights Offering, the ownership interest of the Common
Stockholders in the Company would increase from
approximately 34% to approximately 51%. See "The Financing
Transactions--Summary of Anticipated Effects of the
Financing Transactions; Dilution."

DILUTION UPON
EXERCISE OF
RIGHTS . . . The Subscription Price significantly exceeds the Company's
net tangible book value per share as of March 31, 1994,
after giving effect to the completion of the Rights Offering
and the other Financing Transactions (as defined below).
Based on an exercise price of $2.375 per share, Common
Stockholders who exercise Rights would have experienced an
immediate dilution in net tangible book value of $10.24 per
share and $8.34 per share assuming the exercise of all
outstanding warrants. See "Dilution."

COMMON STOCK
OUTSTANDING PRIOR
TO THE RIGHTS
OFFERING . . 4,418,540 shares.

COMMON STOCK
OUTSTANDING AFTER
THE RIGHTS
OFFERING . . 8,837,080 shares, assuming the exercise of all Rights.

RISK FACTORS An investment in the Common Stock offered by this Prospectus
involves various risks, and prospective investors should
carefully consider the matters discussed under "Risk
Factors" prior to any investment in the Company. Such risks
include, among others:

- risks associated with the negative pressures that the
prolonged real estate recession continues to place on both
the volume of transactions and prices for real estate, which
could adversely and materially affect the Company's
operating results, cash flow and financial condition;

v
<PAGE>

- the Company has incurred net losses in each of the last four
fiscal years, primarily as a result of certain restructuring
charges associated with the Company's operations, and there
can be no assurance that after the Rights Offering the
Company will be able to achieve increased revenue or
profitability;

- risks associated with servicing outstanding obligations,
including that the Company may not have funds sufficient to
meet debt obligations;

- the operating activities of the Company and the settlement
of various lawsuits which arose before existing management
began operating the Company continue to consume net cash
resulting in a lack of liquidity, which if not improved,
could result in an inability to sustain the Company's
operations beyond 1994;

- if the Company were forced to seek protection from its
creditors under applicable federal bankruptcy laws and
reorganize or liquidate its assets, it is likely that
holders of Common Stock would receive little, if any,
consideration in respect of their shares;

- the issuance of the large number of shares of Common Stock
pursuant to the Rights Offering and the New Warrants (as
defined below), could adversely affect the market price of
the Common Stock;

- the Company does not now meet several of the listing
criteria for the New York Stock Exchange ("NYSE"), and
although the NYSE has not notified the Company of any plans
to delist the Common Stock, if the NYSE were to delist the
Common Stock, the market price and liquidity of the Common
Stock could be adversely affected;

- if Common Stockholders do not participate in the Rights
Offering, they will experience a reduction in their voting
power from approximately 34% to approximately 25% of the
outstanding voting power of the Company;

- substantial and immediate dilution in net tangible book
value of the Common Stock purchased in the Rights Offering;

- Warburg, through its current stock ownership and Board
representation, is able to substantially influence the
management of the day-to-day operations and affairs of the
Company;

- if Warburg as a result of its purchase of Common Stock
pursuant to its standby commitment acquires control of more
than 50% of the outstanding voting power of the Company,
Warburg will have the power to elect a majority of the
Company's Directors (subject to its obligations under the
Stockholders' Agreement (as defined below)) and to approve
any action requiring Stockholder approval, assuming
compliance with applicable Delaware law and the Certificate
of Incorporation; and

- the Company does not anticipate paying any cash dividends on
the Common Stock in the foreseeable future.

USE OF PROCEEDS The maximum net proceeds to the Company from the sale of the
Common Stock offered hereby are estimated to be
approximately $10.1 million (assuming all of the shares of
Common Stock offered hereby are purchased pursuant to the
exercise of Rights and after deducting estimated expenses of
the Financing Transactions). The minimum net proceeds of
the Rights Offering are estimated to be

vi
<PAGE>

approximately $9.8 million (assuming the purchase of Common
Stock only by Warburg up to the maximum amount of its
obligation and after deducting estimated expenses of the
Financing Transactions). Warburg is required to fulfill its
standby commitment first through cancellation of
indebtedness under the Bridge Loan, including accrued
interest, and thereafter through payment of funds directly
to the Company. In the event that following the purchase of
shares by Warburg pursuant to its standby commitment there
is any outstanding indebtedness remaining under the Bridge
Loan, any such remaining amounts outstanding under the
Bridge Loan will be retired with the proceeds of the Rights
Offering. Thereafter, remaining proceeds, if any, of the
Rights Offering will be used for general corporate purposes.
See "The Rights Offering -- Commitment of Warburg" and "Use
of Proceeds."

FINANCING TRANSACTIONS

BACKGROUND

On September 12, 1994, the Company held its Annual Meeting of
Stockholders (the "Annual Meeting"), at which the stockholders of the Company
(the "Stockholders"), including a majority of the Common Stockholders other than
Warburg and the Company's principal lender, The Prudential Insurance Company of
America ("Prudential") approved certain financing transactions (the "Financing
Transactions"), including the Rights Offering. The Financing Transactions also
include the amendment of certain agreements between the Company and Prudential,
the issuance to Warburg, under certain circumstances, and Prudential of warrants
to purchase 325,000 and 150,000 shares of Common Stock, respectively, and
amendments to the outstanding Senior Preferred Stock (as defined below), the
outstanding Junior Preferred Stock (as defined below) and outstanding warrants
to purchase Common Stock. It is anticipated that the Financing Transactions
will close promptly following the expiration of the Rights Offering. The
Financing Transactions other than the Rights Offering are described below. For
a discussion of the Rights Offering, see "The Rights Offering."

LOAN AGREEMENTS

BRIDGE LOAN. On March 29, 1994, Warburg and the Company entered
into a Loan and Security Agreement pursuant to which Warburg has agreed to make
advances to the Company from time to time in an aggregate principal amount for
all such advances outstanding not to exceed $10 million at any time. The
outstanding principal amount of the Bridge Loan bears interest at a rate of 5%
per annum. The Bridge Loan is secured by the Company's commercial brokerage
revenues and amounts held in a cash collateral account established by the
Company. Prudential also has a lien on the cash collateral account which is
subordinated to Warburg's lien. As of August 1, 1994, the Company had borrowed
$6 million under the Bridge Loan. As described above, all indebtedness under
the Bridge Loan will be retired in connection with the Rights Offering and
Warburg's standby commitment. See "The Rights Offering--Commitment of Warburg,"
"Financing Transactions--Exercise of Contingent Warrants," "Use of Proceeds."

PRUDENTIAL 1994 WAIVER. On March 28, 1994, in order to
facilitate the completion of the Financing Transactions, Prudential agreed to
waive (the "Prudential 1994 Waiver") through December 31, 1994 certain
provisions of its loan agreement with the Company (the "Prudential Debt
Agreement") with respect to the outstanding 9.9% Senior Notes (the "Senior
Notes"), the 10.65% Subordinated Payment-in-Kind Notes (the "PIK Notes") and the
Revolving Credit Note (the "Revolving Credit Note"). Pursuant to the Prudential
1994 Waiver, Prudential waived compliance under covenants relating to working
capital, cumulative operating losses and capital expenditures and waived the
Company's obligation to repay or prepay any principal under the Senior Notes and
the Revolving Credit Note that would have been due during 1994. Prudential
excused performance of the foregoing provisions until the earlier of the
execution of a definitive amendment of the Prudential Debt Agreement as
contemplated by the Financing Transactions or December 31, 1994.

vii
<PAGE>

PRUDENTIAL DEBT AGREEMENT. Upon consummation of the Financing
Transactions, the Company and Prudential will amend the Prudential Debt
Agreement with respect to the Senior Notes, the PIK Notes and the Revolving
Credit Note. Pursuant to the amendment, $15 million principal amount of the
Senior Notes, the PIK Notes and the Revolving Credit Note which would have been
due from 1994 through 1996 will be deferred and no principal payments will be
required until November 1, 1997, and thereafter (A) the Revolving Credit Note
will mature November 1, 1999, (B) principal on the Senior Notes will be payable
in two equal installments on November 1, 1997 and 1998, and (C) principal on the
PIK Notes will be payable in two approximately equal installments on November 1,
2000 and 2001, (ii) the interest rate on the PIK Notes will increase from 10.65%
to 11.65% per annum on January 1, 1996, (iii) the temporary repayment
requirements applicable to the Revolving Credit Note and certain covenants
relating to working capital, cumulative operating losses and capital
expenditures will be ineffective until April 1, 1997, (iv) the Company will be
required to maintain a ratio of EBITDA (as defined in the Prudential Debt
Agreement) to total interest expense equal to or greater than 2:1 on a rolling
12 month basis as of April 1, 1997 and quarterly thereafter, (v) the Company
will be required to make supplemental debt payments commencing in 1998 if the
Company generates certain levels of cash flow (vi) the Company will be
permitted to make up to $5 million of loans and advances to its sales persons
against future commissions, and guarantees of such loans and advances and
(vii) certain other restrictions and covenants will be eliminated from the
Prudential Debt Agreement or waived by Prudential.

The following table compares the required principal payments due
under the existing terms of the Prudential Debt Agreement with the required
principal payments due under the Prudential Debt Agreement after giving effect
to the amendments which will be effected in connection with the Financing
Transactions.

Principal Due Under Principal Due Under
Existing Terms of Prudential Debt
Prudential Debt Agreement(1) Agreement As Amended(3)
---------------------------- -----------------------
<S> <C> <C>
1994 $4,000,000(2) $ -0-
1995 $5,500,000 $ -0-
1996 $5,500,000 $ -0-
1997 $3,000,000 $5,000,000
1998 $3,000,000 $5,000,000
1999 $3,000,000 $5,000,000
2000 -0- $4,500,000
2001 -0- $4,500,000
- --------------------
<FN>
(1) Under the Prudential Debt Agreement, the Company is required to repay all
outstanding principal under the Revolving Credit Note for a 60-day period
each year. The amount due under the Revolving Credit Note currently is
$5,000,000, all of which would have been required to be paid in 1994. The
Revolving Credit Note matures on December 31, 1994, at which time, the
Company may convert such Note into a new term note which would mature on
December 31, 1996. The table assumes that the Company elected to make such
conversion.

(2) Pursuant to the Prudential 1994 Waiver, Prudential agreed to waive the
Company's obligation to repay any principal under the Revolving Credit Note
and to prepay the $4,000,000 principal which would have been due on the
Senior Notes through the earlier of the execution of a definitive amendment
of the Prudential Debt Agreement as contemplated by the Financing
Transactions or December 31, 1994.

(3) Pursuant to the proposed amendments to the Prudential Debt Agreement, the
requirement to repay principal under the Revolving Credit Note will be
deferred until November 1, 1999 and the Company will not have the option of
converting the Revolving Credit Note into a new term note. The table
excludes PIK Notes issued and to be issued in lieu of cash interest.
</TABLE>

ISSUANCE OF NEW WARRANTS

As consideration for acquiring unsubscribed shares of Common
Stock in connection with the Rights Offering, and agreeing to the other
transactions contemplated by the Rights Offering, the Company will issue to
Warburg warrants to purchase 325,000 shares of Common Stock at an exercise price
of $2.375 per share (the "Warburg 1994 Warrants"); provided that the Company
will be obligated to issue the Warburg 1994 Warrants only if Warburg purchases
at least 500,000 shares of Common Stock pursuant to the Standby Agreement. As
consideration for modifying the Prudential Debt Agreement with

viii
<PAGE>

the Company, waiving noncompliance with certain covenants and agreeing to the
other transactions contemplated by the Financing Transactions, the Company will
issue to Prudential warrants to purchase 150,000 shares of Common Stock at an
exercise price of $2.375 per share (the "Prudential 1994 Warrants" and together
with the Warburg 1994 Warrants, the "New Warrants"). Any or all of the New
Warrants may be exercised at any time until five years after the date of
issuance. The other terms of the New Warrants will be the same as the terms of
the Existing Warrants (as defined below), after giving effect to the amendments
to the Existing Warrants discussed below (including the amendments to the
Warrant Anti-Dilution Provisions (as defined below).

1993 RESTRUCTURING

On January 29, 1993, the stockholders of the Company approved a
financial recapitalization and debt restructuring (the "Restructuring"),
pursuant to which Warburg, for a purchase price of $12,850,000, purchased (i)
128,266 shares of the Company's 12% Senior Convertible Preferred Stock (the
"Senior Preferred Stock"), (ii) five-year warrants initially to purchase 340,000
shares of Common Stock, at an exercise price of $5.00 per share (the "$5.00
Warrants"), (iii) five-year warrants initially to purchase 142,000 shares of
Common Stock at an exercise price of $5.50 per share (the "$5.50 Warrants" and
together with the $5.00 Warrants, the "Warburg 1993 Warrants"), and (iv)
warrants to purchase 373,818 shares of Common Stock at an exercise price of
$5.00 per share, subject to certain limitations (the "Contingent Warrants").
Also pursuant to the Restructuring, Joe F. Hanauer ("Hanauer"), who is currently
Chairman of the Board, Executive Chairman and Chief Executive Officer of the
Company purchased for $900,000 (i) 8,894 shares of Senior Preferred Stock, (ii)
$5.00 Warrants initially to purchase 160,000 shares of Common Stock, (iii) $5.50
Warrants initially to purchase 58,000 shares of Common Stock and (iv) Contingent
Warrants to purchase 26,182 shares of Common Stock.

Pursuant to the Restructuring, the Company and Prudential agreed
to restructure the existing indebtedness of the Company owed to Prudential,
including the issuance to Prudential, in exchange for the cancellation of $15
million of subordinated debt, of 150,000 shares of the Company's 5% Junior
Convertible Preferred Stock (the "Junior Preferred Stock" and together with the
Senior Preferred Stock, the "Preferred Stock") and $5.50 Warrants initially to
purchase 200,000 shares of Common Stock (the "Prudential 1993 Warrants"). The
Common Stock and the Preferred Stock are sometimes collectively referred to
herein as the "Capital Stock." The Warburg 1993 Warrants, the Prudential 1993
Warrants and the $5.00 Warrants and $5.50 Warrants held by Hanauer are sometimes
collectively referred to herein as the "Existing Warrants."

As part of the Restructuring, Warburg, Prudential, Hanauer and
the Company entered into a Stockholders' Agreement (as amended as of this date,
the "Stockholders' Agreement"), which provides for the nomination of up to three
persons for election as Director by Warburg and up to two persons for election
as Director by Prudential.

Pursuant to the Financing Transactions, the Existing Warrants and
the Preferred Stock will be subject to certain amendments and adjustments which
are summarized below. See "Financing Transactions." The following chart
describes the changes to the outstanding Preferred Stock, Existing Warrants and
Contingent Warrants held by Warburg and Prudential which will be effected in
connection with the Financing Transactions:

ix
<PAGE>

Current Exercise Price New Exercise Price
and Amount of and Amount of
Security Underlying Securities Underlying Securities(1)
- ------------------------------- ---------------------------------------- -----------------------------------------
<S> <C> <C>

WARBURG

Senior Preferred Stock Convertible into 4,256,083 shares at a Convertible into approximately 4,650,000
conversion price of $3.0137 per share. shares at a conversion price of
approximately $2.76 per share.

$5.00 Warrants Exercisable for 340,000 shares at an Exercisable for approximately 459,000
exercise price of $5.00 per share. shares at an exercise price of $3.50 per
share.

$5.50 Warrants Exercisable for 142,000 shares at an Exercisable for approximately 198,000
exercise price of $5.50 per share. shares at an exercise price of $3.50 per
share.

PRUDENTIAL

Junior Preferred Stock Convertible into 2,674,511 shares at a Convertible into 2,674,511 shares at a
conversion price of $5.6085 per share. conversion price of $5.6085 per share.

Prudential $5.50 Warrants Exercisable for 200,000 shares at an Exercisable for 200,000 shares at an
exercise price of $5.50 per share. exercise price of $3.50 per share.

HANAUER(2)

Senior Preferred Stock Convertible into 295,118 shares at a Convertible into approximately 322,000
conversion price of $3.0137 per share. shares at a conversion price of
approximately $2.76 per share.

$5.00 Warrants Exercisable for 160,000 shares at an Exercisable for approximately 216,000
exercise price of $5.00 per share. shares at an exercise price of
approximately $3.70 per share.

$5.50 Warrants Exercisable for 58,000 shares at an Exercisable for approximately 81,000
exercise price of $5.50 per share. shares at an exercise price of
approximately $3.94 per share.

Contingent Warrants Exercisable for 26,182 shares at an Exercisable for approximately 35,000
exercise price of $5.00 per share. shares at an exercise price of
approximately $3.70 per share.

- ----------------------
<FN>
(1) Assumes the issuance of all shares of Common Stock reserved for issuance in
the Rights Offering. The exact adjustments will be based on, among other
things, the number of shares of Common Stock issued in the Rights Offering.

(2) All changes to the number of underlying securities and exercise or
conversion price of the securities held by Hanauer will be made solely upon
application of the anti-dilution provisions contained in such securities.
</TABLE>

AMENDMENTS TO EXISTING WARRANTS

Upon consummation of the Financing Transactions, the Warburg 1993
Warrants and the Prudential 1993 Warrants will be subject to certain adjustments
and amendments. The exercise price and the number of shares of Common Stock
issuable upon exercise of each Existing Warrant currently are subject to
adjustment from time to time upon the occurrence of certain events, including
upon the issuance of rights, options, warrants or securities directly or
indirectly convertible into Common Stock, and certain issuances of Common Stock,
for a consideration per share less than the greater of the current market price
or the warrant exercise price per share on the date of such issue (the "Warrant
Anti-Dilution Provisions"). Upon consummation of the Financing Transactions,
the exercise prices of the Warburg 1993 Warrants will be reduced to $3.50 per
share and the number of shares issuable upon exercise of the Warburg 1993
Warrants will be increased from 340,000 and 142,000 to approximately 459,000
and 198,000 shares of Common Stock for the $5.00 Warrants and $5.50 Warrants,
respectively. The exact adjustments will be based on, among other things,
the number of shares of Common Stock issued in the Rights Offering. The
exercise price of the Prudential 1993 Warrants will be reduced to $3.50 per
share, but the number of shares of Common Stock issuable upon exercise will
not change. The expiration date of the Prudential 1993 warrants will be
extended from January 29, 1988 to December 31, 1988. Upon consummation

x
<PAGE>

of the Financing Transactions, the Warrant Anti-Dilution Provisions contained in
the Existing Warrants held by Warburg and Prudential will be amended to, among
other things, eliminate the anti-dilution protection upon issuance of shares at
a price which is less than the greater of the market price and the exercise
price.

CANCELLATION OF CONTINGENT WARRANTS

Upon consummation of the Restructuring, Warburg acquired
Contingent Warrants to purchase 373,818 shares of Common Stock only in the event
that the Company incurs a defined liability in excess of $1,500,000 at an
aggregate exercise price equal to the lesser of 93.45% of the amount by which
such excess liability exceeds $500,000 or $5.00 per share multiplied by the
number of shares purchased. The other terms of the Contingent Warrants,
including the anti-dilution provisions, are the same as those contained in the
Existing Warrants. Concurrently with the consummation of the Rights Offering,
the Contingent Warrants will be cancelled; PROVIDED that Warburg will be
obligated to surrender the Contingent Warrants for cancellation only if the
Company issues the Warburg 1994 Warrants.

AMENDMENTS TO PREFERRED STOCK

REDEMPTION PROVISIONS. The Preferred Stock is subject to
mandatory redemption at certain specified times commencing on November 1, 2000.
Upon consummation of the Financing Transactions, the mandatory redemption
provisions will be eliminated, except that under certain limited circumstances,
the Company may be required to redeem the Junior Preferred Stock in connection
with an underwritten public offering of the Company's Common Stock as described
in "--Conversion of Junior Preferred Stock" below.

ANTI-DILUTION PROVISIONS. The outstanding shares of Senior
Preferred Stock, all of which are held by Warburg and Hanauer, currently are
convertible into an aggregate of 4,551,201 shares of Common Stock, at the option
of the holder, at a conversion price of $3.0137 per share of Common Stock. The
outstanding shares of Junior Preferred Stock, all of which are held by
Prudential, currently are convertible into an aggregate of 2,674,511 shares of
Common Stock, at the option of the holder, at a conversion price of $5.6085 per
share of Common Stock. The Preferred Stock currently provides that the
conversion prices are subject to adjustment from time to time upon the
occurrence of certain events, including upon the issuance of rights, options,
warrants or securities directly or indirectly convertible into Common Stock, and
certain issuances of Common Stock for a consideration per share less than the
greater of the current market price or the conversion price per share on the
date of such issue (the "Preferred Stock Anti-Dilution Provisions"). Warburg,
Hanauer and Prudential have waived application of the Preferred Stock Anti-
Dilution Provisions with respect to issuances by the Company from January 29,
1993 through consummation of the Financing Transactions pursuant to the
Company's 1990 Stock Option Plan (including securities issued upon the exercise
of stock options granted pursuant to such Plan) and the Company's Employee Stock
Purchase Plan. Upon consummation of the Rights Offering and upon application of
the Preferred Stock Anti-Dilution Provisions, the conversion price of the Senior
Preferred Stock will be adjusted to approximately $2.75 per share, assuming the
issuance of all shares reserved for issuance in the Rights Offering. As a
result of the adjustment to the conversion price, the number of shares of Common
Stock issuable upon conversion of the Senior Preferred Stock held by Warburg and
Hanauer will increase to approximately 4,998,800. The exact adjustments will be
based on, among other things, the number of shares of Common Stock issued in the
Rights Offering. Prudential has agreed to waive the application of the
Preferred Stock Anti-Dilution Provisions with respect to the Junior Preferred
Stock in connection with the Financing Transactions. Upon consummation of the
Financing Transactions, the Preferred Stock Anti-Dilution Provisions contained
in the Senior Preferred Stock held by Warburg

xi
<PAGE>

and the Junior Preferred Stock held by Prudential will be amended to, among
other things, eliminate the anti-dilution protection upon issuance of shares at
a price which is less than the greater of the market price and the conversion
price.

DIVIDEND RATE. Holders of the Senior Preferred Stock and the
Junior Preferred Stock are entitled to receive cumulative dividends payable in
cash, at a rate of 12% and 5% per annum, respectively. Upon consummation of the
Financing Transactions, the Junior Preferred Stock will be amended to increase
the dividend rate effective January 1, 2002 to 10% per annum with further
increases of 1% per annum effective January 1, 2003 and January 1, 2004 and 2%
per annum effective January 1, 2005 and each January 1 thereafter. Also in
connection with the Financing Transactions, the Senior Preferred Stock will be
amended so that at such time as the dividend rate on the Junior Preferred Stock
would increase above the dividend rate on the Senior Preferred Stock, the
dividend rate on the Senior Preferred Stock will increase by the same amount.
Assuming no other changes to the dividend rates of the Preferred Stock, as a
result of these amendments, the dividend rate on the Senior Preferred Stock will
increase by 2% per annum effective January 1, 2005. The Preferred Stock is
subject to mandatory conversion provisions under certain limited circumstances,
pursuant to which the Preferred Stock would be converted to Common Stock. The
conversion price of the Preferred Stock is not subject to adjustment for accrued
but unpaid dividends and upon conversion the dividends are no longer payable.

CONVERSION OF JUNIOR PREFERRED STOCK. The Junior Preferred Stock
will be amended to provide that in the event that the Company undertakes to sell
Common Stock in an underwritten public offering and the Company's investment
bankers advise the Company that in order to complete the public offering on the
most favorable terms to the Company it is necessary to retire the Junior
Preferred Stock, then the Company may direct all holders of the Junior Preferred
Stock to convert the Junior Preferred Stock to Common Stock; provided that such
holders will be obligated to convert only after the later of the time Warburg
has committed to convert its Senior Preferred Stock and the consummation of such
underwritten public offering. If the holders of the Junior Preferred Stock are
required to convert the Junior Preferred Stock at a time when the Common Stock
issuable upon conversion would have a value less than the accreted value of the
Junior Preferred Stock (including all unpaid dividends), then such holders must
either, at their option, require the Company to redeem the Junior Preferred
Stock at the accreted value or convert the Junior Preferred Stock.

AMENDMENTS TO STOCKHOLDERS' AGREEMENT

The Stockholders' Agreement, which contains agreements among
Warburg, Prudential and Hanauer with respect to voting for the election of
Directors and grants Warburg, Prudential and Hanauer certain registration rights
with respect to the securities received by them in the Restructuring, will be
amended so that Warburg and Prudential will have the same registration rights
for the New Warrants, the Common Stock issuable upon exercise of the New
Warrants and any shares of Common Stock acquired in connection with the Rights
Offering. The Common Stock issuable upon exercise of the New Warrants and the
Common Stock acquired in connection with the Rights Offering will be subject to
the voting requirements of the Stockholders' Agreement.

SUMMARY OF ANTICIPATED EFFECTS OF THE FINANCING TRANSACTIONS

The Financing Transactions, if approved and implemented, will
have a material effect on the Company and on the holders of the Company's Common
Stock. The Financing Transactions may result in a significant dilution of the
equity ownership of the Common Stockholders, depending on the participation of
the Common Stockholders in the Rights Offering. In addition, adjustments in the
number of shares issuable upon conversion of the Senior Preferred Stock,
adjustments in the number of shares issuable upon exercise of the Existing
Warrants held by Warburg and Hanauer and the Contingent Warrants held by Warburg
and Hanauer and the issuance of the New Warrants will have a dilutive effect on
the equity ownership of the Common Stockholders. Such dilution would reduce a
Common Stockholder's ownership interest in the Company. See "The Financing
Transactions--Summary of Anticipated Effects of the Financing Transactions."

xii
<PAGE>

HISTORICAL AND PRO FORMA CAPITALIZATION

The following table sets forth the capitalization of the Company
as of March 31, 1994, and such capitalization as adjusted to give effect to the
consummation of the Financing Transactions, including the Rights Offering,
assuming that the Financing Transactions had occurred as of March 31, 1994.
This table should be read in conjunction with the Company's consolidated
financial statements for the three months ended March 31, 1994 contained in the
Form 10-Q, as amended, for the quarter ended March 31, 1994, incorporated herein
by reference.

March 31, 1994
(unaudited)
(in thousands)
--------------------------
Historical Pro Forma(1)
----------- ------------
<S> <C> <C>

Long-term debt obligations:
Current portion $ 256 $ 256
Related Party
9.9% Senior Notes 10,000 10,000
10.65% PIK Notes, net of $920,000 cancellation and
$451,000 of unamortized discount 9,593 9,593
Revolving Credit Note 5,000 5,000
Bridge Loan 4,000 4,000
Notes payable at various rates of interest, due through
2005, long-term portion 839 839
---------- ----------
Total long-term debt obligations 29,688 29,688
---------- ----------
Redeemable preferred stock:
12% Senior convertible preferred stock:
137,160 shares outstanding 14,857 --
5% Junior convertible preferred stock:
150,000 shares outstanding 15,737 --
---------- ----------
Total redeemable preferred stock 30,594 --
---------- ----------
Stockholders' equity:
Preferred stock, $.01 par value:
1,000,000 shares authorized; 287,160 shares issued as
redeemable preferred stock; as adjusted: 8,894 shares of
Series A 12% Senior Convertible Preferred Stock
outstanding, 128,266 shares of Series B 12% Senior
Convertible Preferred Stock outstanding and 150,000
shares of 5% Junior Convertible Preferred Stock
outstanding, with dividend rates subject to increase
commencing 2005, 2005 and 2002, respectively -- 30,594
Common stock, $.01 par value:
25,000,000 shares authorized; 4,112,358 shares
outstanding; 8,224,716 shares outstanding as adjusted 42 83
Additional paid-in capital 47,591 56,967
Retained earnings (deficit) (121,725) (121,725)
---------- ----------
Total stockholders' equity (deficit) (74,092) (34,081)
---------- ----------
Total redeemable preferred stock and
stockholders' equity (deficit) (43,498) (34,081)
---------- ----------
Total capitalization $(13,810) $ (4,393)
---------- ----------
---------- ----------

- --------------------
<FN>
(1) Assumes consummation of the Financing Transactions, including the issuance
of 4,112,358 shares of Common Stock pursuant to the Rights Offering and the
effectiveness of amendments to the Certificate of Incorporation pursuant to
which the mandatory redemption provisions of the Preferred Stock will be
eliminated. Also assumes payment of expenses attributable to the Rights
Offering of $350,000.
</TABLE>

xiii
<PAGE>

RISK FACTORS

AN INVESTMENT IN THE SHARES OFFERED BY THIS PROSPECTUS INVOLVES
CERTAIN RISKS. PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW THE ENTIRE
PROSPECTUS AND CONSIDER THE FOLLOWING RISK FACTORS BEFORE MAKING A DECISION TO
PARTICIPATE IN THE RIGHTS OFFERING.

CONTINUING REAL ESTATE RECESSION

The prolonged real estate recession continues to place severely
negative pressures on both the volume of transactions and prices for real
estate. Further declines in the volume of transactions and prices for real
estate could adversely and materially affect the Company's operating results,
cash flow and financial condition and could require the Company to discontinue
certain of its operations or sell additional assets.

HISTORICAL NET LOSSES; STOCKHOLDERS' DEFICIT

The Company has incurred net losses in each of the last four
fiscal years, primarily as a result of certain restructuring charges associated
with the Company's operations. During fiscal years 1990, 1991 and 1992, losses
increased from $29.8 million in 1990 to $49.3 million in 1991 and to $59.7
million in 1992. The Company's net loss for 1993 was $18.2 million. Over the
same four-year period, stockholders' equity decreased from $55.5 million in
1990, to $6.5 million in 1991, to a deficit of $51.5 million in 1992 and to a
deficit of $68.9 million in 1993, as a direct result of the losses from
operations and special charges and unusual items. During that time, the Company
did not incur any material defaults under its outstanding debt obligations.
There can be no assurance that after the Rights Offering the Company will be
able to achieve increased revenue or profitability.

DEBT FINANCING; INABILITY TO SERVICE DEBT

After completion of the Financing Transactions, the Company will
continue to have substantial debt obligations of approximately $24 million under
the Prudential Debt Agreement and will continue to have significant Preferred
Stock dividend obligations. Management believes that, after completion of the
Financing Transactions, it will have sufficient operating cash flow to pay
interest and scheduled amortization on all of its outstanding indebtedness. In
1994, the Company's obligations for cash interest payments will be approximately
$1.3 million. See "Financing Transactions--Financing Transactions and Deferral
of Debt Payments" for a description of the Company's future obligations of
principal payments. However, even if the Financing Transactions are completed,
the Company's ability to meet its debt service obligations will depend on a
number of factors, including its ability to improve operating cash flow. There
can be no assurance that targeted levels of operating cash flow will actually be
achieved. The Company's ability to maintain or increase operating cash flow
will be largely dependent upon the real estate markets across the country.

LACK OF LIQUIDITY

The operating activities of the Company and the settlement of
various lawsuits which arose before existing management began operating the
Company continue to consume net cash. The Company believes that as a result of
the proceeds of the Rights Offering, the cost reduction programs already
implemented, the nonrecurring nature of lawsuits which generally arose out of
discontinued operations and the deferral of principal owed to Prudential, the
Company will have sufficient cash liquidity through 1994. In order for cash
flow from operating activities to be sufficient to sustain the Company's
operations beyond 1994, the Company will likely be required to achieve an
increase in revenue. There can be no assurance that such an increase in revenue
will occur or that it will be sufficient to maintain adequate cash to continue
operations beyond 1994.

1
<PAGE>

REORGANIZATION UNDER CHAPTER 11

If, in the future, the Company's financial forecasts indicate
that there is no longer a reasonable prospect for survival, the Company could be
required to restructure its financial affairs under the Federal Bankruptcy Code
or seek some other type of restructuring. If the Company were unable to meet
its debt service burden, the Company would be forced to seek protection from its
creditors under applicable federal bankruptcy laws. If this were to occur and
the Company were forced to reorganize or liquidate its assets, it is likely that
holders of Common Stock would receive little, if any, consideration in respect
of their shares.

POSSIBLE DECLINE OF STOCK PRICE AFTER RIGHTS OFFERING

The issuance of approximately 4,400,000 shares pursuant to the
Rights Offering at $2.375 per share and the New Warrants (as defined below) to
purchase 475,000 shares of Common Stock at $2.375, which together would
represent approximately 27% of the equity of the Company on a fully diluted
basis, could adversely affect the market price of the Common Stock. On
March 28, 1994, the last trading day prior to the announcement of the Financing
Transactions by the Company, the closing sales price on the NYSE was $3-3/8 per
share. On ________________, 1994, the closing sales price of the Common Stock
on the NYSE was $_____ per share.

CONTINUED LISTING CRITERIA ON THE NYSE

There are certain quantitative and qualitative criteria for the
continued listing of the Common Stock on the NYSE. The Company does not now
meet several of the criteria, including a minimum level of net tangible assets
and three year average net income, and does not anticipate it will meet such
criteria after the Financing Transactions. Although the NYSE has informed the
Company that it is closely monitoring the Company's continued listing status, it
has not notified the Company of any plans to delist the Common Stock. In the
event of delisting, the Company will use its best efforts to have its Common
Stock traded in another market, such as the over-the-counter market. However,
the delisting of the Common Stock by the NYSE could have an adverse impact on
the market price and liquidity of the Common Stock.

DILUTION OF VOTING POWER OF EXISTING COMMON STOCK

Upon consummation of the Financing Transactions, the percentage
of the Company's voting securities owned by existing Common Stockholders, other
than Prudential and Hanauer, could be reduced significantly on a fully diluted
basis. If Common Stockholders do not participate in the Rights Offering, the
outstanding voting power held by such Common Stockholders will be reduced from
approximately 34% to approximately 25% of the outstanding voting power of the
Company. On a fully diluted basis, assuming exercise of all outstanding
warrants and conversion of Preferred Stock, the outstanding voting power held by
such Common Stockholders will be reduced from approximately 31% to approximately
22% of the outstanding voting power of the Company. See "Financing
Transactions--Summary of Anticipated Effects of the Financing Transactions;
Dilution."

DILUTION IN NET TANGIBLE BOOK VALUE UPON EXERCISE OF RIGHTS

The Subscription Price per Right significantly exceeds the
Company's net tangible book value per share as of March 31, 1994, after giving
effect to the completion of the Rights Offering. Based on an exercise price of
$2.375 per share, Common Stockholders who exercise Rights would have experienced
an immediate dilution in net tangible book value of $10.24 per share and $8.34
per share assuming the exercise of all outstanding warrants. See "Summary--
Historical and Pro Forma Capitalization."

2
<PAGE>

OWNERSHIP BY CONTROLLING STOCKHOLDERS AND POSSIBLE EFFECTS

Warburg currently holds approximately 36.6% of the outstanding
Capital Stock of the Company, and approximately 39.5% on a fully diluted basis
assuming the exercise of warrants. Warburg, through ownership of its Senior
Preferred Stock and Common Stock and Board representation, is able to
substantially influence the management of the day-to-day operations and affairs
of the Company. Prudential holds approximately 26.4% of the outstanding Capital
Stock of the Company (approximately 25.3% on a fully diluted basis assuming the
exercise of all warrants) and is the Company's principal lender. As a result of
such stock ownership, Warburg and Prudential collectively have the power to
elect all of the Directors of the Company and collectively have the power, as
shareholders, to act together to approve all fundamental corporate transactions,
including mergers and the sale of all or substantially all of the Company's
assets.

POSSIBLE CONFLICTS OF INTEREST

Following the completion of the Financing Transactions, Warburg
will hold between approximately 28.1% and approximately 54.5% of the outstanding
Capital Stock of the Company, depending on the participation of the Common
Stockholders in the Rights Offering. On a fully diluted basis, assuming
exercise of all outstanding warrants, Warburg will hold between approximately
31.5% and approximately 54.9% of the outstanding Capital Stock of the Company,
depending on the participation of the Common Stockholders in the Rights
Offering. In the event that Warburg controls more than 50% of the outstanding
voting power of the Company, Warburg will have the power to elect a majority of
the Company's Directors (subject to its obligations under the Stockholders'
Agreement (as defined below)) and to approve any action requiring Stockholder
approval, assuming compliance with applicable Delaware law and the Certificate
of Incorporation, including approval of certain corporate transactions,
including a merger or the sale of all or substantially all of the Company's
assets.

Common Stockholders should be aware that two of the Board's six
members have been nominated by Warburg and thus have certain interests that are
in addition to and may conflict with those of Common Stockholders. In
connection with the Financing Transactions, Warburg has agreed to loan the
Company up to $10 million under the Bridge Loan, and through August __, 1994,
has advanced the Company $6 million under the Bridge Loan. Also in connection
with the Financing Transaction, Warburg has agreed to purchase shares of Common
Stock not purchased by Common Stockholders in the Rights Offering and, under
certain circumstances, will be granted the Warburg 1994 Warrants. In addition,
Hanauer holds Preferred Stock and warrants which will be subject to certain
anti-dilution adjustments as a result of the Financing Transactions.

As a significant institutional investor in real estate,
Prudential also utilizes the services of the Company and its competitors on a
regular basis. Prudential, its affiliates and franchisees paid the Company
approximately $4.6 million for management of several of its properties and for
leasing commissions during 1993. The Company also rents office space in the
ordinary course of business under a long-term lease from a partnership of which
Prudential is a general partner, paying approximately $1.3 million in rent
during 1993. "Financing Transactions--Summary of Anticipated Effects of the
Financing Transactions; Dilution."

ABSENCE OF DIVIDENDS ON COMMON STOCK

The Company does not anticipate paying any cash dividends in the
foreseeable future. The Prudential Debt Agreement contains provisions that
prohibit payment of cash dividends or distributions on the Common Stock. In
addition, unless full cumulative dividends have been paid on the Senior
Preferred Stock and the Junior Preferred Stock, the Company will not be entitled
to pay dividends on the Common Stock.

3
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of the Financing Transactions, a total of
approximately 9,312,000 shares of Common Stock will be issuable upon conversion
of the Preferred Stock and upon exercise of outstanding warrants. The Company
also has stock option, purchase and other plans covering up to 1,650,000 shares
of Common Stock. Options to purchase 339,272 shares of Common Stock under the
stock option plans were outstanding as of June 1, 1994. The conversion of such
shares of Preferred Stock and the exercise of such warrants and options, along
with the issuance of shares under other Company plans, would result in the
issuance of a substantial number of shares of Common Stock, thereby diluting the
proportionate equity interests of the holders of the Common Stock. No
prediction can be made as to the effect, if any, that future sales of shares, or
the availability of shares for future sales, will have on the market price of
the Common Stock prevailing from time to time. Sales of substantial amounts of
Common Stock (including shares issued upon the exercise of warrants or options),
or the perception that such sales could occur, could adversely affect prevailing
market prices for the Common Stock.

4
<PAGE>

THE RIGHTS OFFERING

THE RIGHTS

The Company is distributing as soon as practicable after the date
of this Prospectus, at no cost, to each holder of Common Stock of record as of
September 13, 1994 (the "Record Date"), one Right for each share of Common
Stock. Each Right entitles the holder to purchase at the subscription price of
$2.375 (the "Subscription Price") one share of Common Stock. Rights expire at
5:00 p.m. (Chicago time) on October 13, 1994 (the "Expiration Time").

The Rights are evidenced by nontransferable rights certificates
("Rights Certificates"), which record holders are receiving with copies of this
Prospectus.

Stockholders may (a) purchase Common Stock through the exercise
of their Rights (including Rights obtained pursuant to the Oversubscription
Privilege) or (b) allow Rights to expire unexercised.

There is no minimum number of shares which must be subscribed for
in the Rights Offering. There is no assurance that any shares offered hereby
will be subscribed for and purchased by holders of Common Stock, in which case
Warburg will acquire up to approximately 4,250,000 shares. See "-- Commitment
of Warburg."

All commissions, fees and other expenses (including brokerage
commissions and transfer taxes) incurred in connection with the exercise of
Rights are the responsibility of the holder of the Rights and none of such
commissions, fees or expenses shall be paid by the Company.

Reference is made to the "Instructions for Completing Rights
Form" accompanying the Rights Certificate for a description of how to exercise
Rights.

METHOD OF OFFERING

The Rights Offering is being made directly by the Company. The
Company will pay no underwriting discounts or commissions, finders fees or other
remuneration in connection with any distribution of the Rights or sales of the
shares of Common Stock offered hereby, other than the fees paid to Harris Trust
Company of California, as Subscription Agent. The Company estimates that the
expenses of the Rights Offering will total approximately $350,000.

SUBSCRIPTION PRIVILEGES

BASIC SUBSCRIPTION PRIVILEGE. Each Right will entitle the holder
to purchase at the Subscription Price one share of Common Stock (the "Basic
Subscription Privilege"). Each holder is entitled to subscribe for all or any
portion of the shares of Common Stock that may be acquired through the exercise
of its Basic Subscription Privilege.

OVERSUBSCRIPTION PRIVILEGE. Any shares of Common Stock offered
hereby and not purchased pursuant to the Basic Subscription Privilege will be
available for subscription pursuant to an oversubscription privilege (the
"Oversubscription Privilege"). A holder who validly exercises all of the Rights
evidenced by the Rights Certificate issued pursuant to the Rights Offering may
oversubscribe at the Subscription Price for remaining shares of Common Stock, up
to a maximum number equal to the number of shares of Common Stock held by such
holder as of the Record Date. If the total number of shares of Common Stock
available for purchase pursuant to the Oversubscription Privilege (the "Excess
Shares") is insufficient to satisfy all subscriptions pursuant to the
Oversubscription Privilege, the Excess Shares will be allocated pro rata among
the holders exercising the Oversubscription Privilege in proportion

5
<PAGE>

to the number of Rights exercised by each such holder, relative to the number of
Rights exercised by all holders exercising the Oversubscription Privilege. No
fractional shares will be issued. The Oversubscription Privilege is not
transferable.

The Company will notify a holder exercising the Oversubscription
Privilege promptly after the Expiration Time of the number of Excess Shares
available to such holder for oversubscription. If a proration of the Excess
Shares results in a holder's receiving fewer shares of Common Stock than the
holder subscribed for pursuant to the Oversubscription Privilege, then the
excess funds paid by that holder as the Subscription Price for shares not issued
will be returned by mail to subscribers as soon as practicable after the
Expiration Time, without interest or deduction.

In order to exercise the Oversubscription Privilege, banks,
brokers and other nominee holders who exercise the Oversubscription Privilege on
behalf of beneficial owners of Rights will be required to certify (a "Nominee
Holder Certification") to the Subscription Agent and the Company the number of
shares held on the Record Date on behalf of each such beneficial owner of
Rights, the number of Rights as to which the Basic Subscription Privilege has
been exercised on behalf of each such beneficial owner, that each such
beneficial owner's Basic Subscription Privilege held in the same capacity has
been exercised in full and the number of shares of Common Stock subscribed for
pursuant to the Oversubscription Privilege by each such beneficial owner, and to
record certain other information received from each such beneficial owner.

COMMITMENT OF WARBURG

The Company's principal stockholder, Warburg, Pincus Investors,
L.P. ("Warburg"), has entered into a Standby Agreement pursuant to which it has
agreed to purchase at the Subscription Price shares of Common Stock reserved for
issuance pursuant to the exercise of Rights and not purchased pursuant to the
Basic Subscription Privilege or the Oversubscription Privilege, subject to a
maximum number of shares that will result in an aggregate purchase price paid by
Warburg being equal to $10 million plus accrued interest owed to Warburg by the
Company under the Loan and Security Agreement dated March 29, 1994 between the
Company and Warburg (the "Bridge Loan"). Warburg will pay for such shares first
through the cancellation of indebtedness under the Bridge Loan, and thereafter
through payment of funds directly to the Company. As of August 1, 1994, the
Company had borrowed $6 million under the Bridge Loan. If Common Stockholders
do not purchase any shares of Common Stock in the Rights Offering, Warburg will
purchase the maximum number of shares it is committed to buy under the Standby
Agreement, which would be approximately 4,250,000 shares. See "Financing
Transactions -- Summary of Anticipated Effects of the Financing Transaction;
Dilution" and "Risk Factors."

EXERCISE OF RIGHTS AND SUBSCRIPTION AGENT

Rights holders may exercise the Basic Subscription Privilege and
the Oversubscription Privilege by properly completing and signing the
subscription form on the Rights Certificate, including, if required, a signature
guarantee from an Eligible Institution (as defined in "Instructions for
Completing Rights Certificates" accompanying the Rights Certificate), and
mailing or delivering the Rights Certificate to Harris Trust Company of
California (the "Subscription Agent"), together with payment of the aggregate
Subscription Price in full (in United States dollars). A holder who wishes to
exercise the Oversubscription Privilege may elect to subscribe for (a) a
specified number of shares (subject to the maximum oversubscription permitted
hereby) or (b) the maximum number of shares to which he may be entitled to
oversubscribe.

6
<PAGE>

A holder may exercise Rights in whole or in part, but no Rights may be
exercised for fractional shares. If an exercising Rights holder does not
indicate the number of Rights being exercised, or does not forward full payment
of the aggregate Subscription Price for the number of Rights that the holder
indicates are being exercised, then the holder will be deemed to have exercised
the Basic Subscription Privilege with respect to the maximum number of Rights
that may be exercised for the aggregate Subscription Price payment delivered by
the holder, and to the extent that the aggregate Subscription price payment
delivered by the holder exceeds the product of the Subscription Price multiplied
by the number of Rights evidenced by the Rights Certificate delivered by the
holder (such excess being the "Subscription Excess"), the holder will be deemed
to have exercised the Oversubscription Privilege to purchase, to the extent
available, that number of whole Excess Shares equal to the quotient obtained by
dividing the Subscription Excess by the Subscription Price. Any amount
remaining after application of the foregoing procedures shall be returned to the
holder as soon as practicable by mail without interest or deduction.

Rights Certificates and payment should be mailed or delivered by hand
or overnight courier by such holders to:

IF BY MAIL: IF BY HAND OR OVERNIGHT COURIER:

Harris Trust Company of California Harris Trust Company of California
c/o Harris Trust and Savings Bank c/o Harris Trust and Savings Bank
P.O. Box 830 311 West Monroe, 11th Floor
Chicago, Illinois 60690-0830 Chicago, Illinois 60606

The Subscription Agent's telephone number is (312) 461-3324.

Payment of the Subscription Price may be made by wire transfer, check,
bank draft or money order payable to the order of Harris Trust Company of
California, as Subscription Agent, for all shares of Common Stock subscribed
for. Wire transfers should be sent to: Harris Trust & Savings Bank, ABA:
071000288, Account No: 1092113, Account Name: Harris Trust Shareholder Services.

The Subscription Price will be considered to have been paid only upon
clearance of the wire transfer, check, bank draft or money order tendered
therefor. All funds received by the Subscription Agent from the exercise of the
Rights will be deposited upon receipt.

Pending issuance of certificates representing shares of Common Stock,
funds received for the exercise of Rights and, if applicable, the
Oversubscription Privilege, will be held in a segregated escrow account. If
shares are not issued pursuant to the Basic Subscription Privilege, or if a
holder exercising the Oversubscription Privilege is allocated less than all of
the shares of Common Stock for which that holder subscribed pursuant to the
Oversubscription Privilege, then the excess funds held in escrow paid by such
holder shall be returned by mail without interest or deduction as soon as
practicable after the Expiration Time and after all prorations and adjustments
contemplated by the Rights Offering have been effected.

Certificates representing the shares of Common Stock subscribed for
will be issued and delivered as soon as practicable after payment of the
Subscription Price. Subscribers will have no rights as stockholders of the
Company until stock certificates representing the shares of Common Stock
subscribed for are issued to them.

If, prior to the Expiration Time, the Subscription Agent receives
payment in full for each share of Common Stock being subscribed for and a
written notice of guarantee (a "Notice of Guaranteed Delivery") from an Eligible
Institution stating the name of the subscriber, the number of Rights represented
by Rights Certificate it holds and the number of shares of Common Stock
subscribed

7
<PAGE>

for, and guaranteeing the prompt delivery of the Rights Certificate, such
subscription may be accepted (such procedure being referred to as the
"Guaranteed Delivery Procedure"). However, no such exercise of Rights shall be
honored unless the Company receives the duly completed Rights Certificate at or
before 5:00 p.m., Chicago Time, on October 21, 1994. The Notice of Guaranteed
Delivery may be delivered to the Subscription Agent in the same manner as the
Rights Certificates at the addresses set forth above, or may be delivered by
telecopy to (312) 765-8244.

ONCE A HOLDER HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE OR THE
OVERSUBSCRIPTION PRIVILEGE, THE EXERCISE MAY NOT BE REVOKED.

TO BE ACCEPTED, THE PROPERLY COMPLETED RIGHTS CERTIFICATES AND PAYMENT
WITH RESPECT TO THE EXERCISE OF THE BASIC SUBSCRIPTION PRIVILEGE AND THE
OVERSUBSCRIPTION PRIVILEGE MUST BE RECEIVED BY THE COMPANY BEFORE 5:00 P.M.,
CHICAGO TIME, ON OCTOBER 13, 1994, UNLESS THE GUARANTEED DELIVERY PROCEDURE IS
COMPLIED WITH.

THE INSTRUCTIONS ACCOMPANYING THE RIGHTS CERTIFICATE SHOULD BE READ
CAREFULLY AND FOLLOWED IN DETAIL. RIGHTS CERTIFICATES SHOULD BE SENT WITH
PAYMENT TO THE SUBSCRIPTION AGENT. DO NOT SEND RIGHTS CERTIFICATES TO THE
COMPANY.

Questions relating to the method of subscription and requests for
additional copies of this Prospectus should be directed to the Subscription
Agent at (312) 461-3324.

INFORMATION AGENT

The Company has engaged Morrow & Co., Inc. to act as information agent
(the "Information Agent") and to assist the Company in contacting certain
stockholders in connection with the Rights Offering. Pursuant to this
engagement, the Information Agent will be calling directly certain of the
Company's stockholders, as well as brokers in whose name the shares of Common
Stock may be held of record by such stockholders, to inform them of the Rights
Offering. Upon request of the stockholders, the Information Agent will follow
up by sending an information packet containing this Prospectus and the
instructions for the use of the Subscription Certificate. The Information Agent
will neither supply Rights Certificates nor will it be able to accept completed
Rights Certificates on behalf of the Company. RIGHTS HOLDERS SHOULD NOT FORWARD
THEIR COMPLETED RIGHTS CERTIFICATES TO THE INFORMATION AGENT. EXERCISE OF THE
RIGHTS MAY BE MADE ONLY BY DELIVERY OF THE RIGHTS CERTIFICATES TO THE
SUBSCRIPTION AGENT IN THE MANNER SET FORTH ABOVE.

The Information Agent's address and phone number are as follows:

Morrow & Co., Inc.
909 3rd Avenue
New York, New York 10022-4799
Call Collect: (212) 741-5511

EXPIRATION OF RIGHTS

THE RIGHTS WILL EXPIRE AND BECOME VOID AT 5:00 P.M., CHICAGO TIME, ON
OCTOBER 13, 1994 (the "Expiration Time").

Rights not exercised prior to the Expiration Time will no longer be
exercisable and will be cancelled without further action. The Company will not
be obligated to honor any purported exercise of Rights received by the
Subscription Agent after the Expiration Time, except pursuant to the Guaranteed
Delivery Procedure described above.

8
<PAGE>

The Company reserves the right, in its sole discretion, to extend the
Expiration Time in order to deal with any unforeseen contingencies relating to
the conduct of the Rights Offering, but does not otherwise expect to extend the
Expiration Time.

DELIVERY OF CERTIFICATES

Certificates for shares of Common Stock issuable upon exercise of the
Basic Subscription Privilege will be mailed as soon as practicable after the
subscriptions have been accepted by the Subscription Agent to holders not
participating in the Oversubscription Privilege. Certificates for shares of
Common Stock issuable upon exercise of the Basic Subscription Privilege and the
Oversubscription Privilege will be mailed as soon as practicable after the
Expiration Time. However, holders participating in the Oversubscription
Privilege may elect to have certificates for shares of Common Stock issuable
upon exercise of the Basic Subscription Privilege mailed as soon as practicable
after the subscriptions have been accepted and to have certificates representing
shares issuable upon exercise of the Oversubscription Privilege mailed as soon
as practicable after the Expiration Time.

RISK OF DELIVERY AND PAYMENT; DELIVERY BY MAIL

The risk of method of delivery of all documents and payment is on
subscribers, not the Company. If the mail is used, it is recommended that
insured, registered mail be used and that a sufficient number of days be allowed
to ensure delivery to the Subscription Agent before the Expiration Time.
Because uncertified personal checks may take at least five business days to
clear, Rights holders are strongly urged to pay, or arrange for payment, by
means of certified or cashier's check, bank draft, money order or wire transfer
of funds.

TRANSFER OF RIGHTS

Rights may be not be transferred.

NOMINEE HOLDERS

Holders on the Record Date who hold shares of Common Stock for the
account of others, such as brokers, trustees or depositories for securities (a
"Nominee Record Date Holder"), should contact the respective beneficial owners
of such shares as soon as possible to ascertain those beneficial owners'
intentions and to obtain instructions and certain beneficial owner
certifications with respect to their Rights, all as included in the Instructions
distributed by Nominee Record Date Holders to beneficial owners. If a beneficial
owner so instructs, the Nominee Record Date Holder should complete the
appropriate subscription form on the Rights Certificate, and, in the case of any
exercise of the Oversubscription Privilege, the related Nominee Holder
Certification and submit them to the Subscription Agent with the proper payment.
In addition, beneficial owners of Common Stock or Rights held through such
Nominee Record Date Holder should contact the Nominee Record Date Holder and
request the Nominee Record Date Holder to effect transactions in accordance with
the beneficial owner's instructions.

PROCEDURES FOR DTC PARTICIPANTS

It is anticipated that the exercise of the basic Subscription
Privilege (but not the Oversubscription Privilege) may be effected through the
facilities of The Depository Trust Company ("DTC"). Rights exercised as part of
the Basic Subscription Privilege through the DTC are referred to
as "DTC Exercised Rights." A holder of DTC Exercised Rights may exercise the
Oversubscription Privilege in respect thereof by properly executing and
delivering to the Subscription Agent, on or prior to the Expiration Time, a DTC
Participant Oversubscription Exercise Form and a Nominee Holder Certification,
together with payment of the appropriate Subscription Price of the number of
shares of Common Stock for which the Oversubscription Privilege is to be
exercised. Copies of the DTC

9
<PAGE>

Participant Oversubscription Exercise Form and the Nominee Holder Certification
may be obtained from the Subscription Agent.

INTERPRETATION

All questions as to the validity, form, eligibility, including time of
receipt, and acceptance of any subscription or request for division will be
determined by the Company, in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any
subscription or request for division if it is not in proper form or if the
acceptance thereof or the issuance of Common Stock or Rights pursuant thereto
could be deemed unlawful. The Company also reserves the right to waive any
defect with regard to any particular subscription or request for division. The
Company shall not be under any duty to give notification of any defects or
irregularities in subscriptions or requests for division, nor shall it incur any
liability for failure to give such notification. Subscriptions will not be
deemed to have been made nor requests for division received until any such
defects or irregularities have been cured or waived within such time as the
Company shall determine. Subscriptions or requests for division with defects or
irregularities which have not been cured or waived will be returned by the
Company to the appropriate holder of the Rights as soon as practicable.

DETERMINATION OF SUBSCRIPTION PRICE

The Subscription Price was determined through negotiations among
Warburg, Prudential and the Company in March 1994 in which the terms of the
Financing Transactions were finalized. See "Financing Transaction--Background
and Financial Condition" above for a description of the Financing Transactions.
See "Market Price". In approving the Subscription Price, the Board of Directors
considered the historical trading prices of the Common Stock as quoted on the
New York Stock Exchange and, among other things, such factors as the history of
and prospects for the Company, its past and present operating losses, the
prospects for future earnings and the present state of the Company's
development. On ____________, 1994, the closing price of the Common Stock on
the NYSE was $________ per share.

There can be no assurance that the market price for the Common Stock
during the Rights Offering will not be equal to or below the Subscription Price,
or that, following the issuance of the Rights and of the Common Stock upon an
exercise of Rights, a subscribing Rights holder will be able to sell shares
purchased in the Rights Offering at a price equal to or greater than the
Subscription Price.

The Company has not retained a financial advisor to render any opinion
as to the fair market value of the Company. Accordingly, the fair market value
of a share of Common Stock may be less or more than the Subscription Price.

STATE AND FOREIGN SECURITIES LAWS

The Rights may not be exercised by any person, and neither this
Prospectus nor any Rights Certificate shall constitute an offer to sell or a
solicitation of an offer to purchase any shares of Common Stock in any
jurisdiction in which such transactions would be unlawful. The Company believes
that any action required of the Company has been taken in all jurisdictions of
the United States to permit exercises of the Rights and purchases of the Common
Stock by the stockholders of the Company. No action has been taken in any
jurisdiction outside the United States to permit offers and sales of the Rights
or the Common Stock. Consequently, the Company may reject subscriptions
pursuant to the exercise of Rights by any holder of Rights outside the United
States, and the Company may also reject subscriptions from holders in
jurisdictions within the United States if it should later determine that it may
not lawfully issue shares to such holders, even if it could do so by qualifying
the shares for sale or by taking other actions in such jurisdictions.

10
<PAGE>

ANTI-TAKEOVER EFFECT OF RIGHTS OFFERING

The Rights Offering has no anti-takeover purpose and the Company does
not believe that the Rights Offering has any anti-takeover effect.

11
<PAGE>

FINANCING TRANSACTIONS

BACKGROUND AND FINANCIAL CONDITION

In 1980, the Company was primarily a West Coast real estate brokerage
operation. The Company concluded that it would be best positioned to serve
large corporate clients and institutional investors by operating on a nationwide
basis and providing a full range of real estate services in addition to
brokerage services. The Company implemented this strategy through the
acquisition of existing brokerage businesses and diversification into fee-based
real estate related services. These services included appraisal and consulting,
property management, mortgage brokerage and asset management. In 1981, the
Company became a publicly owned company through a merger, thereby acquiring a
number of real estate assets that were later sold.

From 1981 through 1986, the Company grew dramatically, acquiring 24
regional and local real estate services firms in the commercial brokerage,
residential brokerage, property management, and related services areas. The
acquisitions have enabled the Company to provide diversified services to multi-
regional and national clients. Most of the acquired companies no longer use
their original company names and are identified solely as Grubb & Ellis Company.
By 1987, the Company operated 162 offices in 95 cities in 19 states and the
District of Columbia, with approximately 4,100 real estate agents and 2,600 non-
agent employees. In November 1986, the Company borrowed $35 million from
Prudential to refinance debt incurred in connection with the acquisitions. This
debt consisted of $10 million of 9.9% Senior Notes (the "Old Senior Notes") and
$25 million of 10.65% Subordinated Notes (the "Old Subordinated Notes").

The following table sets forth the Company's revenue and expenses for
the five years ended December 31, 1993 (dollars in thousands):

1993(1) 1992(2) 1991(3) 1990 1989
------- ------- ------- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue
Commercial real estate brokerage commissions. . . . . . . . . . $141,875 $136,082 $139,513 $174,569 $199,026
Residential real estate brokerage commissions . . . . . . . . . 20,266 49,171 88,572 101,719 119,567
Real estate service fees, commissions and other . . . . . . . . 38,590 37,709 38,149 42,734 38,973
Interest income . . . . . . . . . . . . . . . . . . . . . . . . 442 529 1,656 1,429 2,919
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551 672 744 909 1,545
-------- -------- -------- -------- --------
Total Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . 201,724 224,163 268,634 321,360 362,030
-------- -------- -------- -------- --------

Costs and expenses
Real estate brokerage and other commissions . . . . . . . . . . 100,250 117,154 138,459 165,896 190,879
Selling, general and administrative . . . . . . . . . . . . . . 55,958 64,607 72,022 92,303 87,929
Salaries and wages. . . . . . . . . . . . . . . . . . . . . . . 44,780 48,412 58,477 69,558 68,702
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . 2,588 4,380 4,726 3,993 4,689
Depreciation and amortization . . . . . . . . . . . . . . . . . 2,287 3,802 6,820 11,973 7,136
Special charges and unusual items(4). . . . . . . . . . . . . . 13,494 44,879 36,982 7,088 608
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . 219,357 283,234 317,486 350,811 359,943
-------- -------- -------- -------- --------
Loss before income taxes. . . . . . . . . . . . . . . . . . . . (17,633) (59,071) (48,852) (29,451) (2,087)
Provision for income taxes. . . . . . . . . . . . . . . . . . . (575) (605) (445) (300) (1,566)
-------- -------- -------- -------- --------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . $(18,208) $(59,676) $(49,297) $(29,751) $ 521
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
<FN>
____________________

(1) Northern California residential brokerage operations were sold in
March 1993 and real estate advisory business was sold in February 1993.

(2) Georgia residential brokerage operations were sold in January 1992.

(3) Texas residential brokerage operations were sold in July 1991.

(4) Includes writedowns of goodwill as follows: for 1993, $10,054,000; for
1992, $18,895,000; for 1991, $29,465,000; and for 1990, $4,179,000.
</TABLE>

12
<PAGE>

Since 1988, the Company's business and financial condition has been
substantially impaired. The largest factor contributing to the decline in the
Company's revenue, business and financial condition has been the general
economic recession and resulting severe downturn in activity levels and prices
within the commercial real estate sector. In addition, the Company's expansion
prior to 1986 resulted in a significant increase in the Company's level of fixed
costs and overhead. Beginning in Texas in 1985, where approximately 40% of the
Company's commercial and residential brokerage operations were based, brokerage
revenue declined due to the collapse of oil and gas prices and general
unavailability of credit. The 1986 Tax Reform Act limited the ability of
investors to utilize losses generated from real estate investments and
significantly reduced the demand for investments in real estate throughout the
country. In 1987, the real estate recession began to affect commercial
brokerage operations in the Northeast. By late 1989, revenue from commercial
brokerage operations nationwide decreased dramatically, reflecting substantial
declines in the number of and prices for investment and land transactions due to
recessionary economic conditions and the continued unavailability of credit.

In addition, real estate partnerships and joint ventures sponsored or
participated in by the Company were adversely impacted as the real estate
markets deteriorated. As a result, the Company either lost its investment or
had to contribute additional cash either to service debt for which the Company
was liable or to meet its obligations under partnership agreements.

Beginning in 1989, the Company adopted certain cost-cutting measures
including closing selected offices and reducing its work force and salary
expenses. In 1990, in response to adverse real estate market conditions, the
Company closed 15 offices in locations judged to be non-strategic. In 1991, the
Company closed four additional offices and also sold its Texas residential
brokerage operations. In January 1992, the Company sold its Georgia residential
brokerage operations, leaving California as its sole focus for residential
business at that time. Restructuring charges in connection with these measures
of approximately $15.3 million were first incurred by the Company in the third
quarter of 1990, including amounts for additional reserves for joint ventures
and partnerships in the Company's Texas operations. Operating expenses were
further reduced and additional restructuring charges of $36.7 million were taken
in the third and fourth quarters of 1991. In order to cover the Company's
negative cash flow, in February 1991, the Company arranged and fully utilized a
$5 million revolving line of credit from Prudential (the "1991 Revolving Line of
Credit").

FINANCIAL RESTRUCTURING

From 1990 to late 1992, the Company actively pursued equity financing
to strengthen its liquidity and meet its short- and long-term working capital
needs, as the severe economic recession had hindered its ability to meet debt
principal and interest obligations to Prudential. On January 29, 1993, the
Stockholders approved a proposal for restructuring the debt and equity of the
Company (the "Restructuring"), which involved a cash investment of $12,850,000
by Warburg and $900,000 by Joe F. Hanauer ("Hanauer"), a private investor who
became Chairman of the Board of the Company. Pursuant to the Restructuring
Warburg purchased (i) 128,266 shares of the Company's Senior Preferred Stock,
(ii) five-year warrants initially to purchase 340,000 shares of Common Stock, at
an exercise price of $5.00 per share (the "$5.00 Warrants"), (iii) five-year
warrants initially to purchase 142,000 shares of Common Stock at an exercise
price of $5.50 per share (the "$5.50 Warrants" and together with the $5.00
Warrants, the "Warburg 1993 Warrants"), and (iv) warrants to purchase 373,818
shares of Common Stock at an exercise price of $5.00 per share, subject to
certain limitations (the "Contingent Warrants"). Also pursuant to the
Restructuring, Hanauer purchased (i) 8,894 shares of Senior Preferred Stock,
(ii) $5.00 Warrants initially to purchase 160,000 shares of Common Stock, (iii)
$5.50 Warrants initially to purchase 58,000 shares of Common Stock and (iv)
Contingent Warrants to purchase 26,182 shares of Common Stock.

13
<PAGE>

Also pursuant to the Restructuring, Prudential cancelled $10 million
of the Old Senior Notes in exchange for $10 million of the 9.9% Senior Notes
(the "Senior Notes"), and cancelled $15 million of the Old Subordinated Notes in
exchange for 150,000 shares of the 5% Junior Preferred Stock and warrants
exercisable for 200,000 shares of Common Stock at an exercise price of $5.50 per
share (the "Prudential 1993 Warrants" and together with the Warburg 1993
Warrants and the $5.00 Warrants and $5.50 Warrants held by Hanauer, the
"Existing Warrants"). Prudential also cancelled the remaining $10 million of
Old Subordinated Notes in exchange for $10 million of 10.65% Payment-In-Kind
Notes (the "PIK Notes"), which were reduced to approximately $9 million when
Prudential exercised its then existing warrant to purchase 397,549 shares of
Common Stock at an exercise price per share of $7.30 (giving effect to the
reverse stock split which was effected on January 29, 1993). Approximately
$1,982,000 of accrued interest payable to Prudential also was cancelled in
conjunction with the exercise of this warrant. Additionally, the $5 million
1991 Revolving Line of Credit was exchanged for a $5 million Revolving Credit
Note due December 31, 1994 (the "Revolving Credit Note"), exchangeable for a
two-year term loan due December 31, 1996. The Senior Note, Subordinated Note
and Revolving Credit Note Agreement with Prudential dated November 2, 1992 (the
"Prudential Debt Agreement") prohibits the payment of cash dividends and
contains additional restrictions on the making of acquisitions, loans,
investments, debt and sales of assets. The Company also is required to maintain
a defined working capital ratio. As of December 31, 1993, the Company did not
meet the working capital ratio requirement, and was in violation of certain
other covenants. However, Prudential provided a waiver of these covenants as of
December 31, 1993. The Prudential Debt Agreement also requires the Company to
periodically make certain principal and interest payments. During 1993,
Prudential allowed a deferral of the $2 million principal payment on the Senior
Notes due November 1, 1993, until May 1, 1994. As described below, in March
1994, in order to facilitate the completion of the Financing Transactions,
Prudential deferred the Company's obligation to make this principal payment
until the earlier of the execution of a definitive amendment of the Prudential
Debt Agreement as contemplated by the Financing Transactions or December 31,
1994.

As a result of the Restructuring, Warburg and Hanauer together hold
approximately 39% and Prudential holds approximately 26% of the Company's equity
on a fully diluted basis but before exercise of outstanding warrants at June 1,
1994. Warburg and Hanauer together hold approximately 44% and Prudential holds
approximately 25% of the Company's equity on a fully diluted basis at June 1,
1994, assuming the exercise of all outstanding warrants.

1993 FINANCIAL RESULTS

The Company's net loss for 1993 was $18.2 million compared to a net
loss of $59.7 million for the previous year. The Company's results included a
restructuring charge of $13.5 million related to a write-off of goodwill and
restructuring charges associated with its operations. During 1993,
stockholders' deficit increased by $17.4 million from 1992 and book value
decreased from $(14.29) per share of Common Stock, giving effect to the one-for-
five reverse stock split, to $(16.96) per share of Common Stock, as a direct
result of the loss from operations and special charges and unusual items.

During 1993 and the first quarter of 1994, the Company continued to
close or sell additional offices. In February 1993, the Company completed the
sale of the real estate advisory business of Grubb & Ellis Realty Advisers,
Inc., a wholly owned subsidiary of the Company, to a privately held concern. In
early March 1993, the Company sold its Northern California residential real
estate brokerage operations. The sale included 13 residential real estate
offices located throughout Northern California as well as a relocation office.
Under the terms of the sale, most of the approximately 400 employees and
salespersons of the Company's Northern California residential operations became
employees of the purchaser. Also, in October 1993, the Company's residential
mortgage services operations in Northern California were closed. The Company's
only remaining residential brokerage and residential mortgage service operations
are in Southern California. Effective February 1994, the Company closed
unprofitable appraisal and consulting offices in Dallas, Phoenix and Atlanta.
During 1993 and 1994, the Company

14
<PAGE>

has settled, or reached agreement to settle, various lawsuits and claims which
arose before existing management began operating the Company. The lawsuits and
claims principally arose out of the Company's activities in connection with
certain partnerships and joint ventures in which the Company was involved. The
aggregate amount of cash which the Company has been, or will be, required to pay
to settle these lawsuits and claims is expected to be approximately
$4.4 million, which amount has been accrued in the Company's financial
statements.

FIRST SIX MONTHS 1994 FINANCIAL RESULTS

During the first six months of 1994, the Company had a net loss of
$3.5 million compared to a net loss of $4.2 million for the same period of 1993.
Total revenues of $80.8 million for the first six months of 1994 declined over
the same period in 1993 by approximately $12.2 million. Excluding revenue from
the sold Northern California residential brokerage operations and certain
offices which at the end of 1993 were closed or were expected to be closed, as
well as government contracting business conducted during the first quarter of
1993 which was not repeated in 1994, revenue increased approximately $3.7
million or 4.8% in the first six months of 1994 compared to the same period of
1993.

Effective February 1, 1994, the Company modified its reporting
structure to increase operating efficiencies and reduce costs. The
modifications include the integration of management of commercial brokerage
operations with the appraisal and consulting and commercial mortgage brokerage
operations, on a regional basis. The integration also includes those property
management operations which the Company has resumed, independent of Axiom Real
Estate Management, Inc. ("Axiom"), a majority owned subsidiary of the Company
which provides property and facilities management. Axiom closed offices in
geographic areas in which it did not manage a sufficient number of properties to
support the costs associated with operating those offices. These closures were
consistent with Axiom's strategic objective to focus on those markets where it
has a larger number of properties which will enable it to provide more
efficient, cost-effective service. Additionally, in February 1994, the Company
closed several unprofitable appraisal and consulting offices.

FINANCING TRANSACTIONS AND DEFERRAL OF DEBT PAYMENTS

As of the end of 1993, the Company projected that without additional
capital, the Company would be unable beyond the near term to meet its working
capital needs and service its principal obligations to Prudential. As of
December 31, 1993, the Company did not meet the working capital covenant
contained in the Prudential Debt Agreement.

The Company explored various alternatives in order to meet its short-
and long-term cash requirements, including reducing costs, closing additional
operations and obtaining financing, including through the possible sale of
assets. Throughout late 1993 and early 1994, the Company held discussions with
Warburg and Prudential concerning the possibility of additional investments in
the Company and with Prudential concerning a possible deferral of amounts due
under the Prudential Debt Agreement. During that time, Prudential indicated
that it was unwilling to invest additional capital into the Company.

During March 1994, the Company, Warburg and Prudential substantially
completed negotiations on the terms of the proposed financing transactions (the
"Financing Transactions," as described below). On March 28, 1994, Warburg and
the Company entered into a Loan and Security Agreement pursuant to which Warburg
agreed to loan the Company up to $10 million at an initial interest rate of 5%
per annum with a maturity date of April 28, 1995 (the "Bridge Loan"). Also, at
that time, in order to facilitate the completion of the Financing Transactions,
Prudential waived certain failures to perform under the Prudential Debt
Agreement, including the non-compliance with the working capital ratio and
cumulative loss covenants (the "Prudential 1994 Waiver"). Pursuant to the
Prudential 1994 Waiver, Prudential waived compliance under covenants relating to
working capital, cumulative operating losses and capital expenditures and waived
the Company's obligation to repay or prepay any principal

15
<PAGE>

under the Senior Notes and the Revolving Credit Note that would have been due
during 1994, and Prudential excused performance of the foregoing provisions
until the earlier of the execution of a definitive amendment of the Prudential
Debt Agreement as contemplated by the Financing Transactions or December 31,
1994.

At the same time, the Company, Warburg and Prudential also
substantially completed their negotiations with respect to (i) the terms of the
Rights Offering which will result in an investment of approximately $10 million
for equity of the Company through the issuance of Common Stock and the
retirement of the Bridge Loan provided by Warburg, (ii) a deferral of the
Company's obligations to repay principal under the Prudential Debt Agreement
until November 1, 1997 and a waiver of certain covenants under the Prudential
Debt Agreement through April 1, 1997, and (iii) the terms of certain amendments
to the Preferred Stock and the Existing Warrants held by each of Warburg and
Prudential. The transactions described in (i)-(iii) are also included in the
Financing Transactions.

The following table compares the required principal payments due under
the existing terms of the Prudential Debt Agreement with the required principal
payments due under the Prudential Debt Agreement after giving effect to the
amendments which will be effected in connection with the Financing Transactions.

<TABLE>
<CAPTION>
Principal Due Under Principal Due Under
Existing Terms of Prudential Debt
Prudential Debt Agreement(1) Agreement As Amended(3)
---------------------------- -----------------------
<S> <C> <C>
1994 $4,000,000(2) $ -0-
1995 $5,500,000 $ -0-
1996 $5,500,000 $ -0-
1997 $3,000,000 $5,000,000
1998 $3,000,000 $5,000,000
1999 $3,000,000 $5,000,000
2000 -0- $4,500,000
2001 -0- $4,500,000
<FN>
____________________

(1) Under the Prudential Debt Agreement, the Company is required to repay all
outstanding principal under the Revolving Credit Note for a 60-day period
each year. The amount due under the Revolving Credit Note currently is
$5,000,000, all of which would have been required to be paid in 1994. The
Revolving Credit Note matures on December 31, 1994, at which time, the
Company may convert such Note into a new term note which would mature on
December 31, 1996. The table assumes that the Company elected to make such
conversion.

TERMS OF THE FINANCING TRANSACTIONS

On September 12, 1994, the Company held its Annual Meeting of the
Stockholders (the "Annual Meeting"), at which the stockholders of the Company
(the "Stockholders"), including a majority of the holders of Common Stock (the
"Common Stockholders"), other than Prudential and Warburg, approved the
Financing Transactions including the Rights Offering. The Financing
Transactions also include the amendment of certain agreements between the
Company and Prudential, the issuance to Warburg and Prudential of warrants to
purchase 325,000 and 150,000 shares of Common Stock, respectively, and amendment
to the outstanding Senior Preferred Stock (as defined below), the outstanding
Junior Preferred Stock (as defined below) and

16
<PAGE>

outstanding warrants to purchase Common Stock. It is anticipated that the
Financing Transactions will close promptly after the Expiration Time. The
Financing Transactions other than the Rights Offering are described below. For
a discussion of the Rights Offering, see "The Rights Offering."

BRIDGE LOAN AGREEMENT

On March 29, 1994, Warburg and the Company entered into a Loan and
Security Agreement (the "Bridge Loan Agreement") pursuant to which Warburg has
agreed to make advances to the Company from time to time in an aggregate
principal amount for all such advances outstanding not to exceed $10 million at
any time (the "Bridge Loan"). The outstanding principal amount of the Bridge
Loan bears interest at a rate of 5% per annum. All outstanding principal and
interest on the Bridge Loan mature on April 28, 1995. As of August __, 1994,
the Company had borrowed $6 million under the Bridge Loan.

Pursuant to the Bridge Loan Agreement, the Company has established a
system pursuant to which all commercial brokerage commissions are deposited into
a cash collateral account. The Company's obligations under the Bridge Loan
Agreement are secured by the cash collateral account and all rights to payment
in respect of all commercial real estate brokerage fees and commissions due to
the Company or any of its subsidiaries in connection with the commercial real
estate brokerage operations of the Company and its subsidiaries. Prior to the
existence of an event of default under the Bridge Loan Agreement and delivery of
the requisite notice of blockage of the cash collateral account (a "Notice of
Blockage"), the Company may make withdrawals from the cash collateral account,
and may use the proceeds from the Bridge Loan, for any general corporate purpose
other than certain Prohibited Uses. "Prohibited Uses" include uses of proceeds
for (i) the satisfaction of a judgment or other award of damages in excess of $1
million in any one case or group of consolidated cases, (ii) annual capital
expenditures in excess of the greater of $5,000,000 or two times the Company's
consolidated total assets, (iii) severance payments to a single employee of the
Company or any subsidiary in excess of $1 million, or (iv) payment in respect of
any lease of real property entered into after the date of the Bridge Loan
Agreement if the aggregate rent required under such lease during its term
exceeds $5 million. After the delivery of a Notice of Blockage, the right of
the Company to make any withdrawal from the cash collateral account will be
terminated and Warburg's security interest in the cash collateral account will
be subordinated in right of payment to the extent of the proceeds in the cash
collateral account to the prior payment of commissions to be paid to real estate
agents and brokers as compensation for the commercial real estate brokerage
operations that gave rise to the brokerage commissions collected by the Company.
Pursuant to an amendment to the Prudential Debt Agreement, the Company has
granted Prudential a lien on the cash collateral account to secure the Company's
obligations under the Prudential Debt Agreement. Prudential's lien is
subordinated to Warburg's lien.

Pursuant to the Bridge Loan Agreement, the Company is subject to
various affirmative and negative covenants, including a prohibition from
entering into guarantees of new liabilities and from pledging any Company assets
as security for any liabilities or obligations of any other person.

Upon an event of default, indebtedness under the Bridge Loan
Agreement, at Warburg's option, will become immediately due and Warburg will not
have any further obligation to make advances under the Bridge Loan Agreement.
An event of default under the Bridge Loan Agreement includes (i) the Company's
failure to pay principal, interest, fees or other amounts due under the Bridge
Loan Agreement, (ii) any material default under the Company's other loan
agreements or delivery by Prudential of a Notice of Blockage after an event of
default under the Prudential Debt Agreement, (iii) a money judgment, writ or
warrant of attachment or similar process involving any individual case in an
amount in excess of $1 million or in the aggregate at any time in an amount in
excess of $3 million (in either case not adequately covered by insurance as to
which an insurance company has acknowledged coverage) which shall have been
entered or filed against the Company or any of its subsidiaries or any of their
respective assets and shall remain undischarged for a period of 60 days, (iv)
the Company becoming

17
<PAGE>

insolvent, filing for bankruptcy or similar events, and (v) a material adverse
change in the condition (financial or otherwise), operations, properties or
performance of the Company or any other event which Warburg reasonably and in
good faith believes impairs, or is substantially likely to impair either the
prospect of payment or performance by the Company of its obligations, or the
rights and remedies of Warburg, under the Bridge Loan Agreement or related
documents.

PRUDENTIAL DEBT AGREEMENT

Pursuant to the Restructuring, Prudential and the Company entered into
the Prudential Debt Agreement, pursuant to which the Company issued $10 million
of the Senior Notes and approximately $9 million of the PIK Notes. Semi-annual
interest payments are required pursuant to both the Senior Notes and the PIK
Notes, although until all of the Senior Notes have been retired, the interest on
the PIK Notes may be paid in kind, by the issuance of additional PIK Notes.
Annual principal payments are required in the amount of (i) $2 million on
November 1 of each of 1993 and 1994 with respect to the Senior Notes, (ii) $3
million on November 1 of each of 1995 and 1996, also with respect to the Senior
Notes, (iii) one third of the principal amount of the PIK Notes on November 1 of
each of 1997 and 1998, and (iv) all remaining outstanding principal amounts of
the PIK Notes on November 1, 1999. All annual principal payments also will
include accrued and unpaid interest on the principal so paid. The Company was
unable to make the principal payment due on the Senior Notes on November 1,
1993, and Prudential agreed to defer such payment until May 1, 1994.

Pursuant to the Prudential Debt Agreement, the Company also issued
Prudential the $5 million Revolving Credit Note. The Revolving Credit Note
bears interest at 2.5% above LIBOR, which interest is payable quarterly. During
one sixty consecutive-day period during 1994, the Company will be required to
pay down in full, and make no additional borrowings pursuant to, or permit any
fees to be outstanding with respect to, the Revolving Credit Note (the "Pay Down
Provision"). After the expiration of such sixty-day period, the full $5 million
may once again become available. Additionally, upon maturity, the Company may
have the option of converting the Revolving Credit Note into a new term note,
which would mature on December 31, 1996 (the "Converted Term Note"). The
Converted Term Note would have an interest rate of LIBOR plus 3% and mature on
December 31, 1996, and require semi-annual principal payments (payable on June
30 and December 31 of each of 1995 and 1996) of $1,250,000.

The Prudential Debt Agreement contains a provision whereby if the
Company or any subsidiary of the Company pays a liability, or (upon certain
circumstances) becomes obligated to pay liabilities, in excess of $1,500,000,
any of which arise out of a single event (or a series of related events) and
relate to certain liabilities or contingent liabilities (other than for borrowed
money) of certain partnerships or joint ventures in which the Company or any
subsidiary of the Company owns or owned an interest, then, upon notice to
Prudential, Prudential will defer certain of the principal (but not interest)
payments on the Senior Notes or the Revolving Credit Note. Principal payments
will be deferred in an amount equal to the lesser of (i) $3,000,000 and (ii) the
amount by which the relevant liability exceeds $1,500,000. Any amounts deferred
will have to be repaid after the earlier to occur of (i) five years from the
date of the deferral notice and (ii) the maturity of the Senior Notes.

The Prudential Debt Agreement contains significant restrictions on the
payment of cash dividends on and repurchases of stock of the Company. The
Prudential Debt Agreement also contains significant restrictions on the
Company's (and certain of its subsidiaries') ability to, among other things, (i)
incur debt and liens upon their properties, (ii) enter into guarantees and make
loans, investments and advances, (iii) merge or enter into similar business
combinations, (iv) conduct any business other than their present businesses, (v)
sell assets, including receivables, and (vi) enter into certain other
transactions. Further, the Company's ability to make capital expenditures and
purchase the stock or assets of any other person or entity during the term of
the Prudential Debt Agreement will be limited to the aggregate of $10 million
plus additional amounts based upon, among other things, the Company's

18
<PAGE>

earnings (or minus the Company's losses) and other proceeds as defined by the
Prudential Debt Agreement.

The Prudential Debt Agreement contains various other covenants. For
example, the Prudential Debt Agreement requires that the Company (combined with
certain of its subsidiaries and taken as a whole) must (i) maintain a ratio (the
"Working Capital Ratio") of Consolidated Current Assets to Consolidated Current
Liabilities (as such terms are defined in the Prudential Debt Agreement),
excluding the current portion of long-term debt, of at least 1:1 at the end of
each of its fiscal quarters and (ii) not permit the sum of the net loss before
interest, taxes, depreciation, amortization and non-recurring items and
excluding certain other items (a "Cumulative Loss") to exceed $4 million as of
December 31, 1993, and $6 million as of the end of each fiscal quarter after the
fiscal quarter ended December 31, 1993 for any two consecutive fiscal quarters.
As of December 31, 1993, the Company was not in compliance with the Working
Capital Ratio requirement.

PRUDENTIAL 1994 WAIVER

On March 28, 1994, in connection with the negotiation of the Financing
Transactions, Prudential agreed to waive the Company's failure to comply with
the Working Capital Ratio as of December 31, 1993, and waived certain provisions
relating to certain asset sales and incurrence of debt that the Company had made
during 1993. Prudential also agreed to waive the Company's obligations to pay
principal amounts under the Prudential Debt Agreement (including the payment of
$2 million principal amount on the Senior Notes due in May 1994 and the payment
of $2 million principal amount on the Senior Notes due in November 1994) and
compliance with the Working Capital Ratio requirement, the Cumulative Loss
requirement, restrictions on capital expenditures and the Pay Down Provision
with respect to the Revolving Credit Note until the earlier of (i) execution of
a definitive amendment to the Prudential Debt Agreement or (ii) December 31,
1994. Prudential also waived any provisions of the Prudential Debt Agreement
which would have prohibited the Company from entering into the Bridge Loan
Agreement.

AMENDMENTS TO PRUDENTIAL DEBT AGREEMENT

Pursuant to the Financing Transactions, Prudential and the Company
will amend the Prudential Debt Agreement to provide that (i) $15 million
principal amount of the Senior Notes, the PIK Notes and the Revolving Credit
Note which would have been due from 1994 through 1996 will be deferred and no
principal payments will be required until November 1, 1997, and thereafter (A)
the Revolving Credit Note will mature on November 1, 1999, (B) principal on the
Senior Notes will be payable in two equal installments on November 1 of each of
1997 and 1998, and (C) principal on the PIK Notes will be payable in two
approximately equal installments on November 1 of each of 2000 and 2001, (ii)
the interest rate on the PIK Notes will increase from 10.65% to 11.65% per annum
on January 1, 1996, (iii) the Pay Down Provisions applicable to the Revolving
Credit Note and the covenants requiring the Company to maintain the Working
Capital Ratio, the Cumulative Loss provisions and covenants restricting the
Company's capital expenditures will be ineffective until April 1, 1997, (iv) as
of April 1, 1997 and quarterly thereafter, the Company will be required to
maintain a ratio of EBITDA (as defined below) to total interest expense at least
2:1 on a rolling 12-month basis, (v) commencing January 1, 1998, if in the
preceding year Adjusted Cash Flow (as defined below) exceeds $5 million, then
the Company will be required to make supplemental debt repayments in the
following year (50% on July 1 and 50% on October 1) in an amount equal to 75% of
such excess, with payments being applied to the PIK Notes in reverse order of
maturity, (vi) the Company will be permitted to make up to $5 million of loans
and advances to its salespersons against future commissions, and guarantees of
such loans and advances, and (vii) the Company will not be required to use the
proceeds of any public offering to repay indebtedness under the Prudential Debt
Agreement. "Adjusted Cash Flow" is defined as earnings before interest, taxes,
depreciation and amortization ("EBITDA") less the sum of (a) pre-tax earnings of
Axiom, net of

19
<PAGE>

any debt repayments or dividend payments from Axiom, (b) interest paid in cash,
(c) taxes paid in cash, and (d) supplemental debt repayments made pursuant to
clause (v) above.

ISSUANCE OF NEW WARRANTS

As consideration for acquiring unsubscribed shares of Common Stock in
connection with the Rights Offering and agreeing to the other transactions
contemplated by the Financing Transactions, the Company will issue Warburg
warrants to purchase 325,000 shares of Common Stock at an exercise price of
$2.375 per share (the "Warburg 1994 Warrants"): provided that the Company will
be obligated to issue the Warburg 1994 Warrants only if Warburg purchases at
least 500,000 shares of Common Stock pursuant to the Standby Agreement. As
consideration for modifying the Prudential Debt Agreement with the Company,
waiving noncompliance with certain covenants and agreeing to the other
transactions contemplated by the Financing Transactions, the Company will issue
Prudential warrants to purchase 150,000 shares of Common Stock at an exercise
price of $2.375 per share (the "Prudential 1994 Warrants" and together with the
Warburg 1994 Warrants, the "New Warrants"). Any or all of the New Warrants may
be exercised at any time until five years after the date of issuance. The other
terms of the New Warrants will be the same as the Existing Warrants, after
giving effect to the amendments thereto which will be made in connection with
the Financing Transactions (including the elimination of the Warrant Anti-
Dilution Provisions).

AMENDMENTS TO THE EXISTING WARRANTS

Warburg and Hanauer hold Existing Warrants to purchase an aggregate of
500,000 shares of Common Stock at an initial exercise price of $5.00 per share
and Existing Warrants to purchase an aggregate of 200,000 shares at an initial
exercise price of $5.50 per share and Prudential holds Existing Warrants to
purchase 200,000 shares at an initial exercise price of $5.50 per share. Any or
all of the Existing Warrants may be exercised at any time until January 29,
1998, which is the fifth anniversary of the closing date of the Restructuring.
Payment of the aggregate exercise price may be made in cash or at the election
of the holder by delivering warrants, the value of which will be deemed to be
equal to the difference between the then current Market Price (as defined) per
share and the exercise price. Payment of the aggregate price of the Prudential
1993 Warrants may also be made by the cancellation by Prudential and the
delivery to the Company of the Senior Notes, the PIK Notes, the Revolving Credit
Note or the Converted Term Note or by cancellation of accrued and unpaid
interest thereon.

The exercise price and the number of shares of Common Stock issuable upon
exercise of each Existing Warrant are subject to adjustment from time to time
upon the occurrence of certain stock dividends or distributions, stock splits,
reverse stock splits, certain issuances of rights, options, warrants or
securities directly or indirectly convertible into Common Stock at a price per
share less than the greater of the current Market Price or the exercise price
per share on the date of such issue, certain extraordinary dividends or
distributions to all holders of Common Stock, and certain issuances of Common
Stock for a consideration per share less than the greater of the Market Price or
the exercise price per share on the date of such issue (the "Warrant Anti-
Dilution Provisions"). Warburg, Hanauer and Prudential have waived application
of the Warrant Anti-Dilution Provisions with respect to issuances by the Company
from January 29, 1993 through consummation of the Financing Transactions
pursuant to the Company's 1990 Stock Option Plan (including securities issued
upon the exercise of stock options granted pursuant to such Plan) and the
Company's Employee Stock Purchase Plan. Upon consummation of the Financing
Transactions, the Warrant Anti-Dilution Provisions contained in the Existing
Warrants held by Warburg and Prudential will be amended to provide that in the
event of certain stock dividends or distributions, stock splits, reverse stock
splits and stock reclassifications, mergers, consolidations or similar
transactions, each holder of such Existing Warrants will have the right to
receive upon exercise the number and kind of shares or other securities or
property which it would have been entitled to receive had the Existing Warrants
been exercised immediately prior to such event. As amended, the Existing
Warrants held by Warburg and Prudential no longer will have the benefit of
receiving adjustments to the

20
<PAGE>

exercise price and number of shares issuable upon exercise in the event of
certain dilutive stock issuances, including issuances of rights, options,
warrants or securities convertible into Common Stock at a price per share less
than the greater of the then current Market Price or the exercise price per
share.

Pursuant to the Warrant Anti-Dilution Provisions, the issuance of
shares of Common Stock pursuant to the Rights Offering would result in an
adjustment in both the exercise price and the number of shares issuable upon
exercise of all of the Existing Warrants. In particular, for Existing Warrants
with an exercise price of $5.00 per share, the exercise price would be adjusted
to approximately $3.70 per share, and for Existing Warrants with an exercise
price of $5.50 per share, the exercise price would be adjusted to approximately
$3.94 per share, and the number of shares issuable upon exercise would be
proportionately increased. Pursuant to agreements among Warburg, Prudential and
the Company, the exercise prices of the Existing Warrants held by Warburg and
Prudential will be reduced to $3.50 per share, the number of shares issuable
upon exercise of the Warburg 1993 Warrants will be adjusted only to extent of
the proportionate adjustment provided for in the Warrant Anti-Dilution
Provisions, and the number of shares issuable upon exercise of the Prudential
1993 Warrants will not be subject to any adjustment. Therefore, upon
consummation of the Financing Transactions, and assuming the issuance of all
shares reserved for issuance in the Rights Offering, Warburg's $5.00 Warrants to
purchase 340,000 will be exchanged for warrants to purchase approximately
459,000 shares of Common Stock at $3.50 per share, Warburg's $5.50 Warrants to
purchase 142,000 shares will be exchanged for warrants to purchase approximately
198,000 shares of Common Stock at $3.50 per share, and the Prudential 1993
Warrants will be exchanged for warrants to purchase 200,000 shares of Common
Stock at $3.50 per share. The exact adjustments to the number of shares
issuable upon exercise of the Existing Warrants held by Warburg will be based
on, among other things, the number of shares of Common Stock issued in the
Rights Offering. In addition, the expiration dates of the Prudential 1993
Warrants will be extended from January 28, 1998 to December 31, 1998.

In connection with the Restructuring, the Company also issued Existing
Warrants to Hanauer. Pursuant to the Warrant Anti-Dilution Provisions, and
assuming the issuance of all shares reserved for issuance in the Rights
Offering, the current exercise prices of $5.00 and $5.50 per share of Hanauer's
Existing Warrants will be adjusted to approximately $3.70 and $3.94 per share,
respectively, and the number of shares of Common Stock issuable upon exercise of
such warrants will be increased proportionately from 216,000 and 81,000 shares,
respectively, to approximately 219,000 and 82,000 shares of Common Stock,
respectively, upon consummation of the Financing Transactions. The exact
adjustments will be based on, among other things, the number of shares of Common
Stock issued in the Rights Offering.

CANCELLATION OF CONTINGENT WARRANTS

Upon consummation of the Restructuring, Warburg and Hanauer acquired
Contingent Warrants to purchase 373,818 and 26,182 shares of Common Stock,
respectively, at an exercise price of $5.00 per share, which Contingent Warrants
will become exercisable for a period of 90 days in the event that Warburg and
Hanauer are notified that the Company or any subsidiary of the Company pays a
liability ("Contingent Liability") or becomes obligated to pay a liability which
(a) exceeds $1,500,000 and (b)(i) arises out of a single event, occurrence or
proceeding (or a series of events, occurrences or proceedings which arise out of
or present the same factual issues) and (ii) relates to any partnership
liability of any partnership or joint venture in which the Company or any
subsidiary of the Company owns or owned, directly or indirectly, any partnership
or other equity interest, or of which the Company or any subsidiary of the
Company is or was a general partner, other than indebtedness for borrowed money,
which partnership liability is identified on the disclosure schedule to the
Purchase Agreement which was executed in connection with the Restructuring.
Warburg and Hanauer have the right to exercise at any time until January 29,
1998 all or a portion of their respective Contingent Warrants up to an aggregate
exercise price equal to the lesser of (x) the amount by which such excess
liability exceeds $500,000 and (y) $5.00 multiplied by the number of shares
issuable upon exercise of the Contingent Warrants. In the event that Hanauer
determines not to exercise his Contingent Warrants, he has agreed

21
<PAGE>

to offer them to Warburg for an aggregate consideration of $1.00. The other
terms of the Contingent Warrants, including the anti-dilution provisions, are
the same as those contained in the Existing Warrants. In 1994, the Company
incurred a Contingent Liability and the Contingent Warrants have therefore
become exercisable. It is expected that Hanauer will not exercise his
Contingent Warrants at this time, and it is also expected that Warburg will not
acquire Hanauer's Contingent Warrants.

Concurrently with the consummation of the Financing Transactions, the
Contingent Warrants held by Warburg will be cancelled; PROVIDED that Warburg
will be obligated to surrender the Contingent Warrants for cancellation only if
the Company issues the Warburg 1994 Warrants.

Pursuant to the anti-dilution provisions in the Contingent Warrants
held by Hanauer, and assuming the issuance of all shares reserved for issuance
in the Rights Offering, the current exercise price of $5.00 per share will be
adjusted to approximately $3.70 per share, and the number of shares of Common
Stock issuable upon exercise of such warrants will be increased proportionately
from 26,182 shares to approximately 35,370 shares of Common Stock following
consummation of the Financing Transactions. The exact adjustments will be based
on, among other things, the number of shares of Common Stock issued in the
Rights Offering. If the Company is not required to issue the Warburg 1994
Warrants, then Warburg will continue to hold the Contingent Warrants, in which
case, upon application of the anti-dilution provisions, the exercise price of
Warburg's Contingent Warrants and number of shares issuable upon exercise would
be adjusted in the same manner as the Contingent Warrants held by Hanauer.

AMENDMENTS TO PREFERRED STOCK

Upon consummation of the Restructuring, the Company issued Warburg and
Hanauer 128,266 and 8,894 shares of Senior Preferred Stock and issued to
Prudential 150,000 shares of Junior Preferred Stock. Upon consummation of the
Financing Transactions, the Certificate of Incorporation will be amended to
effect certain amendments to the terms of the Senior Preferred Stock held by
Warburg and the Junior Preferred Stock. The Senior Preferred Stock will be
divided into two series, Series A and Series B. The Series A Senior Convertible
Preferred Stock, par value $.01 per share, will be held by Hanauer and will be
subject to certain amendments other than the amendments to the Preferred Stock
Anti-Dilution Provisions, and the Series B Senior Convertible Preferred Stock,
par value $.01 per share, will be held by Warburg and will be subject to all of
the proposed amendments. The amendments to the Preferred Stock were agreed to
by the parties in their negotiation of the terms of the Financing Transactions.

AUTHORIZED PREFERRED STOCK. Currently, the Company is authorized to
issue 1,000,000 shares of Preferred Stock, of which 250,000 have been designated
Senior Convertible Preferred Stock and of which 200,000 have been designated
Junior Convertible Preferred Stock. Pursuant to the amendments, the Company
will be authorized to issue 1,000,000 shares of Preferred Stock, of which 50,000
will be designated Series A Senior Convertible Preferred Stock, 200,000 will be
designated Series B Senior Convertible Preferred Stock and 200,000 will be
designated Junior Convertible Preferred Stock.

REDEMPTION PROVISIONS. The Senior Preferred Stock and the Junior
Preferred Stock will be amended to eliminate the mandatory redemption
provisions, except that under certain limited circumstances, the Company may be
required to redeem the Junior Preferred Stock in connection with an underwritten
public offering of the Company's Common Stock as described in "Conversion of
Junior Preferred Stock" below.

ANTI-DILUTION PROVISIONS. As a result of the Financing Transactions
and upon application of the Preferred Stock Anti-Dilution Provisions, the
conversion price of the Senior Preferred Stock will be adjusted from $3.0137 to
approximately $2.76 per share of Common Stock, which will result in the Senior
Preferred Stock held by Warburg and Hanauer being convertible into an aggregate
of

22
<PAGE>

approximately 4,650,000 and 322,000 shares of Common Stock, respectively. The
exact adjustment will be based on, among other things, the number of shares of
Common Stock issued in the Rights Offering. Prudential has agreed to waive the
application of the Preferred Stock Anti-Dilution Provisions in connection with
the Financing Transactions. As a result, the Junior Preferred Stock will
continue to be convertible into 2,674,511 shares of Common Stock and the
conversion price will remain at $5.6085 per share.

The Preferred Stock Anti-Dilution Provisions contained in the Senior
Preferred Stock held by Warburg and the Junior Preferred Stock held by
Prudential will be amended to provide that in the event of certain stock
dividends or distributions, stock splits, reverse stock splits and stock
reclassifications, mergers, consolidations or similar transactions, each holder
of such Preferred Stock will have the right to receive upon conversion the
number and kind of shares or other securities or property which it would have
been entitled to receive had the Preferred Stock been converted immediately
prior to such event. As amended, the Preferred Stock held by Warburg and
Prudential no longer will have the benefit of receiving an adjustment to the
number of shares issuable upon conversion in the event of certain dilutive stock
issuances, including issuances of rights, options, warrants or securities
convertible into Common Stock at a price per share less than the greater of the
current market price or the conversion price per share.

DIVIDEND RATE. The Junior Preferred Stock will be amended to increase
the dividend rate effective January 1, 2002 to 10% per annum with further
increases of 1% per annum effective January 1, 2003 and January 1, 2004 and 2%
per annum effective January 1, 2005 and each January 1 thereafter. Also in
connection with the Financing Transactions, the Senior Preferred Stock will be
amended so that at such time as the dividend rate on the Junior Preferred Stock
would increase above the dividend rate on such Senior Preferred Stock, the
dividend rate on the Senior Preferred Stock will increase by the same amount.
Assuming no other changes to the dividend rates of the Preferred Stock, as a
result of these amendments, the dividend rate on the Senior Preferred Stock held
by Warburg will increase by 2% per annum effective January 1, 2005.

CONVERSION OF JUNIOR PREFERRED STOCK. The Junior Preferred Stock will
be amended to provide that in the event that the Company undertakes to sell
Common Stock in an underwritten public offering and the Company's investment
bankers advise the Company that in order to complete the public offering on the
most favorable terms to the Company it is necessary to retire the Junior
Preferred Stock, then the Company may direct all holders of the Junior Preferred
Stock to convert the Junior Preferred Stock; provided that such holders will be
obligated to convert only after the later of the time Warburg has committed to
convert its Senior Preferred Stock and the consummation of such underwritten
public offering. If the holders of the Junior Preferred Stock are required to
convert the Junior Preferred Stock at a time when the Common Stock issuable upon
conversion would have a value less than the accreted value of the Junior
Preferred Stock (including all unpaid dividends), then such holders must either,
at their option, require the Company to redeem the Junior Preferred Stock at the
accreted value or convert the Junior Preferred Stock.

STOCKHOLDERS' AGREEMENT

Upon consummation of the Restructuring, the Company, Warburg, Hanauer
and Prudential entered into the Stockholders' Agreement dated January 29, 1993
and amended July 1, 1993 (the "Stockholders' Agreement").

VOTING AGREEMENT. Pursuant to the Stockholders' Agreement prior to
July 1, 1993, at any special or annual meeting of Stockholders at which
Directors are to be elected or in connection with a solicitation of consents
through which Directors are to be elected, each "Stockholder" (as defined below)
is required to vote (or give a written consent with respect to) all of its
shares of Capital Stock in favor of: (i) the election to the Board of two
nominees designated by Prudential (the "Prudential

23
<PAGE>

Nominee") and three nominees designated by Warburg (the "Warburg Nominees"); and
(ii) the election to the Board of such other nominees, not running in opposition
to the Prudential Nominees or to the Warburg Nominees, who shall have been
selected or approved as such by the Board. The Stockholders' Agreement was
amended on July 1, 1993 to decrease the required number of Prudential Nominees
to one and to decrease the required number of Warburg nominees to two. Warburg
or Prudential may at any time cause the Stockholders' Agreement to be amended so
that the required number of Prudential Nominees is increased to two and the
required number of Warburg Nominees is increased to three. Prudential and
Warburg will not be obligated to comply with the foregoing provisions if the
Board has failed, in the case of Prudential, to nominate for election to the
Board the required number of Prudential Nominees after being requested to do so
by Prudential, or has failed, in the case of Warburg, to nominate for election
to the Board the required number of Warburg Nominees after being requested to do
so by Warburg. "Stockholder" is currently defined in the Stockholders'
Agreement to mean Warburg, Prudential and any other person (except Hanauer) who
agrees to be bound by the terms of the Stockholders' Agreement, provided that no
person shall be a "Stockholder" if such person ceases to beneficially own (x) at
least 51% of the Senior Preferred Stock, Warburg 1993 Warrants and all issued
Warburg Registrable Securities (as defined below) or (y) at least 75% of the
Junior Preferred Stock, Prudential $5.50 Warrants and all issued Prudential
Registrable Securities (as defined below).

The Stockholders' Agreement also provides that each "Stockholder"
(i) will vote against removal of the other party's nominees (unless requested by
such party to vote for removal in which case it will do so), (ii) will exercise
its best efforts to cause its nominees on the Board to vote in favor of a
nominee of the other party to fill any vacancy on the Board created by the
resignation, removal or death of such party's nominee if the effect of failing
to so fill such vacancy would be that there would be less than one Prudential
Nominee or two Warburg Nominees remaining on the Board, and (iii) at any special
or annual meeting of Stockholders prior to the Company's 1995 annual meeting,
will vote (or give a written consent with respect to) all of its shares of
Capital Stock in favor of electing Hanauer as a Director or against removal of
Hanauer as a Director.

The provisions of the Stockholders' Agreement pertaining to voting by
Stockholders will terminate at such time as there is only one Stockholder. In
any event, the provisions of the Stockholders' Agreement with respect to voting
arrangements and restrictions will terminate no later than ten years from the
date of the Stockholders' Agreement in accordance with applicable law, subject
to extension by the agreement of the remaining parties to the Stockholders'
Agreement.

Pursuant to the Stockholders' Agreement, Reuben S. Leibowitz, John D.
Santoleri and Douglas M. Karp were Warburg Nominees, and Wilbert F. Schwartz and
John P. Mullman were Prudential Nominees who were elected to the Board in
January 1993. Mr. Karp and Mr. Mullman have resigned from the Board. In
February 1993, Mr. Schwartz became President and Chief Executive Officer of the
Company and was no longer a Prudential Nominee. Messrs. Leibowitz, Santoleri
and Schwartz were elected to the Board at the Annual Meeting. Prudential did
not designate a nominee for election to the Board at the Annual Meeting.

Upon consummation of the Financing Transactions, the definition of
"Stockholder" in the Stockholders' Agreement will be amended to mean Warburg,
Prudential and any other person (except Hanauer) who agrees to be bound by the
terms of the Stockholders' Agreement, provided that no person shall be a
"Stockholder" (as defined in the Stockholders' Agreement) if such person ceases
to beneficially own (x) at least 51% of the Senior Preferred Stock, Warburg 1993
Warrants, Warburg 1994 Warrants and all issued Warburg Registrable Securities or
(y) at least 75% of the Junior Preferred Stock, Prudential $5.50 Warrants,
Prudential 1994 Warrants and all issued Prudential Registrable Securities. The
Common Stock issuable upon exercise of the New Warrants and the Common Stock
acquired by Warburg, Hanauer or Prudential, as the case may be, in connection
with the Rights Offering will be subject to the voting requirements of the
Stockholders' Agreement.

24
<PAGE>

Prior to September 1993, the Company and its subsidiary, Grubb & Ellis
Asset Services Company ("GEASC"), provided services to the Resolution Trust
Company (the "RTC") and the Federal Deposit Insurance Corporation (the "FDIC").
As a result of Prudential's current stock ownership and certain of its rights
under the Stockholders' Agreement, Prudential may be deemed to be a related
entity to the Company under RTC regulation. The Company, upon learning that
Prudential was party to a lawsuit with the FDIC, voluntarily refrained from
entering into new RTC contracts on the basis that if Prudential is deemed to be
a related party with the Company, the existence of the lawsuit might impair the
Company's and GEASC's ability to contract with the RTC and the FDIC. The Company
is currently in contact with the RTC to determine what limits might be placed on
Prudential in order to satisfy RTC regulations. Prudential has expressed its
willingness to enter into certain amendments to the Stockholders' Agreement to
eliminate one impediment to resumption of the Company's contracting business
with the RTC and the FDIC, including (i) terminating the voting agreements
contained in the Stockholders' Agreement, (ii) waiving, but not relinquishing,
its right to nominate Directors until such time as Prudential's equity ownership
in the Company will not impair GEASC's ability to perform government contracting
services, and (iii) to the extent that Prudential is entitled to cast more than
24.9% of the votes which all Stockholders are eligible to cast on any matter,
granting a proxy to the Board to vote the excess shares (but only the excess
shares) on such matter in proportion to the vote thereon of all Stockholders
other than Prudential. Prudential will continue to have registration rights
under the Stockholders' Agreement as described below. In April 1994, the
Company was notified by the RTC that it has proposed to exclude the Company from
RTC contracting as the Company had not filed certain reports with the RTC. The
Company has filed a response to the RTC's proposed exclusion. Both matters must
be resolved before the Company or GEASC can be eligible to resume its RTC and
FDIC contracting business. The Company is unable to predict the outcome or
timing of these matters or whether or when it will be allowed to resume RTC and
FDIC contracting services.

REGISTRATION RIGHTS. The Stockholders' Agreement provides that at any
time each of (i) the holders of at least 30% of the aggregate number (on the
date of the Stockholders' Agreement) of shares of Common Stock issued or
issuable upon conversion of any Senior Preferred Stock and all shares of Common
Stock issued or issuable upon exercise of any Existing Warrants and Contingent
Warrants issued to Warburg and Hanauer (collectively, the "Warburg Registrable
Securities"), may make three written requests to the Company for registration
under the Securities Act of all or part of such securities; provided, however,
that Warburg may make any of such three requests for registration regardless of
the percentage of Warburg Registrable Securities held by it, and (ii) each of
the holders of at least 30% of the aggregate number (on the date of the
Stockholders' Agreement) of shares of Common Stock issued upon exercise of the
Old Prudential Warrants, all shares of Common Stock issued or issuable upon
conversion of any Junior Preferred Stock and all shares of Common Stock issued
or issuable upon exercise of any Prudential $5.50 Warrants (collectively, the
"Prudential Registrable Securities") may make three written requests to the
Company for registration under the Securities Act of all or part of such
securities; provided, however, that Prudential may make any of such three
requests for registration regardless of the percentage of Prudential Registrable
Securities held by it.

The Stockholders' Agreement also provides that in the event a holder
of Warburg Registrable Securities requests a registration pursuant to the
foregoing provisions, Hanauer may elect to include a proportionate share of
Warburg Registrable Securities held by him in which case he will be permitted to
sell such Warburg Registrable Securities on the same terms as the holder of the
Warburg Registrable Securities requesting such registration.

Pursuant to the Stockholders' Agreement, holders of Warburg
Registrable Securities and Prudential Registrable Securities also have certain
"piggyback" registration rights to include their securities, subject to certain
limitations, in any other registration statement filed by the Company for its
own account or pursuant to any of the foregoing requests, or otherwise.
Whenever the Company effects a registration pursuant to the registration rights
provisions of the Stockholders' Agreement, the Company will be required to pay
the costs of such registration of securities, except that each selling
stockholder

25
<PAGE>

will bear its pro rata share of customary underwriting discounts and
commissions, the customary fees and expenses of its counsel and applicable
transfer taxes. The Stockholders' Agreement contains customary indemnification
and contribution provisions relating to the exercise by the holders of
registrable securities of their registration rights thereunder.

Upon consummation of the Financing Transactions, the Stockholders'
Agreement will be amended to extend the registration rights currently granted to
Warburg and Prudential to the Warburg 1994 Warrants and the Prudential 1994
Warrants to be issued in connection with the Financing Transactions, any shares
of Common Stock issued upon exercise of such Warrants and any shares of Common
Stock acquired by Warburg, Hanauer or Prudential, as the case may be, in
connection with the Rights Offering. Warburg, Prudential and Hanauer have not
requested that the Company include any registrable securities in the
registration statement which the Company filed in connection with the Rights
Offering.

SUMMARY OF ANTICIPATED EFFECTS OF THE FINANCING TRANSACTIONS; DILUTION

The Financing Transactions will have a material effect on the Company
and on the holders of the Company's Common Stock. The Financing Transactions
may result in a significant dilution of the voting interests of the Company's
Common Stockholders, depending on the participation of the Stockholders in the
Rights Offering. Such dilution would reduce a Common Stockholder's ownership
interest in the Company.

The following table sets forth the equity ownership of the Company
prior to the consummation of the Financing Transactions and assuming conversion
of Preferred Stock.

Before Financing Transactions
-----------------------------
Number of Percent of
Common Equity
Number of and Assuming
Common Preferred Exercise of
Shares Percent Shares(1) Percent Warrants(2)
------ ------- --------- ------- -----------

<S> <C> <C> <C> <C> <C>
Public 3,994,000 90.5% 3,994,000 34.3% 30.9%
Warburg 0 0 4,256,000 36.6 39.5
Hanauer 21,000 0.5 316,000 2.7 4.3
Prudential 398,000 9.0 3,072,000 26.4 25.3
--------- ----- ---------- ----- -----
Total 4,413,000 100.0% 11,638,000 100.0% 100.0%
<FN>
____________________

(1) Assumes conversion of the Senior Preferred Stock held by Warburg and
Hanauer into approximately 4,256,000 and 295,000 shares of Common Stock,
respectively. Assumes conversion of the Junior Preferred Stock held by
Prudential into approximately 2,675,000 shares of Common Stock. Holders of
the Senior Preferred Stock and the Junior Preferred Stock have one vote for
each share of Common Stock into which the Preferred Stock could be
converted. Does not assume exercise of stock options issued pursuant to
the Company's stock option plans.

(2) Assumes the exercise of Existing Warrants held by Warburg, Hanauer and
Prudential for 482,000, 218,000 and 200,000 shares of Common Stock,
respectively. Assumes the exercise of Contingent Warrants held by Warburg
and Hanauer for approximately 374,000 and 26,000 shares of Common Stock,
respectively.
</TABLE>

The following table sets forth the equity ownership of the Company
after the consummation of the Financing Transactions, assuming that Common
Stockholders fully subscribe to the Rights Offering and assuming that Common
Stockholders do not purchase any shares of Common Stock upon exercise of the
Rights, and that Warburg acquires 4,250,000 shares of Common Stock, which is
approximately the maximum number which it has agreed to acquire pursuant to the
Stand-by Agreement.

26
<PAGE>

After Financing Transactions After Financing Transactions
Assuming Common Stockholders Assuming Common Stockholders Do Not
Purchase Shares in Rights Offering(1) Purchase Shares in Rights Offering(3)
-------------------------------------------- -------------------------------------------
Percent Percent
of Equity of Equity
Number of Assuming Number of Assuming
Common Percent All Warrants Common Percent All Warrants
Shares of Equity Exercised(2) Shares of Equity Exercised(4)
------ --------- ------------ ------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Public 8,385,000 51.0% 45.9% 3,994,000 24.5% 22.2%
Warburg 4,615,000 28.1 31.5 8,902,000 54.5 54.9
Hanauer 362,000 2.2 3.8 364,000 2.2 3.9
Prudential 3,072,000 18.7 18.8 3,072,000 18.8 19.0
---------- ----- ----- ---------- ----- -----
Total 16,434,000 100.0% 100.0% 16,332,000 100.0% 100.0%

- --------------------
<FN>
(1) Assumes the purchase of all shares of Common Stock issuable upon exercise
of all Rights by Common Stockholders, other than Prudential. Also assumes
conversion of the Senior Preferred Stock held by Warburg and Hanauer into
4,615,000 and 320,000 shares of Common Stock, respectively, and conversion
of the Junior Preferred Stock held by Prudential into approximately
2,675,000 shares of Common Stock. Does not assume exercise of stock
options issued pursuant to the Company's stock option plans.

(2) Assumes (i) the exercise of Existing Warrants, as amended, held by Warburg,
Hanauer and Prudential for 645,000, 291,000 and 200,000 shares of Common
Stock, respectively, (ii) the exercise of New Warrants held by Prudential
for 150,000 shares of Common Stock and (iii) the exercise of Contingent
Warrants held by Warburg and Hanauer for 495,000 and 35,000 shares of
Common Stock, respectively.

(3) Assumes acquisition by Warburg of 4,250,000 shares of Common Stock in
connection with the Rights Offering. Also assumes conversion of the Senior
Preferred Stock held by Warburg and Hanauer into 4,639,000 and 322,000
shares of Common Stock, respectively, the acquisition by Hanauer of
approximately 21,000 shares of Common Stock upon exercise of Rights and
conversion of the Junior Preferred Stock held by Prudential into
approximately 2,675,000 shares of Common Stock. Does not assume exercise
of stock options issued pursuant to the Company's stock option plans.

(4) Assumes (i) the exercise of Existing Warrants, as amended, held by Warburg,
Hanauer and Prudential for 654,000, 295,000 and 200,000 shares of Common
Stock, respectively, (ii) the exercise of New Warrants held by Warburg and
Prudential for 325,000 and 150,000 shares of Common Stock, respectively,
and (iii) the exercise of Contingent Warrants held by Hanauer for 35,000
shares of Common Stock.

</TABLE>

USE OF PROCEEDS

The maximum net proceeds to the Company from the sale of the
Common Stock offered hereby are estimated to be approximately $10.1 million
(assuming all of the shares of Common Stock offered hereby are purchased
pursuant to the exercise of Rights and after deducting estimated expenses of the
Financing Transactions). The minimum net proceeds of the Rights Offering are
estimated to be approximately $9.8 million (assuming the purchase of Common
Stock only by Warburg up to the maximum amount of its obligation and after
deducting estimated expenses of the Financing Transactions). Warburg is
required to fulfill its standby commitment first through cancellation of
indebtedness under the Bridge Loan, including accrued interest, and thereafter
through payment of funds directly to the Company. In the event that following
the purchase of shares by Warburg pursuant to its standby commitment there is
any outstanding indebtedness remaining under the Bridge Loan, any such remaining
amounts outstanding under the Bridge Loan will be retired with the proceeds of
the Rights Offering. Thereafter, remaining proceeds, if any, of the Rights
Offering will be used for general corporate purposes.

27
<PAGE>

MARKET PRICE

The principal markets for the Company's Common Stock are the NYSE
and the Pacific Stock Exchange. The following table sets forth the high and low
sales prices of the Company's Common Stock as reported on the NYSE composite
tape for the period indicated. The prices shown have been adjusted to give
retroactive effect to a one-for-five reverse stock split as of January 29, 1993.

Price Range of
Common Stock
----------------
High Low
------- ------
<S> <C> <C>
1991
First Quarter. . . . . . . . . . . . . . . . . . $14-3/8 $5
Second Quarter . . . . . . . . . . . . . . . . . 12-1/2 7-1/2
Third Quarter. . . . . . . . . . . . . . . . . . 10 6-7/8
Fourth Quarter . . . . . . . . . . . . . . . . . 8-3/4 6-1/4

1992
First Quarter. . . . . . . . . . . . . . . . . . $12-1/2 $6-7/8
Second Quarter . . . . . . . . . . . . . . . . . 10-5/8 6-1/4
Third Quarter. . . . . . . . . . . . . . . . . . 8-1/2 5
Fourth Quarter . . . . . . . . . . . . . . . . . 6-1/4 4-3/8

1993
First Quarter. . . . . . . . . . . . . . . . . . $ 8 $1-7/8
Second Quarter . . . . . . . . . . . . . . . . . 5-7/8 3-3/8
Third Quarter. . . . . . . . . . . . . . . . . . 4-1/2 2-3/4
Fourth Quarter . . . . . . . . . . . . . . . . . 3-5/8 2-5/8

1994
First Quarter. . . . . . . . . . . . . . . . . . $ 3-7/8 $2-7/8
Second Quarter . . . . . . . . . . . . . . . . . 3-1/4 2-1/4
Third Quarter (through _______________, 1994). .
</TABLE>

On March 28, 1994, the last trading day prior to the announcement
of the Financing Transactions by the Company, the closing sales price of the
Common Stock on the NYSE was $3-3/8 per share. On September ____, 1994, the
date of the Annual Meeting at which the Financing Transactions were approved,
the closing sales price of the Common Stock on the NYSE was $_______ per share.

The Company did not pay any cash dividends during the periods
indicated, and is prohibited from doing so under the Prudential Debt Agreement.

28
<PAGE>

DILUTION

The net tangible book value of the Company's Common Stock as of
March 31, 1994 was approximately ($74.1 million) or ($18.02) per share. "Net
tangible book value" per share represents the amount of total tangible assets
less total liabilities, divided by the number of shares of Common Stock
outstanding. After giving effect to the sale by the Company of the 4,112,358
shares of Common Stock pursuant to the Rights Offering and after deducting the
estimated offering expenses, the pro forma net tangible book value of the
Company as of March 31, 1994 would have been approximately ($64.7 million), or
($7.86) per share, representing an immediate increase in net tangible book value
of $10.16 per share to existing stockholders and an immediate and substantial
dilution of $10.24 per share to stockholders purchasing shares in the Rights
Offering. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Subscription Price . . . . . . . . . . . . . . . . . . . . . . . $ 2.38
Net tangible book value per share before offering. . . . . . . ($18.02)
Increase per share attributable to stockholders
exercising Rights. . . . . . . . . . . . . . . . . . . . . . 10.16
-----
Pro forma net tangible book value per share after offering. . . . (7.86)
-------
Dilution to stockholders exercising Rights(1) . . . . . . . . . . ($10.24)
-------
-------
- --------------------
<FN>
(1) Dilution is determined by subtracting the pro forma net tangible book value
per share from the Subscription Price paid by a stockholder for a share of
Common Stock.
</TABLE>

The above calculations do not give effect to the exercise of all
warrants that will be outstanding upon consummation of the Financing
Transactions. Assuming the exercise of all outstanding warrants, Common
Stockholders who exercise Rights would have experienced an immediate dilution in
net tangible book value of $8.34 per share.

DIVIDEND POLICY

The Company intends to retain any future earnings for use in its
business and therefore does not anticipate paying any cash dividends in the
foreseeable future. In addition, the Prudential Debt Agreement prohibits the
payment by the Company of dividends or distributions on the Common Stock until
the outstanding debt under such Agreement is paid in full.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following summary of federal income tax consequences is based
on current law, is for general information only and is not based upon or
supported by a ruling of the Internal Revenue Service (the "Service"). The tax
treatment of a holder of Rights or Common Stock acquired on exercise of a Right
may vary depending upon his particular situation. Certain holders (including
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) may be subject to special rules not discussed
below. EACH HOLDER SHOULD CONSULT HIS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO HIM OF RECEIVING, HOLDING, EXERCISING AND DISPOSING OF THE
RIGHTS OR COMMON STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE,
LOCAL, FOREIGN AND PENDING TAX LAWS.

RIGHTS

29
<PAGE>

RECEIPT OF RIGHTS. Pursuant to Section 305(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), a holder should not recognize
income for federal income tax purposes by reason of the receipt of a Right, and
the Company intends to so treat the distribution of Rights as a nontaxable
distribution.

If the Service were to take a contrary position with respect to
this matter, by deeming the distribution of Rights to constitute a taxable
distribution, a holder receiving a Right would recognize a dividend, taxable as
ordinary income, in an amount equal to the fair market value of the Right
received, but only to the extent of the current and accumulated earnings and
profits of the Company. To the extent the deemed distribution exceeds the
current and accumulated earnings and profits of the Company, such excess would
be treated first as a nontaxable recovery of adjusted tax basis in the Common
Stock with respect to which the Right was distributed and then as gain from the
sale or exchange of such Common Stock. A holder's tax basis in a Right received
in a taxable distribution would equal the fair market value of the Right as of
the date of distribution of the Right (the "Distribution Date").

Under the Company's intended treatment (i.e., a nontaxable
distribution), if a Right is exercised, the tax basis of the Right in the hands
of a holder will be determined by allocating the holder's tax basis in his
shares of Common Stock with respect to which the Right was distributed between
such shares of Common Stock and the Right, in proportion to their relative fair
market values on the Distribution Date. If, however, the fair market value of
the Right on the Distribution Date is less than 15% of the fair market value of
the shares of Common Stock with respect to which the Right was distributed, the
holder's tax basis in the Right will be deemed to be zero unless the holder
affirmatively elects, in accordance with Treasury Regulations, to apportion his
tax basis in accordance with the preceding sentence. The holding period of a
Right will include the holding period for the shares of Common Stock with
respect to which the Right was distributed.

EXERCISE OF RIGHTS. No gain or loss will be recognized by a
holder of Rights upon exercise of the Rights for cash. The adjusted tax basis
of a holder of Common Stock acquired upon exercise of Rights will be equal to
the sum of the holder's adjusted tax basis in the exercised Rights and the
Subscription Price. The holding period for Common Stock acquired upon exercise
of Rights will commence on the date of such exercise.

EXPIRATION OF RIGHTS WITHOUT EXERCISE. A holder of a Right who
allows it to expire without exercise may not allocate any tax basis to the
unexercised Right and will therefore not sustain a loss because of its
expiration.

ADJUSTMENT TO THE TERMS OF A RIGHT. An adjustment to the
Subscription Price of a Right, or the failure to make such an adjustment (and
possibly an adjustment to the number of shares of Common Stock purchasable upon
the exercise of the Right or the failure to make such an adjustment), in certain
circumstances may result in a distribution that could be taxable as a dividend
under the Code to the holder of the Right or the Common Stock. Alternatively, a
modification of the terms of a Right may be treated as a taxable exchange of the
Right for a new right to purchase Common Stock, with the holder recognizing gain
or loss (as discussed above), even though no cash may have been distributed to
the holder.

COMMON STOCK

DISPOSITION OF COMMON STOCK. The sale or other disposition of
Common Stock acquired on exercise of a Right will result in the recognition of
gain or loss by the holder of such Common Stock in an amount equal to the
difference between the amount realized and the holder's adjusted tax basis in
the Common Stock. Gain or loss will be capital gain or loss if the Common Stock
was held as a capital asset, and will be long-term capital gain or loss if the
Common Stock has a holding period for tax

30
<PAGE>

purposes of more than one year. The holding period of shares of Common Stock
acquired by exercise of the Rights commences on the date such Rights are
exercised.

POTENTIAL LIMITATIONS ON USE OF LOSS CARRYFORWARDS

In general, upon a change of ownership, Section 382 of the Code
limits the amount of a loss corporation's taxable income that could be offset
annually by its carryforwards of net operating loss (and certain "built-in"
losses that are economically accrued but not recognized at the time of a change
of ownership) to an amount equal to the product obtained by multiplying the
aggregate value of such corporation's capital stock immediately prior to the
requisite change of ownership by the federal long-term tax-exempt interest rate.
A change of ownership occurs and Section 382 of the Code will apply if, within a
three year "testing period," there is more than a 50 percentage point increase
in the capital stock of the loss corporation held by persons who own (actually
or constructively) at least five percent in value of the loss corporation's
stock (with persons who separately are less than five percent stockholders
generally being treated in the aggregate as a single stockholder). Except in
limited circumstances, options to acquire stock will be treated as if they had
been exercised, on an option-by-option basis, if such treatment results in the
requisite change of ownership.

Upon the reorganization of the Company in January 1993, a change
of ownership occurred for Section 382 purposes, which limited the availability
of any then existing net operating loss carryforwards and built-in losses of the
Company. Although the Rights Offering, of itself, will not trigger a change of
ownership for purposes of Section 382 of the Code, future events beyond the
control of the Company, such as transactions in its Common Stock or other
ownership interests, could cause a change of ownership and result in limitations
on the use of losses by the Company. Therefore, there can be no assurance that
carryforwards of net operating loss (and certain "built-in" loss, when
recognized) of the Company will be available to offset future income and tax
liability of the Company.

THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSE-
QUENCES IS FOR GENERAL INFORMATION ONLY. ACCORDINGLY, EACH HOLDER OF RIGHTS AND
COMMON STOCK SHOULD CONSULT HIS OWN TAX ADVISOR WITH RESPECT TO THE TAX
CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE RIGHTS AND
COMMON STOCK, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN
AND PENDING TAX LAWS.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Latham & Watkins, San Francisco, California.

EXPERTS

The consolidated financial statements and schedules of Grubb &
Ellis Company and Subsidiaries at December 31, 1993 and 1992, and for the years
then ended, incorporated by reference in this Prospectus and Registration
Statement have been audited by Ernst & Young, independent auditors, as set forth
in their reports thereon incorporated by reference herein and in the
Registration Statement which, as to the year ended December 31, 1993, is based
in part on the report of Coopers & Lybrand, independent public accountants. The
consolidated financial statements and schedules of Grubb & Ellis Company and
Subsidiaries at December 31, 1991 and for the year then ended, incorporated by
reference in this Prospectus and Registration Statement have been audited by
Coopers & Lybrand, independent public accountants, as set forth in their report
thereon incorporated by reference herein and in the Registration Statement. The
financial statements referred to above are included in reliance upon such
reports given upon the authority of such firms as experts in accounting and
auditing.

31
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED ON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE RIGHTS
OR THE COMMON STOCK TO WHICH IT RELATES, OR AN OFFER IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED BY
REFERENCE HEREIN IS CORRECT AT ANY TIME AFTER THE DATE HEREOF.

-------------------------

TABLE OF CONTENTS
-------------------------

Page
----

Available Information. . . . . . . . . . . . . . . ii
Incorporation of Certain Documents
By Reference . . . . . . . . . . . . . . . . . . iii
Prospectus Summary . . . . . . . . . . . . . . . . iv
Risk Factors . . . . . . . . . . . . . . . . . . . 1
The Rights Offering. . . . . . . . . . . . . . . . 5
Financing Transactions . . . . . . . . . . . . . . 12
Use of Proceeds. . . . . . . . . . . . . . . . . . 27
Market Price . . . . . . . . . . . . . . . . . . . 28
Dilution . . . . . . . . . . . . . . . . . . . . . 29
Dividend Policy. . . . . . . . . . . . . . . . . . 29
Certain Federal Income Tax Consequences. . . . . . 29
Legal Matters. . . . . . . . . . . . . . . . . . . 31
Experts. . . . . . . . . . . . . . . . . . . . . . 31

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

GRUBB & ELLIS COMPANY

RIGHTS TO PURCHASE
COMMON STOCK
EXPIRING OCTOBER 13, 1994

----------------
PROSPECTUS
----------------

________________, 1994

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>

INSTRUCTIONS FOR USE OF GRUBB & ELLIS COMPANY
RIGHTS CERTIFICATE
---------------------------------------

CONSULT THE SUBSCRIPTION AGENT OR YOUR BANK OR
BROKER AS TO ANY QUESTIONS
---------------------------------------

In any state where the offering made thereby must be made by a
broker-dealer registered in that state, the offering is being made on behalf of
Grubb & Ellis Company by one or more registered brokers or dealers licensed
under the laws of such jurisdiction.

---------------------------------------

The following instructions relate to a rights offering (the
"Rights Offering") by Grubb & Ellis Company, a Delaware corporation (the
"Company"), to the holders of its Common Stock, $0.01 par value (the "Common
Stock"), as described in the Company's Prospectus dated September __, 1994 (the
"Prospectus"). Holders of record of Common Stock at the close of business on
September 13, 1994 (the "Record Date") are receiving one nontransferable
subscription right (each, a "Right") for each share of Common Stock held of
record on the Record Date. The Rights are evidenced by nontransferable rights
certificates ("Rights Certificates"), which record holders are receiving with
copies of the Company's Prospectus. Each whole Right entitles the holder
thereof to purchase from the Company one share of Common Stock at the
subscription price of $2.375 (the "Subscription Price"). An aggregate of
4,418,540 Rights exercisable to purchase an aggregate of 4,418,540 shares of
Common Stock are being distributed in connection with the Rights Offering. Any
shares of Common Stock offered hereby and not purchased pursuant to the Basic
Subscription Privilege will be available for subscription pursuant to an
oversubscription privilege (the "Oversubscription Privilege"). A holder who
validly exercises all of the Rights evidenced by the Rights Certificate issued
pursuant to the Rights Offering may oversubscribe at the Subscription Price for
remaining shares of Common Stock, up to a maximum number equal to the number of
shares of Common Stock held by such holder as of the Record Date. If the total
number of shares of Common Stock available for purchase pursuant to the
Oversubscription Privilege (the "Excess Shares") is insufficient to satisfy all
subscriptions pursuant to the Oversubscription Privilege, the Excess Shares will
be allocated pro rata among the holders exercising the Oversubscription
Privilege in proportion to the number of Rights exercised by each such holder,
relative to the number of Rights exercised by all holders exercising the
Oversubscription Privilege. If such pro rata allocation results in any holder
being allocated a greater number of Excess Shares than such holder subscribed
for pursuant to the exercise of that holder's Oversubscription Privilege, then
such holder will be allocated only that number of Excess Shares for which such
holder oversubscribed, and the remaining Excess Shares will be allocated among
all other holders exercising the Oversubscription Privilege on the same pro rata
basis outlined above. No fractional shares will be issued. The
Oversubscription Privilege is not transferable. See "The Rights Offering -
Subscription Privileges - Oversubscription Privilege" in the Prospectus.

The Rights will expire at 5:00 p.m, Chicago time, on October 13,
1994 (the "Expiration Time"), subject to extension in the discretion of the
Company.

The number of Rights to which you are entitled is printed on the
face of your Rights Certificate. You should indicate your wishes with regard to
the exercise of your Rights by completing the appropriate form or forms on the
back of your Rights Certificate and returning the Rights Certificate to the
Subscription Agent in the envelope provided.

YOUR SUBSCRIPTION RIGHT MUST BE RECEIVED BY THE SUBSCRIPTION
AGENT, OR GUARANTEED DELIVERY PROCEDURES WITH RESPECT TO YOUR SUBSCRIPTION RIGHT
MUST BE COMPLIED WITH, AND PAYMENT OF THE

<PAGE>

SUBSCRIPTION PRICE, INCLUDING FINAL CLEARANCE OF ANY CHECKS, MUST BE RECEIVED BY
THE SUBSCRIPTION AGENT, AT OR BEFORE 5:00 P.M, CHICAGO TIME, ON OCTOBER 3, 1994,
OR SUCH LATER DATE AS IS DETERMINED BY THE COMPANY. YOU MAY NOT REVOKE ANY
PROPER EXERCISE OF A RIGHT.

1. SUBSCRIPTION.

To exercise Rights, complete Form 1 and send your properly
completed and executed Rights Certificate (or Notice of Guaranteed Delivery),
together with payment in full of the Subscription Price for each share of Common
Stock subscribed for pursuant to the Basic Subscription Privilege and the
Oversubscription Privilege to Harris Trust Company of California, as
Subscription Agent (the "Subscription Agent"). Payment of the Subscription
Price must be made for the full number of shares of Common Stock being
subscribed for (a) in U.S. dollars by check or postal, telegraphic or express
money order payable to Harris Trust Company of California, as Subscription Agent
or (b) by wire transfer of funds in U.S. dollars to the account maintained by
the Subscription Agent for such purpose at Harris Trust & Savings Bank, ABA No.
071000288; Account No. 1092113; Account Name: Harris Trust Shareholder
Services. THE SUBSCRIPTION PRICE WILL BE DEEMED TO HAVE BEEN RECEIVED BY THE
SUBSCRIPTION AGENT ONLY UPON (I) CLEARANCE OF ANY UNCERTIFIED CHECK, (II)
RECEIPT BY THE SUBSCRIPTION AGENT OF ANY CERTIFIED OR CASHIER'S CHECK OR OF ANY
POSTAL, TELEGRAPHIC OR EXPRESS MONEY ORDER OR (III) RECEIPT OF COLLECTED FUNDS
IN THE SUBSCRIPTION AGENT'S ACCOUNT DESIGNATED ABOVE. If paying by uncertified
personal check, please note that the funds paid thereby may take at least five
business days to clear. ACCORDINGLY, REGISTERED HOLDERS OF RIGHTS WHO WISH TO
PAY THE SUBSCRIPTION PRICE BY MEANS OF AN UNCERTIFIED PERSONAL CHECK ARE URGED
TO MAKE PAYMENT SUFFICIENTLY IN ADVANCE OF THE EXPIRATION TIME TO ENSURE THAT
SUCH PAYMENT IS RECEIVED AND CLEARS BY SUCH DATE AND ARE URGED TO CONSIDER, IN
THE ALTERNATIVE, PAYMENT BY MEANS OF CERTIFIED OR CASHIER'S CHEEK, MONEY ORDER
OR WIRE TRANSFER OF FUNDS.

Alternatively, you may cause a written guarantee substantially in
the form of Exhibit A to these Instructions (the "Notice of Guaranteed
Delivery") from a member firm of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc., or from a
commercial bank or trust company having an office or correspondent in the United
States (each, an "Eligible Institution"), to be received by the Subscription
Agent prior to the Expiration Time; payment in full of the applicable
Subscription Price may be made separately as long as said payment is also
received by the Subscription Agent prior to the Expiration Time. Such Notice of
Guaranteed Delivery must state your name, the number of Rights represented by
your Rights Certificate and the number of Underlying Shares being subscribed for
pursuant to the Basic Subscription Privilege and, if any, pursuant to the
Oversubscription Privilege, and must guarantee the delivery to the Subscription
Agent of your properly completed and executed Rights Certificate by 5:00 p.m.,
Chicago time on October 21, 1994. Additional copies of the Notice of Guaranteed
Delivery may be obtained upon request from the Subscription Agent or the
Information Agent at the addresses, or by calling the telephone numbers,
indicated below.

Banks, brokers and other nominee holders of Rights who exercise
the Basic Subscription Privilege and the Oversubscription Privilege on behalf of
beneficial owners of Rights will be required to certify to the Subscription
Agent and the Company (by delivery to the Subscription Agent of a Nominee Holder
Certification substantially in the form available from the Subscription Agent or
the Information Agent), as to the aggregate number of Rights which have been
exercised and the number of shares of Common Stock thereby subscribed for
pursuant to the Basic Subscription Privilege and the Oversubscription Privilege
by each beneficial owner of Rights (which may include such nominee) on whose
behalf such nominee is acting. If more Excess Shares are subscribed for
pursuant to the Oversubscription Privilege than are available for sale, Excess
Shares will be allocated PRO RATA, as described above.

2
<PAGE>

The addresses and telephone number of the Subscription Agent, are
as follows:

<TABLE>
<S> <C> <C>
GENERAL INFORMATION:
(312) 462-3324

BY MAIL: FACSIMILE TRANSMISSION BY HAND OR OVERNIGHT COURIER:
COPY NUMBER:
Harris Trust Company of California (312) 765-8244 Harris Trust Company of California
c/o Harris Trust and Savings Bank c/o Harris Trust and Savings Bank
P.O. Box 830 CONFIRM FACSIMILE BY TELEPHONE: 311 West Monroe, 11th Floor
Chicago, Illinois 60690-0830 (XXX) XXX-XXXX Chicago, Illinois, 60606

</TABLE>

The address and telephone number of Morrow & Co., Inc., the
Information Agent, are as follows:

Morrow & Co., Inc.
909 3rd Avenue
New York, New York 10022-4799
Call Collect: (212) 741-5511

If the aggregate Subscription Price that you have paid is
insufficient to purchase the number of shares of Common Stock that you have
indicated are being subscribed for, or if you do not specify the number of
shares of Common Stock you intend to purchase, then you will be deemed to have
exercised first the Basic Subscription Privilege and second the Oversubscription
Privilege to purchase shares of Common Stock to the full extent of the payment
tendered (subject to the restrictions described above). If the aggregate
Subscription Price that you have paid exceeds the amount necessary to purchase
the number of shares of Common Stock for which you have indicated an intention
to subscribe, then you will be deemed to have exercised first, the Basic
Subscription Privilege (if not already fully exercised) and second, the
Oversubscription Privilege to the full extent of the excess payments tendered
(subject to the restrictions described above).

2. ISSUANCE AND DELIVERY OF STOCK CERTIFICATES, ETC.

The following issuances, deliveries and payments will be made to
you at the address shown on the face of your Rights Certificate unless you
provide special issuance, payment or delivery instructions to the contrary by
completing Form 2.

a. DELIVERY OF CERTIFICATES. Certificates for shares of Common
Stock issuable upon exercise of the Basic Subscription Privilege will be mailed
as soon as practicable after the subscriptions have been accepted by the
Subscription Agent to holders not participating in the Oversubscription
Privilege. Certificates for shares of Common Stock issuable upon exercise of
the Basic Subscription Privilege and the Oversubscription Privilege will be
mailed as soon as practicable after the Expiration Time. However, holders
participating in the Oversubscription Privilege may elect to have certificates
for shares of Common Stock issuable upon exercise of the Basic Subscription
Privilege mailed as soon as practicable after the subscriptions have been
accepted and to have certificates representing shares issuable upon exercise of
the Oversubscription Privilege mailed as soon as practicable after the
Expiration Time.

b. CASH PAYMENTS. As soon as practicable after the Expiration
Time and after all prorations and adjustment contemplated by the terms of the
Rights Offering have been effected, the Subscription Agent will return by mail
without interest or deduction to each registered holder of Rights exercising the
Oversubscription Privilege any excess funds received in payment of the
Subscription Price for Excess Shares that are subscribed for by such Rights
holder but not allocated to such Rights holder pursuant to the Oversubscription
Privilege.

3
<PAGE>

3. SIGNATURES.

a. SIGNATURES BY REGISTERED HOLDER. The signature on the
Rights Certificate must correspond with the name of the registered holder
exactly as it appears on the face of the Rights Certificate without any
alteration or change whatsoever. Persons who sign the Rights Certificate in a
representative or other fiduciary capacity must indicate their capacity when
signing and, unless waived by the Subscription Agent in its sole and absolute
discretion, must present to the Subscription Agent satisfactory evidence of
their authority to so act.

b. EXECUTION BY PERSON OTHER THAN REGISTERED HOLDER. If the
Rights Certificate is signed by a person other than the holder named on the face
of the Rights Certificate, proper evidence of authority of the person signing
the Rights Certificate must accompany the same unless, for good cause, the
Subscription Agent dispenses with proof of authority.

c. SIGNATURE GUARANTEES. Your signature must be guaranteed by
an Eligible Institution if you wish the Common Stock issued as a result of the
exercise of Rights to be registered in a name other than that of the registered
holder or if they are to be delivered to an address other than that set forth on
the face of the Rights Certificate. See Instruction 2 above.

4. METHOD OF DELIVERY.

The method of delivery of Subscription Rights and payment of the
Subscription Price to the Subscription Agent will be at the election and risk of
the registered holder of the Rights, but, if sent by mail, it is recommended
that they be sent by registered mail, properly insured, with return receipt
requested, and that a sufficient number of days be allowed to ensure delivery to
the Subscription Agent and the clearance of any uncertified personal checks sent
in payment of the Subscription Price prior to 5:00 p.m., Chicago time, on
October 13, 1994.

5. SPECIAL PROVISIONS RELATING TO THE DELIVERY OF RIGHTS THROUGH THE
DEPOSITORY TRUST COMPANY.

In the case of Rights that are held of record through The
Depository Trust Company ("DTC"), exercises of the Basic Subscription Privilege
(but not the Oversubscription Privilege) may be effected by instructing DTC to
transfer Rights (such Rights being "DTC Exercised Rights") from the DTC account
of such holder to the DTC account of the Subscription Agent, together with
making payment of the Subscription Price for each Underlying Share subscribed
for pursuant to the Basic Subscription Privilege. THE OVERSUBSCRIPTION
PRIVILEGE IN RESPECT TO THE DTC EXERCISED RIGHTS MAY NOT BE EXERCISED THROUGH
DTC. The holder of DTC Exercised Rights may exercise the Oversubscription
Privilege in respect of such DTC Exercised Rights by properly executing and
delivering to the Subscription Agent at or prior to 5:00 p.m. Chicago time, on
October 13, 1994, a DTC Participant Oversubscription Exercise Form, in the form
available from the Information Agent or the Subscription Agent, together with
payment of the appropriate Subscription Price for the number of shares of Common
Stock for which the Oversubscription Privilege is to be exercised.

If a Notice of Guaranteed Delivery relates to Rights with respect
to which exercise of the Basic Subscription Privilege will be made through DTC
and such Notice of Guaranteed Delivery also relates to the exercise of the
Oversubscription Privilege, a DTC Participant Oversubscription Exercise Form
must also be received by the Subscription Agent in respect of such exercise of
the Oversubscription Privilege at or prior to the Expiration Time.

6. TRANSFER TAXES.

The Company will pay transfer taxes, if any, applicable to the
issuance and sale of Common Stock to a registered holder of Rights upon the
exercise of Rights by such holder. If, however, a transfer tax is imposed for
any reason other than the issuance and sale of the Company's Common Stock to a
registered holder of Rights upon exercise of Rights by such holder, including
the issuance of such shares in a name other than that of such holder, the amount
of any such transfer taxes (whether imposed on the registered holder or

4
<PAGE>

any other person) will be payable by the registered holder or such other person.
In any such event, the Subscription Agent will be entitled to refuse to take the
action requested until it has received satisfactory evidence of the payment of
such taxes or exemption therefrom.

7. IRREGULARITIES.

All questions concerning the timeliness, validity, form and
eligibility of any exercise of Rights will be determined by the Company, whose
determinations will be final and binding. The Company, in its sole discretion,
may waive any defect or irregularity, or permit a defect or irregularity to be
corrected within such time as it may determine, or reject the purported exercise
of any Right. Rights Certificates will not be deemed to have been received or
accepted until all irregularities have been waived or cured within such time as
the Company determines, in its sole discretion. Neither the Company nor the
Subscription Agent will be under any duty to give notification of any defect or
irregularity in connection with the submission of Rights Certificates or incur
any liability for failure to give such notification.

Exhibit A - Notice of Guaranteed Delivery

5
<PAGE>
EXHIBIT A
TO INSTRUCTIONS
NOTICE OF GUARANTEED DELIVERY

FOR

SUBSCRIPTION RIGHTS

ISSUED BY

GRUBB & ELLIS COMPANY

This form, or one substantially equivalent thereto, must be used
to exercise Rights pursuant to the Rights Offering described in the Prospectus
dated September __, 1994 (the "Prospectus") of Grubb & Ellis Company, a Delaware
corporation (the "Company"), if a registered holder of Rights cannot deliver the
Rights Certificate evidencing the Rights (the "Rights Certificate"), to the
Subscription Agent listed below (the "Subscription Agent") at or prior to 5:00
p.m., Chicago time, on October 13, 1994 (the "Expiration Time"), or such later
time to which the Rights Offering may have been extended. Such form must be
delivered by hand or sent by facsimile transmission or mail to the Subscription
Agent, and must be received by the Subscription Agent at or prior to the
Expiration Time. See "The Rights Offering-Exercise of Rights and Subscription
Agent" in the Prospectus. Payment of the Subscription Price of $2.375 per share
for each share of the Company's Common Stock subscribed for upon exercise of
such Right must be received by the Subscription Agent in the manner specified in
the Instructions at or prior to 5:00 p.m., Chicago time, on October 13, 1994,
even if the Rights Certificate evidencing such Right is being delivered pursuant
to the procedure for guaranteed delivery thereof.

THE SUBSCRIPTION AGENT IS:

HARRIS TRUST COMPANY OF CALIFORNIA

The addresses and telephone number of the Subscription Agent, are
as follows:

GENERAL INFORMATION
(312) 461-3324

</TABLE>

DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.

A-1
<PAGE>

LADIES AND GENTLEMEN:

The undersigned hereby represents that he or she is the
registered holder of Rights Certificate(s) representing _________ Rights and
that such Rights Certificate(s) cannot be delivered to the Subscription Agent at
or before 5:00 p.m., Chicago time, on October 13, 1994. Upon the terms and
subject to the conditions set forth in the Prospectus, receipt of which is
hereby acknowledged, the undersigned hereby elects to exercise (i) the Basic
Subscription Privilege to subscribe for one share of Common Stock per right with
respect to each of ______________ Rights represented by such Subscription Right
and (ii) the Oversubscription Privilege relating to each such Right to
subscribe, to the extent that Excess Shares (as defined in the Prospectus) are
available therefor, for an aggregate of up to __________ Excess Shares, subject
to a maximum equal to the number of shares owned by the undersigned as of
September 13, 1994. The undersigned understands that payment of the
Subscription Price of $2.375 per share for each share of Common Stock subscribed
for pursuant to the Basic Subscription Privilege and the Oversubscription
Privilege must be received by the Subscription Agent at or before 5:00 p.m.,
Chicago time, on October 13, 1994, and represents that such payment, in the
aggregate amount of $____________, either (check appropriate box):

/ / is being delivered to the Subscription Agent;

/ / has been delivered separately to the Subscription Agent; and is being or
was delivered in the manner set forth below (check appropriate box and
complete information relating thereto):

/ / wire transfer of funds
- name of transferor institution ________________________________________
- date of transfer ___________ - confirmation number if available _______

/ / uncertified check (Payment by uncertified check will not be deemed to have
been received by the Subscription Agent until such check has cleared.
Holders paying by such means are urged to make payment sufficiently in
advance of the Expiration Time to ensure that such payment clears by such
date.)

/ / certified or cashier's check

/ / money order
- name of maker ___________________________________________________________
- date and number of check or money order _________________________________
- bank on which check is drawn or issuer or money order ___________________

Signature _______________________ Address:
_________________________________ _____________________________________________
Name(s) _________________________ _____________________________________________
(INCLUDING ZIP CODE)
_________________________________
PLEASE TYPE OR PRINT Area Code and Tel No(s)._____________________
_____________________________________________

(If signature is by a trustee(s),
executor(s), administrator(s),
guardian(s), attorney(s)-in-fact,
agent(s), officer(s) of a
corporation or another acting in
a fiduciary or representative
capacity, such capacity must be Subscription Right
clearly indicated below.) No(s). (if available) _______________________

GUARANTEE OF DELIVERY
(NOT TO BE USED FOR RIGHTS CERTIFICATE SIGNATURE GUARANTEE)

The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States, guarantees that the undersigned will deliver to the Subscription Agent
the Rights Certificate(s) representing the Rights being exercised hereby, with
any required signature guarantees and any other required documents, by 5:00
p.m., Chicago time on October 21, 1994.

_________________________________ Dated: ________________________________, 1993
Name(s) _________________________ _____________________________________________
_________________________________ _____________________________________________
(ADDRESS) (NAME OF FIRM)

_________________________________ _____________________________________________
(AREA CODE AND TELEPHONE NUMBER) (AUTHORIZED SIGNATURE)

The institution which completes this form must communicate the guarantee
to the Subscription Agent and must deliver the Rights Certificate(s) to the
Subscription Agent within the time period shown herein. Failure to do so could
result in a financial loss to such institution.

A-2

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses payable by the
Company in connection with the issuance and distribution of the Rights and the
Common Stock being registered (all amounts are estimated except the SEC
Registration Fee):

<TABLE>

<S> <C>
SEC Registration. . . . . . . . . . . . . . . . . . . . . . $ 3,619
Blue Sky Qualification Fees and Expenses. . . . . . . . . . 25,000
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . 200,000
Accounting Fees and Expenses. . . . . . . . . . . . . . . . 25,000
Subscription Agent's and Information Agent's Fees . . . . . 10,000
Printing Expenses . . . . . . . . . . . . . . . . . . . . . 45,000
Listing Fees. . . . . . . . . . . . . . . . . . . . . . . . 40,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 1,381
--------

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $350,000
--------
--------
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 7.01 of the Company's Bylaws states that the Company will, to
the full extent permitted by the Delaware General Corporate Law, as amended from
time to time, indemnify each person who is made a party to or is involved in any
proceeding by reason of acting in the capacity of director, officer, employee or
certain other capacities with the Company against certain liabilities, including
certain labilities under the Securities Act of 1933, as amended (the "Securities
Act"). The Company has entered into indemnification agreements with each of its
directors and executive officers, which also provide indemnification against
certain liabilities, including certain liabilities under the Securities Act.

Section 145 of the General Corporation Law of the State of Delaware
authorizes a corporation to indemnify its directors and officers in terms
sufficiently broad to permit such indemnification (including reimbursement of
expenses incurred) under certain circumstances for liabilities arising under the
Securities Act.

The Company currently maintains directors' and officers' liability
insurance in the form of policies which provide for coverage of liabilities up
to a maximum amount of $7.5 million per policy year (subject to certain minimum
initial payments by the Company). The policies insure directors and officers
for liabilities incurred in connection with or on behalf of the Company, except
for losses incurred on account of certain specified liabilities, including
losses from "matters which may be deemed uninsurable under the law pursuant to
which this policy shall be construed."

ITEM 16. EXHIBITS.

4.1 Certificate of Incorporation of the Company, as restated
effective December 8, 1993. (1)

4.2 Specimen stock certificate for Common Stock, $0.01 par value, of
the Company.

4.3 Form of Rights Certificate.

5 Opinion of Latham & Watkins.

II-1
<PAGE>

10.1 Standby Agreement dated July 21, 1994 between the Company and
Warburg, Pincus Investors, L.P.

10.2 Amendment dated July 20, 1994 to the Senior Notes, the
Subordinated Notes and the Revolving Credit Note Agreement
between the Company and The Prudential Insurance Company of
America.

23.1 Consent of Latham & Watkins (included in Exhibit 5).

23.2 Consents of Independent Public Accountants.

23.2(a) Consent of Ernst & Young.
23.2(b) Consent of Coopers & Lybrand.
23.2(c) Consent of Coopers & Lybrand.

24 Powers of Attorney.
- ------------------

(1) Incorporated by reference to Exhibit 3.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993.

ITEM 17. UNDERTAKINGS.

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;

(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.

PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8, and
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.

II-2
<PAGE>

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.

(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

(d) The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon
rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of the time
it was declared effective.

(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE
offering thereof. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, California, on the 22nd day of July,
1994.

GRUBB & ELLIS COMPANY

/s/ Joe F. Hanauer
------------------
Joe F. Hanauer, Chairman

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

Signature Title Date
--------- ----- ----
<S> <C> <C>

/s/ Wilbert F. Schwartz* President, Chief Executive Officer July 22, 1994
----------------------------- and Director
Wilbert F. Schwartz

/s/ Robert J. Hanlon, Jr.* Chief Financial Officer and July 22, 1994
----------------------------- Senior Vice President (Prinicpal
Robert J. Hanlon, Jr. Accounting Officer)

/s/ Joe F. Hanauer* Chairman of the Board and Director July 22, 1994
-----------------------------
Joe F. Hanauer

/s/ Reuben S. Leibowitz* Director July 22, 1994
-----------------------------
Reuben S. Leibowitz

/s/ John D. Santoleri* Director July 22, 1994
-----------------------------
John D. Santoleri

/s/ Lawrence S. Bacow* Director July 22, 1994
-----------------------------
Lawrence S. Bacow

----------------------------- Director
R. David Anacker

* By:Robert J. Walner

-----------------------------
(attorney-in-fact)

</TABLE>

II-4
<PAGE>
Exhibit Index

Document Title
-------- -----

4.1 Certificate of Incorporation of the Company, as restated
effective December 8, 1993. (1)

4.2 Specimen stock certificate for Common Stock, $0.01 par value, of
the Company.

4.3 Form of Rights Certificate.

5 Opinion of Latham & Watkins.

10.1 Standby Agreement dated July 21, 1994 between the Company and
Warburg, Pincus Investors, L.P.

10.2 Amendment dated July 20, 1994 to the Senior Notes, the
Subordinated Notes and the Revolving Credit Note Agreement
between the Company and The Prudential Insurance Company of
America.

23.1 Consent of Latham & Watkins (included in Exhibit 5).

23.2(a) Consent of Ernst & Young.

23.2(b) Consent of Coopers & Lybrand.

23.2(c) Consent of Coopers & Lybrand.

24 Powers of Attorney.
- ---------

(1) Incorporated by reference to Exhibit 3.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993.

II-5

<PAGE>

Exhibit 4.2
Specimen Stock Certificate

Number SHARES
CH
GRUBB & ELLIS
COMMON STOCK
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE SEE REVERSE FOR RIGHTS LEGEND
THIS CERTIFICATE IS TRANSFERRABLE IN
CHICAGO, LOS ANGELES OR NEW YORK SEE REVERSE FOR CERTAIN DEFINITIONS

GRUBB & ELLIS COMPANY

THIS CERTIFIES THAT CUSIP 400095 20 4

IS THE OWNER OF

FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF THE PAR VALUE OF
$.01 PER SHARE OF

CERTIFICATE OF STOCK

GRUBB & ELLIS COMPANY, TRANSFERRABLE ON THE BOOKS OF THE CORPORATION BY THE
HOLDER HEREOF IN PERSON OR ANY ACKNOWLEDGED ATTORNEY UPON THE SURRENDER OF THE
CERTIFICATE PROPERLY ENDORSED. THIS CERTIFICATE IS NOT VALID UNLESS
COUNTERSIGNED BY THE TRANSFER AGENT AND REGISTERED BY THE REGISTRAR.

WITNESS THE FACSIMILE SEAL OF THE CORPORATION AND THE FACSIMILE SIGNATURES
OF ITS DULY AUTHORIZED OFFICERS.

DATED:
/s/ Wilbert F. Schwartz
PRESIDENT CORPORATE
SEAL
/s/ Robert J. Hanlon, Jr.
SECRETARY

COUNTERSIGNED AND REGISTERED:
HARRIS TRUST COMPANY
OF CALIFORNIA TRANSFER AGENT
AND REGISTRAR
BY

AUTHORIZED OFFICER

<PAGE>

Exhibit 4.3
Form of Rights Certificate

RIGHTS NUMBER OF RIGHTS CUSIP NO. __________
CERTIFICATE NO.

RIGHTS CERTIFICATE FOR COMMON STOCK

VOID AND VALUELESS IF NOT RECEIVED BY SUBSCRIPTION AGENT WITH PAYMENT IN
FULL BY 5:00 P.M. CHICAGO TIME ON OCTOBER 13, 1994.

SUBSCRIPTION PRICE: $2.375 for each share of Common Stock

EXPIRATION TIME: 5:00 p.m., Chicago Time on October 13, 1994

The registered holder named below or assigns is entitled to subscribe for
shares of Common stock, par value $.01 per share, of Grubb & Ellis Company upon
the terms and conditions set forth in the Prospectus, dated September ___, 1994,
and the instructions relating thereto. All capitalized terms used herein have
the same meaning as are given to them in the Prospectus, which is available from
the Subscription Agent.

One Right and $2.375 are needed to subscribe for one share of Common Stock.

GRUBB & ELLIS COMPANY

By ________________________________________________________
Chief Executive Officer

THE SUBSCRIPTION AGENT IS HARRIS TRUST COMPANY OF CALIFORNIA
c/o Harris Trust and Savings Bank
P.O. Box 830, Chicago, Illinois 60690-0830
Telephone (312) 461-3324

THIS OFFERING MAY BE WITHDRAWN UNDER CERTAIN CIRCUMSTANCES. Subscribers
are advised to review the instructions and the prospectus, copies of which are
available from the Subscription Agent, before subscribing for shares of Common
Stock.

<PAGE>

GRUBB & ELLIS COMPANY
EXERCISE FORM

1. If you DO NOT INTEND TO EXERCISE YOUR RIGHTS to purchase additional shares
of Grubb & Ellis Company common stock, do NOT complete this form and you do
not need to take any further action.

2. If you DO INTEND TO EXERCISE YOUR RIGHTS to purchase additional shares of
Grubb & Ellis Company common stock:
- Complete the information on this form.
- Sign and date the form.
- Return this form and your payment in the amount shown as "Total Due"
using the enclosed reply envelope. Additional payment may be required
and any excess payment will be refunded. Payment of the Subscription
Price must be made for the full number of shares of Common Stock being
subscribed for (a) in U.S. dollars by check of postal, telegraphic or
express money order payable to Harris Trust Company of California, as
Subscription Agent or (b) by wire transfer of funds in U.S. dollars to
the account maintained by the Subscription Agent for such purpose at
Harris Trust & Savings Bank, ABA No. 071000288; Account No. 1092113;
Account Name: Harris Trust Shareholder Services.

THIS RIGHTS OFFERING EXPIRES At 5:00 P.M., CHICAGO TIME, ON OCTOBER 13, 1994
UNLESS EXTENDED AND THIS EXERCISE FORM IS VOID THEREAFTER
_________________________________________________________________________
FORM 1 - SUBSCRIPTION

/ / I hereby irrevocably subscribe for the number of Shares indicated below
upon the terms and conditions specified in the Prospectus related
hereto.

Basic Subscription Privilege

x $2.375 = $
---------
Number of Subscription Amount Due
Shares* Price

Over-Subscription Privilege (optional)

x $2.375 = $
---------
Number of Subscription Amount Due
Shares* Price

TOTAL PAYMENT REQUIRED = $
Total Due

* This number is not to exceed the number of common shares noted in "#2" of the
reverse side of this form.

Agreement and Signature

I hereby irrevocably subscribe for the number of shares indicated above upon
the terms and conditions specified in the Prospectus relating thereto. Receipt
of the Prospectus is hereby acknowledged.

Signature guaranteed by:

Dated: , 1993.

(See Instruction as to
Signature Guarantee)

Please date and sign exactly as your name appears on the reverse side of this
Exercise Form. Joint owners should each sign. If signing as executor,
administrator, attorney, trustee or guardian, give title as such. If a
corporation, sign in full corporate name by authorized officer. If a
partnership, sign in the name of authorized person. Please provide your daytime
telephone number.______________________________________________________

QUESTIONS REGARDING THE EXERCISE FORM SHOULD BE DIRECTED TO THE INFORMATION
AGENT, MORROW & CO., INC.

Call collect: (212) 741-5511

FORM 2 - DELIVERY INSTRUCTIONS: Address for delivery of stock if other
than shown on reverse hereof:

_______________________________________________________
_______________________________________________________

<PAGE>
Exhibit 5
Opinion of Latham & Watkins

July 21, 1994

Grubb & Ellis Company
One Montgomery Street
Telesis Tower
San Francisco, California 94104

Ladies and Gentlemen:

We have acted as special counsel to Grubb & Ellis Company, a Delaware
corporation (the "Company"), in connection with the Registration Statement on
Form S-3 which is being filed with the Securities and Exchange Commission by the
Company on the date hereof (the "Registration Statement") with respect to the
registration under the Securities Act of 1933, as amended, of up to 4,418,540
shares (the "Common Shares") of the Company's common stock, par value $.01 per
share. This opinion is rendered to the Company pursuant to its request.

In our capacity as such counsel, we are familiar with the proceedings
taken by the Company in connection with the authorization, issuance and sale of
the Common Shares for the purposes of this opinion. In addition, we have made
such legal and factual examinations and inquiries, including an examination of
originals (or copies certified or otherwise identified to our satisfaction as
being true reproductions of originals) of such documents, corporate records and
other instruments, and have obtained from officers of the Company such
certificates and other representations and assurances as we have deemed
necessary or appropriate for the purposes of this opinion.

In such examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
legal capacity of natural persons executing such documents and the authenticity
and conformity to original documents of documents submitted to us as certified
or photostatic copies.

Our opinion herein is limited to the effect on the subject transaction
only of the federal laws of the United States, the internal laws of the State of
California and the General Corporation Law of the State of Delaware. We assume
no responsibility regarding the applicability to, or the effect thereon, of the
laws of any other jurisdiction or, in the case of Delaware, any other laws, or
as to matters of municipal law or the laws of any local agencies within any
state.

Subject to the foregoing, and the other matters set forth herein, we
are of the opinion that, as of the date hereof, the Common Shares have been duly
authorized and reserved for issuance, and, when issued, delivered and paid for
in the manner described in the Registration Statement, will be validly issued,
fully paid and nonassessable.

We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm contained under the
heading "Legal Matters" of the prospectus included therein.

Very truly yours,

LATHAM & WATKINS

<PAGE>

Exhibit 10.1

STANDBY AGREEMENT

THIS STANDBY AGREEMENT (as it may be amended, supplemented or otherwise
modified from time to time, this "Agreement") is entered into as of July 21,
1994 by and between GRUBB & ELLIS COMPANY, a Delaware corporation (the
"Company") and WARBURG, PINCUS INVESTORS, L.P., a Delaware limited partnership
("Warburg").

RECITAL

A. On March 28, 1994, the Company, Warburg and The Prudential
Insurance Company of America ("Prudential") entered into a Term Sheet (the "Term
Sheet") pursuant to which, among other things, the Company, subject to certain
conditions, has agreed to undertake a rights offering (the "Rights Offering") in
which the Company would issue to each holder of common stock (the "Common
Stockholders") one nontransferable right (a "Right") for each share of Common
Stock. Each Right would entitle the holder to purchase prior to the expiration
date of such Right one share of Common Stock at a subscription price equal to
$2.375 per share (the "Subscription Price"). Each Common Stockholder who
validly exercises all of his or her Rights would have the right to oversubscribe
at the Subscription Price for any additional shares of Common Stock to the
extent that unsubscribed shares are available, up to a maximum number equal to
the number of shares of Common Stock held by such holder as of the record date
and subject to proration.

B. Warburg and the Company have entered into a Loan and Security
Agreement dated as of March 29, 1994 (the "Loan Agreement") pursuant to which
Warburg agreed to make advances to the Company from time to time in an aggregate
principal amount for all such advances outstanding not to exceed $10 million at
any time (the "Bridge Loan").

C. Warburg and the Company deem it desirable for Warburg to purchase
shares of Common Stock not purchased by Common Stockholders in the Rights
Offering, subject to a maximum obligation, as described herein.

D. Warburg and the Company have agreed that concurrently with the
purchase of Common Stock by Warburg, certain existing warrants and preferred
stock of the Company held by Warburg would be amended. The number of shares
issuable upon the exercise of such warrants and upon the conversion of such
preferred stock will not be finally determined until the expiration of the
rights offering.

E. As consideration for agreeing to acquire unsubscribed shares of
Common Stock in connection with the Rights Offering, the Company has agreed to
issue to Warburg a warrant to purchase up to 325,000 shares of Common Stock;
provided that the issuance of such warrant will be conditioned upon Warburg
acquiring at least 500,000 shares of Common Stock pursuant to the stand-by
commitment described in Section 2 below.

<PAGE>

AGREEMENT

NOW, THEREFORE, the Company and Warburg hereby agree as follows:

1. DEFINITIONS. The following terms used herein shall have the
meanings set forth below:

"CHARTER AMENDMENT" shall have the meaning set forth in Section 6.

"CLOSING" shall mean the Closing of the transactions described in this
Agreement, which shall be held at 9:00 a.m. on the Closing Date at the
offices of Latham & Watkins, 505 Montgomery Street, Suite 1900, San
Francisco, California, or such other time as may be agreed to by the
parties hereto.

"CLOSING DATE" shall mean the date that is one business day after the
Rights Offering Termination Date, or such other date as may be agreed to by
the parties hereto.

"CONTINGENT WARRANTS" shall mean Contingent Stock Subscription
Warrants Nos. ___ and ___ issued by the Company to Warburg that provide for
the purchase of an aggregate of 373,818 shares of Common Stock at an
exercise price of $5.00 per share.

"FINANCING TRANSACTIONS" shall mean the transactions contemplated by
the Term Sheet, including the Rights Offering, the amendments to the
Preferred Stock, the amendments to the Warburg 1993 Warrants and the
issuance of the New Warrants.

"$5.00 WARRANTS" shall mean Stock Subscription Warrants Nos. 6 and 14
issued by the Company to Warburg that provide for the purchase of an
aggregate of 340,000 shares of Common Stock at an exercise price of $5.00
per share.

"$5.50 WARRANTS" shall mean Stock Subscription Warrants Nos. 7 and 12
issued by the Company to Warburg that provide for the purchase of an
aggregate of 142,000 shares of Common Stock at an exercise price of $5.50
per share.

"PREFERRED STOCK" shall mean the Senior Preferred Stock and the 5%
Junior Convertible Preferred Stock

"PROSPECTUS" shall mean the final prospectus included in the
Registration Statement for use in connection with the issuance of the
Rights.

"REGISTRATION STATEMENT" shall mean the Company's Registration
Statement on Form S-3 under the Securities Act of 1933, as amended (the
"1933 Act") and the rules and regulations of the Securities and Exchange
Commission (the "Commission") thereunder (the "1933 Act Regulations"), or
such other appropriate Form under the 1933 Act and the 1933 Act
Regulations, pursuant to which the Rights and underlying shares of Common
Stock will be registered pursuant to the 1933 Act.

"RIGHTS OFFERING TERMINATION DATE" shall mean the date on which the
subscription period (as the same may be extended by the Company) under the
Rights Offering expires.

2
<PAGE>

"SECURITIES" shall mean the shares of Common Stock acquired by Warburg
pursuant to the standby commitment, the Series B Senior Preferred Stock,
the Warburg Amended Warrant and the Warburg New Warrant.

"SENIOR PREFERRED STOCK" shall mean the Company's 12% Senior
Convertible Preferred Stock.

"SERIES B SENIOR PREFERRED STOCK" shall mean the Company's Series B
Senior Preferred Stock to be issued to Warburg in exchange for the Senior
Preferred Stock as contemplated herein and in the Charter Amendment.

"SUBSCRIPTION SHARES" shall mean the shares of Common Stock registered
pursuant to the Registration Statement and issuable upon exercise of
Rights.

"WARBURG AMENDED WARRANT" shall have the meaning set forth in
Section 4.

"WARBURG NEW WARRANT" shall have the meaning set forth in Section 5.

"WARBURG 1993 WARRANTS" shall mean the $5.00 Warrants and the $5.50
Warrants.

2. STANDBY COMMITMENT. Subject to the terms and conditions of this
Agreement, on the Closing Date, Warburg shall purchase at $2.375 per share all
shares of Common Stock reserved for issuance pursuant to the exercise of the
Rights and not validly purchased by Common Stockholders in the Rights Offering,
subject to a maximum number of shares that will result in an aggregate purchase
price paid by Warburg being equal to $10 million plus accrued interest on the
Bridge Loan as of the Closing Date. The purchase price for such shares of
Common Stock shall be paid by Warburg (i) first, through cancellation of the
outstanding principal of and accrued interest on the Bridge Loan and (ii)
thereafter through payment of funds directly to the Company (the "Additional
Funds"). On the Rights Offering Termination Date, the Company shall notify
Warburg of the number of shares of Common Stock validly purchased by Common
Stockholders in the Rights Offering together with the number of shares of Common
Stock that Warburg will be obligated to purchase pursuant to this Section 2,
including a calculation of accrued interest on the Bridge Loan. The
determination of the number of shares shall be made based upon the assumption
that all Rights subject to guaranteed delivery (including payment of the
exercise price related thereto) will be duly and validly exercised. On the
Rights Offering Termination Date, the Company shall notify Warburg of the amount
of Additional Funds, if any, that are required pursuant to clause (ii) above.

3. REPAYMENT OF BRIDGE LOAN. Subject to the terms and conditions of
this Agreement, on the Closing Date the Company shall repay any indebtedness
outstanding under the Bridge Loan after giving effect to the transactions set
forth in Section 2 above, and, upon such payment, any and all indebtedness
outstanding under the Bridge Loan shall be deemed repaid and cancelled. Warburg
shall deliver to the Company the Promissory Notes evidencing indebtedness under
the Bridge Loan, marked "paid in full."

4. EXCHANGE OF 1993 WARRANTS. Subject to the terms and conditions
of this Agreement, on the Closing Date, Warburg shall surrender the Warburg 1993
Warrants to the Company in exchange for a new warrant (the "Warburg Amended
Warrant"), which shall be in the form of Exhibit 4.1 hereto and shall provide
for an exercise price of $3.50 per share. On the Rights Offering Termination
Date, the Company shall notify Warburg of the number of shares of Common

3
<PAGE>

Stock which will be issuable upon exercise of the Warburg Amended Warrant, which
will be calculated to be that number of shares that the $5.00 Warrant would have
represented the right to purchase plus the number of shares that the $5.50
Warrant would have represented the right to purchase, in both cases if the anti-
dilution provisions of such Warburg 1993 Warrants had been applied through the
Rights Offering Termination Date, including the issuances of securities
contemplated by the Financing Transactions but excluding issuances of securities
waived in the Letter Agreement Regarding Waiver of Certain Anti-Dilution
Provisions among the Company, Warburg, Prudential and Joe F. Hanauer.

5. ISSUANCE OF WARBURG NEW WARRANTS. Subject to the terms and
conditions of this Agreement, in the event that the number of shares Warburg
purchases pursuant to Section 2 equals or exceeds 500,000 shares, on the Closing
Date, the Company shall issue to Warburg a warrant in the form of Exhibit 5.1 to
purchase 325,000 shares of Common Stock for an exercise price of $2.375 per
share (the "Warburg New Warrant").

6. AMENDMENTS TO PREFERRED STOCK. Subject to the terms and
conditions of this Agreement, on the Closing Date, the Company shall file with
the Secretary of State of the State of Delaware an Amendment to the Company's
Restated Certificate of Incorporation in the form of Exhibit 6.1 (the "Charter
Amendment"), providing for certain amendments to the terms of the Preferred
Stock. Upon the filing of the Charter Amendment, Warburg shall exchange
certificates representing all of its shares of Senior Preferred Stock for an
equal number of shares of Series B Senior Preferred Stock. On the Rights
Offering Termination Date, the Company shall notify Warburg of the Series B
Senior Preferred Stock Conversion Price (as defined in the Charter Amendment),
which will be calculated based on the application through the Closing Date of
the anti-dilution provisions of the Senior Preferred Stock, including after
giving effect to the issuances of securities contemplated by the Financing
Transactions but excluding issuances of securities waived in the Letter
Agreement Regarding Waiver of Certain Anti-Dilution Provisions among the
Company, Warburg, Prudential and Joe F. Hanauer.

7. CANCELLATION OF CONTINGENT WARRANT. On the Closing Date, in the
event that the Company is obligated to issue the Warburg New Warrant pursuant to
Section 5, Warburg shall surrender to the Company for cancellation the
Contingent Warrants and the Company shall cancel such Contingent Warrants. The
determination as to whether Warburg shall be obligated to surrender the
Contingent Warrants shall be made on the Closing Date concurrently with the
determination as to whether the condition set forth in Section 5 has been
satisfied.

8. REPRESENTATIONS AND WARRANTIES. (a) The Company hereby
represents and warrants to Warburg as follows, which representations and
warranties are, as of the date hereof, and will be, as of the Closing Date, true
and correct:

(1) At the time the Registration Statement becomes effective,
the Registration Statement will comply in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading.
The Prospectus, at the time the Registration Statement becomes effective and at
the Closing Date, will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, that the representations and warranties in this subsection
shall not apply to statements in or omissions from the Registration Statement or
the Prospectus made in

4
<PAGE>

reliance upon and in conformity with the information furnished to the Company in
writing by Warburg expressly for use in the Registration Statement or in the
Prospectus.

(2) The documents incorporated by reference into the Prospectus
pursuant to Item 12 of Form S-3 under the 1933 Act, at the time they were filed
with the Commission complied in all material respects with the requirements of
the Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules
and regulations of the Commission thereunder (the "1934 Act Regulations"), and
did not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and any documents hereafter filed deemed to be
incorporated by reference into the Prospectus will, when they are filed with the
Commission, comply in all material respects with the requirements of the 1934
Act and the 1934 Act Regulations, and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.

(3) The consolidated financial statements (which term, as used
herein, includes all related notes) included in the Registration Statement and
the Prospectus present fairly the financial position of the Company and its
consolidated subsidiaries at the dates indicated and the results of operations
of the Company and its consolidated subsidiaries for the periods specified;
except as otherwise stated in the Registration Statement, said financial
statements have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis; and the supporting schedules included
in the Registration Statement present fairly the information required to be
stated therein.

(4) This Agreement has been duly authorized, executed and
delivered by the Company.

(b) Warburg hereby represents and warrants to the Company, which
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true and correct, that this Agreement has been duly
authorized, executed and delivered by Warburg.

9. ACTIONS ON OR PRIOR TO CLOSING. Each of Warburg and the Company
covenant to take the following actions prior to Closing:

(a) CONSENTS AND REASONABLE EFFORTS. Each of the Company and
Warburg shall use its best efforts to obtain all consents, approvals,
authorizations or waivers of any public, governmental or regulatory body or
authority, including, without limitation, the filing, if required, of a
Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act"), and any and all consents, approvals or waivers from
parties to contracts as may be necessary for the consummation of the
transactions contemplated by this Agreement (the "Consents").

(b) STOCKHOLDER APPROVAL. The Company shall use its best
efforts to obtain approval of the transactions contemplated by this Agreement of
holders of a majority of the Common Stock present in person or by proxy at the
Company's Annual Meeting of Stockholders and entitled to vote on the Financing
Transactions, other than Warburg and Prudential.

(c) RIGHTS OFFERING. The Company shall take all steps
reasonably required to complete the Rights Offering as contemplated by the Term
Sheet. The commencement of

5
<PAGE>

the mailing of the Rights Certificates (as defined in the Prospectus) to the
holders of record of the Common Stock shall take place as promptly as
practicable after the day on which the Registration Statement becomes effective.
The subscription period under the Rights Offering shall be at least 16 days.

10. DELIVERIES AT CLOSING. (a) At the Closing, the Company shall
deliver to Warburg the following:

(1) The duly executed Warburg Amended Warrant;

(2) Subject to satisfaction of the conditions set forth in
Section 5, the duly executed Warburg New Warrant;

(3) A certificate representing the number of shares of Common
Stock issued to Warburg pursuant to Section 2;

(4) Payment of any amounts outstanding under the Bridge Loan
after giving effect to the transactions described in Section 2;

(5) A certificate representing 128,266 shares of Series B Senior
Preferred Stock as contemplated by the Charter Amendment.

(6) A certificate setting forth calculations of the number of
shares and accrued interest as contemplated by Sections 2, 4 and 6;

(7) Copies of the Restated Certificate of Incorporation,
including all amendments thereto, of the Company certified by the Secretary of
State of the State of Delaware as being in full force and effect on a recent
date prior to the Closing Date, together with the by-laws of the Company,
including all amendments thereto, certified by the Secretary or Assistant
Secretary of the Company;

(8) A copy of the Charter Amendment in the form filed with the
Secretary of State of the State of Delaware.

(9) Certificates of incumbency and corporate resolutions
authorizing the execution, delivery and performance of this Agreement, the
Warburg Amended Warrant and the Warburg New Warrant, and all other documents
contemplated hereby and thereby, all in form and substance satisfactory to
Warburg and its counsel.

(10) A certificate of an officer of the Company certifying
(a) the Company has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied at or prior to the Closing Date and (b)
that the subscription period under the Rights Offering has expired.

(b) At the Closing, Warburg shall deliver to the Company the
following:

(1) Any Additional Funds required to be paid pursuant to clause
(ii) of Section 2 above.

6
<PAGE>

(2) All Promissory Notes delivered pursuant to the Loan
Agreement, which Notes shall be irrevocably cancelled;

(3) The Contingent Warrant, to be cancelled;

(4) The Warburg 1993 Warrants, to be cancelled; and

(5) Certificates No. 3 and No. 6 representing 128,266 shares of
Senior Preferred Stock, to be cancelled.

(6) A certificate of a duly authorized representative of Warburg
certifying that Warburg has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to the Closing
Date.

11. CONDITIONS TO OBLIGATIONS OF WARBURG AND THE COMPANY. The
obligations of the Company and Warburg to effect the transactions described in
this Agreement are subject to the satisfaction of the following conditions,
unless waived in writing by both Warburg and the Company:

(a) The Registration Statement shall have become effective not
later than the date it is mailed to the Common Stockholders; and at the Closing
Date no stop order suspending the effectiveness of the Registration Statement
shall have been issued under the 1933 Act or proceedings therefor initiated or
threatened by the Commission.

(b) Holders of shares of Common Stock representing a majority of
the shares of Common Stock present in person or by proxy at the Annual Meeting
and entitled to vote on the Financing Transactions, other than Warburg and
Prudential, shall have voted to approve the transactions set forth in this
Agreement.

(d) All necessary Consents shall have been obtained and the
applicable notification period under the HSR Act shall have terminated.

(e) The Company and Prudential shall have entered into the
Amendment to the Prudential Debt Agreement in the form attached hereto as
Exhibit 11.1 and shall have consummated the transactions contemplated thereby.

12. CONDITIONS TO OBLIGATIONS OF WARBURG. The obligations of Warburg
to effect the transactions described in this Agreement are subject to the
satisfaction of the following conditions, unless waived in writing by Warburg:

(a) The Company shall have duly delivered to Warburg the funds
and the documents set forth in Section 10(a).

(b) The Company shall have filed with the Secretary of State of
the State of Delaware the Charter Amendment.

7
<PAGE>

(c) The Stockholders' Agreement among the Company, Warburg,
Prudential and Joe F. Hanauer shall have been amended as described in the
Company's Proxy Statement with respect to the 1994 Annual Meeting of
Stockholders.

13. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to effect the transactions described in this Agreement are subject to
the satisfaction of the following conditions, unless waived in writing by the
Company:

(a) Warburg shall have duly delivered to the Company the funds
and the documents set forth in Section 10(b).

14. ACTIONS AFTER CLOSING.

(a) The Company will make generally available to its security
holders as soon as practicable, but not later than 90 days after the close of
the period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 of the 1933 Act Regulations) for the twelve-month period
beginning not later than the first day of the Company's fiscal quarter next
following the "effective date" (as defined in said Rule 158) of the Registration
Statement.

(b) The Company will use the net proceeds received by it from
the sale of the Subscription Shares in the manner specified in the Prospectus
under "Use of Proceeds."

(c) The Company agrees to indemnify and hold harmless, to the
full extent permitted by law, Warburg and each person, if any, who controls
Warburg within the meaning of Section 15 of the 1933 Act or Section 20(a) of the
1934 Act, against all losses, liabilities, claims, damages and expenses
whatsoever (including, but not limited to, reasonable attorneys' fees and any
and all expense whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever (which fees and expenses shall be reimbursed to Warburg on a current
basis within 30 days of invoice therefor), and any and all amounts paid in
settlement of any claim or litigation), joint or several, to which they or any
of them may become subject under the 1933 Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement (or any amendment
thereto), or any related preliminary prospectus or the Prospectus, or in any
amendment thereof or supplement thereto or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that the Company will not be liable in any such case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by Warburg
expressly for use therein.

(d) Warburg agrees to indemnify and hold harmless, to the full
extent permitted by law, the Company and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20(a) of the
1934 Act, against all losses, liabilities, claims, damages and expenses
whatsoever (including, but not limited to, reasonable attorneys' fees and any
and all expense whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any claim
whatsoever (which fees and expenses shall be reimbursed to the Company on a
current basis within 30 days of invoice therefor), and any

8
<PAGE>

and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the 1933 Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), or any related preliminary prospectus or
the Prospectus, or in any amendment thereof or supplement thereto or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information furnished in writing by
Warburg to the Company specifically for inclusion in such Registration Statement
or Prospectus and has not been corrected in a subsequent writing prior to or
concurrently with the effective date of the Registration Statement.

(e) Promptly after receipt by an indemnified party under
subsection (c) or (d) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section except to the extent that it has
been prejudiced in any material respect by such failure or from any liability
which it may have otherwise). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein, and to
the extent it may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. Notwithstanding the foregoing, the indemnified party or
parties shall have the right to employ its or their own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel shall
have been authorized in writing by one of the indemnifying parties in connection
with the defense of such action, (ii) the indemnifying parties shall not have
employed counsel to have charge of the defense of such action within a
reasonable time after notice of commencement of the action, or (iii) in the
reasonable judgment of the indemnified party, based upon advice of its counsel,
a conflict of interest may exist between such indemnified party and the
indemnifying party with respect to such claims (in which case, the indemnifying
parties shall not have the right to direct the defense of such action on behalf
of the indemnified party or parties), in any of which events such fees and
expenses shall be borne by the indemnifying parties; provided that, with respect
to clause (iii), the indemnifying party has consented in writing to the
indemnified party's choice of counsel, which consent shall not be unreasonably
withheld. In the event one or more law firms has represented both the
indemnifying party and the indemnified party (the "Joint Counsel"), and the
indemnified party retains separate counsel, the indemnified party agrees that it
shall not object to the continued use of the Joint Counsel by the indemnifying
party and further agrees to waive any conflicts of interest. Under no
circumstances shall any indemnified party take a position or make an argument in
any proceeding in which such party is being indemnified that is inconsistent
with or prejudicial to any position or argument advanced by the indemnifying
party. If so requested by the indemnifying party, the indemnified party shall
appeal a judgment rendered against such indemnified party; provided that the
cost of such appeal shall be borne by the indemnifying party. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. Anything in this Section to the contrary
notwithstanding, an indemnifying party (A) shall not be liable for any
settlement of any claim or action effected without its written consent;

9
<PAGE>

provided, however, that such consent was not unreasonably withheld; (B) shall be
liable for the cost of appealing any judgment rendered against an indemnified
party, or for any increase in the amount of a judgment resulting from such
appeal, only if the indemnifying party has consented in writing to such appeal,
which consent may be withheld in the indemnifying parties's sole discretion; and
(C) shall be liable for a judgment rendered against an indemnified party only if
such judgment is final and nonappealable.

15. TRANSFER OF SECURITIES.

(a) REPRESENTATION OF WARBURG. Warburg represents that it is an
"Accredited Investor" as defined in Rule 501 of the General Rules and
Regulations under the Securities Act of 1933.

(b) INVESTMENT PURPOSE. Warburg is acquiring the Securities for
its own account and not with a view to, or for offer or sale in connection with,
any distribution thereof in violation of the Securities Act of 1933, as amended.

(c) TRANSFER OF SECURITIES. The Securities shall not be
transferable except upon the conditions specified in this Section 15, which
conditions are intended to insure compliance with the provisions of the
Securities Act and state securities laws in respect of the transfer of any such
Securities.

(d) RESTRICTIVE LEGENDS. (i) Unless and until otherwise
permitted by this Section 15, each certificate for Securities shall be stamped
or otherwise imprinted with a legend in substantially the following form:

"THIS [SHARE OF PREFERRED/COMMON STOCK] [STOCK SUBSCRIPTION WARRANT
AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS STOCK SUBSCRIPTION
WARRANT] AND [ANY SHARES ISSUABLE UPON CONVERSION OF SUCH SHARES] HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
NEITHER THIS [SHARE OF PREFERRED/COMMON STOCK] [STOCK SUBSCRIPTION
WARRANT] NOR ANY OF SUCH SHARES MAY BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT."

(ii) Each certificate for Series B Senior Preferred Stock shall
also be stamped or otherwise imprinted with a legend satisfying the
requirements of Section 151(f) of the General Corporation Law of the State
of Delaware.

(iii) The Company may order its transfer agents for the Securities
to stop the transfer of any Securities bearing the legend set forth in
Section 15(d)(i) until the conditions of this Section 15 with respect to
the transfer of such Securities have been satisfied.

(e) NOTICE OF PROPOSED TRANSFER. At the time of any transfer or
sale or proposed transfer or sale of any Securities, the Company may require
written notice describing briefly the manner of such transfer or sale and a
written opinion of counsel for the holder thereof (who may be inside counsel) to
the effect that such transfer or sale may be effected without the registration
of such Securities under the Securities Act and will be made in compliance with
applicable state

10
<PAGE>

securities and blue sky laws. The Company shall thereupon permit or cause its
transfer agent (if any) to permit such transfer or sale to be effected unless
the Company, within five days after receipt of such notice and opinion, shall
furnish to such holder and such holder's counsel (if any) an opinion of the
Company's outside counsel which (i) states that such sale or transfer may not be
effected without the registration of such Securities under the Securities Act
(or will not be made in compliance with applicable securities and blue sky laws)
and (ii) specifies the reasons, factual, legal or both, why such counsel's
opinion differs from that of holder's counsel. However, if in such written
notice to the Company the transferring holder informs the Company that the
transfer or sale is to a purchaser or transferee whom the transferring holder
knows or reasonably believes to be a "qualified institutional buyer," as that
term is defined in Rule 144A promulgated under the Securities Act, no opinion of
counsel shall be required.

(f) TERMINATION OF RESTRICTIONS. Notwithstanding the foregoing
provisions of this Section 15, the restrictions imposed by this Section 15 upon
the transferability of the Securities shall terminate as to any particular
Securities when (i) such Securities shall have been effectively registered under
the Securities Act and sold by the holder thereof in accordance with such
registration, (ii) such Securities have been sold in accordance with Rule 144 or
Rule 144A promulgated under the Securities Act, or (iii) written opinions to the
effect that such restrictions are no longer required or necessary under any
federal or state law or regulation have been received from counsel for the
holder thereof (who may be inside counsel) and, if the Company shall so require,
from counsel for the Company.

(g) EXCHANGE, TRANSFER AND REPLACEMENT OF CERTIFICATES. Subject
to this Section 15, upon surrender of any certificate representing Securities
duly endorsed for exchange or transfer, the Company will, at its expense, or
will cause its transfer agent, at the Company's expense, to issue in exchange
therefor new certificates in such denominations as may be requested representing
in the aggregate the same number of Securities represented by the certificate so
surrendered and registered as such Stockholder may request. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any certificate representing Securities and, in the case of any
such loss, theft or destruction, upon delivery of an agreement of indemnity
satisfactory to the Company or, in the case of any such mutilation, upon
surrender and cancellation of such certificate, the Company will issue, at its
expense, or will cause its transfer agent, at the Company's expense, to issue a
new certificate representing the same aggregate number of Securities represented
by such lost, stolen, destroyed or mutilated certificate; PROVIDED, HOWEVER,
that in the event of any loss, theft or destruction of any certificate
representing Securities registered in the name of Warburg or any of its
affiliates, or in the name of any other holder which is an institutional
investor or its nominee, the Company shall not require such person or Affiliate
or any other holder which is an institutional investor or its nominee to furnish
any indemnity or surety bond in connection with the issuance of a new
certificate therefor if the Company is furnished with an affidavit of the holder
(if the holder is an individual) or, otherwise, the Chairman of the Board,
President, any Vice President, Treasurer or any Assistant Treasurer of the
holder (or, in the case of a nominee, the beneficial owner for which such holder
is serving as nominee) setting forth the fact of such loss, theft or destruction
and, together with such affidavit, such holder furnishes (or, in the case of a
nominee, the beneficial owner for which such holder is serving as nominee
furnishes) to the Company its written agreement to indemnify the Company with
respect to such loss, theft or destruction; the Company shall, however, have the
right to require any holder of Securities other than Warburg or any of its
affiliates or any other holder which is an institutional investor or its nominee
to furnish such an indemnity or surety bond. The party delivering any
certificate representing Securities

11
<PAGE>

pursuant to this Section 15 will pay the cost of such delivery (including the
cost of insurance against loss or theft in an amount satisfactory to the
sender).

16. MISCELLANEOUS.

(a) NOTICES. All notices, requests and demands which any party
is required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following addresses:

The Company: Grubb & Ellis Company
One Montgomery Street
Telesis Tower
San Francisco, California 94104
Telephone Number: (415) 956-4699
Telecopier Number: (415) 274-9700
Attn: General Counsel

Warburg: Warburg, Pincus Investors, L.P.
c/o E.M. Warburg, Pincus & Co., Inc.
466 Lexington Avenue
10th Floor
New York, NY 10017
Telephone Number: (212) 878-0653
Telecopier Number: (212) 878-9200
Attn: Reuben S. Leibowitz

or to such other address as any party may designate by written notice to each
other party. Each such notice, request and demand shall be deemed given or made
as follows: (a) if sent by hand delivery or courier service, upon delivery; (b)
if sent by mail, upon the earlier of the date of receipt or three (3) days after
deposit in the U.S. mail, first class and postage prepaid; or (c) if sent by
telecopy, upon receipt.

(b) SUCCESSORS, ASSIGNMENT. This Agreement shall be binding on
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
the Company may not assign or transfer its interest or obligations hereunder
without the prior written consent of Warburg.

(c) ENTIRE AGREEMENT; COUNTERPARTS; AMENDMENT. This Agreement,
the Loan Agreement, and each of the other Loan Documents (as defined in the Loan
Agreement) constitute the entire agreement between the Company and Warburg with
respect to the subject matter hereof and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be executed in any number of counterparts and may be
amended or modified only by a written instrument executed by each party hereto.

(d) NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or

12
<PAGE>

indirect cause of action or claim in connection with, this Agreement or any
other of the Loan Documents to which it is not a party.

(e) TIME IS OF THE ESSENCE. Time is of the essence of each and
every provision of this Agreement.

(f) SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.

(g) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California.

13
<PAGE>

IN WITNESS WHEREOF, each of the parties hereto has caused this Standby
Agreement to be duly executed on its behalf by its officer thereunto duly
authorized, as of the day and year first above written.

WARBURG, PINCUS INVESTORS, L.P.

By: Warburg, Pincus & Co., General Partner

By:__________________________________________
Name:
Title:

GRUBB & ELLIS COMPANY

By:__________________________________________
Name:
Title:

14
<PAGE>

EXHIBITS

EXHIBIT 4.1 - FORM OF WARBURG AMENDED WARRANTS
EXHIBIT 5.1 - FORM OF WARBURG NEW WARRANT
EXHIBIT 6.1 - FORM OF CHARTER AMENDMENT
EXHIBIT 11.1 - AMENDMENT TO PRUDENTIAL DEBT AGREEMENT

15
<PAGE>

Exhibit 4.1 and 5.1 to Standby Agreement

Stock Subscription Warrant to Subscribe for
________ Shares of Common Stock

FORM OF RESTATED STOCK SUBSCRIPTION WARRANT

THIS STOCK SUBSCRIPTION WARRANT AND ANY SHARES ACQUIRED UPON THE
EXERCISE OF THIS STOCK SUBSCRIPTION WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. NEITHER THIS STOCK SUBSCRIPTION WARRANT NOR
ANY OF SUCH SHARES MAY BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.

STOCK SUBSCRIPTION WARRANT

To Subscribe for and Purchase Shares
of Common Stock of

GRUBB & ELLIS COMPANY

THIS CERTIFIES THAT, for value received,

[WARBURG, PINCUS INVESTORS, L.P. ("WARBURG")/THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA ("PRUDENTIAL")] or registered assigns, is entitled
to subscribe for and purchase from GRUBB & ELLIS COMPANY (herein called the
"Company"), a corporation organized and existing under the laws of the State of
Delaware, at any time or from time to time during the period specified in
paragraph 2 hereof, up to

_______________ THOUSAND

fully paid and nonassessable shares of the Company's Common Stock (the "Common
Stock") at an exercise price per share of $3.50 (the "Exercise Price"). The
number of shares purchasable hereunder and the Exercise Price are subject to
adjustment as provided in paragraph 4 hereof. These Stock Subscription Warrants
were originally issued pursuant to the Agreement. The term "Warrants", as used
herein, shall mean this Stock Subscription Warrant, including all amendments
hereto. The term "Warrant Shares", as used herein, refers to the shares
purchasable upon the exercise of the Warrants.

Certain terms used herein and not elsewhere defined are defined
in paragraph 15 hereof.

This Warrant is subject to the following provisions, terms and
conditions:

1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR
SHARES. The rights represented by this Warrant may be exercised by the holder
hereof in whole or in part (but not as to a fractional Warrant Share), by the
surrender of this Warrant, together with a completed Exercise

16
<PAGE>

Agreement in the form attached hereto, during normal business hours on any
business day at the principal office of the Company (or such other office or
agency of the Company in New York, New York or San Francisco, California as it
may designate by notice in writing to the holder hereof at the address of such
holder appearing on the books of the Company) at any time during the period set
forth in paragraph 2 hereof and upon payment to the Company by certified check
or bank draft of the Exercise Price for such shares, or, at the election of the
holder hereof, by delivery of other Warrants equal in value to the aggregate
Exercise Price with respect to such Warrants being exercised, the value of which
other Warrants shall be deemed to equal the difference between the Market Price
of a share of Common Stock on the date immediately preceding the date of
exercise and the then current Exercise Price. The Company agrees that the
shares so purchased shall be and are deemed to be issued to the holder hereof or
its designee as the record owner of such shares as of the close of business on
the date on which this Warrant shall have been surrendered and payment made for
such shares as aforesaid. Certificates for the Warrant Shares so purchased,
representing the aggregate number of shares specified in said Exercise
Agreement, shall be delivered to the holder hereof within a reasonable time, not
exceeding five business days, after the rights represented by this Warrant shall
have been so exercised. Each stock certificate so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of said holder or such other name (upon compliance with the transfer
requirements hereinafter set forth) as shall be designated by said holder. If
this Warrant shall have been exercised only in part, then, unless this Warrant
has expired, the Company shall, at its expense, at the time of delivery of said
stock certificates, deliver to said holder a new Warrant representing the number
of shares with respect to which this Warrant shall not then have been exercised.
The Company shall pay all taxes and other expenses and charges payable in
connection with the preparation, execution and delivery of stock certificates
(and any new Warrants) pursuant to this paragraph except that, in case such
stock certificates shall be registered in a name or names other than the holder
of this Warrant or its nominee, funds sufficient to pay all stock transfer taxes
which shall be payable in connection with the execution and delivery of such
stock certificates shall be paid by the holder hereof to the Company at the time
of the delivery of such stock certificates by the Company as mentioned above.

2. PERIOD OF EXERCISE. This Warrant is exercisable at any time
or from time to time prior to January 29, 1998.

3. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company
covenants and agrees that all Warrant Shares will, upon issuance, be fully paid
and nonassessable and free from preemptive rights and all taxes, liens and
charges with respect to the issue thereof; and without limiting the generality
of the foregoing, the Company covenants and agrees that it will from time to
time take all such action as may be required to assure that the par value per
Warrant Share is at all times equal to or less than the effective Exercise
Price. The Company further covenants and agrees that during the period within
which the rights represented by this Warrant may be exercised, the Company will
at all times have authorized, and reserved for the purpose of issue upon
exercise of the subscription rights evidenced by this Warrant, a sufficient
number of shares of Common Stock to provide for the exercise of the rights
represented by this Warrant. The Company shall take all such action as may be
necessary to assure that such shares of Common Stock may be so issued without
violation of any applicable law or regulation and will be approved for listing
on any domestic securities exchange upon which the Common Stock may be listed.
The Company further covenants and agrees that it will, at any time, at its
expense, promptly list on each national securities exchange on which any Capital
Stock is at the time listed, upon official notice of issuance, Common Stock
issuable upon the exercise of any Warrant as provided in paragraph 1 hereof, and
maintain such listing of all shares of Common Stock from time to time issuable
upon such exercise, and will, at any time, register under the Securities
Exchange Act of 1934, as amended, all shares of Common Stock

17
<PAGE>

from time to time issuable upon such exercise if and at the time that any
existing shares of Capital Stock are so registered.

4. ANTI-DILUTION PROVISIONS. The Exercise Price set forth above
shall be subject to adjustment from time to time as hereinafter provided. For
purposes of this paragraph 4, the term "Capital Stock" as used herein includes
the Company's Common Stock and shall also include any capital stock of any class
of the Company hereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Company; provided that the shares
purchasable pursuant to this Warrant shall include only Common Stock. Upon each
adjustment of the Exercise Price, this Warrant shall thereafter represent the
right to purchase, at the Exercise Price resulting from such adjustment, the
largest number of shares of Common Stock obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Common Stock purchasable thereunder immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment.

In case the Company, at any time, shall be a party to any
Transaction, each holder hereof, upon the exercise hereof at any time on or
after the Consummation Date shall be entitled to receive, and this Warrant shall
thereafter represent the right to receive, in lieu of the Common Stock issuable
upon exercise prior to the Consummation Date, the kind and amount of securities
or property (including cash) which it would have owned or have been entitled to
receive after the happening of such Transaction had this Warrant been exercised
immediately prior to such Transaction.

Notwithstanding anything contained herein to the contrary, the
Company shall not effect any Transaction unless prior to the consummation
thereof each corporation or entity (other than the Company) which may be
required to deliver any securities or other property upon the exercise of
Warrants, the surrender of Warrants or the satisfaction of exercise rights as
provided herein, shall assume, by written instrument delivered to each holder of
Warrants, the obligation to deliver to such holder such securities or other
property to which, in accordance with the foregoing provisions, such holder may
be entitled, and such corporation or entity shall have similarly delivered to
each holder of Warrants an opinion of counsel for such corporation or entity,
satisfactory to each holder of Warrants, which opinion shall state that all the
outstanding Warrants, including, without limitation, the exercise provisions
applicable thereto, if any, shall thereafter continue in full force and effect
and shall be enforceable against such corporation or entity in accordance with
the terms hereof and thereof and, together with such other matters as such
holders may reasonably request.

In case the Company shall (i) pay a dividend in shares of Capital
Stock or securities convertible into Capital Stock or make a distribution to all
holders of shares of Capital Stock in shares of Capital Stock or securities
convertible into Capital Stock, (ii) subdivide its outstanding shares of Capital
Stock, (iii) combine its outstanding shares of Capital Stock into a smaller
number of shares of Capital Stock or (iv) issue by reclassification of its
shares of Capital Stock other securities of the Corporation, the Exercise Price
shall be adjusted (to the nearest cent) by multiplying the Exercise Price
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of shares of Capital Stock outstanding immediately prior to the
occurrence of such event, and of which the denominator shall be the number of
shares of Capital Stock outstanding (including any convertible securities issued
pursuant to clause (i) or (iv) above on an as converted basis) immediately
thereafter. An adjustment made pursuant to the foregoing sentence shall become
effective

18
<PAGE>

immediately after the effective date of such event retroactive to the record
date, if any, for such event.

(d) NOTICE OF ADJUSTMENT. Upon the occurrence of any event
requiring an adjustment of the Exercise Price, then and in each such case the
Company shall promptly deliver to each holder of Warrants a certificate signed
by the President or any Vice President and the Secretary or any Assistant
Secretary of the Company (an "Officers' Certificate") stating the Exercise Price
resulting from such adjustment and the increase or decrease, if any, in the
number of shares of Common Stock issuable upon exercise of the Warrants, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. Within 90 days after each fiscal year in which any
such adjustment shall have occurred, or within 30 days after any request
therefor by any holder of Warrants stating that such holder contemplates
exercise of such Warrants, the Company will obtain and deliver to each holder of
Warrants the opinion of its regular independent auditors or another firm of
independent public accountants of recognized national standing selected by the
Company's Board of Directors who are satisfactory to the registered holder of
this Warrant, which opinion shall confirm the statements in the most recent
Officers' Certificate delivered under this paragraph 4(d).

(e) OTHER NOTICES. In case at any time:

(i) the Company shall declare or pay to the holders of Capital
Stock any dividend other than a regular periodic cash dividend or any
periodic cash dividend in excess of 115% of the cash dividend for the
comparable fiscal period in the immediately preceding fiscal year;

(ii) the Company shall declare or pay any dividend upon Capital
Stock payable in stock or make any special dividend or other distribution
(other than regular cash dividends) to the holders of Capital Stock;

(iii) the Company shall offer for subscription pro rata to the
holders of Capital Stock any additional shares of stock of any class or
other rights;

(iv) there shall be any capital reorganization, or
reclassification of the Capital Stock of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its
assets to, another corporation or other entity;

(v) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or

(vi) there shall be any other Transaction;

then, in any one or more of such cases, the Company shall give to the holder of
each Warrant (a) at least 15 days prior to any event referred to in clause (i)
or (ii) above, at least 30 days prior to any event referred to in clause (iii),
(iv) or (v) above, and within five business days after it has knowledge of any
pending Transaction, written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription rights or for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up or Transaction and (b) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, winding-up or Transaction known to the Company, at least 30 days
prior written notice of the date (or, if not then known, a reasonable
approximation thereof by the Company) when the same shall take place. Such
notice in

19
<PAGE>

accordance with the foregoing clause (a) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Capital Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Capital Stock shall be entitled to exchange their Capital Stock
for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding-up or Transaction, as the case may be. Such notice shall also state
that the action in question or the record date is subject to the effectiveness
of a registration statement under the Securities Act or to a favorable vote of
security holders, if either is required.

5. CERTAIN AGREEMENTS OF THE COMPANY. The Company covenants and
agrees that:

(a) CERTAIN ACTIONS PROHIBITED. The Company will not by
amendment of its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant and in the taking of all such action as may
reasonably be requested by the holder of any Warrant in order to protect the
exercise rights of the holders of the Warrants. Without limiting the generality
of the foregoing, the Company (i) will not increase the par value of any shares
of Common Stock receivable upon the exercise of the Warrants above the Exercise
Price then in effect, (ii) will take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of all Warrants from
time to time outstanding, (iii) will not take any action which results in any
adjustment of the number of shares of Common Stock issuable after the action
upon the exercise of all of the Warrants would exceed the total number of shares
of Common Stock then authorized by the Company's certificate of incorporation
and available for the purpose of issue upon such exercise, and (iv) will not
issue any capital stock of any class which has the right to more than one vote
per share or any capital stock of any class which is preferred as to dividends
or as to the distribution of assets upon voluntary or involuntary dissolution,
liquidation or winding-up, unless the rights of the holders thereof shall be
limited to a fixed sum or percentage (or floating rate related to market yields)
of par value or stated value in aspect of participation in dividends and a fixed
sum or percentage of par value or stated value in any such distribution of
assets.

(b) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon
any entity succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.

(c) ISSUANCE OF WARRANT SECURITIES. If the issuance of any
Warrant Shares required to be reserved for purposes of exercise of this Warrant
or for the conversion of such Warrant Shares requires registration with or
approval of any Federal governmental authority under any Federal or state law
(other than any registration under the Securities Act) or listing on any
national securities exchange, before such shares may be issued upon exercise of
this Warrant, the Company will, at its expense, use its best efforts to cause
such shares to be duly registered or approved, or listed on the relevant
national securities exchange, as the case may be, at such time, so that such
shares may be issued in accordance with the terms hereof and so converted.

6. ISSUE TAX. The issuance of certificates for Warrant Shares
upon the exercise of Warrants shall be made without charge to the holders of
such Warrants or such shares for any issuance tax in respect thereof, provided
that the Company shall not be required to pay any tax which

20
<PAGE>

may be payable in respect of any transfer involved in the issuance and delivery
of any certificate in a name other than the holder of the Warrant exercised.

7. CLOSING OF BOOKS. The Company will at no time close its
transfer books against the transfer of any Warrant, of any Warrant Shares issued
or issuable upon the exercise of any Warrant or in any manner which interferes
with the timely exercise of this Warrant.

8. AMENDMENTS TO TERMS OF WARRANT SHARES. The Company will not
amend the terms of the Warrant Shares.

9. AVAILABILITY OF INFORMATION. The Company will cooperate with
each holder of any Warrants or Warrant Shares in supplying such information as
may be necessary for such holder to complete and file any information reporting
forms presently or hereafter required by the Securities and Exchange Commission
as a condition to the availability of an exemption from the Securities Act for
the sale of any Warrants or Warrant Shares. The Company will deliver to any
person at the time holding any Warrants, promptly upon their becoming available,
copies of all financial statements, reports, notices and proxy statements sent
or made available generally by the Company to its stockholders, and copies of
all regular and periodic reports and all registration statements and
prospectuses filed by the Company with any securities exchange or with the
Securities and Exchange Commission.

10. NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. This Warrant
shall not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the holder hereof to purchase Warrant Shares, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Exercise Price or as a stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.

11. TRANSFER AND EXCHANGE.

(a) (1) The transfer of this Warrant and all rights hereunder,
in whole or in part, is registrable at the office or agency of the Company
referred to below by the holder hereof in person or by his duly authorized
attorney, upon surrender of this Warrant properly endorsed. Each taker and
holder of this Warrant, by taking or holding the same, consents and agrees that
this Warrant, when endorsed in blank, shall be deemed negotiable, and that the
holder hereof, when this Warrant shall have been so endorsed, may be treated by
the Company and all other persons dealing with this Warrant as the absolute
owner and holder hereof for any purpose and as the person entitled to exercise
the rights represented by this Warrant, or to the registration of transfer
hereof on the books of the Company; and until due presentment for registration
of transfer on such books the Company may treat the registered holder hereof as
the owner and holder for all purposes, and the Company shall not be affected by
notice to the contrary.

(2) The holder of this Warrant, by acceptance hereof,
understands that the Warrant Securities are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being or will
be acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such Warrant Securities may
be resold without registration under the Securities Act only in certain limited
circumstances. The holder of this Warrant, by acceptance hereof, agrees to
comply with all applicable laws (including, without

21
<PAGE>

limitation, any filing required by the Hart-Scott-Rodino Antitrust Improvements
Act of 1976) upon exercise hereof.

The holder of this Warrant, by acceptance hereof, represents that
such holder is acquiring this Warrant and any Warrant Shares to be issued upon
exercise hereof for its own account (including any separate account) for the
purpose of investment and not with a view to or for sale in connection with any
distribution thereof. The holder hereof further represents that such holder has
had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Warrant Securities as
required by Section (b)(2)(ii)(v) of Rule 502 of Regulation D under the
Securities Act.

Without in any way limiting the foregoing, the holder hereof
further agrees not to make any disposition of all or any portion of the Warrant
Securities unless and until:

(x) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement; or

(y) (i) The holder hereof shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii)
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company (it being understood that if the holder of this
Warrant is a party to the Agreement, counsel who is such party's employee shall
be deemed reasonably satisfactory to the Company), that such disposition will
not require registration of such Warrant Securities under the Securities Act.

(b) REGISTER. The Company shall maintain, at the principal
office of the Company (or such other office or agency of the Company in New
York, New York or San Francisco, California as it may designate by notice to the
holder hereof), a register for the Warrants, in which the Company shall record
the name and address of the person in whose name a Warrant has been issued, as
well as the name and address of each transferee and each prior owner of such
Warrant. Within 10 days after any holder of Warrants shall by notice request
the same, the Company will deliver to such holder a certificate, signed by one
of its officers, listing the name and address of every other holder of Warrants
and/or Warrant Shares, as such information appears in said register and in the
stock transfer books of the Company at the close of business on the day before
such certificate is signed.

(c) WARRANTS EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in paragraph 11(b), for new Warrants
of like tenor representing in the aggregate the right to subscribe for and
purchase the number of shares which may be subscribed for and purchased
hereunder of Common Stock, each of such new Warrants to represent the right to
subscribe for and purchase such number of shares as shall be designated by said
holder hereof at the time of such surrender.

(d) REPLACEMENT OF WARRANTS. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction, upon delivery of an indemnity bond (or, in the case of any
institutional holder, an indemnity agreement) reasonably satisfactory in form
and amount to the Company or, in

22
<PAGE>

the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor.

(e) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of
this Warrant in connection with any exchange, transfer or replacement as
provided in this paragraph 11, this Warrant shall be promptly cancelled by the
Company. The Company shall pay all taxes (other than securities transfer taxes)
and all other expenses and charges payable in connection with the preparation,
execution and delivery of Warrants pursuant to this paragraph 11.

12. NOTICES. All notices, requests and other communications
required or permitted to be given or delivered to the holders of Warrants shall
be in writing, and shall be delivered, or shall be sent by certified or
registered mail, postage prepaid and addressed, to each holder at the address
shown on the register for the Warrants, or at such other address as shall have
been furnished to the Company by notice from such holder. All notices, requests
and other communications required or permitted to be given or delivered to the
Company shall be in writing, and shall be delivered, or shall be sent by
certified or registered mail, postage prepaid and addressed, to the office of
the Company, at One Montgomery Street, San Francisco, California 94104,
Attention: Chief Financial Officer, with a copy to General Counsel, or at such
other address as shall have been furnished to the holders of Warrants by notice
from the Company. Any such notice, request or other communication may be sent
by telegram or telex, but shall in such case be subsequently confirmed by a
writing delivered or sent by certified or registered mail as provided above.
All notices shall be deemed to have been given either at the time of the
delivery thereof to (or the receipt by, in the case of a telegram or telex) any
officer or employee of the person entitled to receive such notice at the address
of such person for purposes of this paragraph 12, or, if mailed, at the
completion of the third full day following the time of such mailing thereof to
such address, as the case may be.

13. GOVERNING LAW. This Warrant shall be construed in
accordance with and governed by the laws of the State of New York without regard
to the principles of conflicts of laws.

14. REMEDIES. The Company stipulates that the remedies at law
of the holder of this Warrant in the event of any default or threatened default
by the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.

15. DEFINITIONS. For the purpose of this Warrant, the following
terms shall have the following meanings:

"ADDITIONAL SHARES OF CAPITAL STOCK" shall mean all shares
(including treasury shares) of Capital Stock issued or sold (or, pursuant to
paragraph 4(a) deemed to be issued) by the Company after the date hereof,
whether or not subsequently reacquired or retired by the Company, other than
shares of Common Stock issued upon the exercise of the Warrants.

"CAPITAL STOCK" shall have the meaning assigned to such term in
paragraph 4.

"CONSUMMATION DATE" shall mean the date of the consummation of a
Transaction.

23
<PAGE>

"CONVERTIBLE SECURITIES" shall mean any evidences
of indebtedness, shares of stock (other than Common Stock) or securities
directly or indirectly convertible into or exchangeable for Additional Shares of
Capital Stock.

"MARKET PRICE" shall mean, on any date specified herein, (A) if
any class of Capital Stock is listed or admitted to trading on any national
securities exchange, the highest price obtained by taking the arithmetic mean
over a period of twenty consecutive Trading Days ending the second Trading Day
prior to such date of the average, on each such Trading Day, of the high and low
sale price of shares of each such class of Capital Stock or if no such sale
takes place on such date, the average of the highest closing bid and lowest
closing asked prices thereof on such date, in each case as officially reported
on all national securities exchanges on which each such class of Capital Stock
is then listed or admitted to trading, or (B) if no shares of any class of
Capital Stock are then listed or admitted to trading on any national securities
exchange, the highest closing price of any class of Capital Stock on such date
in the over-the-counter market as shown by NASDAQ or, if no such shares of any
class of Capital Stock are then quoted in such system, as published by the
National Quotation Bureau, Incorporated or any similar successor organization,
and in either case as reported by any member firm of the New York Stock Exchange
selected by the Company. If no shares of any class of Capital Stock are then
listed or admitted to trading on any national securities exchange and if no
closing bid and asked prices thereof are then so quoted or published in the
over-the-counter market, "Market Price" shall mean the higher of (x) the book
value per share of Capital Stock (assuming for the purposes of this calculation
the economic equivalence of all shares of all classes of Capital Stock) as
determined on a fully diluted basis in accordance with generally accepted
accounting principles by a firm of independent public accountants of recognized
standing (which may be its regular auditors) selected by the Board of Directors
of the Company as of the last day of any month ending within 60 days preceding
the date as of which the determination is to be made or (y) the fair value per
share of Capital Stock (assuming for the purposes of this calculation the
economic equivalence of all shares of all classes of Capital Stock), as
determined on a fully diluted basis in good faith by an independent brokerage
firm or Standard & Poor's Corporation (as selected by the Board of Directors of
the Company), as of a date which is 15 days preceding the date as of which the
determination is to be made.

"OPTIONS" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire either Additional Shares of Capital Stock or
Convertible Securities.

"OTHER SECURITIES" shall mean any stock (other than Capital
Stock) and any other securities of the Company or any other Person (corporate or
otherwise) which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise or partial exercise of the
Warrants, in lieu of or in addition to Common Stock.

["PRUDENTIAL WARRANTS" SHALL MEAN ALL WARRANTS, INCLUDING ANY
AMENDMENTS THERETO, ISSUED PURSUANT TO THE SECURITIES PURCHASE AGREEMENT DATED
NOVEMBER 2, 1992 BETWEEN THE COMPANY AND PRUDENTIAL.]

"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.

"TRADING DAY" shall mean any day on which the New York Stock
Exchange is open for trading on a regular basis.

24
<PAGE>

"TRANSACTION" shall mean any transaction to which the Company is
a party at any time (including, without limitation, a merger, consolidation,
sale of all or substantially all of the Company's assets, liquidation or
recapitalization of the Capital Stock) in which the previously outstanding
Capital Stock shall be changed into or exchanged for different securities of the
Company or common stock or other securities of another corporation or interests
in a noncorporate entity or other property (including cash) or any combination
of any of the foregoing or in which the Capital Stock ceases to be a publicly
traded security either listed on the New York Stock Exchange or the American
Stock Exchange or quoted by NASDAQ or any successor thereto or comparable
system.

["WARBURG WARRANTS" SHALL MEAN ALL WARRANTS, INCLUDING ANY
AMENDMENTS THERETO, ISSUED PURSUANT TO THE SECURITIES PURCHASE AGREEMENT DATED
NOVEMBER 2, 1992 BY AND AMONG THE COMPANY, WARBURG AND JOE F. HANAUER.]

"WARRANT SECURITIES" shall mean the Warrants and the Warrant
Shares.

16. MISCELLANEOUS.

(a) AMENDMENTS. This Warrant and any provision hereof may be
amended or waived only by an instrument in writing signed by the holders of then
outstanding [PRUDENTIAL] [WARBURG] Warrants representing the right to purchase
not less than a majority of the total number of shares of Common Stock issuable
upon exercise of all then outstanding [PRUDENTIAL] [WARBURG] Warrants then not
transferable without registration under the Securities Act and, if it is to be
bound thereby, by the Company.

(b) DESCRIPTIVE HEADINGS. The descriptive headings of the
several paragraphs of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.

IN WITNESS WHEREOF, GRUBB & ELLIS COMPANY has caused this Stock
Subscription Warrant to be signed by its duly authorized officer under its
corporate seal, attested by its duly authorized officer, and the Warrant to be
dated as of _____________, 1994.

GRUBB & ELLIS COMPANY

By ____________________________
Title:

Attest:

By ____________________________
Title:

25
<PAGE>

FORM OF EXERCISE AGREEMENT

Date

To:

The undersigned, pursuant to the provisions set forth in the
within Stock Subscription Warrant, hereby agrees to subscribe for and purchase
________ shares of Common Stock covered by such Stock Subscription Warrant, and
makes payment herewith in full therefor at the price per share provided by
such Stock Subscription Warrant [in cash] [by delivery of $_____ principal
amount of ______ Notes] [by cancellation of $______ of accrued and unpaid
interest on ______ Notes].

Name__________________________

Title_________________________

Company_______________________

Signature_____________________

Address_______________________

______________________________

<PAGE>

ASSIGNMENT

FOR VALUE RECEIVED

hereby sells, assigns and transfers all of the rights of the undersigned under
the within Stock Subscription Warrant, with respect to the number of Warrant
Shares covered thereby set forth hereinbelow to:

Name of Assignee Address No. of Shares
- ---------------- ------- -------------

Dated: ___________, 19__.

Name__________________________

Title_________________________

Company_______________________

Signature_____________________

Witness_______________________

<PAGE>

Exhibit 10.2

July 20, 1994

Grubb & Ellis Company
One Montgomery Street
Telesis Tower
San Francisco, California 94104

Attention: Robert J. Hanlon, Jr.
Chief Financial Officer

Ladies and Gentlemen:

Reference is made to the Senior Notes, the Subordinated Notes and the
Revolving Credit Note Agreement among Grubb & Ellis Company (the "Company") and
The Prudential Insurance Company of America ("Prudential"), dated as of November
2, 1992 (as amended from time to time, the "Agreement"), pursuant to which
Prudential (i) purchased an aggregate of $10,000,000 in principal amount of the
Company's 9.90% Senior Notes due November 1, 1996 (the "Senior Notes") and an
aggregate of $10,000,000 in principal amount of the Company's 10.65%
Subordinated Payment-in-Kind Notes due November 1, 1999 (the "PIK Notes") and
(ii) agreed to make revolving credit loans to the Company in the aggregate
principal amount of $5,000,000. Capitalized terms used herein and not defined
shall have the meanings given such terms in the Agreement.

RECITALS

A. The Company has informed Prudential that the Company believes it will
need additional working capital to fulfill its financial plans.

B. On March 28, 1994, the Company, Prudential and Warburg, Pincus
Investors, L.P. ("Warburg") reached agreement (the "Preliminary Agreement") upon
the terms of a proposed financing transaction to provide the Company with
additional working capital, including (i) a bridge loan facility (the "Warburg
Bridge Loan") provided by Warburg, (ii) a rights offering (the "Rights
Offering") of Company Common Stock, and (iii) modification to the Agreement.

<PAGE>

Robert J. Hanlon, Jr.
July 20, 1994
Page 2

C. On March 28, 1994, Warburg and the Company entered into that certain
Loan and Security Agreement (the "Warburg Loan Agreement") regarding the Warburg
Bridge Loan, pursuant to which Warburg made available to the Company a revolving
credit facility of up to $10 million.

D. In addition, as contemplated by the Preliminary Agreement and at the
request of the Company, Prudential, by letter dated March 28, 1994, granted the
Company certain waivers with respect to certain covenants contained in the
Agreement and made certain other modifications thereof.

E. The Company intends to commence the Rights Offering pursuant to which
it intends to raise not less than $10 million of equity capital. The proceeds
from the Rights Offering will be used, in part, to repay, in full, all of the
Company's indebtedness to Warburg pursuant to the Warburg Loan Agreement.

F. By the terms of the Preliminary Agreement, and in connection with the
consummation of the Rights Offering, Prudential has agreed, among other things,
to provide the Company with additional financing through the lengthening of the
amortization periods with respect to the Company's indebtedness to Prudential as
well as making certain other modifications to the Agreement.

G. In consideration for Prudential's agreeing to make the foregoing
accommodations, the Company has agreed to certain other provisions set forth
herein.

NOW THEREFORE, in consideration of the terms and conditions contained
herein, the Company and Prudential agree as follows:

1. Paragraph 1 of the Agreement is hereby amended as follows:

(a) In subparagraph (a) deleting the date "November 1, 1996" and replacing
it with the date "November 1, 1998";

(b) In subparagraph (b) deleting the phrase "payable at the rate of
10.65%" and replacing it with the phrase "payable at the then applicable
PIK Rate"; and

<PAGE>

Robert J. Hanlon, Jr.
July 20, 1994
Page 3

2. Paragraph 2B.9 of the Agreement is hereby deleted in its entirety and
all references to Converted Revolving Notes throughout the Agreement are hereby
deleted.

3. Paragraph 4A of the Agreement is hereby amended and restated in its
entirety as follows:

"4A. REQUIRED PREPAYMENTS OF THE SENIOR NOTES. The Company shall
prepay the Senior Notes, without premium, in the amount of $5,000,000
on November 1, 1997, together with interest thereon to such prepayment
date. The remaining outstanding principal amount of the Senior Notes,
together with interest accrued thereon, is due and payable on November
1, 1998."

5. Paragraph 4B of the Agreement is hereby amended and restated in its
entirety as follows:

"4B. REQUIRED PREPAYMENTS OF PIK NOTES. The Company shall prepay the
PIK Notes, without premium, in the amount equal to 50% of the
aggregate principal amount of all outstanding PIK Notes as of the date
that that certain amendment letter dated July 20, 1994 by and between
Prudential and the Company becomes effective (in accordance with
Section 22 thereof) on November 1, 2000, together with interest
thereon to such prepayment date. The remaining outstanding principal
amount of the PIK Notes, together with interest accrued thereon, is
due and payable on November 1, 2001."

6. Paragraph 4C of the Agreement is hereby deleted in its entirety, and
the following shall be substituted therefor:

"4C. REQUIRED PREPAYMENT FROM EXCESS CASH FLOW. On July 1, 1998 and
on each July 1 and October 1 thereafter, the Company shall apply
thirty-seven and one-half percent (37.5%) of its positive Excess Cash
Flow, if any, from the preceding fiscal year to prepay the principal
amount of the PIK Notes, plus accrued interest to the date of
prepayment on the amount of the PIK Notes so prepaid, or, if all of
the PIK Notes have been repaid, to prepay the principal amount of the
Senior Notes, plus accrued interest to date of prepayment on the
amount of the Senior Notes so prepaid. Any such prepayments with
respect to the PIK Notes and/or Senior Notes shall be applied first to
accrued and unpaid interest thereon, and then in

<PAGE>

Robert J. Hanlon, Jr.
July 20, 1994
Page 4

satisfaction of required payments of principal in inverse order of their
scheduled due dates."

7. Paragraph 4I of the Agreement is hereby deleted in its entirety.

8. Paragraph 5A of the Agreement is hereby amended by deleting the "and"
at the conclusion of subparagraph (vi) thereof, renumbering subparagraph (vii)
as subparagraph (viii) and inserting the following as a new subparagraph (vii):

"(vii) as soon as practicable and in any event within 90 days after
the end of each fiscal year, a schedule of all outstanding Guarantees
issued on behalf of salespersons of the Company or any Restricted
Subsidiary and all outstanding loans and outstanding advances made to
such Persons pursuant to the Commission Advance Program during such
fiscal year, which schedule shall specify (a) the outstanding amount
of each such Guarantee and advance, (b) the employee on whose behalf
such Guarantee, or to whom such advance, was made, (c) whether such
outstanding amount represents an outstanding Guarantee or an
outstanding advance and (d) the date such Guarantee or advance was
initially made; and"

9. Paragraph 6A of the Agreement is hereby amended and restated, in its
entirety, as follows:

"6A. WORKING CAPITAL RATIO. The Company covenants that on and
after April 1, 1997 it will not permit the ratio of Consolidated
Current Assets to Consolidated Current Liabilities (excluding the
current portion of Funded Debt) to be less than 1:1 at the end of any
fiscal quarter."

10. Paragraph 6C.2 of the Agreement is hereby amended as follows:

(a) By deleting Subparagraph 6C.2(ii) in its entirety, and inserting in
substitution therefor, the following:

"(ii) [Intentionally Omitted];";

(b) By deleting Subparagraph 6C.2(v) in its entirety and inserting in
substitution therefor, the following:

<PAGE>

Robert J. Hanlon, Jr.
July 20, 1994
Page 5

"(v) additional Indebtedness consisting of nonrecourse Debt incurred
by newly created or newly acquired Restricted Subsidiaries not to
exceed $15,000,000 in the aggregate with respect to all such
additional Indebtedness plus any such additional nonrecourse Debt
incurred with respect to 222 Sutter Street Partners, Ltd.;";

"(vi) guarantees of loans and advances made to salespersons of the
Company or any Restricted Subsidiary pursuant to the Commission
Advance Program provided that after giving effect thereto the
aggregate amount of such guarantees plus the aggregate amount of loans
and advances permitted pursuant to Subparagraph 6C.3(vi) shall not
exceed $5,000,000 outstanding at any one time;"; and

(d) By deleting Subparagraph 6C.2 (vii) in its entirety, and inserting in
substitution therefor, the following:

"(vii) Indebtedness incurred in connection with the refinancing of
the Revolving Loans in an amount not in excess of the aggregate
outstanding principal amount of Revolving Loans as of the date of such
refinancing; and".

11. Subparagraph 6C.3(vi) is hereby amended and restated in its entirety
as follows:

"(vi) make loans or other advances under the Commission Advance
Program to, or on account of errors and omissions insurance premium
payments for, salespersons associated with the Company or any
Restricted Subsidiary provided that the aggregate principal amount of
all such loans or advances plus the aggregate amount of all guarantees
permitted pursuant to Subparagraph 6C.2(vi) shall not exceed
$5,000,000 outstanding at any one time.

12. The parties hereto acknowledge the following amendment and restatement
of Paragraph 6C.6, which was effected pursuant to that certain letter agreement
dated as of March 28, 1994 by and between Prudential and the Company:

<PAGE>

Robert J. Hanlon, Jr.
July 20, 1994
Page 6

"6C.6 SALE OF ASSETS - Transfer, sell or otherwise dispose of
assets of the Company (including, without limitation, capital stock of or
Indebtedness owned by a Restricted Subsidiary to the Company or another
Restricted Subsidiary) other than (i) assets transferred, sold or otherwise
disposed of in the ordinary course of business, including any assets which
are obsolete or worn out or which are replaced within three months of sale
by assets of at least the equivalent market value, (ii) equipment being
sold, leased, transferred or otherwise disposed of which the Company
determines is no longer required by it in conducting its business so long
as replacements are obtained for such equipment within three months of at
least the equivalent market value, (iii) assets (other than those described
in clauses (i) or (ii)) having a fair market value of up to $5,000,000 in
the aggregate and (iv) assets (other than those described in clauses (i) or
(ii)) having a fair market value above $5,000,000 in the aggregate so long
as the Company prepays its obligations hereunder and under the Notes
pursuant to Paragraph 4D, except that any Restricted Subsidiary may at any
time transfer assets to a wholly owned Restricted Subsidiary of the
Company; PROVIDED, HOWEVER, that (A) no assets may be disposed of pursuant
to clause (iv) at a time when an Event of Default has occurred and is
continuing and (B) in no event shall the Company permit the sale of its
name, its trademark, its logo or any other significant intangible assets,
except in connection with a permitted sale of a Subsidiary or division;"

13. Paragraph 6D of the Agreement is hereby deleted in its entirety and
the following is hereby substituted therefor:

"6D. INTEREST COVERAGE RATIO. As of April 1, 1997 and each July 1,
October 1, January 1 and April 1 thereafter, the Company will not permit
its Interest Coverage Ratio to be less than 2.0 to 1.

14. Paragraph 6E of the Agreement is hereby amended and restated in its
entirety as follows:

"6E. CAPITAL EXPENDITURES. The Company will not, in any fiscal
year commencing on or after January 1, 1997, permit the sum of (i) its
and its Restricted Subsidiaries' Capital Expenditures and (ii) the
cost of all acquisitions of assets or stock of other Persons to exceed
a cumulative amount equal to the sum of (a) $5,000,000, (b) an amount
equal to 25% of the Company's positive Excess Cash Flow, if any, for
the preceding

<PAGE>

Robert J. Hanlon, Jr.
July 20, 1994
Page 7

fiscal year and (c) the Net Proceeds received in cash during such fiscal
year from the sale by the Company of, or exercise of any warrant or option
for, any stock in the Company."

15. Paragraph 6G of the Agreement is hereby amended and restated in its
entirety as follows:

"6G. CLEAN DOWN REQUIREMENT. In each fiscal year commencing on or
after January 1, 1997 the Company will not permit to be outstanding any
Revolving Loans or fees with respect thereto or interest thereon during one
sixty consecutive day period."

16. Paragraph 6H of the Agreement is hereby amended and restated in its
entirety as follows:

"6H. AXIOM. The Company will not permit Axiom to take, or
contract to take, any action, which would result in a violation of any
covenant, representation or warranty or other provision of this
Agreement were Axiom a Restricted Subsidiary except for any such
contracts or actions permitted or contemplated by the Axiom joint
venture agreement, as in effect on the date hereof.

17. Paragraph 11A of the Agreement is hereby amended by the addition of
the following definitions in the appropriate alphabetic location:

"'COMMISSION ADVANCE PROGRAM' shall mean any program pursuant to which the
Company or any Restricted Subsidiary may make advances to their sales
agents against future real estate commissions to be earned by such sales
agents.

'Consolidated Cash Interest Expenses' shall mean, when used with respect to
the Company for any period, the Total Interest Expense which is paid or due
and payable by the Company and its Restricted Subsidiaries during such
period, excluding any interest paid or due and payable in stock or any debt
or equity securities of the Company or any of its Subsidiaries.

'CONSOLIDATED CASH TAX PAYMENTS' shall mean, when used with respect to the
Company for any period, the sum of all taxes (of whatever kind and nature)
paid or due and payable by the Company and its Restricted Subsidiaries
during such period.

<PAGE>

Robert J. Hanlon, Jr.
July 20, 1994
Page 8

'EXCESS CASH FLOW' shall mean, when used with respect to the Company
for any fiscal year, an amount equal to the positive difference
between (x) EBITDA for such fiscal year and (y) the sum of (i)
$5,000,000, (ii) Consolidated Cash Interest Payments for such fiscal
year, (iii) Consolidated Cash Tax Payments for such fiscal year, (iv)
Axiom pre-tax earnings for such fiscal year net of any debt repayments
to the Company from Axiom in such fiscal year, and (v) any payments
made pursuant to Paragraphs 4A, 4B, 4C, 4D or 4E hereof in such fiscal
year, all as determined in reliance upon the annual audited financial
statements for such fiscal year delivered to the Holders of Notes
pursuant to Paragraph 5A hereof on the March 31 next succeeding the
last day of such fiscal year.

'INTEREST COVERAGE RATIO' shall mean, as of any date, the ratio of (i)
EBITDA for the immediately preceding twelve month period to (ii) Total
Interest Expense for such period.

'PIK RATE' shall mean a per annum rate of interest equal to (i) 10.65% from
the date hereof until December 31, 1995, and (ii) 11.65% thereafter."

18. The definitions of "SENIOR DEBT", "TERMINATION DATE" and "TOTAL
INTEREST EXPENSE" in paragraph 11A of the Agreement are hereby amended and
restated in their entirety as follows:

"'SENIOR DEBT' means Indebtedness owed by the Company under the Senior
Notes and the Revolving Notes and any permitted refinancing of any
such Notes.

'TERMINATION DATE' shall mean November 1, 1999."

'TOTAL INTEREST EXPENSE' shall mean, for any period, total interest expense
(including that attributable to capital leases in accordance with GAAP) of
the Company and its Restricted Subsidiaries on a consolidated basis with
respect to all outstanding Indebtedness of the Company and its Restricted
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit, but
excluding the amortization of original issued discount and capitalized debt
issuance expenses."

19. In consideration for Prudential's willingness to extend additional
credit to the Company, to waive the Events of Default that would be caused by
certain actions the Company has expressed

<PAGE>

Robert J. Hanlon, Jr.
July 20, 1994
Page 9

an interest in taking and to amend the Agreement, the Company hereby agrees as
follows:

(a) The first paragraph of each of the outstanding PIK Notes shall be
amended and restated such that (x) the interest rate on such Notes
(the "PIK Rate") shall equal 10.65% until December 31, 1995 and 11.65%
thereafter and (y) the interest rate payable on principal and, to the
extent permitted by law, interest which has become due and owing shall
equal the greater of (i) 2% over the then applicable PIK Rate and (ii)
2% over the rate of interest publicly announced by Morgan Guaranty
Trust Company of New York from time to time in New York City as its
prime rate; and the Company will deliver to each of the Holders of PIK
Notes Amended and Restated PIK Notes (the "Amended PIK Notes")
substantially in the form attached hereto as Exhibit A;

(b) That certain Stock Subscription Warrant (the "Old Warrant") issued by
the Company to Prudential on January 29, 1993 shall be amended and
restated in the form attached hereto as Exhibit B (the "Amended Old
Warrant"), such amendment to:

(i) decrease the per share exercise price from $5.50 to $3.50;

(ii) eliminate certain of the antidilution provisions therein; and

(iii) extend the period during which the Old Warrant is exercisable
until December 31, 1998.

(c) The Company shall issue to Prudential a warrant (the "New Warrant"),
in the form attached hereto as Exhibit C, to purchase 150,000 shares
(subject to adjustment) of the Company's common stock at $2.375 per
share (subject to adjustment), which warrant shall be exercisable on
the date of issuance and for the five year period thereafter.

20. (a) The Company hereby acknowledges and agrees that it does not
currently have any claims of any kind, causes of action, suits, debts, damages,
judgments or liabilities whatsoever, whether known or unknown, liquidated or
unliquidated, contingent or otherwise, at law or in equity (collectively,
"Claims"), against Prudential, its directors, officers, employees, agents,
successors and assigns (collectively, the "Prudential Parties"),

<PAGE>

Robert J. Hanlon, Jr.
July 20, 1994
Page 10

by reason of any act, cause, document, matter or thing whatsoever up to and
including the date hereof, related (i) to the borrower lender-relationship
created pursuant to the Agreement, the related documents or any prior agreements
relating to the Debt of the Company to Prudential and/or (ii) to Prudential's
ownership of stock in the Company or exercise of its rights as a stockholder
pursuant to the Stockholders' Agreement or otherwise and/or the Prudential Stock
Purchase Agreement, including, without limitation, any Claims based upon any
theory of equitable subordination or lender liability. To the extent that any
Claims referred to in the preceding sentence do exist, and as additional
consideration for Prudential's willingness to extend additional credit to the
Company and to amend the Agreement, the Company hereby releases and forever
discharges the Prudential Parties from, and unconditionally covenants not to sue
the Prudential Parties for, such Claims. The Company acknowledges that this is
intended to be a general release, that it has been represented by independent
counsel of its own choice and it has made this acknowledgement and executed this
release with the consent and upon the advice of its counsel.

(b) Prudential hereby acknowledges and agrees that, other than (i) its
right to repayment of principal and payments of interest with respect to the
Notes and the other obligations of the Company pursuant to the Agreement and
hereunder (including, without limitation, its obligations to pay the costs and
expenses referred to in paragraph 22(i) hereof) and (ii) contractual obligations
and obligations pursuant to the Company's Certificate of Incorporation with
respect to the Prudential Preferred Stock and the Old Warrants contemplated by
the Prudential Stock Purchase Agreement, the Company's Certificate of
Incorporation, the Stockholders' Agreement or the Old Warrants, it does not
currently have any Claims, against the Company, its directors, officers,
employees, agents, successors and assigns (collectively, the "Company Parties"),
by reason of any act, cause, document, matter or thing whatsoever up to and
including the date hereof, related (x) to the borrower lender-relationship
created pursuant to the Agreement, the related documents or any prior agreements
relating to the Debt of the Company to Prudential and/or (y) to Prudential's
ownership of stock in the Company or exercise of its rights as a stockholder
pursuant to the Stockholders' Agreement or otherwise and/or the Prudential Stock
Purchase Agreement. To the extent that any Claims referred to in the preceding
sentence do exist, and as additional consideration for the Company's willingness
to amend the Agreement, the Prudential hereby releases and forever discharges
the Company Parties from, and unconditionally covenants not to sue the Company
Parties for, such Claims, including, without

<PAGE>

Robert J. Hanlon, Jr.
July 20, 1994
Page 11

limitations, any claims pursuant to any federal or state securities laws;
PROVIDED, HOWEVER, that nothing herein shall be deemed to release or discharge
any of the Company Parties from, or to grant a covenant not to sue any Company
Parties with respect to, any Claim arising from a breach of any representation,
warranty or covenant of the Company contained in the Agreement, the Prudential
Securities Purchase Agreement or any other contract, agreement or document, of
which Prudential, as of the date hereof, does not have actual knowledge;
FURTHER, PROVIDED, that Prudential hereby represents that it is not aware of any
facts which would constitute any such breach which upon the effectiveness of
this agreement (in accordance with Section 22 hereof) will continue to exist,
although nothing in this clause shall in any way abrogate the effect of the
immediately prior clause. Prudential acknowledges that it has been represented
by independent counsel of its own choice and it has made this acknowledgement
and executed this release with the consent and upon the advice of its counsel.

21. Prudential hereby acknowledges and agrees that nothing herein or in
the Agreement shall require the proceeds from the Rights Offering or any other
public offering of any shares of the Company's stock to be applied to repay the
Company's obligations pursuant to the Agreement and the Notes, PROVIDED,
HOWEVER, that this Paragraph 21 shall (i) in no way relieve the Company from any
of such repayment obligations in accordance with the terms of the Agreement and
the Notes, or (ii) in any manner limit the recourse of a holder of any of the
Notes to any of the Company's property, assets or funds.

22. The provisions of this agreement, including without limitation the
amendments to the Agreement, shall not be effective until the following
conditions have been completed to the satisfaction of Prudential and its
counsel:

(a) The Company shall have executed and delivered to Prudential the New
Warrant

(b) The Company shall have executed and delivered to Prudential the
Amended Old Warrant, upon which delivery Prudential agrees to return
to the Company the Old Warrant.

(c) The Company shall have executed and delivered to each Holder of PIK
Notes an Amended PIK Note, as described above in paragraph 17 of this
agreement, upon which delivery Prudential, on behalf of such Holders,
agrees to return to the Company the original PIK Notes.

<PAGE>

Robert J. Hanlon, Jr.
July 20, 1994
Page 12

(d) The Company shall have executed and delivered to each Holder of Senior
Notes an Amended and Restated Senior Note in the form of Exhibit D
hereto, upon which delivery Prudential, on behalf of such Holders,
agrees to return to the Company the original Senior Notes.

(e) The Company shall have executed and delivered to Prudential an Amended
and Restated Revolving Credit Note in the form of Exhibit E hereto,
upon which delivery Prudential agrees to return to the Company the
original Revolving Credit Note.

(f) All conditions precedent to the consummation of the Rights Offering
shall have been satisfied or waived and Prudential shall have received
evidence that (i) the Board of Directors has duly approved the
Company's entry into and consummation of the transactions contemplated
by the Rights Offering Documents, (ii) the holders of the requisite
majorities of each class of the capital stock of the Company entitled
to vote have duly consented to the Rights Offering according to the
terms of the Rights Offering Documents, and (iii) any necessary
filings and other acts required to consummate the Rights Offering or
to comply with applicable laws and regulations have been duly
completed. For the purposes of this letter agreement, the term
"Rights Offering Documents" shall mean (i) that certain Registration
Statement under the Securities Act on Form S-3 filed by the Company
with respect to the shares of Common Stock, including all exhibits,
schedules and amendments thereto and (ii) that certain Standby
Agreement by and between Warburg and the Company.

(g) Prudential shall have received copies of the certificate of
incorporation, including all amendments thereto, of the Company
certified by the Secretary of State of Delaware as being in full force
and effect on a recent date prior to the date hereof, together with
the by-laws of the Company, including all amendments thereto,
certified by the Secretary or Assistant Secretary of the Company.

(h) Prudential shall have received a copy of each of the Rights Offering
Documents, certified as a true and correct copy thereof by officers of
the parties thereto, certified copies of all certificates and other
documents delivered in connection with the Rights

<PAGE>

Robert J. Hanlon, Jr.
July 20, 1994
Page 13

Offering and copies of all opinions delivered in connection with the
Rights Offering.

(i) The Company shall have reimbursed Prudential for its costs and
expenses, including but not limited to reasonable attorneys' fees,
incurred in the preparation and negotiation of this agreement and the
related documents.

(j) The Company shall have delivered to Prudential certificates of
incumbency and corporate resolutions authorizing the execution,
delivery and performance of this agreement, the New Warrant, the
Amended Old Warrant, the New Notes and all other documents
contemplated hereby and thereby, together with a favorable opinion of
counsel, all in form and substance satisfactory to Prudential and its
counsel.

(k) The Company and Prudential shall agree, in writing, as to the
outstanding principal and accrued and unpaid interest on the Notes as
of the date on which this agreement becomes effective in accordance
with the terms of this Section 22.

23. This amendment shall be effective only to the extent specifically set
forth herein. The Company agrees that the execution by Prudential of this
agreement does not constitute "a course of dealing" in contravention of
Prudential's rights under the Agreement, the Senior Notes, the PIK Notes, the
Revolving Notes, the Old Warrant and other related documents. Except as
expressly provided herein or in the documents contemplated hereby, the
Agreement, the Senior Notes, the PIK Notes, the Revolving Notes, the Old Warrant
and other related documents are neither altered nor amended, and all the terms
and conditions of the Agreement, the Senior Notes, the PIK Notes, the Revolving
Notes, the Old Warrant and other related documents remain in full force and
effect. This amendment will supersede, replace and terminate (i) all provisions
of the Preliminary Agreement regarding the amendment of the Agreement, the Notes
and the Old Warrant and (ii) any and all other prior agreements regarding any
such amendments, and hereafter neither the Company nor Prudential shall have any
liability under such provisions of the Preliminary Agreement or any such other
agreements; PROVIDED, HOWEVER, that nothing herein shall supersede, replace or
terminate any provisions of the Preliminary Agreement relating to (i)
Prudential's ownership of preferred or common stock in the Company, (ii) the
provisions of the Stockholders' Agreement or (iii) any provision in Exhibit A
thereto under the headings

<PAGE>

Robert J. Hanlon, Jr.
July 20, 1994
Page 14

"Bridge Financing" and "Rights Offering and Subscription Warrant Conversion."

24. This amendment may be executed in several counterparts, each of which
shall be deemed to be an original but all of which shall constitute one and the
same agreement.

<PAGE>

Robert J. Hanlon, Jr.
July 20, 1994
Page 15

If you are in agreement with the foregoing, please sign the enclosed
duplicate of this letter where indicated below and return the same to Mr. John
Mullman of Prudential.

Very truly yours,

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

By:
-----------------------------
Title:

Agreed and accepted as of
the date first above written:

GRUBB & ELLIS COMPANY

By:
--------------------------
Title:

<PAGE>

Exhibit 23.2(a)
Consent of Ernst & Young

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 pertaining to the Rights to Purchase up to
4,418,540 shares of Common Stock of Grubb & Ellis Company and subsidiaries and
to the incorporation by reference therein of our report dated March 29, 1994,
with respect to the financial statements and schedules of Grubb & Ellis Company
and Subsidiaries included in the Annual Report (Form 10-K and Form 10-K/A
(Amendment No. 2)) for the year ended December 31, 1993, filed with the
Securities and Exchange Commission.

Very truly yours,

ERNST & YOUNG

San Francisco, California
July 21, 1994

<PAGE>

Exhibit 23.2(b)
Consent of Coopers & Lybrand

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form S-3
pertaining to the rights to purchase shares of Common Stock of Grubb & Ellis
Company of our report dated January 28, 1994, on our audit of the financial
statements of Axiom Real Estate Management, Inc. ("Axiom") as of and for the
year ended December 31, 1993. Ernst & Young has placed reliance on our work
performed on the financial statements of Axiom as of and for the year ended
December 31, 1993, and has elected to make reference to that effect in its
reports on the consolidated financial statements of Grubb & Ellis Company dated
March 29, 1994. We also consent to the reference to our firm under the caption
"Experts."

Very truly yours,

COOPERS & LYBRAND

July 21, 1994
Pittsburgh, Pennsylvania

<PAGE>

Exhibit 23.2(c)

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the Registration Statement
of Grubb & Ellis Company on Form S-3 of our report dated March 27, 1992,
except as to the information presented in Schedule VIII, for which the date is
December 24, 1992, on our audits of the consolidated financial statements
and financial statement schedules of Grubb & Ellis Company and Subsidiaries
for the year ended December 31, 1991, which report is included in the Annual
Report on Form 10-K for the year ended December 31, 1993 and the Annual Report
on Form 10-K/A (Amendment No. 2) for the year ended December 31, 1993.
We also consent to the reference to our Firm under the caption "Experts".

COOPERS & LYBRAND

San Francisco, California
July 22, 1994

<PAGE>

Exhibit 24
Powers of Attorney

GRUBB & ELLIS COMPANY
REGISTRATION STATEMENT

POWER OF ATTORNEY

RIGHTS OFFERING

Robert J. Hanlon, Jr., the undersigned Senior Vice President and Chief
Financial Officer of Grubb & Ellis Company (the "Company"), hereby constitutes
and appoints Robert J. Walner and Carol Vanairsdale, jointly and severally, his
attorneys with full power of substitution, to sign and file with the Securities
and Exchange Commission, in his capacity as Senior Vice President and Chief
Financial Officer of the Company, a registration statement to be filed under the
Securities Act of 1933, as amended, with respect to the Company's offering of
rights to purchase shares of the Company's Common Stock in connection with the
Company's March/April 1994 financing, and any and all amendments and supplements
thereto, both pre-effective and post-effective, and any and all instruments or
documents filed as part of or in conjunction with the registration statement or
amendments or supplements thereto, and hereby ratifies all that said attorneys
or any of them may do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have signed these presents this 17th day of March,
1994.

/s/ Robert J. Hanlon, Jr.
-------------------------------------------------------
Robert J. Hanlon, Jr.

<PAGE>

GRUBB & ELLIS COMPANY
REGISTRATION STATEMENT

POWER OF ATTORNEY

RIGHTS OFFERING

Wilbert F. Schwartz, the undersigned President and Chief Executive Officer
of Grubb & Ellis Company (the "Company"), hereby constitutes and appoints Robert
J. Walner and Carol Vanairsdale, jointly and severally, his attorneys with full
power of substitution, to sign and file with the Securities and Exchange
Commission, in his capacity as President and Chief Executive Officer of the
Company, a registration statement to be filed under the Securities Act of 1933,
as amended, with respect to the Company's offering of rights to purchase shares
of the Company's Common Stock in connection with the Company's March/April 1994
financing, and any and all amendments and supplements thereto, both pre-
effective and post-effective, and any and all instruments or documents filed as
part of or in conjunction with the registration statement or amendments or
supplements thereto, and hereby ratifies all that said attorneys or any of them
may do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have signed these presents this 17th day of March,
1994.

/s/ Wilbert F. Schwartz
-------------------------------------------------------
Wilbert F. Schwartz

<PAGE>

GRUBB & ELLIS COMPANY
REGISTRATION STATEMENT

POWER OF ATTORNEY

RIGHTS OFFERING

Each of the undersigned directors of Grubb & Ellis Company, a Delaware
corporation (the "Company"), hereby constitutes and appoints Robert J. Walner
and Carol Vanairsdale, jointly and severally, his attorneys with full power of
substitution, to sign and file with the Securities and Exchange Commission, in
his capacity as such director of the Company, a registration statement to be
filed under the Securities Act of 1933, as amended, with respect to the
Company's offering of rights to purchase shares of the Company's Common Stock in
connection with the Company's March/April 1994 financing, and any and all
amendments and supplements thereto, both pre-effective and post-effective, and
any and all instruments or documents filed as part of or in conjunction with the
registration statement or amendments or supplements thereto, and hereby ratifies
all that said attorneys or any of them may do or cause to be done by virtue
hereof.

This instrument may be executed in a number of identical counterparts, each
of which shall be deemed an original for all purposes and all of which shall
constitute, collectively, one instrument.

IN WITNESS WHEREOF, we have signed these presents this 17th day of March,
1994.

/s/ Wilbert F. Schwartz /s/ Joe. F. Hanauer
---------------------------------- ---------------------------------
Wilbert F. Schwartz Joe F. Hanauer

/s/ Lawrence S. Bacow /s/ Reuben S. Leibowitz
---------------------------------- ---------------------------------
Lawrence S. Bacow Reuben S. Leibowitz

/s/ John D. Santoleri
---------------------------------- ---------------------------------
Kenneth E. Field John D. Santoleri