================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           --------------------------
                                    FORM 10-K

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                     FOR THE FISCAL YEAR ENDED JUNE 30, 2002

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

      FOR THE TRANSITION PERIOD FROM _________________ TO _________________

                          COMMISSION FILE NUMBER 1-8122

                             GRUBB & ELLIS COMPANY

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                                    DELAWARE
                         (STATE OR OTHER JURISDICTION OF
                         INCORPORATION OR ORGANIZATION)
                  2215 SANDERS ROAD, SUITE 400, NORTHBROOK, IL
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                   94-1424307
                      (I.R.S. EMPLOYER IDENTIFICATION NO.)
                                     60062
                                   (ZIP CODE)

                                 (847) 753-7500
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:


                               TITLE OF EACH CLASS
                                  COMMON STOCK

                   NAME OF EACH EXCHANGE ON WHICH REGISTERED
                            NEW YORK STOCK EXCHANGE

        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in its definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

      The aggregate market value of voting common stock held by non-affiliates
of the registrant as of September 20, 2002 was approximately $8,071,474.

      The number of shares outstanding of the registrant's common stock as of
September 20, 2002 was 15,078,299 shares.

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

                      DOCUMENTS INCORPORATED BY REFERENCE:

      Portions of the Registrant's definitive proxy statement to be filed
pursuant to Regulation 14A no later than 120 days after the end of the fiscal
year (June 30, 2002) are incorporated by reference into Part III of this Report.

================================================================================
<PAGE>

                              GRUBB & ELLIS COMPANY
                                    FORM 10-K

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>              <C>                                                                                         <C>
                                                                                                             Page

  COVER PAGE .............................................................................................     1

  TABLE OF CONTENTS ......................................................................................     2

  PART I

  Item 1.        Business ................................................................................     3

  Item 2.        Properties ..............................................................................     6

  Item 3.        Legal Proceedings .......................................................................     6

  Item 4.        Submission of Matters to a Vote of Security Holders .....................................     6

  PART II.

  Item 5.        Market for the Registrant's Common Equity and Related Stockholder Matters ...............     7

  Item 6.        Selected Financial Data .................................................................     8

  Item 7.        Management's Discussion and Analysis of Financial Condition and Results of Operations ...     9

  Item 7A.       Quantitative and Qualitative Disclosures About Market Risk ..............................    18

  Item 8.        Financial Statements and Supplementary Data .............................................    19

  Item 9.        Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ....    43

  PART III.

  Item 10.       Directors and Executive Officers of the Registrant ......................................    43

  Item 11.       Executive Compensation ..................................................................    43

  Item 12.       Security Ownership of Certain Beneficial Owners and Management ..........................    43

  Item 13.       Certain Relationships and Related Transactions ..........................................    43

  PART IV.

  Item 14.       Exhibits, Financial Statement Schedules, and Reports on Form 8-K ........................    44

  SIGNATURES .............................................................................................    49

  CERTIFICATIONS .........................................................................................    50

  EXHIBIT INDEX ..........................................................................................    52
</TABLE>




                                       2
<PAGE>

                              GRUBB & ELLIS COMPANY

                                     PART I

ITEM 1. BUSINESS

GENERAL

      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 owned subsidiaries (the
"Company") is an integrated real estate services firm. The Company utilizes more
than  1,000  transaction  professionals  in  42  owned  offices,  and  over  400
transactions  professionals in 47 affiliate offices. Including its alliance with
Knight Frank, one of Europe's leading real estate  consulting  firms, it has the
collective  resources of over 8,000  individuals  in 200 offices in 29 countries
around the world.  The Company is one of the nation's  largest  publicly  traded
commercial real estate firms, based on total revenue.

      The Company,  through its  offices,  affiliates  and alliance  with Knight
Frank  provides a full range of real  estate  services,  including  transaction,
management  and  consulting   services,   to  users  and  investors   worldwide.
Professionals  throughout  Grubb & Ellis  strategize,  arrange and advise on the
sale, acquisition or lease of such business properties as industrial, retail and
office  buildings,  as well as the  acquisition  and disposition of multi-family
properties and commercial land.

      Major  multiple-market  clients have a single point of contact through the
Company's global accounts program for coordination of all services. Delivered in
a seamless manner across a global platform,  comprehensive services inclusive of
feasibility  studies,  site  selection,  market  forecasts and research are made
available to large companies and investors.

      Property and facilities  management services are provided by Grubb & Ellis
Management  Services,  Inc. ("GEMS"),  a wholly owned subsidiary of the Company.
Leveraging the management  portfolio and the trend for  outsourcing,  additional
revenues  are earned in the  provision  of business  services  and  construction
management.  Operating on a national scale,  GEMS had  approximately 152 million
square feet of property under management as of June 30, 2002.

      Our global executive office is located at 55 E. 59th Street, New York, New
York 10022-1122  (telephone  212-759-9700).  Our principal  operations center is
located at 2215 Sanders Road, Suite 400,  Northbrook,  Illinois 60062 (telephone
847-753-7500).

CURRENT BUSINESS PLATFORM AND ORGANIZATION

      Historically,   Grubb  &  Ellis'  transaction   services  operations  have
generated  approximately 85% of the Company's revenue, with leasing transactions
providing  approximately  75% of the transaction  revenue and  dispositions  and
acquisitions accounting for the remaining 25%. The leasing activity represents a
balanced   blend  of  tenant   representation,   landlord   representation   and
dual-representation.  Grubb & Ellis' transaction  professionals are supported by
the  Company's  in-depth  market  research  which  is  regarded  by real  estate
professionals and other industry  constituents as one of the leading sources for
market data in the real estate industry.

      The management services group has traditionally  represented approximately
15% of the  Company's  revenue.  Management  service  fees  are  generated  from
third-party property management,  facilities management,  business services, and
other related  activities.  The Grubb & Ellis Management  Services business unit
provides its customers with client accounting, engineering services, independent
property management, and corporate facilities management.

      The Company is currently organized in the following business segments,  in
order to provide the real estate related services  described  below.  Additional
information  on  these  business  segments  can be  found in Note 16 of Notes to
Consolidated Financial Statements in Item 8 of this Report.

TRANSACTION SERVICES

      Historically, transaction services have represented a large portion of the
Company's  operations,  and in fiscal year 2002 represented 84% of the Company's
total revenue. A significant portion of the transaction services provided by the
Company are transaction  related services,  in which the Company  represents the
interests  of tenants,  owners,  buyers or sellers in leasing,  acquisition  and
disposition transactions. These transactions involve various types of commercial
real estate, including office, industrial, retail, hospitality, multi-family and
land.




                                       3
<PAGE>


      The Company also delivers, to a lesser extent,  certain consulting related
services  primarily  to  its  transaction   services  clients,   including  site
selection,  feasibility studies, exit strategies, market forecasts,  appraisals,
strategic planning and research services.

MANAGEMENT SERVICES

      GEMS provides  comprehensive  property management and related services for
properties  owned primarily by  institutional  investors,  along with facilities
management services for corporate users.  Related services include  construction
management,  business  services and engineering  services.  In fiscal year 2002,
these services represented the remaining 16% of the Company's total revenue.

STRATEGIC INITIATIVES

      In fiscal  2002,  the Company  continued  to build a global  platform  and
develop the expertise to provide a comprehensive range of integrated real estate
transaction and advisory  services.  The Company plans to leverage its expertise
and  market  presence  in  transaction  and  management  services  to  become  a
full-service  business advisory firm that corporations entrust to advise them on
strategic real estate issues. The Company continued its efforts this past fiscal
year in positioning  itself as a leading provider of  comprehensive  real estate
services.  In  order  to  maximize  the  potential  of the  integrated  services
platform, the Company will focus on building value-added services such as global
consulting,  project management and capital markets capabilities.  The Company's
platform will continue to strive for differentiation  and competitive  advantage
in the pursuit of transaction services business.

      Grubb & Ellis will strive to build real estate advisory  capabilities that
provide the depth and  specialty  expertise  that will  enhance its  delivery of
transaction  services  and  position  the  Company  as a  strategic  advisor  to
corporate America. The Company will continue to build comprehensive  value-added
services that address the strategic  complexities of real estate decisions faced
by business  entities and other  constituents in the real estate industry.  As a
prelude to executing a transaction,  the Company will seek to advise a client on
how real estate fits into its overall  strategic  plan. By  positioning  Grubb &
Ellis as a business advisor to corporate executive management, the Company plans
to create the  platform to deliver the  strategic  planning  and  advisory  real
estate  services  that the Company  believes  will be the catalyst for increased
success  in  the  delivery  of  transactions.  The  Company  will  focus  on  an
account-centric  model of building client  relationships  and recurring  revenue
streams from the  integrated  business  platform in  furtherance  of its goal to
provide real estate services to an identifiable  and sustainable  customer base.
In addition, if successfully  implemented,  Grubb & Ellis believes,  among other
things,  that the Company  would then be more  resilient to the economic  swings
that have traditionally impacted the Company's earnings.

      The Knight Frank strategic alliance is the centerpiece for the advancement
of the Company's global business strategy. With market presence in Europe, India
and the Pacific Rim, the Company  believes that Knight Frank is positioned to be
an effective  alliance  partner that  complements  Grubb & Ellis'  strengths and
provides the mechanism to deliver real estate services to global enterprises. As
the trend towards globalization among large entities continues to gain momentum,
the Company intends to focus on global business development and capabilities.

      Grubb & Ellis has focused its efforts in penetrating the lucrative "middle
market"  of  real   estate   operating   companies,   REITs,   and  real  estate
investors/owners in the delivery of transaction services on complex dispositions
and investment sale  transactions.  The Company's senior investment  transaction
professionals  have  developed  strategic  relationships  in  the  institutional
investment  marketplace  that provide  recurring  revenues from investment sales
activities involving pension advisors, opportunity funds, and other constituents
that invest in commercial properties.

      In February 2002, the Company acquired  substantially all of the assets of
the Wadley-Donovan Group, Inc., a professional real estate services firm located
in northern New Jersey. This group specializes in site selection, consulting and
providing economic  development  strategies  primarily for Fortune 100 companies
and state,  local and  regional  government  agencies  and  municipalities.  The
Company continues to explore additional strategic acquisition opportunities that
have the  potential  to expand  the depth and  breadth of its  current  lines of
business and increase its market  share.  The  Company's  ability to  assimilate
acquired advisory practices and new strategic initiatives, and its effectiveness
in transitioning the overall related infrastructure, are critical to its success
in realizing its goals of a fully  integrated  business  model.  There can be no
assurance that the Company will be able to complete any further  acquisitions or
introductions of new strategic initiatives.

      Grubb & Ellis plans to continue to leverage the talent  within the Company
and the collective  local market  knowledge to  differentiate  themselves in the
marketplace.  In building the integrated business services platform, the Company



                                       4
<PAGE>


plans to leverage each of its specialty  operating areas,  stressing synergy and
integration in growing account-centric  relationships among prominent owners and
users of real estate.

      The  Company  has  broadened  its  national  affiliate  program,   through
alliances  with 39 real  estate  services  firms,  which has enabled it to enter
markets  where it previously  did not have a formal  presence and to better meet
the  multi-market  needs of global  clients.  The Company  has also  invested in
technology  systems  designed to provide a scalable  platform  for growth and to
efficiently deliver and share data with clients.  Among them is what the Company
believes to be a state-of-the-art, company-wide information sharing and research
network  which  enables its  professional  staff across all offices to work more
efficiently,  access  the latest  market  intelligence,  and more fully  address
clients' needs.

INDUSTRY AND COMPETITION

      The commercial real estate industry is large and fragmented. The estimated
$4 trillion of commercial real estate in the United States produces annual sales
transactions valued at $500 billion and annual lease transactions valued at $200
billion.  The gross  market for annual  brokerage  commissions  is  estimated at
approximately  $19  billion.  On a  national  basis,  the  commercial  brokerage
industry is highly  fragmented  with the  half-dozen  leading  firms  generating
approximately 10% of the revenue.

      As a result of the current economic downturn, at present, lease rates have
declined  or  stabilized  in  many  markets.   Absorption   rates  have  dropped
significantly  and  vacancy  rates  have  increased  in  many  markets.  Leasing
commission rates have held firm, although sales commission rates have come under
pressure,  especially for larger institutional-grade  properties.  These factors
have contributed to an industry-wide decline in commission revenue.

      The  Company  competes  in a variety  of  service  disciplines  within the
commercial  real  estate  industry.  Each of  these  business  areas  is  highly
competitive on a national as well as local level. The Company faces  competition
not only from other real estate service  providers,  but also from boutique real
estate advisory firms,  appraisal firms and self-managed  real estate investment
trusts.  Although many of the Company's  competitors are local or regional firms
that  are  substantially  smaller  than  the  Company,  some  of  the  Company's
competitors  are  substantially  larger  than the Company on a local or regional
basis.  In general,  there can be no assurance  that the Company will be able to
continue to compete  effectively,  to maintain current fee levels or margins, or
maintain or increase its market share.  Due to the Company's  relative  strength
and longevity in the markets in which it presently operates,  and its ability to
offer clients a range of real estate services on a local, regional, national and
international  basis, the Company  believes that it can operate  successfully in
the  future  in this  highly  competitive  industry,  although  there  can be no
assurances in this regard.

ENVIRONMENTAL REGULATION

      Federal,  state  and  local  laws  and  regulations  impose  environmental
controls,  disclosure  rules and  zoning  restrictions  that have  impacted  the
management,  development,  use,  and/or  sale  of  real  estate.  The  Company's
financial  results and  competitive  position  for the fiscal year 2002 have not
been  materially   impacted  by  its  compliance  with   environmental  laws  or
regulations.  Such laws and  regulations  tend to  discourage  sales and leasing
activities  and  mortgage  lending  with  respect  to some  properties,  and may
therefore  adversely affect the Company and the industry in general.  Failure of
the Company to disclose  environmental  issues in connection  with a real estate
transaction  may  subject  the  Company  to  liability  to a buyer or  lessee of
property.  Applicable laws and contractual  obligations to property owners could
also subject the Company to environmental  liabilities  through the provision of
management  services.  Environmental  laws and regulations  impose  liability on
current  or  previous  real  property  owners  or  operators  for  the  cost  of
investigating,  cleaning up or removing  contamination  caused by  hazardous  or
toxic substances at the property.  The Company may be held liable as an operator
for such  costs in its role as an on-site  property  manager.  Liability  can be
imposed even if the original actions were legal and the Company had no knowledge
of,  or was  not  responsible  for,  the  presence  of the  hazardous  or  toxic
substances.  Further,  the Company may also be held  responsible  for the entire
payment of the liability if it is subject to joint and several liability and the
other  responsible  parties  are unable to pay.  The  Company may also be liable
under  common law to third  parties  for  damages and  injuries  resulting  from
environmental  contamination  emanating from the site, including the presence of
asbestos containing materials.  Insurance for such matters may not be available.
Additionally,  new or  modified  environmental  regulations  could  develop in a
manner that could  adversely  affect the Company's  transaction  and  management
services. See Note 10 of Notes to Consolidated Financial Statements in Item 8 of
this Report.

SEASONALITY

      Since the majority of the Company's  revenues are derived from transaction
services  which are seasonal in nature,  the  Company's  revenue  stream and the
related  commission expense are also subject  to seasonal fluctuations. However,



                                       5
<PAGE>


the Company's  non-variable  operating  expenses,  which are treated as expenses
when incurred  during the year,  are  relatively  constant in total dollars on a
quarterly  basis.  The Company has typically  experienced  its lowest  quarterly
revenue  in the  quarter  ending  March 31 of each  year  with  higher  and more
consistent  revenue in the quarters ending June 30 and September 30. The quarter
ending  December 31 has  historically  provided the highest  quarterly  level of
revenue due to  increased  activity  caused by the desire of clients to complete
transactions by calendar year-end. Revenue in any given quarter during the years
ended June 30, 2002,  2001 and 2000,  as a percentage  of total annual  revenue,
ranged from a high of 34.4% to a low of 18.6%.

SERVICE MARKS

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

REAL ESTATE MARKETS

      The Company's  business is highly  dependent on the commercial real estate
markets,  which in turn are  impacted by  numerous  factors,  including  but not
limited to the  general  economy,  interest  rates and demand for real estate in
local markets. Changes in one or more of these factors could either favorably or
unfavorably impact the volume of transactions and prices or lease terms for real
estate.  Consequently,  the  Company's  revenue  from  transaction  services and
property management fees,  operating results,  cash flow and financial condition
are impacted by these factors, among others.

SECURITIES EXCHANGE LISTING

     The  Company's  common  stock is  currently  listed  on the New York  Stock
Exchange ("NYSE") pursuant to a listing  agreement.  As previously  disclosed by
the Company,  the NYSE had  accepted the  Company's  proposed  business  plan to
attain  compliance  with the NYSE's listing  standard on or before July 4, 2003.
This plan had been  submitted  in  response  to a  notification  received by the
Company on January 4, 2002 regarding non-compliance with such listing standards.
As a result of the  business  plan's  acceptance,  the  Company's  common  stock
continued  to be traded on the  exchange,  subject  to the  Company  maintaining
compliance  with the plan and periodic  review by the NYSE. Upon completion of a
recent review,  the NYSE announced on October 8, 2002 that the Company's  common
stock will be de-listed from the NYSE, due primarily to the Company's book value
and market  capitalization  value being below minimum  levels  required by their
listing standards.  The Company is making  arrangements to have its common stock
traded on the over-the-counter  market ("OTC") and is scheduled to cease trading
on the NYSE prior to the opening on  Thursday  October 17,  2002.  Although  the
Company is seeking an orderly transition and has reason to believe the NYSE will
effectuate  the same,  there can be no  assurance  that the OTC will  accept the
Company's shares for listing prior to their de-listing from the NYSE, or at all,
and that there will be no  interruption  of the public  listing of the Company's
common stock.

ITEM 2. PROPERTIES

      The  Company  leases  all  of  its  office  space  through  non-cancelable
operating  leases.  The  terms  of the  leases  vary  depending  on the size and
location of the office.  As of June 30, 2002, the Company  leased  approximately
801,000 square feet of office space in 88 locations  under leases,  which expire
at various  dates  through  December  31,  2011.  For those  leases that are not
renewable,  the Company  believes  there is adequate  alternative  office  space
available at acceptable rental rates to meet its needs, although there can be no
assurances  in this  regard.  For further  information,  see Note 10 of Notes to
Consolidated Financial Statements in Item 8 of this Report.

ITEM 3. LEGAL PROCEEDINGS

      None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matters were submitted to a vote of security  holders during the fourth
quarter of fiscal year 2002.



                                       6
<PAGE>


                              GRUBB & ELLIS COMPANY

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

MARKET AND PRICE INFORMATION

      The principal  market for the Company's common stock is the New York Stock
Exchange ("NYSE").  The following table sets forth the high and low sales prices
of the  Company's  common stock on the NYSE for each quarter of the fiscal years
ended June 30, 2002 and 2001.

<TABLE>
<CAPTION>
                                                            2002                               2001
                                                  ------------------------           ------------------------
                                                   High               Low             High               Low
                                                  ------            ------           ------            ------
<S>                                                <C>               <C>              <C>               <C>
      First Quarter                                $5.40             $3.35            $6.50             $5.50
      Second Quarter                               $4.10             $2.31            $6.38             $4.13
      Third Quarter                                $3.10             $2.35            $6.30             $4.80
      Fourth Quarter                               $4.25             $2.30            $6.07             $4.50
</TABLE>

      As of  September  20,  2002,  there were 1,225  registered  holders of the
Company's  common stock and 15,078,299  shares of common stock  outstanding,  of
which 11,409,447 were held by persons who may be considered  "affiliates" of the
Company,  as defined in Federal  securities  regulations.  Sales of  substantial
amounts of common stock,  including  shares issued upon the exercise of warrants
or options,  or the  perception  that such sales might  occur,  could  adversely
affect prevailing market prices for the common stock.

      No cash dividends  were declared on the Company's  common stock during the
fiscal  years  ended June 30, 2002 or 2001.  The  Company has agreed,  under the
terms of its revolving credit facility,  not to pay cash dividends on its common
stock for the duration of the facility,  without obtaining an appropriate waiver
from the lenders.

SALES OF UNREGISTERED SECURITIES

      On January 23, 2002, Warburg, Pincus Investors, L.P. exercised warrants to
purchase an aggregate  of  1,337,358  shares of Common Stock of the Company at a
weighted  average price of  approximately  $3.11 per share,  in cash. The shares
were  exempt  from  the  registration  requirements  under  Section  4(2) of the
Securities Act of 1933, as amended (the "Act"),  in that the transaction did not
involve a public  offering or sale of the Company's  securities  ("Section  4(2)
Exemption.").

      On January 28, 2002, the Company  issued to Joe F. Hanauer,  a director of
the Company, 1,977 shares of Common Stock of the Company, upon the surrender and
cashless  exercise of a warrant to purchase 10,714 shares of Common Stock of the
Company at an  exercise  price of $2.375 per share.  The  issuance  of the 1,977
shares was exempt as a Section 4(2) Exemption.

      Effective  May 14,  2002,  the Company  repurchased  the shares  issued to
Warburg,  Pincus Investors,  L.P. at the same aggregate  purchase price paid for
them. At the same date, the Company issued and sold to Kojaian Ventures,  L.L.C.
("KV") the same number of shares of common stock,  at the same  purchase  price.
The shares were exempt from the registration  requirements under Section 4(2) of
the Act, as a Section 4(2) Exemption.

      Also effective May 14, 2002, the Company issued to KV a promissory note in
the face amount of $11,237,500,  the outstanding principal, accrued interest and
certain costs of which were convertible,  generally at the option of the holder,
to shares of a new Series A Preferred Stock. On September 19, 2002, KV converted
the  promissory  note to 11,725 shares of Series A Preferred  Stock.  The shares
were exempt from the registration  requirements under Section 4(2) of the Act as
a Section 4(2) Exemption.  The net proceeds of the note were used in part to pay
down  revolving  debt of the Company under its credit  agreement and in part for
working capital purposes.

      See Notes 6 and 17 of Notes to Consolidated Financial Statements, and such
disclosure is incorporated herein by reference.

      None of the sales described above was underwritten.



                                       7
<PAGE>


EQUITY COMPENSATION PLAN INFORMATION

      The following table provides  information on equity  compensation plans of
the Company as of June 30, 2002.

<TABLE>
<CAPTION>
                                                                                              Number of securities
                                                                                            remaining available for
                                                                                             future issuance under
                            Number of securities to be            Weighted average            equity compensation
                             issued upon exercise of             exercise price of              plans (excluding
                               outstanding options,             outstanding options,        securities reflected in
                                warrants and rights              warrants and rights               column (a))
Plan Category                           (a)                              (b)                           (c)
--------------                 ---------------------             -------------------          ---------------------
<S>                                  <C>                                <C>                        <C>
Equity Compensation
plans approved by
security holders                     1,625,603                          $5.36                      2,417,153(1)

Equity compensation
plans not approved by
security holders                     1,191,258                          $7.59                        755,355

Total                                2,816,861                          $6.30                      3,172,508(1)
</TABLE>


(1)Includes 915,782 shares authorized for issuance under the Company's  Employee
   Stock  Purchase  Plan, a plan  intending to qualify  under Section 423 of the
   Internal Revenue Code of 1986, as amended.

EQUITY COMPENSATION PLANS NOT APPROVED BY STOCKHOLDERS

      Grubb & Ellis 1998 Stock  Option  Plan--this  information  can be found in
Note 8 of Notes to Consolidated Financial Statements in Item 8 of this Report.

ITEM 6. SELECTED FINANCIAL DATA

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

<TABLE>
<CAPTION>
                                                                   FOR THE YEARS ENDED JUNE 30,
                                               -----------------------------------------------------------------------
                                                   2002           2001          2000           1999           1998
                                                  ------         ------        ------         ------         ------
                                                                  (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                            <C>           <C>            <C>            <C>             <C>
Total revenue ..............................   $  313,476     $  411,962     $  413,919    $  314,101     $  282,834
Net income (loss) ..........................      (15,477)         1,369         16,290         8,079         21,506
Benefit (provision) for income taxes .......        1,187         (5,372)        (9,598)       (5,301)          (447)
(Increase) reduction in deferred tax asset
  valuation allowance ......................       (5,214)            --             --         1,325          6,504
Income (loss) before extraordinary item and
  cumulative effect (1) ....................      (15,477)         4,908         16,290         8,079         21,506
Income (loss) before extraordinary item and
  cumulative effect per common share (1)
  - Basic ..................................        (1.09)          0.28           0.82          0.41           1.10
  - Diluted ................................        (1.09)          0.27           0.77          0.37           0.98
Weighted average common shares
  - Basic ..................................   14,147,618     17,051,546     19,779,220    19,785,715     19,607,352
  - Diluted ................................   14,147,618     17,975,351     21,037,311    21,587,898     22,043,920
</TABLE>

(1)Income  and  per  share  data  reported  on the  above  table  reflect  other
   non-recurring expenses in the amount of $1.75 million, $6.2 million and $2.65
   million  for  the  fiscal  years  ended  June  30,   2002,   2001  and  2000,
   respectively.  Net income for the fiscal year ended June 30, 2001 includes an
   extraordinary  loss of $406,000,  net of taxes, on the extinguishment of debt
   and a charge of $3.1 million  reflecting the cumulative effect of a change in
   an accounting principle. For information regarding comparability of this data
   as it may relate to future  periods,  see discussion in Item 7,  Management's
   Discussion and Analysis of Financial  Condition and Results of Operations and
   Notes 5, 13 and 14 of the Notes to Consolidated  Financial Statements in Item
   8 of this Report.




                                       8
<PAGE>


<TABLE>
<CAPTION>
                                                                          AS OF JUNE 30,
                                               -----------------------------------------------------------------------
                                                  2002           2001          2000           1999           1998
                                                  -----          -----         -----          -----          -----
                                                                  (IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                               <C>            <C>          <C>            <C>          <C>
CONSOLIDATED BALANCE SHEET DATA:
Total assets ............................         $ 90,377       $  92,426    $  115,942     $  98,451    $  76,847
Working capital .........................            4,251           1,216        11,883          (300)      15,822
Long-term debt ..........................           36,660          29,000            --           553          459
Other long-term liabilities .............           10,396           9,734        10,422        11,189       11,122
Stockholders' equity ....................            5,866          16,316        61,620        44,482       35,414
Book value per common share .............             0.39            1.22          3.11          2.24         1.80
Common shares outstanding ...............       15,028,839      13,358,615    19,810,894    19,885,084   19,721,056
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

NOTE REGARDING FORWARD-LOOKING STATEMENTS

      This Annual Report contains  statements that are not historical  facts and
constitute  projections,  forecasts  or  forward-looking  statements  within the
meaning of the Private Securities  Litigation Reform Act of 1995. The statements
are not  guarantees  of  performance.  They  involve  known and  unknown  risks,
uncertainties, assumptions and other factors which may cause the actual results,
performance or achievements  of the Company to be materially  different from any
future  results,  performance  or  achievements  expressed  or  implied by these
statements. You can identify such statements by the fact that they do not relate
strictly to  historical or current  facts.  These  statements  use words such as
"believe,"  "expect,"  "should,"  "strive",  "plan,"  "intend",  "estimate"  and
"anticipate" or similar  expressions.  When we discuss our strategy or plans, we
are making projections,  forecasts or forward-looking statements. Actual results
and  stockholders'  value will be  affected  by a variety of risks and  factors,
including,  without  limitation,  international,  national  and  local  economic
conditions and real estate risks and financing  risks and acts of terror or war.
Many of the risks and factors that will  determine  these results and values are
beyond  the  Company's  ability  to control or  predict.  These  statements  are
necessarily based upon various  assumptions  involving  judgment with respect to
the future.

      All  such  forward-looking  statements  speak  only as of the date of this
Annual Report. The Company expressly  disclaims any obligation or undertaking to
release  publicly  any updates of revisions  to any  forward-looking  statements
contained herein to reflect any change in the Company's expectations with regard
thereto or any change in events,  conditions or  circumstances on which any such
statement is based.

      Factors that could adversely affect the Company's  ability to obtain these
results and value include, among other things:

      o DECLINE IN THE  VOLUME OF REAL  ESTATE  TRANSACTIONS  AND PRICES OF REAL
ESTATE.  The Company's  revenue is largely based on commissions from real estate
transactions.  As a result, a decline in the volume of real estate available for
lease or sale, or in real estate prices, could have a material adverse effect on
the Company's revenues.

      o GENERAL  ECONOMIC  SLOWDOWN OR  RECESSION  IN THE REAL  ESTATE  MARKETS.
Periods of economic  slowdown or recession,  rising  interest rates or declining
demand for real  estate,  both on a general or regional  basis,  will  adversely
affect  certain  segments of the Company's  business.  Such economic  conditions
could result in a general  decline in rents and sales  prices,  a decline in the
level of  investment  in real  estate,  a decline  in the  value of real  estate
investments  and an  increase in  defaults  by tenants  under  their  respective
leases,  all of which in turn would adversely  affect revenues from  transaction
services fees and brokerage  commissions  which are derived from property  sales
and aggregate rental payments, property management fees and consulting and other
service fees.

      o THE  COMPANY'S  DEBT LEVEL AND ABILITY TO MAKE  PRINCIPAL  AND  INTEREST
PAYMENTS.  The Company currently has $31.75 million of outstanding debt incurred
in connection with the self-tender offer. Any material downturn in the Company's
revenue or increase in its costs and expenses could render the Company unable to
meet its debt obligations.  The Company is subject to credit facility  covenants
which are based on the  achievement  of certain cash flow  levels.  Should these
cash flow levels not be achieved, it is possible that the Company would be found
to be in default of its credit facility.

      o IMPLEMENTATION  OF  STRATEGIC  INITIATIVES,  EXPENSES OR CAPITAL EXPEND-
ITURES  RELATED TO  INITIATIVES.  As  discussed in Part I, Item 1 of this Annual
Report under "Strategic  Initiatives," the Company has undertaken,  and plans to
continue to undertake, a number of strategic initiatives,  some of which involve
expansion  into a new specialty  areas,  integration  of the Company's  business
units,  investments  in technology  systems,  service  improvements,  people and
acquisitions. There can be no assurance



                                       9
<PAGE>


that the Company will be able to  successfully  develop and expand its expertise
in  specialty  areas,  whether by  acquisition  or organic  growth,  or that the
Company will be able to effectively  integrate its core business units.  Even if
the Company successfully  develops and deploys its integrated services platform,
there can be no  assurance  that it will result in the  Company's  revenues  and
value  being  less  cyclical  or in the  Company's  profit  margins  being  more
consistent  and  higher.  The  investments  related  to some or all of these new
initiatives may result in significant expenditures by the Company. The Company's
results of operations could be adversely affected if these strategic initiatives
are unsuccessful.

      o RISKS  ASSOCIATED WITH  ACQUISITIONS.  As discussed in Part I, Item I of
this Annual Report under "Strategic  Initiatives,"  the Company has completed an
acquisition and established a strategic  alliance.  Also, in connection with the
Company's  strategic  initiatives,  it  may  undertake  one or  more  additional
strategic acquisitions.  There can be no assurance that significant difficulties
in integrating  operations acquired from other companies and in coordinating and
integrating  systems in a strategic alliance will not be encountered,  including
difficulties  arising from the diversion of  management's  attention  from other
business concerns,  the difficulty  associated with assimilating groups of broad
and  geographically  dispersed  personnel and  operations  and the difficulty in
maintaining  uniform standards and policies.  There can be no assurance that the
integration will ultimately be successful, that the Company's management will be
able to  effectively  manage any acquired  business or that any  acquisition  or
strategic alliance will benefit the Company overall.

      o LIABILITIES  ARISING FROM  ENVIRONMENTAL  LAWS AND REGULATIONS.  Part I,
Item  I  of  this  Annual  Report  under  "Environmental  Regulation"  discusses
potential risks related to environmental laws and regulations.

      o THE COMPANY  FACES  INTENSE  COMPETITION.  Part I, Item I of this Annual
Report under "Competition" discusses potential risks related to competition.

      o THE  COMPANY'S  REVENUES  ARE  SEASONAL.  Part I, Item I of this  Annual
Report under  "Seasonality"  discusses  potential  risks related to the seasonal
nature of the Company's business.

      o THE COMPANY'S  ABILITY TO ATTRACT AND RETAIN  QUALIFIED  PERSONNEL.  The
growth of the  Company's  business  is  largely  dependent  upon its  ability to
attract and retain  qualified  personnel  in all areas of its  business.  If the
Company is unable to attract  and retain  such  qualified  personnel,  it may be
forced to limit its growth, and its business and operating results could suffer.

      o CONTROL BY EXISTING STOCKHOLDERS. A single investor has in excess of 50%
of the voting power of the Company. As a result, this investor can influence the
Company's  affairs and policies and the approval or  disapproval of most matters
submitted to a vote of the  Company's  stockholders,  including  the election of
directors.

      o OTHER  FACTORS.  Other  factors  are  described elsewhere in this Annual
Report.

                   CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

REVENUE RECOGNITION

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

IMPAIRMENT OF GOODWILL

      In assessing the  recoverability  of the Company's  goodwill,  the Company
must make assumptions regarding estimated future cash flows and other factors to
determine the fair value of the respective assets. On July 1, 2002, the


                                       10
<PAGE>


Company adopted Statements of Financial  Accounting Standards No. 142, "Goodwill
and Other  Intangible  Assets."  The  Company  has  completed  the  transitional
impairment  tests of  goodwill  as of July 1,  2002 and has  determined  that no
goodwill  impairment  will impact the  earnings  and  financial  position of the
Company as of that date. Future events could occur which would cause the Company
to  conclude  that  impairment  indicators  exist  and  an  impairment  loss  is
warranted.

DEFERRED TAXES

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

INSURANCE AND CLAIM RESERVES

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

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

                              RESULTS OF OPERATIONS

OVERVIEW

      The Company  reported a net loss of $15.5  million for the year ended June
30, 2002,  primarily due to the decline in net  transaction  services  revenues,
partially offset by the decreases in operating expenses and non-recurring  items
and the  cumulative  effect from the change in accounting  principle  recognized
during the prior fiscal year.

FISCAL YEAR 2002 COMPARED TO FISCAL YEAR 2001

REVENUE

      The Company's  revenue is derived  principally from  transaction  services
fees related to commercial real estate,  which include commissions from leasing,
acquisition and disposition, and agency leasing assignments as well as fees from
appraisal  and  consulting  services.  Management  services  fees  comprise  the
remainder of the Company's  revenues,  and include fees related to both property
and facilities management outsourcing and business services.

      Total revenue for fiscal year 2002 was $313.5 million, a decrease of 23.9%
from  revenue of $412.0  million for fiscal year 2001.  Significantly  affecting
this decline was a $96.4 million  decrease in  transaction  services fees in the
current  fiscal year from the prior fiscal year.  This resulted  from  decreased
activity  in the  technology  markets as well as the  current  softening  in the
general  economy and its impact on the real  estate  industry  through  negative
absorption  and higher  vacancy rates,  particularly  in the office sector.  The
terrorist  attacks  of  September  11,  2001  created   additional   marketplace
instability and further  deterioration of overall economic conditions across the
United States.  Management  services fees remained relatively flat decreasing to
$51.4  million  during the 2002 fiscal year as compared to $53.5  million in the
prior fiscal year.

COSTS AND EXPENSES

      Services  commissions  expense is the Company's  largest  expense and is a
direct function of gross  transaction  services  revenue  levels,  which include
transaction services commissions and other fees.  Professionals receive services
commissions  at rates  that  increase  upon  achievement  of  certain  levels of
production. As a percentage of gross transaction revenue, related



                                       11
<PAGE>


commission  expense decreased to 58.0% for fiscal year 2002 as compared to 60.4%
for fiscal year 2001. This decrease was due to unusually high average commission
expense  incurred  during the prior year in  technology  markets such as Silicon
Valley,  San Francisco,  Denver,  Washington  D.C. and New York,  resulting from
higher production per professional.

      Salaries,  wages and benefits  were  relatively  flat,  decreasing by $1.4
million or 1.4% during  fiscal year 2002 as compared to 2001.  Selling,  general
and  administrative  expenses  decreased by $2.7 million,  or 4.0%, for the same
period.  The decrease in these operating costs of $4.1 million resulted from the
Company  tightening its  discretionary  expenditures  in response to the slowing
general economy.

      Depreciation  and  amortization  expense for fiscal year 2002 decreased to
$10.7  million  from  $11.6  million  in fiscal  year 2001.  The  Company  holds
multi-year service contracts with certain key professionals,  the costs of which
are amortized  over the lives of the respective  contracts,  which are generally
two to three years.  Amortization  expense  relating to these  contracts of $2.1
million  was  recognized  in fiscal year 2002,  compared to $2.9  million in the
prior year due to a reduction in the number of new service contracts executed in
the current year.

      During fiscal year 2002, the Company  concluded  long standing  litigation
proceedings on the JOHN W. MATTHEWS, ET AL. V KIDDER,  PEABODY & CO., ET AL. AND
HSM INC., ET AL.  ("Matthews")  case for which it had  previously  recorded loss
reserves.  In addition,  during this period,  loss  reserves  were recorded as a
result of the liquidation proceedings surrounding one of the Company's insurance
carriers  ("Reliance"  liquidation).  (See  Note  10 of  Notes  to  Consolidated
Statements in Item 8 of this Report for  additional  information.)  The positive
outcome of the Matthews case, partially offset by the additional exposure on the
Reliance  liquidation,  resulted in $2.2  million of income  from claim  related
reserves.  The Company also incurred other non-recurring expenses in fiscal year
2002  totaling  $3.9  million,  consisting  of $1.0 million of  severance  costs
related to a reduction  of salaried  overhead,  $2.1  million  related to office
closure  costs,  $300,000  related to costs  incurred for the  retirement of the
Warburg  Pincus  $5,000,000  Subordinated  Note  and  for the  evaluation  of an
unsolicited  purchase  offer  from a third  party,  and  $500,000  related  to a
write-down of the carrying  basis of an  investment in a commercial  real estate
services internet venture.  The Company's decision to write-down its interest in
the venture was due to a dilution in the Company's ownership  position,  as well
as  uncertainty  in the  venture's  ability to achieve its business  plan.  As a
result of these events,  the Company has recognized a net non-recurring  expense
of $1,749,000 for fiscal year 2002.

      During  fiscal  year 2001,  the  Company  recognized  other  non-recurring
expenses totaling $6.2 million, relating primarily to the impairment of goodwill
related to the April 1998 acquisition of White  Commercial Real Estate,  as well
as compensation  expense  related to stock options  exercised in connection with
the Company's  self-tender offer, an initial write down in the carrying basis of
an investment in an internet venture,  and executive  severance costs related to
prior senior management  changes.  (See Notes 12 and 13 of Notes to Consolidated
Statements in Item 8 of this Report for additional information.)

      In June 2001, the Financial Accounting Standards Board issued Statement of
Financial  Accounting Standards No. 142, "Goodwill and Other Intangible Assets,"
effective  for fiscal years  beginning  after  December 15, 2001.  Under the new
rules,  goodwill  will no  longer be  amortized  but will be  subject  to annual
impairment tests in accordance with the Statement.  Other intangible assets will
continue to be amortized over their useful lives. The Company will apply the new
rules on accounting for goodwill and other  intangible  assets  beginning in the
first fiscal quarter of fiscal 2003,  which for the Company would be the quarter
ending September 30, 2002. Application of the non-amortization provisions of the
Statement  is  expected  to result in an  increase  in net  operating  income of
approximately  $1.6 million per year. The Company has completed the transitional
impairment  tests of  goodwill  as of July 1,  2002 and has  determined  that no
goodwill  impairment  will impact the  earnings  and  financial  position of the
Company as of that date.

      Interest  income  decreased  during fiscal year 2002 as compared to fiscal
year 2001 as a result of lower available invested cash and lower interest rates.

      Interest expense incurred during fiscal year 2002 was due to the Company's
term  loan  borrowings  under  the  credit  facility  related  to the  Company's
self-tender offer, and the note payable-affiliate funded in March 2002. Interest
expense  incurred during the first half of fiscal year 2001 was due primarily to
seller financing  related to business  acquisitions  made in calendar year 1998.
Interest  expense incurred in the second half of fiscal year 2001 was due to the
term loan borrowings under the credit facility.

      Effective December 31, 2000, the Company restructured its credit agreement
with Bank of  America,  N.A.  as agent and  lender  and  certain  other  lenders
("Credit Agreement").  Unamortized costs related to the prior agreement totaling
$406,000, net of applicable taxes, were written off and have been recorded as an
extraordinary loss from extinguishment of debt during fiscal year 2001.



                                       12
<PAGE>


      As disclosed in "Accounting Change" below, the SEC issued SAB 101 relating
to the recognition of revenue for publicly owned  companies.  The application of
SAB 101  resulted  in the  recognition  of a  cumulative  effect  charge of $3.1
million (net of applicable taxes of $2.1 million) on July 1, 2000.

INCOME TAXES

      As of June 30,  2002,  the Company had gross  deferred tax assets of $14.6
million,  with $5.4 million of the deferred tax assets relating to net operating
loss carry  forwards  which will be available to offset  future  taxable  income
through 2012.  Management  believes  that the Company will  generate  sufficient
future taxable income to realize a portion of these net deferred tax assets. The
Company has recorded a valuation allowance for $9.7 million against the deferred
tax  assets as of June 30,  2002 and will  continue  to do so until such time as
management  believes that the Company will realize such tax  benefits.  Although
uncertainties  exist as to these events, the Company will continue to review its
operations  periodically  to assess whether and when all deferred tax assets may
be realized.  The net income tax benefit  recorded in 2002 reflects a charge for
an increase in the valuation  allowance of $5.2 million  compared to a charge of
$200,000 in 2001. See Note 7 of Notes to  Consolidated  Financial  Statements in
Item 8 of this Report for additional information.

NET INCOME

      The net loss for fiscal year 2002 was $15.5 million, or $(1.09) per common
share on a diluted basis, as compared to net income of $1.4 million, or $.08 per
common share for fiscal year 2001.

STOCKHOLDERS' EQUITY

      During fiscal year 2002,  stockholders'  equity decreased $10.4 million to
$5.9 million from $16.3 million at June 30, 2001.  The net loss of $15.5 million
for fiscal  year 2002 was  partially  offset by the  receipt of $5.2  million of
proceeds from the exercise of warrants along with the sale of common stock under
the Company's stock option plans and employee stock purchase plan. See Liquidity
and  Capital  Resources  below  and Note 8 of Notes  to  Consolidated  Financial
Statements in Item 8 of this Report for additional  information.  The book value
per common share issued and outstanding decreased to $0.39 at June 30, 2002 from
$1.22 at June 30, 2001.

FISCAL YEAR 2001 COMPARED TO FISCAL YEAR 2000

ACCOUNTING CHANGE

      In December  1999, the  Securities  and Exchange  Commission  issued Staff
Accounting  Bulletin  No. 101 ("SAB  101"),  Revenue  Recognition  in  Financial
Statements.  SAB 101 summarizes the SEC staff's views  regarding the recognition
and  reporting of revenues in financial  statements.  The adoption of SAB 101 is
reflected as a cumulative effect of a change in accounting  principle as of July
1, 2000. Under SAB 101, the Company's leasing  commissions that are payable upon
certain  events such as tenant  occupancy  or  commencement  of rent will now be
recognized upon the occurrence of such events. In addition, consulting fees will
be recognized  under SAB 101 generally upon the delivery of agreed upon services
to the client.  Historically,  the Company had recognized leasing commissions at
the earlier of receipt of full payment or receipt of partial  payment when lease
and  commissions  agreements had been executed and no significant  contingencies
existed.  The  Company  had  recognized  consulting  fees as  employee  time was
incurred  on a  project.  While this  accounting  change  affects  the timing of
recognition of leasing revenues (and corresponding  services commission expense)
and  consulting  revenues,  it does not  impact  the  Company's  cash  flow from
operations.

      The cumulative  effect of the accounting change on prior years resulted in
a reduction to income for fiscal year 2001 of $3.1  million  (net of  applicable
taxes of $2.1  million),  or $.17 per diluted  share.  The effect of retroactive
application  of the  accounting  change  to July 1, 2000  increased  transaction
services  fees by $2.6  million,  EBITDA by $1.1  million and income  before the
cumulative  effect of the  accounting  change by  $632,000,  or $.04 per diluted
share, for fiscal year 2001.

      On a pro forma basis,  giving effect to the change  retroactive to July 1,
1999,  the  Company  would have  reported  transaction  services  fees of $354.0
million,  EBITDA of $37.7  million,  and net income of $15.5  million for fiscal
year 2000.  Actual  results  reported for fiscal year 2000 included  transaction
services fees of $355.7 million, EBITDA of $38.9 million and net income of $16.3
million.



                                       13
<PAGE>


REVENUE

      Total revenue for fiscal year 2001 was $412.0 million,  a decrease of 0.5%
from $413.9  million for fiscal year 2000.  Transaction  services  fees remained
relatively flat, as increased activity in the first half of the fiscal year from
certain technology  markets,  multi-market  relationships and larger assignments
was  offset in the  second  half of the  fiscal  year by the  weakening  general
economy and its impact on the real estate industry through  negative  absorption
and higher  vacancy  rates.  The impact of SAB 101 on these  revenues for fiscal
2001 as compared to fiscal 2000 was insignificant.  Management  services fees of
$53.5 million in fiscal 2001 decreased by  approximately  $4.7 million,  or 8.1%
compared  to the prior  year.  New  business  revenue  gains were  offset by the
Company   resigning  a  marginally   profitable   account  which  had  generated
approximately  $3.0 million in annual  revenue,  as well as fees  recognized  in
fiscal year 2000 resulting from an unusually  large one-time  business  services
printing assignment.

COSTS AND EXPENSES

      As a percentage of transaction services gross transaction revenue, related
commission  expense  increased  to 60.4%  from  58.5%  for  fiscal  year 2001 as
compared to fiscal year 2000. Unusually high average commission expense had been
incurred  during  the first six months of fiscal  year 2001 in once  flourishing
technology  markets such as Silicon Valley,  San Francisco,  Denver,  Washington
D.C. and New York. This resulted from strong incremental revenue growth in these
markets and the  commensurately  high production per  professional,  rather than
changes to the  existing  compensation  structure of the  Company's  transaction
professionals. Commensurate with the subsequent downturn in transaction services
commission revenues described above, the commission expenses incurred during the
last six months of fiscal year 2001 also declined.

      Salaries,  wages and benefits  expenses,  along with selling,  general and
administrative expenses, were relatively flat in fiscal year 2001 as compared to
fiscal year 2000, increasing by approximately $710,000, or 0.4%.

      Depreciation  and  amortization  expense for fiscal year 2001 increased to
$11.6  million from $10.5  million in fiscal year 2000 as the Company  placed in
service numerous technology infrastructure improvements during the first half of
fiscal year 2000.  The Company  also holds  multi-year  service  contracts  with
certain key professionals, the costs of which are being amortized over the lives
of  the  respective   contracts,   which  are  generally  two  to  three  years.
Amortization  expense relating to these contracts of $2.9 million was recognized
in fiscal year 2001, compared to $2.2 million in the prior year.

      During  fiscal  year 2001,  the  Company  recognized  other  non-recurring
expenses totaling $6.2 million, relating primarily to the impairment of goodwill
related to the April 1998 acquisition of White  Commercial Real Estate,  as well
as compensation  expense  related to stock options  exercised in connection with
the  Company's  self-tender  offer,  a  writedown  in the  carrying  basis of an
investment  in an internet  venture,  and executive  severance  costs related to
senior management changes.  Other  non-recurring  expenses totaling $2.7 million
for fiscal year 2000 were  recognized in connection  with the resignation of the
Company's former chairman and chief executive officer.

      Interest  income  increased  during fiscal year 2001 as compared to fiscal
year 2000 as a result of higher available invested cash from improved operations
in the first  half of the  fiscal  year  being  invested  prior to  funding  the
Company's  self-tender  offer and  related  costs  during the latter half of the
fiscal year.

      Interest  expense  incurred  in fiscal year 2000 and through the first six
months of fiscal  year 2001 was due  primarily  to seller  financing  related to
business  acquisitions  made in calendar year 1998,  as well as credit  facility
borrowings in the last half of fiscal year 1999.  Interest  expense  incurred in
the second half of fiscal year 2001 was due to the term loan borrowings  related
to the Company's self-tender offer.

INCOME TAXES

      As of June 30,  2001,  the Company had gross  deferred tax assets of $11.4
million,  with $2.5 million of the deferred tax assets relating to net operating
loss carry forwards. The Company recorded a valuation allowance for $4.5 million
against the deferred tax assets as of June 30, 2001.

NET INCOME

      Net income for fiscal year 2001 was $1.4 million, or $.08 per common share
on a diluted  basis,  as  compared to net income of $16.3  million,  or $.77 per
common  share for fiscal year 2000.  The Company  generated  basic  earnings per
share of $.08 and $.82 in fiscal years 2001 and 2000, respectively.  Included in
net income were deferred tax benefits of $1.4 million for fiscal year 2000.



                                       14
<PAGE>


STOCKHOLDERS' EQUITY

      During fiscal year 2001,  stockholders'  equity decreased $45.3 million to
$16.3  million from $61.6 million at June 30, 2000. In addition to net income of
$1.4 million for fiscal year 2001,  the Company  received  $2.2 million from the
sale of common stock under its stock option  plans and employee  stock  purchase
plan and paid $48.8 million to  shareholders  in  connection  with a self-tender
offer  completed  in January  2001.  The book value per common  share issued and
outstanding decreased to $1.22 at June 30, 2001 from $3.11 at June 30, 2000.


                         LIQUIDITY AND CAPITAL RESOURCES

      During  fiscal  year 2002,  cash and cash  equivalents  increased  by $6.8
million primarily as a result of cash generated by operating  activities of $4.3
million  and  financing  activities  of $10.0  million  offset  by cash  used in
investing activities of $7.4 million.  Cash used in investing activities related
to $5.1 million of purchases of equipment,  software and leasehold  improvements
and $2.3 million  related to a business  acquisition.  Net financing  activities
primarily  related to the funding of an $11.2 million loan by Kojaian  Ventures,
L.L.C. ("KV"), and related issuance of a promissory note to KV ("KV Subordinated
Note") and  proceeds of $5.2 million from the issuance of common stock offset by
the net repayment of the credit facility term loan debt totaling $5.3 million.

      The Company has historically experienced the highest use of operating cash
in the  quarter  ending  March 31,  primarily  related to the payment of certain
employee benefits and incentives and deferred  commission  payable balances that
attain peak levels during the quarter ending December 31.  Deferred  commissions
balances of approximately $14.5 million,  related to revenues earned in calendar
year 2001, were paid in the quarter ended March 31, 2002.

      See Note 16 of Notes to  Consolidated  Financial  Statements  in Item 8 of
this  Report  for  information  concerning  earnings  before  interest,   taxes,
depreciation and amortization.

      In January 2002, the Company issued an additional  1,337,358 shares of its
common  stock  upon  the  exercise  of  certain  warrants  held  by its  largest
stockholder,  Warburg, Pincus Investors, L.P., which were scheduled to expire on
January  29,  2002.  The  aggregate  purchase  price  of the  common  stock  was
approximately  $4.2 million,  reflecting an average  weighted price of $3.11 per
share.

      In each of  August  2001 and  November  2001,  the  Company  entered  into
amendments to its credit agreement that amended  financial  covenants related to
minimum cash flow levels and fixed cost ratios.  The  amendments  also increased
the interest  margin by 0.50% over the original terms. As a result of continuing
deterioration  in both the general  economy as well as the real estate  services
industry,  the  Company's  operations  for the quarter  ended  December 31, 2001
resulted in  non-compliance  with certain financial  covenants  contained in the
amended agreement.  The Company received a waiver with respect to these covenant
defaults that expired on February 28, 2002.

      Effective March 8, 2002, the Company  completed the  restructuring  of its
credit facility that was effected in accordance with the terms and conditions of
a third  amendment  to the credit  agreement  ("Third  Amendment").  Upon giving
effect to the Third  Amendment,  the Company was and is in  compliance  with its
covenants  under the credit  facility.  Under the terms of the Third  Amendment,
$5,000,000 of principal amortization of the term loan that was previously due in
calendar year 2002 was deferred,  certain  financial  covenants  relating to the
Company's cash flows and operations were revised,  and the commitment  under the
revolving  loan  portion was reduced from  $15,000,000  to  $6,000,000  (and was
further reduced to $5,000,000 in June 2002).

      Simultaneously with the Third Amendment,  the Company, Bank of America (as
administrative  agent), and Warburg,  Pincus Investors,  L.P. ("Warburg Pincus")
also entered into an option purchase agreement (the "Option  Agreement") whereby
Warburg Pincus funded a $5,000,000 promissory note (the "$5,000,000 Subordinated
Note") and  granted the Company the right  (which  right was  assignable  to the
banks)  to  cause  Warburg  Pincus  to  deliver  to the  Company  an  additional
$6,000,000 in June 2002 upon  substantially the same terms and conditions as the
$5,000,000  Subordinated  Note (the "$6,000,000  Subordinated  Note").  All sums
evidenced by the $5,000,000  Subordinated  Note and the $6,000,000  Subordinated
Note  (collectively,  the  "Subordinated  Notes") were  subordinate to all other
indebtedness  under the credit  facility.  The  Subordinated  Notes were  demand
obligations bearing interest at the rate of 15% per annum, compounded quarterly,
although no payments of interest or principal  were  permitted  until the credit
facility was terminated.  In addition, all principal and interest and reasonable
costs evidenced by the Subordinated  Notes were subject to conversion  generally
at the option of the holder,  into 11,000 shares of the Company's  newly created
Series A Preferred Stock having a stated value of $1,000 per share.



                                       15
<PAGE>


      Pursuant to the Option  Agreement,  the Company also received the right to
replace the Warburg Pincus  financing  arrangements  ("Refinancing  Right") by a
certain  date,  contemplated  by the Option  Agreement.  Specifically,  upon the
receipt  of at  least  approximately  $15,000,000  from the  sale of  equity  or
subordinated  debt  securities,  and the  tendering  to Warburg  Pincus,  or its
assigns,  on or before  the  extended  date of May 14,  2002,  of (i) the entire
principal amount of the $11,000,000  Subordinated  Notes,  plus accrued interest
thereon  and  reasonable  costs  with  respect  thereto,  and  (ii)  the  sum of
$4,158,431,  to re-purchase 1,337,358 shares of common stock acquired by Warburg
Pincus  in  January  2002,  all of the debt and  equity  securities  issued  and
issuable thereunder, will automatically be terminated.

      On May 13,  2002,  the  Company  effected  a closing of a  financing  with
Kojaian Ventures, L.L.C. ("KV") which is wholly-owned by C. Michael Kojaian, who
is a member of the Board of Directors of the Company and, along with his father,
owned,  subsequent to the closing of the KV financing,  approximately 20% of the
Company's issued and outstanding  Common Stock. In addition,  certain affiliated
real estate  entities of KV, in the aggregate,  are  substantial  clients of the
Company.  The Company accepted the financing  offered by KV based, in part, upon
the fact that the KV financing, which replaced the financing provided by Warburg
Pincus in March 2002, was on more favorable  terms and conditions to the Company
than the Warburg Pincus financing.

      Accordingly, on the closing of the KV Transaction on May 13, 2002, KV paid
to the Company an aggregate of  $15,386,580  which provided the Company with the
necessary   funds,   which  the  Company  used,  to  (i)  repay  the  $5,000,000
Subordinated Note and accrued interest thereon of $137,500, (ii) pay $100,000 of
Warburg Pincus' reasonable,  documented  out-of-pocket  expenses associated with
the $5,000,000 Subordinated Note, (iii) repurchase, at cost, 1,337,358 shares of
Common  Stock  held by  Warburg  Pincus  for a price per  share of $3.11,  or an
aggregate  purchase  price  of  $4,158,431,  and (iv)  pay  down  $6,000,000  of
revolving debt under the Company's Credit Facility.  In exchange  therefore,  KV
received  (i) a  convertible  subordinated  note  in  the  principal  amount  of
$11,237,500  (the "KV Debt"),  and (ii)  1,337,358  shares of Common  Stock at a
price  of  $3.11  per  share.  As a  consequence,  upon  the  closing  of the KV
Transaction, the Option Agreement was terminated, and KV replaced Warburg Pincus
as a junior  lender  under the Credit  Facility.  The form of KV's  financing is
substantially  identical to the form of the $11,000,000  Subordinated  Debt that
Warburg  Pincus  was to provide  pursuant  to the  Option  Agreement,  provided,
however,  that the KV Debt is more  favorable to the Company in two (2) material
respects.

      First, the interest rate on the KV Debt is 12% per annum as opposed to 15%
per annum.  Similarly,  the Series A  Preferred  Stock into which the KV Debt is
convertible has a coupon of 12% per annum, compounded quarterly, rather than 15%
per annum, compounded quarterly. Second, the Series A Preferred Stock that KV is
entitled to  receive,  like the Series A  Preferred  Stock that was  issuable to
Warburg Pincus,  has approximately a 40% preference on liquidation,  dissolution
and certain change in control transactions rather than the 50% preference on the
Warburg Pincus financing.  KV's liquidation preference is the greater of (i) 1.5
times the Conversion  Amount,  plus the accrued  dividend thereon at the rate of
12% per annum  (provided  such  liquidation,  dissolution,  or change of control
transaction  takes  place  within  twelve (12) months  after May 13,  2002,  and
thereafter  it will increase to 2 times the  Conversion  Amount plus the accrued
dividend  thereon at the rate of 12% per annum),  or (ii) the  equivalent of 40%
percent  of the  consideration  to be  paid  to all the  equity  holders  of the
Company,  not on a fully  diluted  basis as was the case in the  Warburg  Pincus
financing,  but rather,  on an "Adjusted  Outstanding  Basis" (as defined in the
underlying documents).

      On September 19, 2002, Kojaian Ventures,  L.L.C.  ("KV"), a related party,
exercised its right to convert the  subordinated  debt  instruments it held into
preferred stock of the Company. (See Notes 6 and 19 for additional information.)
As a  result  of this  conversion,  11,725  shares  of the  Company's  Series  A
Preferred  Stock  were  issued,  with a face  value of  $1,000  per  share.  The
outstanding   related  party   principal  and  interest   obligations   totaling
$10,967,000  (net of  issuance  costs  of  $758,000),  will be  reclassified  to
stockholders' equity.

      The preferred  stock  contains  liquidation  preference  and voting rights
equal to 1,007 common  shares for each share of preferred  stock,  or a total of
11,807,075 common share equivalents.  As a consequence of the conversion,  there
has been a change in the control of the  Company,  as these  equivalents,  along
with 3,762,884 shares of outstanding common stock owned by KV or its affiliates,
represent  approximately  60% of the  total  voting  power of the  Company.  The
preferred stock is not convertible  into any other  securities of the Company or
subject to redemption. Warburg Pincus, which currently owns approximately 39% of
the issued and outstanding common stock of the Company, has approximately 22% of
the voting power.

      Interest on outstanding borrowings under the credit facility is based upon
BofA's prime rate and/or a LIBOR based rate plus,  in either case, an additional
margin based upon a particular financial leverage ratio of the Company, and will
vary  depending  upon which  interest  rate  options the  Company  chooses to be
applied to specific borrowings. The



                                       16
<PAGE>


average   interest  rate  incurred  by  the  Company  on  the  Credit  Agreement
obligations  during fiscal year 2002 was 5.68%. The term loan facility amortizes
on a monthly basis through December 2002, and then on a quarterly  basis,  until
December 31, 2005 when both facilities mature.

      Certain other  mandatory  prepayment  provisions  related to the operating
cash flows of the Company and  receipts of certain  debt,  equity  and/or  sales
proceeds also exist within the agreement.  Scheduled  principal  payments are as
follows (in thousands):

                     YEAR ENDING
                       JUNE 30                       AMOUNT
                   ---------------              ----------------
                        2003                        $  5,750
                        2004                           9,875
                        2005                          11,125
                        2006                           5,000
                                                    --------
                                                    $ 31,750
                                                    ========

      Direct expenses  related to the Credit  Agreement and amendments  totaling
approximately  $1,070,000 have been recorded as deferred  financing fees and are
amortized over the term of the agreement.  Unamortized fees related to the prior
credit facility agreement,  totaling  approximately  $406,000 (net of applicable
taxes  of  approximately  $270,000)  were  written  off  concurrently  with  the
effective   date  of  the  Credit   Agreement  and  have  been  recorded  as  an
extraordinary loss in accordance with accounting  principles  generally accepted
in the United States during the fiscal year ended June 30, 2001.

      The variable  interest rate structure of the Credit Agreement  exposes the
Company  to  risks  associated  with  changes  in  the  interest  rate  markets.
Consequently,  the Credit Agreement  required the Company to enter interest rate
protection  agreements,  within 90 days of the date of the agreement,  initially
fixing the interest rates on not less than 50% of the aggregate principal amount
of the term loan scheduled to be outstanding for a period of not less than three
years.  The  Company  subsequently  established  risk  management  policies  and
procedures to manage the cost of borrowing obligations, which include the use of
interest  rate swap  derivatives  to fix the interest rate on debt with floating
rate indices.  Further, the Company prohibits the use of derivative  instruments
for trading or speculative purposes. In March 2001, the Company entered into two
interest rate swap agreements for a three year term, with banks that are parties
to the Credit  Agreement.  As of June 30, 2002, the swap  agreements had a total
notional  amount of $14.5 million,  with a fixed annual interest rate to be paid
by the Company of 5.18%, and a variable rate to be received by the Company equal
to three month LIBOR based  borrowing  rates.  The Company has  determined  that
these  agreements are to be  characterized  as effective  under the  definitions
included within Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities".

      On June 30, 2002, the derivative  instruments  were reported at their fair
value of approximately  $283,000,  net of applicable taxes, in other liabilities
in the condensed  Consolidated  Balance Sheet. The offsetting amount is reported
as a deferred  loss in  Accumulated  Other  Comprehensive  Loss.  The  Company's
interest  rate swaps are  treated as cash flow  hedges,  which  address the risk
associated with future variable cash flows of debt transactions.  Over time, the
unrealized gains and losses held in Accumulated Other Comprehensive Loss will be
reclassified  into  earnings  in the same  periods in which the hedged  interest
payments affect earnings.

      Repayment of the Credit Agreement is  collateralized  by substantially all
of the Company's  assets and the Credit Agreement  contains certain  restrictive
covenants,  including,  among other things: achievement of minimum EBITDA levels
as  defined in the  agreement,  restrictions  on  indebtedness,  the  payment of
dividends,  the  redemption  or  repurchase  of  capital  stock,   acquisitions,
investments and loans; and the maintenance of certain financial ratios.

      In January 2002,  the Company filed a  Registration  Statement on Form S-3
with the  Securities and Exchange  Commission,  pursuant to which it intended to
distribute  rights to purchase  shares of its common  stock to  stockholders  of
record as of the close of business on February 25, 2002.  On March 8, 2002,  the
Company  withdrew  this  Registration  Statement  due to  commencement  of other
financing arrangements for the Company.

      In August  1999,  the  Company  announced a program  through  which it may
purchase  up to $3 million of its common  stock on the open  market from time to
time as  market  conditions  warrant.  As of June  30,  2002,  the  Company  had
repurchased  359,900 shares at a total cost of  approximately  $2.0 million.  No
shares were repurchased under this program during fiscal years 2002 and 2001.



                                       17
<PAGE>


      The  Company  has a  $5.0  million  revolver  facility  under  its  Credit
Agreement for intended short term borrowing  needs.  Letters of credit  totaling
$1.35  million have been issued by the  Company,  thus  reducing  the  available
borrowings under the revolver facility.

      Pursuant to the terms of its Credit Agreement,  as amended, the Company is
required to achieve minimum EBITDA levels from operations totaling $12.1 million
for the next fiscal year ended June 30, 2003. In addition,  principal repayments
totaling $5.8 million are scheduled to become due during the 2003 fiscal year.

     The  Company's  common  stock is  currently  listed  on the New York  Stock
Exchange ("NYSE") pursuant to a listing  agreement.  As previously  disclosed by
the Company,  the NYSE had  accepted the  Company's  proposed  business  plan to
attain  compliance  with the NYSE's listing  standard on or before July 4, 2003.
This plan had been  submitted  in  response  to a  notification  received by the
Company on January 4, 2002 regarding non-compliance with such listing standards.
As a result of the  business  plan's  acceptance,  the  Company's  common  stock
continued  to be traded on the  exchange,  subject  to the  Company  maintaining
compliance  with the plan and periodic  review by the NYSE. Upon completion of a
recent review,  the NYSE announced on October 8, 2002 that the Company's  common
stock will be de-listed from the NYSE, due primarily to the Company's book value
and market  capitalization  value being below minimum  levels  required by their
listing standards.  The Company is making  arrangements to have its common stock
traded on the over-the-counter  market ("OTC") and is scheduled to cease trading
on the NYSE prior to the opening on  Thursday  October 17,  2002.  Although  the
Company is seeking an orderly transition and has reason to believe the NYSE will
effectuate  the same,  there can be no  assurance  that the OTC will  accept the
Company's shares for listing prior to their de-listing from the NYSE, or at all,
and that there will be no  interruption  of the public  listing of the Company's
common stock.

      The Company  believes that its  short-term  and long-term  operating  cash
requirements  will  be met by  operating  cash  flow,  and/or  debt  and  equity
financing.  In the event of adverse  economic  conditions  or other  unfavorable
events,  and to the extent that the Company's cash  requirements  are not met by
operating cash flow or available debt or equity  proceeds,  the Company may find
it necessary to reduce  expenditure  levels or undertake other actions as may be
appropriate under the circumstances.

      The  Company  continues  to  explore  additional   strategic   acquisition
opportunities  that have the  potential  to expand the depth and  breadth of its
current  lines of  business  and  increase  its  market  share.  The  sources of
consideration for such acquisitions  could be cash, the Company's current credit
facility, new debt, and/or the issuance of stock, or a combination of the above.
No assurances can be made that any additional  acquisitions will be made or that
financing  will be  available  under  terms  and  conditions  acceptable  to the
Company.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The Company's bank debt  obligations are floating rate  obligations  whose
interest rate and related  monthly  interest  payments vary with the movement in
LIBOR. See Note 5 of Notes to the Consolidated Financial Statements in Item 8 of
this  Report.  In order to  mitigate  this risk,  terms of the credit  agreement
required the Company to enter into interest rate swap  agreements to effectively
convert a portion of its floating rate term debt  obligations to fixed rate debt
obligations  through  March  2004.  Interest  rate swaps  generally  involve the
exchange of fixed and floating rate interest payments on an underlying  notional
amount.  As of June 30, 2002,  the Company had $14.5 million in notional  amount
interest rate swaps  outstanding in which the Company pays a fixed rate of 5.18%
and  receives  a  three-month  LIBOR  based rate from the  counter-parties.  The
notional  amount of the interest rate swap agreements is scheduled to decline as
follows:

                    NOTIONAL AMOUNT                    DATE
                    ---------------              ----------------
                      $10,500,000                  June 30, 2003
                        8,000,000                 March 31, 2004

      When  interest  rates rise the interest rate swap  agreements  increase in
fair value to the Company and when  interest  rates fall the interest  rate swap
agreements decline in value to the Company. As of June 30, 2002, there was a net
decline in interest rates since the Company had entered into the agreements, and
the interest rate swap  agreements  were in an  unrealized  loss position to the
Company of approximately $283,000, net of taxes.




                                       18
<PAGE>


      To highlight  the  sensitivity  of the interest  rate swap  agreements  to
changes  in  interest  rates,  the  following  summary  shows the  effects  of a
hypothetical instantaneous change of 100 basis points (BPS) in interest rates as
of June 30, 2002 (in thousands):

       Notional Amount ......................................    $ 14,500
       Fair Value to the Company ............................        (283)
       Change in Fair Value to the Company Reflecting
         Change in Interest Rates
           -100 BPS .........................................         (99)
           +100 BPS .........................................          97

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA






                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Grubb & Ellis Company

      We have audited the  accompanying  consolidated  balance sheets of Grubb &
Ellis  Company  as of June  30,  2002 and  2001,  and the  related  consolidated
statements of operations,  stockholders'  equity, and cash flows for each of the
three years in the period ended June 30, 2002.  These  financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

      In our opinion,  the consolidated  financial  statements referred to above
present fairly, in all material respects, the consolidated financial position of
Grubb & Ellis Company at June 30, 2002 and 2001, and the consolidated results of
its  operations  and its cash  flows for each of the three  years in the  period
ended June 30, 2002, in conformity with accounting principles generally accepted
in the United States.

      As  discussed  in Note 14 to the  consolidated  financial  statements,  in
fiscal 2001 the Company changed its method of accounting for revenue recognition
for leasing commissions and consulting fees.




ERNST & YOUNG LLP

Chicago, Illinois
September 19, 2002, except
for the third paragraph of Note 17,
as to which the date is October 8, 2002




                                       19
<PAGE>


                              GRUBB & ELLIS COMPANY

                           CONSOLIDATED BALANCE SHEETS
                             JUNE 30, 2002 AND 2001
                        (IN THOUSANDS, EXCEPT SHARE DATA)

                                     ASSETS
<TABLE>
<CAPTION>
                                                                                              2002           2001
                                                                                             ------         ------
Current assets:
<S>                                                                                        <C>            <C>
   Cash and cash equivalents .........................................................     $ 14,085        $  7,248
   Services fees receivable, net .....................................................       13,212          17,897
   Other receivables .................................................................        3,396           3,610
   Professional service contracts, net ...............................................        1,974           3,263
   Prepaid income taxes ..............................................................        6,890           4,598
   Prepaid and other current assets ..................................................          586             680
   Deferred tax assets, net ..........................................................        1,563           1,296
                                                                                           --------        --------
     Total current assets ............................................................       41,706          38,592

Noncurrent assets:
   Equipment, software and leasehold improvements, net ...............................       17,843          19,669
   Goodwill, net .....................................................................       26,958          26,328
   Deferred tax assets, net ..........................................................          947           3,535
   Other assets ......................................................................        2,923           4,302
                                                                                           --------        --------
     Total assets ....................................................................     $ 90,377        $ 92,426
                                                                                           ========        ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable ..................................................................     $  5,569        $  3,330
   Commissions payable ...............................................................        5,347           7,952
   Credit facility debt ..............................................................        5,750           8,000
   Accrued compensation and employee benefits ........................................       16,243          13,416
   Other accrued expenses ............................................................        4,546           4,678
                                                                                           --------        --------
     Total current liabilities .......................................................       37,455          37,376
Long-term liabilities:
   Credit facility debt ..............................................................       26,000          29,000
   Note payable--affiliate, net ......................................................       10,660              --
   Accrued claims and settlements ....................................................        7,823           8,695
   Other liabilities .................................................................        2,573           1,039
                                                                                           --------        --------
     Total liabilities ...............................................................       84,511          76,110
                                                                                           --------        --------
Stockholders' equity:
   Common stock, $.01 par value: 50,000,000 shares authorized; 15,028,839 and
     13,358,615 shares issued and outstanding at June 30, 2002 and 2001, respectively           150             134
   Additional paid-in-capital ........................................................       72,084          66,858
   Accumulated other comprehensive loss ..............................................         (283)            (68)
   Retained deficit ..................................................................      (66,085)        (50,608)
                                                                                           --------        --------
     Total stockholders' equity ......................................................        5,866          16,316
                                                                                           --------        --------
     Total liabilities and stockholders' equity ......................................     $ 90,377        $ 92,426
                                                                                           ========        ========
</TABLE>



              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       20
<PAGE>


                              GRUBB & ELLIS COMPANY

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                FOR THE YEARS ENDED JUNE 30, 2002, 2001 AND 2000
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                 2002         2001          2000
                                                                               --------     --------      --------
Revenue:
<S>                                                                             <C>          <C>           <C>
   Transaction  services fees .............................................     $262,077     $358,462      $355,704
   Management services fees ...............................................       51,399       53,500        58,215
                                                                              ----------   ----------    ----------
     Total revenue ........................................................      313,476      411,962       413,919
                                                                              ----------   ----------    ----------
Costs and expenses:
   Services commissions ...................................................      151,900      216,646       208,260
   Salaries, wages and benefits ...........................................       97,497       98,847        98,383
   Selling, general and administrative ....................................       65,828       68,550        68,304
   Depreciation and amortization ..........................................       10,706       11,635        10,521
   Impairment and other non-recurring expenses ............................        1,749        6,222         2,650
                                                                              ----------   ----------    ----------
     Total costs and expenses .............................................      327,680      401,900       388,118
                                                                              ----------   ----------    ----------

     Total operating income (loss) ........................................      (14,204)      10,062        25,801
Other income and expenses:
   Interest income ........................................................          401        1,640           500
   Interest expense .......................................................       (2,861)      (1,422)         (413)
                                                                              ----------   ----------    ----------
     Income (loss) before income taxes,
      extraordinary item and cumulative effect ............................      (16,664)      10,280        25,888
Benefit (provision) for income taxes ......................................        1,187       (5,372)       (9,598)
                                                                              ----------   ----------    ----------
Income (loss) before extraordinary item and cumulative effect .............      (15,477)       4,908        16,290
Extraordinary loss on extinguishment of debt, net of tax ..................           --         (406)           --
                                                                              ----------   ----------    ----------
Income (loss) before cumulative effect of accounting change ...............      (15,477)       4,502        16,290
Cumulative effect of accounting change, net of tax ........................           --       (3,133)           --
                                                                              ----------   ----------    ----------
   Net income (loss) ......................................................     $(15,477)    $  1,369      $ 16,290
                                                                              ==========   ==========    ==========
Net income (loss) per common share:
   Basic-
   - before extraordinary item and cumulative effect ......................     $  (1.09)    $   0.28      $   0.82
   - from extraordinary loss ..............................................           --        (0.02)           --
   - from cumulative effect of accounting change ..........................           --        (0.18)           --
                                                                              ----------   ----------    ----------
 ..........................................................................     $  (1.09)    $   0.08      $   0.82
                                                                              ==========   ==========    ==========
   Diluted-
   - before extraordinary item and cumulative effect ......................     $  (1.09)    $   0.27      $   0.77
   - from extraordinary loss ..............................................           --        (0.02)           --
   - from cumulative effect of accounting change ..........................           --        (0.17)           --
                                                                              ----------   ----------    ----------
 ..........................................................................     $  (1.09)    $   0.08      $   0.77
                                                                              ==========   ==========    ==========
Weighted average common shares outstanding:
   Basic- .................................................................   14,147,618   17,051,546    19,779,220
                                                                              ==========   ==========    ==========
   Diluted- ...............................................................   14,147,618   17,975,351    21,037,311
                                                                              ==========   ==========    ==========
</TABLE>




              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       21
<PAGE>


                              GRUBB & ELLIS COMPANY

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                FOR THE YEARS ENDED JUNE 30, 2002, 2001 AND 2000
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                          Common Stock
                                      ------------------                    Accumulated
                                                             Additional        Other       Retained       Total            Total
                                      Outstanding             Paid-In-     Comprehensive   Earnings    Comprehensive   Stockholders'
                                        Shares      Amount     Capital         Loss        (Deficit)   Income (Loss)      Equity
                                      -----------   ------   ----------    -------------   ---------   -------------   ------------
<S>                                   <C>            <C>      <C>              <C>         <C>          <C>              <C>
Balance as of July 1, 1999 ........   19,885,084     $199     $112,550         $  --       $(68,267)                     $ 44,482
Stock warrants issued .............           --       --        1,620                           --                         1,620
Stock repurchases .................     (359,900)      (4)      (1,979)                          --                        (1,983)
Employee common stock
   purchases and net exercise of
   stock options ..................      285,710        3        1,208                           --                         1,211
Net income ........................           --       --           --                       16,290                        16,290
                                      ----------     ----     --------        ------       --------                      --------
Balance as of June 30, 2000 .......   19,810,894      198      113,399            --        (51,977)                       61,620
Self-tender offer repurchases .....   (7,000,073)     (70)     (48,740)           --             --                       (48,810)
Employee common stock
   purchases and net exercise of
   stock options ..................      547,794        6        2,199            --             --                         2,205
Net income ........................           --       --           --            --          1,369     $   1,369           1,369
Change in value of cash
  flow hedge, net of tax ..........           --       --           --           (68)            --           (68)            (68)
                                                                                                        ---------
Total comprehensive income ........                                                                     $   1,301
                                      ----------     ----     --------        ------       --------     =========        --------
Balance as of June 30, 2001 .......   13,358,615      134       66,858           (68)       (50,608)                       16,316
Employee common stock
   purchases and net exercise of
   stock options ..................      330,889        3        1,076                                                      1,079
Proceeds from stock warrant
   exercises, net .................    1,339,335       13        4,150                                                      4,163
Net loss ..........................           --       --           --                      (15,477)    $ (15,477)        (15,477)
Change in value of cash
   flow hedge, net of tax .........           --       --           --          (215)            --          (215)           (215)
                                                                                                        ---------
Total comprehensive loss ..........                                                                     $ (15,692)
                                      ----------     ----     --------        ------       --------     =========        --------
Balance as of June 30, 2002 .......   15,028,839     $150     $ 72,084         $(283)      $(66,085)                     $  5,866
                                      ==========     ====     ========        ======       ========                      ========
</TABLE>



              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       22
<PAGE>

                              GRUBB & ELLIS COMPANY

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                FOR THE YEARS ENDED JUNE 30, 2002, 2001 AND 2000
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                  2002         2001          2000
                                                                                --------     --------      --------
<S>                                                                             <C>         <C>            <C>
Cash Flows from Operating Activities:
Net income (loss) ..........................................................    $(15,477)   $   1,369      $ 16,290
Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
   Deferred tax provision (benefit) ........................................       2,321         (566)        2,125
   Depreciation and amortization ...........................................      10,706       11,635        10,521
   Extraordinary loss, net of tax ..........................................          --          406            --
   Cumulative effect of accounting change, net of tax ......................          --        3,133            --
   Impairment  and other non-cash non-recurring expenses ...................         374        3,000            --
   Recovery for services fees receivable valuation allowances ..............        (229)        (195)         (336)
   Stock option compensation expense .......................................          --        1,219            --
Funding of multi-year service contracts ....................................        (793)      (3,637)       (2,773)
(Increase) decrease in services fees receivable ............................       4,724       (3,962)       (2,384)
(Increase) decrease in prepaid income taxes ................................      (2,292)      (4,598)        1,084
(Increase) decrease in prepaid and other assets ............................       1,662        3,975           184
Increase (decrease) in accounts and commissions payable ....................        (255)          92         1,111
Increase (decrease) in accrued compensation and employee benefits ..........       2,828         (900)        4,805
Increase (decrease) in accrued claims and settlements ......................       1,328          (46)          (95)
Increase  (decrease) in other liabilities ..................................        (578)      (2,916)        4,402
                                                                                --------    ---------      --------
     Net cash provided by operating activities .............................       4,319        8,009        34,934
                                                                                --------    ---------      --------

Cash Flows from Investing Activities:

Purchases of equipment, software and leasehold improvements ................      (5,147)      (6,153)       (8,008)
Cash paid for business acquisitions, net of cash acquired ..................      (2,295)        (568)       (1,112)
Other investing activities .................................................          --           --        (1,900)
                                                                                --------    ---------      --------

     Cash used in investing activities .....................................      (7,442)      (6,721)      (11,020)
                                                                                --------    ---------      --------

Cash Flows from Financing Activities:

Repayment of credit facility debt ..........................................     (11,250)      (3,000)       (7,500)
Borrowings on credit facility debt .........................................       6,000       40,000            --
Repayment of acquisition indebtedness ......................................          --         (519)       (2,366)
Repayment of borrowings from affiliate .....................................      (5,000)          --            --
Borrowings from affiliate ..................................................      16,237           --            --
Proceeds from issuance of common stock, net ................................       1,079          986         1,211
Proceeds from stock warrant exercises, net .................................       4,163           --            --
Cash paid to fund self-tender offer ........................................          --      (48,810)           --
Repurchase of common stock .................................................          --           --        (1,983)
Issuance and deferred financing fees .......................................      (1,269)        (559)         (914)
                                                                                --------    ---------      --------

     Net cash provided by (used in) financing activities ...................       9,960      (11,902)      (11,552)
                                                                                --------    ---------      --------

Net increase  (decrease) in cash and cash equivalents ......................       6,837      (10,614)       12,362
Cash and cash equivalents at beginning of the year .........................       7,248       17,862         5,500
                                                                                --------    ---------      --------

Cash and cash equivalents at end of the year ...............................    $ 14,085    $   7,248      $ 17,862
                                                                                ========    =========      ========
</TABLE>



              The accompanying notes are an integral part of these
                       consolidated financial statements.



                                       23
<PAGE>


                              GRUBB & ELLIS COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) THE COMPANY

      Grubb & Ellis Company (the  "Company") is a full service  commercial  real
estate  company  that  provides  services  to real estate  owners/investors  and
tenants  including  transaction  services  involving  leasing,  acquisitions and
dispositions, and property and facilities management services. Additionally, the
Company  provides  consulting and strategic  services with respect to commercial
real estate.

(b) PRINCIPLES OF CONSOLIDATION

      The  consolidated  financial  statements  include the  accounts of Grubb &
Ellis  Company,  and its  wholly  owned  subsidiaries,  including  Grubb & Ellis
Management  Services,  Inc.  ("GEMS"),  which  provides  property and facilities
management services. All significant intercompany accounts have been eliminated.

(c) BASIS OF PRESENTATION

      The financial  statements have been prepared in conformity with accounting
principles  generally  accepted in the United States which require management to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities  (including  disclosure of contingent assets and liabilities) at the
date of the  financial  statements  and the  reported  amounts of  revenues  and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

(d) REVENUE RECOGNITION

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

      Effective  July 1, 2000,  the Company  changed its method of accounting to
comply with the Securities and Exchange  Commission's  ("SEC") Staff  Accounting
Bulletin  No.  101,  "Revenue   Recognition  in  Financial   Statements,"  which
summarized  the SEC staff's  views  regarding the  recognition  and reporting of
revenues in financial statements. See Note 14 for additional information.

(e) COSTS AND EXPENSES

      Real  estate  transaction  services  and  other  commission  expenses  are
recognized  concurrently with the related revenue.  All other costs and expenses
are recognized when incurred.

      GEMS incurs certain  salaries,  wages and benefits in connection  with the
property and corporate  facilities  management services it provides which are in
part  reimbursed  at cost by the owners of such  properties.  The following is a
summary of the GEMS total gross and  reimbursable  salaries,  wages and benefits
(in thousands) for the years ended June 30, 2002, 2001 and 2000. The net expense
is included in salaries,  wages and benefits on the  Consolidated  Statements of
Operations.

<TABLE>
<CAPTION>
                                                                                2002        2001        2000
                                                                             ---------   ---------   ---------
<S>                                                                          <C>         <C>         <C>
Gross salaries, wages and benefits ......................................    $ 151,078   $ 140,667   $ 132,556
Less: reimbursements from property owners ...............................     (117,970)   (104,648)    (94,621)
                                                                             ---------   ---------   ---------
Net salaries, wages and benefits ........................................    $  33,108   $  36,019   $  37,935
                                                                             =========   =========   =========
</TABLE>



                                       24
<PAGE>


                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

(f) ACCOUNTING FOR STOCK-BASED COMPENSATION

      Statements  of Financial  Accounting  Standards No. 123,  "Accounting  for
Stock-Based  Compensation  ("Statement  123") allows companies to either account
for stock-based  compensation under the provisions of Statement 123 or under the
provisions of Accounting Principles Board Opinion No. 25 ("APB 25"). The Company
elected to continue  accounting for  stock-based  compensation  to its employees
under the provisions of APB 25.  Accordingly,  because the exercise price of the
Company's  employee stock options equals or exceeds the fair market value of the
underlying stock on the date of grant, no compensation  expense is recognized by
the  Company.  If the  exercise  price of an award is less than the fair  market
value of the underlying stock at the date of grant,  the Company  recognizes the
difference as  compensation  expense over the vesting  period of the award.  The
Company,  however,  is required to provide pro forma  disclosure  as if the fair
value  measurement  provisions of Statement 123 had been adopted.  See Note 8 of
Notes to Consolidated Financial Statements for additional information.

(g) INCOME TAXES

      Deferred  income taxes are recorded  based on enacted  statutory  rates to
reflect the tax consequences in future years of the differences  between the tax
bases of assets and liabilities and their financial reporting amounts.  Deferred
tax assets,  such as net  operating  loss carry  forwards,  which will  generate
future tax  benefits  are  recognized  to the extent  that  realization  of such
benefits  through future taxable  earnings or alternative tax strategies is more
likely than not.

(h) CASH AND CASH EQUIVALENTS

      Cash and cash  equivalents  consist of demand  deposits and highly  liquid
short-term  debt  instruments  with  maturities of three months or less from the
date of purchase and are stated at cost.

      Cash payments for interest were approximately  $2,892,000,  $1,383,000 and
$537,000  for each of the  fiscal  years  ended  June 30,  2002,  2001 and 2000,
respectively. Cash payments for income taxes for the fiscal years ended June 30,
2002,  2001 and 2000 were  approximately  $360,000,  $10,303,000 and $4,372,000,
respectively.  Cash refunds for income taxes totaling  approximately  $1,576,000
were received in the fiscal year ended June 30, 2002.

(i) TRANSACTION SERVICE CONTRACTS

      The  Company  holds   multi-year   service   contracts  with  certain  key
transaction professionals for which cash payments were made to the professionals
upon  signing,  the  costs of which are  being  amortized  over the lives of the
respective  contracts,  which are  generally  two to three  years.  Amortization
expense  relating to these  contracts  of $2.1  million,  $2.9  million and $2.2
million was recognized in fiscal years 2002, 2001 and 2000, respectively.

(j) EQUIPMENT, SOFTWARE AND LEASEHOLD IMPROVEMENTS

      Equipment,  software  and  leasehold  improvements  are  recorded at cost.
Depreciation of equipment is computed using the straight-line  method over their
estimated useful lives ranging from three to seven years. Software costs consist
of costs to purchase  and develop  software.  All software  costs are  amortized
using a  straight-line  method over their estimated  useful lives,  ranging from
three to seven years.  Development costs are amortized once the related software
is  placed  in  service.   Leasehold   improvements   are  amortized  using  the
straight-line  method  over  their  useful  lives not to exceed the terms of the
respective leases. Maintenance and repairs are charged to expense as incurred.

(k) GOODWILL

      Goodwill,  representing  the excess of the cost over the fair value of the
net tangible assets of acquired  businesses,  is stated at cost and is amortized
on a straight-line  basis over estimated  future periods to be benefited,  which
range from 15 to 25 years.  Accumulated  amortization  amounted to approximately
$5,815,000 and $4,704,000 at June 30, 2002 and 2001,  respectively.  The Company
wrote-off approximately $454,000 of fully amortized goodwill in 2002.



                                       25
<PAGE>

                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)


      The net carrying  value of goodwill is reviewed by management if facts and
circumstances,   such  as   significant   declines  in  revenues  or  number  of
professionals,  suggest  that an  impairment  may  exist.  If an  impairment  is
identified  as a  result  of such  reviews,  the  Company  would  measure  it by
comparing  undiscounted  cash flows of a  specific  acquired  business  with the
carrying  value  of  goodwill  associated  therewith.  If the  future  estimated
undiscounted cash flows are not sufficient to recover the carrying value of such
goodwill,  such asset would be  adjusted  to its fair value  through a charge to
operations. An impairment loss of $2,150,000 was recognized in fiscal 2001. (See
Note  13  of  Notes  to   Consolidated   Financial   Statements  for  additional
information.)  No goodwill  impairment  losses were identified in fiscal 2002 or
2000.

      In June 2001, the Financial  Accounting  Standards Board issued Statements
of Financial Accounting Standards No. 141, BUSINESS  COMBINATIONS,  and No. 142,
GOODWILL AND OTHER INTANGIBLE ASSETS, effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill will no longer be amortized but
will be subject to annual  impairment  tests in accordance  with the Statements.
Other intangible assets will continue to be amortized over their useful lives.

      The Company will apply the new rules on accounting  for goodwill and other
intangible  assets  beginning in the first fiscal quarter of fiscal 2003,  which
for the Company would be the quarter ending  September 30, 2002.  Application of
the  non-amortization  provisions  of the  Statement is expected to result in an
increase in net income of  approximately  $1.6 million per year. The Company has
completed the  transitional  impairment tests of goodwill as of July 1, 2002 and
has  determined  that no  goodwill  impairment  will  impact  the  earnings  and
financial position of the Company as of that date.

(l) ACCRUED CLAIMS AND SETTLEMENTS

      The Company has maintained partially  self-insured and deductible programs
for errors and omissions,  general liability,  workers' compensation and certain
employee  health care costs.  Reserves for such programs are included in accrued
claims and  settlements  and  compensation  and employee  benefits  payable,  as
appropriate.  Reserves are based on the  aggregate of the liability for reported
claims and an actuarially-based estimate of incurred but not reported claims.

(m) FAIR VALUE OF FINANCIAL INSTRUMENTS

      Statements of Financial Accounting  Standards No. 107,  "Disclosures about
Fair  Value  of  Financial  Instruments",  requires  disclosure  of  fair  value
information  about  financial  instruments,  whether  or not  recognized  in the
Consolidated Balance Sheets.  Considerable  judgment is required in interpreting
market data to develop  estimates  of fair  value.  Accordingly,  the  estimates
presented herein are not necessarily  indicative of the amounts that the Company
could  realize  in a  current  market  exchange.  The  use of  different  market
assumptions  and/or  estimation  methodologies may have a material effect on the
estimated fair value amounts.  The carrying  amounts of the Company's  financial
instruments,   which  include  cash  and  cash   equivalents,   receivables  and
obligations under accounts payable and debt instruments,  approximate their fair
values, based on similar instruments with similar risks.

(n) FAIR VALUE OF DERIVATIVE INSTRUMENTS AND HEDGED ITEMS

      The Financial  Accounting  Standards  Board issued  Statement of Financial
Accounting  ("SFAS") No. 138 "Accounting for Derivative  Instruments and Hedging
Activities"  which amends SFAS No. 133,  "Accounting for Derivative  Instruments
and Hedging Activities." SFAS No. 133, as amended,  requires companies to record
derivatives  on the  balance  sheet as assets or  liabilities,  measured at fair
value.  The Company  became subject to the  requirements  of SFAS No. 133 during
March 2001, as a result of entering  into two interest  rate swap  agreements in
conjunction  with a new credit  agreement.  See Note 5 of Notes to  Consolidated
Financial  Statements for additional  information.  SFAS No. 133 may increase or
decrease reported net income and stockholders' equity  prospectively,  depending
on  future  levels  of  interest  rates,  the  computed  "effectiveness"  of the
derivatives,  as that term is  defined  by SFAS No.  133,  and  other  variables
affecting the fair values of derivative  instruments and hedged items,  but will
have no effect on cash flows.




                                       26
<PAGE>

                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

(o) RECLASSIFICATIONS

      Certain amounts in prior periods have been  reclassified to conform to the
current year presentation. Agency leasing fees of approximately $6.7 million and
$7.2 million were  reclassified  from  management  services fees to  transaction
service   fees  for   fiscal   years   2001   and   2000,   respectively.   Such
reclassifications  have not changed previously reported results of operations or
cash flows.

2.  SERVICES FEES RECEIVABLE, NET

      Services  fees  receivable  at June 30,  2002 and  2001  consisted  of the
following (in thousands):

<TABLE>
<CAPTION>
                                                                                               2002         2001
                                                                                             --------     --------
<S>                                                                                         <C>           <C>
Transaction services fees receivable ...................................................    $   6,005     $  9,969
Management services fees receivable ....................................................        8,126        8,886
   Allowance for uncollectible accounts ................................................         (605)        (834)
                                                                                            ---------     --------

     Total .............................................................................       13,526       18,021

   Less portion classified as current ..................................................       13,212       17,897
                                                                                            ---------     --------

   Non-current portion (included in other assets) ......................................    $     314     $    124
                                                                                            =========     ========
</TABLE>

      The   following  is  a  summary  of  the  changes  in  the  allowance  for
uncollectible services fees receivable for the fiscal years ended June 30, 2002,
2001 and 2000 (in thousands):

<TABLE>
<CAPTION>
                                                                                2002          2001         2000
                                                                              --------      --------     --------
<S>                                                                            <C>          <C>          <C>
Balance at beginning of year ..............................................    $   834      $  2,326     $  2,662
Reduction from change in accounting principle .............................         --        (1,297)          --
Recovery of allowance .....................................................       (229)         (195)        (336)
                                                                               -------      --------     --------

Balance at end of year ....................................................    $   605      $    834     $  2,326
                                                                               =======      ========     ========
</TABLE>

3.  EQUIPMENT, SOFTWARE AND LEASEHOLD IMPROVEMENTS, NET

      Equipment,  software and leasehold  improvements at June 30, 2002 and 2001
consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                               2002         2001
                                                                                             --------     --------
<S>                                                                                           <C>          <C>
Furniture, equipment and software systems ..............................................      $43,436      $40,954
Leasehold improvements .................................................................        6,636        5,060
                                                                                              -------      -------
     Total .............................................................................       50,072       46,014
Less accumulated depreciation and amortization .........................................       32,229       26,345
                                                                                              -------      -------
Equipment, software and leasehold improvements, net ....................................      $17,843      $19,669
                                                                                              =======      =======
</TABLE>

      The Company  wrote off  approximately  $1.1  million  and $1.7  million of
furniture  and  equipment  during the fiscal years ended June 30, 2002 and 2001,
respectively.  Approximately  $0.9  million  and  $1.3  million  of  accumulated
depreciation and amortization expense had been recorded on these assets prior to
their   disposition   in  the  fiscal  years  ended  June  30,  2002  and  2001,
respectively.

4.  EARNINGS (LOSS) PER COMMON SHARE

      Statement of Financial  Accounting Standards No. 128, "Earnings per Share"
("Statement  128")requires  disclosure of basic earnings per share that excludes
any  dilutive  effects of options,  warrants,  and  convertible  securities  and
diluted earnings per share.


                                       27
<PAGE>


                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4.  EARNINGS (LOSS) PER COMMON SHARE--(CONTINUED)



      The  following  table  sets  forth the  computation  of basic and  diluted
earnings per common share from continuing  operations (in thousands,  except per
share data):

<TABLE>
<CAPTION>
                                                                                           FOR THE
                                                                                  FISCAL YEAR ENDED JUNE 30,
                                                                                -------------------------------
                                                                                2002         2001          2000
                                                                                ----         ----          ----
<S>                                                                           <C>           <C>          <C>
Basic earnings per common share:
   Income (loss) before extraordinary item and cumulative effect ........     $(15,477)     $  4,908     $ 16,290
                                                                              ========      ========     ========

   Weighted average common shares outstanding ...........................       14,148        17,052       19,779
                                                                              ========      ========     ========
   Earnings (loss) per common share--basic ..............................     $  (1.09)     $   0.28     $   0.82
                                                                              ========      ========     ========

                                                                                           FOR THE
                                                                                  FISCAL YEAR ENDED JUNE 30,
                                                                                -------------------------------
                                                                                2002         2001          2000
                                                                                ----         ----          ----
Diluted earnings per common share:
   Income (loss) before extraordinary item and cumulative effect ........     $(15,477)     $  4,908     $ 16,290
                                                                              ========      ========     ========
   Weighted average common shares outstanding ...........................       14,148        17,052       19,779
   Effect of dilutive securities:
     Stock options and warrants (A) .....................................           --           923        1,258
                                                                              --------      --------     --------
   Weighted average common shares outstanding ...........................       14,148        17,975       21,037
                                                                              ========      ========     ========
   Earnings (loss) per common share--diluted ............................     $  (1.09)     $   0.27     $   0.77
                                                                              ========      ========     ========
</TABLE>

      Additionally,  options outstanding to purchase shares of common stock, the
effect of which would be anti-dilutive, were 2,816,861, 1,661,697, and 1,177,800
at June 30,  2002,  2001 and 2000,  respectively,  and were not  included in the
computation  of diluted  earnings per share either  because the option  exercise
price was greater  than the average  market  price of the common  shares for the
year or in 2002, an operating loss was reported.

5.  CREDIT FACILITY DEBT

      Effective  December  31,  2000,  the Company  entered  into an amended and
restated credit agreement ("Credit Agreement") arranged by Bank of America, N.A.
("BofA"),  which  revised  certain  terms and  provisions  of its  prior  credit
facility.  The Credit  Agreement  provided  for a $40 million term loan that was
used to  fund a  portion  of the  self-tender  offer  completed  by the  Company
effective  January 24, 2001, along with a $15 million  revolving credit facility
for working capital purposes.

      In each of  August  2001 and  November  2001,  the  Company  entered  into
amendments to its Credit Agreement that amended  financial  covenants related to
minimum cash flow levels and fixed cost ratios.  The  amendments  also increased
the interest  margin by 0.50% over the original terms. As a result of continuing
deterioration  in both the general  economy as well as the real estate  services
industry,  the  Company's  operations  for the quarter  ended  December 31, 2001
resulted in  non-compliance  with certain financial  covenants  contained in the
amended agreement.  The Company received a waiver with respect to these covenant
defaults that expired on February 28, 2002.

      Effective March 8, 2002, the Company  completed the  restructuring  of its
credit facility that was effected in accordance with the terms and conditions of
a third  amendment  to the Credit  Agreement  ("Third  Amendment").  Upon giving
effect to the Third  Amendment,  the Company was and is in  compliance  with its
covenants  under the credit  facility.  Under the terms of the Third  Amendment,
$5,000,000 of principal amortization of the term loan that was previously due in
calendar year 2002 was deferred,  certain  financial  covenants  relating to the
Company's cash flows and operations were revised,  and the commitment  under the
revolving  loan  portion was reduced from  $15,000,000  to  $6,000,000  (and was
further reduced to $5,000,000 in June 2002).





                                       28
<PAGE>

                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

5.  CREDIT FACILITY DEBT--(CONTINUED)

      Simultaneously with the Third Amendment,  the Company, Bank of America (as
administrative  agent), and Warburg,  Pincus Investors,  L.P. ("Warburg Pincus")
also entered into an option purchase agreement (the "Option  Agreement") whereby
Warburg Pincus funded a $5,000,000 promissory note (the "$5,000,000 Subordinated
Note") and  granted the Company the right  (which  right was  assignable  to the
banks)  to  cause  Warburg  Pincus  to  deliver  to the  Company  an  additional
$6,000,000 in June 2002 upon  substantially the same terms and conditions as the
$5,000,000  Subordinated  Note (the "$6,000,000  Subordinated  Note").  All sums
evidenced by the $5,000,000  Subordinated  Note and the $6,000,000  Subordinated
Note  (collectively,  the  "Subordinated  Notes") were  subordinate to all other
indebtedness  under the credit  facility.  The  Subordinated  Notes were  demand
obligations bearing interest at the rate of 15% per annum, compounded quarterly,
although no payments of interest or principal  were  permitted  until the credit
facility was terminated.  In addition, all principal and interest and reasonable
costs evidenced by the Subordinated  Notes were subject to conversion  generally
at the option of the holder,  into 11,000 shares of the Company's  newly created
Series A Preferred Stock,  subject to adjustment for accrued  interest  thereon,
having a stated value of $1,000 per share.

      Pursuant to the Option  Agreement,  the Company also received the right to
replace the Warburg Pincus  financing  arrangements  ("Refinancing  Right") by a
certain  date,  contemplated  by the Option  Agreement.  Specifically,  upon the
receipt  of at  least  approximately  $15,000,000  from the  sale of  equity  or
subordinated  debt  securities,  and the  tendering  to Warburg  Pincus,  or its
assigns,  on or before  the  extended  date of May 14,  2002,  of (i) the entire
principal amount of the $11,000,000  Subordinated  Notes,  plus accrued interest
thereon  and  reasonable  costs  with  respect  thereto,  and  (ii)  the  sum of
$4,158,431,  to re-purchase 1,337,358 shares of common stock acquired by Warburg
Pincus  in  January  2002,  all of the debt and  equity  securities  issued  and
issuable  thereunder,  will  automatically  be terminated.  On May 13, 2002, the
Company exercised the Refinancing Right and entered into a replacement financing
arrangement with Kojaian  Ventures,  L.L.C. See Note 6, Note  Payable-Affiliate,
for additional information.

      The Company  currently  has a $5.0  million  revolver  facility  under its
Credit  Agreement for intended  short term  borrowing  needs.  Letters of credit
totaling  $1.35  million  have been issued by the  Company,  thus  reducing  the
available borrowings under the revolver facility.

      Interest on outstanding borrowings under the credit facility is based upon
BofA's prime rate and/or a LIBOR based rate plus,  in either case, an additional
margin based upon a particular financial leverage ratio of the Company, and will
vary  depending  upon which  interest  rate  options the  Company  chooses to be
applied to  specific  borrowings.  The  average  interest  rate  incurred by the
Company on the Credit Agreement  obligations  during fiscal year 2002 was 5.68%.
The term loan facility  amortizes on a monthly basis through  December 2002, and
then on a quarterly basis, until December 31, 2005 when both facilities mature.

      Certain other  mandatory  prepayment  provisions  related to the operating
cash flows of the Company and  receipts of certain  debt,  equity  and/or  sales
proceeds also exist within the Credit Agreement.

      Scheduled principal payments are as follows (in thousands):

                     YEAR ENDING
                        JUNE 30                    AMOUNT
                   -----------------              --------
                         2003                     $ 5,750
                         2004                       9,875
                         2005                      11,125
                         2006                       5,000
                                                  -------
                                                  $31,750
                                                  =======

      Direct expenses  related to the Credit  Agreement and amendments  totaling
approximately  $1,070,000 have been recorded as deferred  financing fees and are
amortized over the term of the agreement.  Unamortized fees related to the prior
credit facility agreement,  totaling  approximately  $406,000 (net of applicable
taxes  of  approximately  $270,000)  were  written  off  concurrently  with  the
effective date of the Credit Agreement and have been recorded as



                                       29
<PAGE>

                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

5.  CREDIT FACILITY DEBT--(CONTINUED)

an  extraordinary  loss  in  accordance  with  accounting  principles  generally
accepted in the United States during the fiscal year ended June 30, 2001.

      The variable  interest rate structure of the Credit Agreement  exposes the
Company  to  risks  associated  with  changes  in  the  interest  rate  markets.
Consequently,  the Credit Agreement  required the Company to enter interest rate
protection  agreements,  within 90 days of the date of the agreement,  initially
fixing the interest rates on not less than 50% of the aggregate principal amount
of the term loan scheduled to be outstanding for a period of not less than three
years.  The  Company  subsequently  established  risk  management  policies  and
procedures to manage the cost of borrowing obligations, which include the use of
interest  rate swap  derivatives  to fix the interest rate on debt with floating
rate indices.  Further, the Company prohibits the use of derivative  instruments
for trading or speculative purposes. In March 2001, the Company entered into two
interest rate swap agreements for a three year term, with banks that are parties
to the Credit  Agreement.  As of June 30, 2002, the swap  agreements had a total
notional  amount of $14.5 million,  with a fixed annual interest rate to be paid
by the Company of 5.18%, and a variable rate to be received by the Company equal
to three month LIBOR based  borrowing  rates.  The Company has  determined  that
these  agreements are to be  characterized  as effective  under the  definitions
included within Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities".

      On June 30, 2002, the derivative  instruments  were reported at their fair
value of approximately  $283,000,  net of applicable taxes, in other liabilities
in the condensed  Consolidated  Balance Sheet. The offsetting amount is reported
as a deferred  loss in  Accumulated  Other  Comprehensive  Loss.  The  Company's
interest  rate swaps are  treated as cash flow  hedges,  which  address the risk
associated with future variable cash flows of debt transactions.  Over time, the
unrealized gains and losses held in Accumulated Other Comprehensive Loss will be
reclassified  into  earnings  in the same  periods in which the hedged  interest
payments affect earnings.

      Repayment of the Credit Agreement is  collateralized  by substantially all
of the Company's  assets and the Credit Agreement  contains certain  restrictive
covenants,  including,  among other things: achievement of minimum EBITDA levels
as  defined in the  agreement,  restrictions  on  indebtedness,  the  payment of
dividends,  the  redemption  or  repurchase  of  capital  stock,   acquisitions,
investments and loans; and the maintenance of certain financial ratios.

6.  NOTE PAYABLE--AFFILIATE

      On May 13,  2002,  the  Company  effected  a closing of a  financing  with
Kojaian Ventures, L.L.C. ("KV") which is wholly-owned by C. Michael Kojaian, who
is a member of the Board of Directors of the Company and, along with his father,
owned,  subsequent to the closing of the KV financing,  approximately 20% of the
Company's issued and outstanding  Common Stock. In addition,  certain affiliated
real estate  entities of KV, in the aggregate,  are  substantial  clients of the
Company.  The Company accepted the financing  offered by KV based, in part, upon
the fact that the KV financing, which replaced the financing provided by Warburg
Pincus  in March  2002  (see  Note 5 for  additional  information),  was on more
favorable terms and conditions to the Company than the Warburg Pincus financing.

      Accordingly,  on the closing of the KV financing on May 13, 2002,  KV paid
to the Company an aggregate of  $15,386,580  which provided the Company with the
necessary   funds,   which  the  Company  used,  to  (i)  repay  the  $5,000,000
Subordinated Note and accrued interest thereon of $137,500, (ii) pay $100,000 of
Warburg Pincus' reasonable,  documented  out-of-pocket  expenses associated with
the $5,000,000 Subordinated Note, (iii) repurchase, at cost, 1,337,358 shares of
Common  Stock  held by  Warburg  Pincus  for a price per  share of $3.11,  or an
aggregate  purchase  price  of  $4,158,431,  and (iv)  pay  down  $6,000,000  of
revolving debt under the Company's Credit Agreement.  In exchange therefore,  KV
received  (i) a  convertible  subordinated  note  in  the  principal  amount  of
$11,237,500  (the "KV Debt"),  and (ii)  1,337,358  shares of Common  Stock at a
price  of  $3.11  per  share.  As a  consequence,  upon  the  closing  of the KV
Transaction, the Option Agreement was terminated, and KV replaced Warburg Pincus
as a junior  lender  under the Credit  Facility.  The form of KV's  financing is
substantially  identical to the form of the $11,000,000  Subordinated Notes that
Warburg  Pincus  was to provide  pursuant  to the  Option  Agreement,  provided,
however,  that the KV Debt is more  favorable to the Company in two (2) material
respects.



                                       30
<PAGE>


                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6.  NOTE PAYABLE--AFFILIATE--(CONTINUED)

      First, the interest rate on the KV Debt is 12% per annum as opposed to 15%
per annum.  Similarly,  the Series A  Preferred  Stock into which the KV Debt is
convertible has a coupon of 12% per annum, compounded quarterly, rather than 15%
per annum, compounded quarterly. Second, the Series A Preferred Stock that KV is
entitled to  receive,  like the Series A  Preferred  Stock that was  issuable to
Warburg Pincus,  has approximately a 40% preference on liquidation,  dissolution
and certain change in control transactions rather than the 50% preference on the
Warburg Pincus financing.  KV's liquidation preference is the greater of (i) 1.5
times the Conversion  Amount,  plus the accrued  dividend thereon at the rate of
12% per annum  (provided  such  liquidation,  dissolution,  or change of control
transaction  takes  place  within  twelve (12) months  after May 13,  2002,  and
thereafter  it will increase to 2 times the  Conversion  Amount plus the accrued
dividend  thereon at the rate of 12% per annum),  or (ii) the  equivalent of 40%
percent  of the  consideration  to be  paid  to all the  equity  holders  of the
Company,  not on a fully  diluted  basis as was the case in the  Warburg  Pincus
financing,  but rather,  on an "Adjusted  Outstanding  Basis" (as defined in the
underlying documents).

      On September 19, 2002,  the conversion  rights  existing under the KV Debt
were exercised. See Note 17, Subsequent Event, for additional information.

7.  INCOME TAXES

      The Company maintains a fiscal year ending June 30 for financial reporting
purposes and a calendar  year for income tax reporting  purposes.  The provision
for income taxes for the fiscal years ended June 30, 2002, 2001 and 2000,  which
includes the income tax impact attributed to the  extraordinary  item ($270,000)
and the cumulative  effect  adjustment  ($2,089,000)  in 2001,  consisted of the
following (in thousands):

<TABLE>
<CAPTION>
                                                                                 2002         2001          2000
                                                                                 ----         ----          ----
<S>                                                                            <C>            <C>          <C>
Current
   Federal ..............................................................      $(4,051)       $3,095       $6,230
   State and local ......................................................          381           484        1,243
                                                                               -------        ------       ------
                                                                                (3,670)        3,579        7,473
  Deferred ..............................................................        2,483          (566)       2,125
                                                                               -------        ------       ------
   Net provision (benefit) ..............................................      $(1,187)       $3,013       $9,598
                                                                               =======        ======       ======
</TABLE>

      The Company recorded prepaid taxes totaling  approximately  $6,890,000 and
$4,598,000 as of June 30, 2002 and 2001, respectively.  Included in these assets
are tax refund  receivables  resulting  from  filed  federal  and state  returns
totaling  approximately  $2,584,000  and  $2,920,000  for  the tax  years  ended
December  31,  2001 and  2000,  respectively.  Also  included  are tax  effected
operating loss carrybacks  totaling  approximately  $4,306,000 and $1,678,000 at
June 30, 2002 and 2001,  respectively,  which the Company  will or has  realized
primarily against federal tax liability payments made in prior tax years.

      After  giving  effect to its income tax returns  filed for  calendar  year
2001,  the Company has  approximately  $8,300,000  of  remaining  prior year tax
liability  payments against which it can apply its current carrybacks as of June
30, 2002.

      At  June  30,  2002,  federal  income  tax  operating  loss  carryforwards
("NOL's")  were  available to the Company in the amount of  approximately  $11.7
million,  which  expire from 2008 to 2012.  Utilization  of certain of these net
operating loss  carryforwards  totaling $5.4 million is limited to approximately
$960,000 per year, pursuant to Section 382 of the Internal Revenue Code ("Code")
relating to a prior ownership  change.  At June 30, 2002, the Company also had a
book capital loss  carryforward  of $1,350,000 that can be used to offset future
book capital gains.

      As a result of a change in estimate in the fiscal year ended June 30, 2000
additional  NOL's  of   approximately   $2.0  million,   previously   considered
unavailable  to the Company  under Code  Section  382 (and not given  accounting
recognition)  were  identified.  Approximately  $1.0 million of these NOL's were
utilized in fiscal year 2000,  with the remaining  carryforwards  reflected as a
component of the NOL's at June 30, 2002, discussed above.




                                       31
<PAGE>


                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

7.  Income Taxes--(Continued)



      The  Company's  effective tax rate on its income before taxes differs from
the statutory federal income tax rate as follows for the fiscal years ended June
30:

<TABLE>
<CAPTION>
                                                                                  2002         2001          2000
                                                                                --------     --------      --------
<S>                                                                               <C>           <C>          <C>
Federal statutory rate .....................................................      34.0%         35.0%        35.0%
State and local income taxes (net of federal tax benefits) .................       5.2           3.9          5.2
Meals and entertainment ....................................................      (2.2)          3.2          1.3
Increase in valuation allowance ............................................     (31.3)           --           --
Goodwill impairment ........................................................        --           8.1           --
Goodwill amortization and other ............................................       1.4           2.1         (2.1)
NOL carryforwards ..........................................................        --            --         (2.3)
                                                                                ------        ------       ------
   Effective income tax rate ...............................................       7.1%         52.3%        37.1%
                                                                                ======        ======       ======
</TABLE>

      During fiscal year 2002, the Company increased the valuation  allowance it
carries against its deferred tax assets by approximately $5.2 million to reflect
uncertainty in regards to the realization of the assets in future periods.

      Deferred  income tax  liabilities  or assets are  determined  based on the
differences  between  the  financial  statement  and tax  basis  of  assets  and
liabilities. The components of the Company's deferred tax assets and liabilities
are as follows as of June 30, 2002 and 2001 (in thousands):

<TABLE>
<CAPTION>
                                                                                               2002         2001
                                                                                               ----         ----
<S>                                                                                          <C>          <C>
Deferred tax assets:
   NOL and credit carry forwards .......................................................     $  5,435     $  2,464
   Insurance reserves ..................................................................        3,887        2,677
   Commission and fee reserves .........................................................          725          641
   Claims and settlements ..............................................................          679        1,534
   Accounting change, deferred for tax basis ...........................................          609        1,014
   Deferred compensation plan ..........................................................        1,409        1,298
   Other ...............................................................................        1,870        1,746
                                                                                             --------     --------
     Deferred tax assets ...............................................................       14,614       11,374
Less valuation allowance ...............................................................       (9,745)      (4,530)
                                                                                             --------     --------
 .......................................................................................        4,869        6,844
Deferred tax liabilities ...............................................................       (2,359)      (2,013)
                                                                                             --------     --------
   Net deferred tax asset ..............................................................     $  2,510     $  4,831
                                                                                             ========     ========
     Current ...........................................................................     $  1,563     $  1,296
                                                                                             ========     ========
     Long Term .........................................................................     $    947     $  3,535
                                                                                             ========     ========
</TABLE>






                                       32
<PAGE>

                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8.  STOCK OPTIONS, WARRANTS, STOCK PURCHASE AND 401(K) PLANS

STOCK OPTION PLANS

      Changes in stock  options  were as follows for the fiscal years ended June
30, 2002, 2001, and 2000:

<TABLE>
<CAPTION>
                                            2002                            2001                             2000
                                 ---------------------------     ---------------------------     ----------------------------
                                  SHARES     EXERCISE PRICE       SHARES     EXERCISE PRICE       SHARES      EXERCISE PRICE
                                 --------   ----------------     --------   ----------------     --------    ----------------
<S>                             <C>           <C>               <C>          <C>                 <C>          <C>
Stock options
   outstanding at the
   beginning of the year ....   2,554,515     $1.88 to $16.44   2,714,330    $1.88 to $16.44     2,530,280    $1.88 to $20.00
Granted .....................     868,000     $2.60 to $4.95      620,000    $4.80 to $6.44        845,500    $4.75 to $5.81
Lapsed or canceled ..........    (577,777)    $4.25 to $13.50    (310,895)   $1.88 to $13.50      (648,050)   $1.88 to $20.00
Exercised ...................     (27,877)    $1.88 to $4.25     (468,920)   $1.88 to $6.50        (13,400)   $1.88 to $2.38
                                ---------                       ---------                        ---------
Stock options outstanding
   at the end of the year ...   2,816,861     $1.88 to $16.44   2,554,515    $1.88 to $16.44     2,714,330    $1.88 to $16.44
                                =========                       =========                        =========
Exercisable at end
  of the Year ...............   1,267,861                       1,095,007                        1,127,182
                                =========                       =========                        =========
</TABLE>

      Additional  information  segregated by relative  ranges of exercise prices
for stock options outstanding as of June 30, 2002 is as follows:

<TABLE>
<CAPTION>
                                                            WEIGHTED         WEIGHTED             WEIGHTED
                                                             AVERAGE          AVERAGE              AVERAGE
                                                              YEARS          EXERCISE             EXERCISE
               EXERCISE                                     REMAINING    PRICE-OUTSTANDING    PRICE-EXERCISABLE
                 PRICE                   SHARES               LIFE            SHARES               SHARES
          -----------------            ----------          -----------   -----------------    -----------------
           <C>                         <C>                    <C>              <C>                  <C>
            $1.88 to $3.05               403,937              9.05             2.89                 2.70
            $3.13 to $4.80             1,076,633              8.09             4.43                 4.18
            $4.95 to $11.13              822,241              7.18             6.84                 5.75
           $11.31 to $16.44              514,050              5.02             12.03                8.81
                                       ---------
                                       2,816,861
                                       =========
</TABLE>

      Weighted  average  information per share with respect to stock options for
fiscal years ended June 30, 2002 and 2001 is as follows:

<TABLE>
<CAPTION>
                                                                                            2002            2001
                                                                                            ----            ----
<S>                                                                                    <C>              <C>
Exercise price:
Granted ............................................................................   $    3.73       $    4.88
  Lapsed or cancelled ..............................................................        8.00            6.21
  Exercised ........................................................................        2.05            3.56
  Outstanding at June 30 ...........................................................        6.30            7.45
Remaining life .....................................................................        7.40 years      6.88 years
</TABLE>


      The  Company's  1990 Amended and Restated  Stock Option Plan,  as amended,
provides  for grants of options to purchase  the  Company's  common  stock for a
total of 2,000,000 shares. At June 30, 2002, 2001 and 2000, the number of shares
available  for the grant of options  under the plan were  795,371,  595,014  and
543,524,  respectively.  Stock  options under this plan may be granted at prices
from 50% up to 100% of the market  price per share at the dates of grant,  their
terms and vesting schedules of which are determined by the Board of Directors.

      The Company's 1993 Stock Option Plan for Outside Directors provides for an
automatic  grant of an option to purchase  10,000 shares of common stock to each
newly  elected  independent  member of the Board of  Directors  and an automatic
grant of an option to purchase 8,000 shares at the successive  four year service
anniversaries  of each such director.  The exercise prices are set at the market
price at the date of grant.  The initial options expire five years from the date
of grant

                                       33
<PAGE>


                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8.  STOCK OPTIONS, WARRANTS, STOCK PURCHASE AND 401(K) PLANS--(CONTINUED)

and vest over three years from such date. The anniversary options vest over four
years from the date of grant and  expire ten years from such date.  The plan was
amended in November  1998 to increase the number of issuable  shares  authorized
for the plan from 50,000 to 300,000 and to provide for the anniversary  options.
The number of shares  available  for grant was  236,000,  254,000 and 246,000 at
June 30, 2002, 2001 and 2000, respectively.

      The  Company's  1998 Stock  Option Plan  provides for grants of options to
purchase the Company's  common stock.  The plan authorizes the issuance of up to
2,000,000  shares,  and had 755,355,  786,105,  and 567,100 shares available for
grant as of June 30, 2002, 2001 and 2000, respectively. Stock options under this
plan may be granted at prices and with such other terms and vesting schedules as
determined by the  Compensation  Committee of the Board of  Directors,  or, with
respect to options granted to corporate officers, the full Board of Directors.

      The  Company's  2000 Stock Option Plan,  provides for grants of options to
purchase the Company's  common stock.  The plan authorizes the issuance of up to
1,500,000  shares,  and had 470,000 and 900,000 shares available for grant as of
June 30,  2002 and 2001,  respectively.  Stock  options  under  this plan may be
granted at prices and with such other terms and vesting  schedules as determined
by the  Compensation  Committee of the Board of  Directors,  or, with respect to
options  granted  to  corporate  officers  who are  subject to Section 16 of the
Securities Exchange Act of 1934, as amended, the full Board of Directors.

STOCK WARRANTS

      In July 1999, the Company  issued a warrant to purchase  600,000 shares of
the  Company's  common  stock at $6.25 per share to Aegon USA  Realty  Advisors,
Inc., the parent company of Landauer  Associates,  Inc. ("LAI"),  as part of the
consideration  granted in the  acquisition  of LAI.  The warrant has a five-year
life, expiring in July 2004, and remains outstanding as of June 30, 2002.

      During January 2002,  warrants were exercised resulting in the issuance of
1,339,335  common  shares and  proceeds of  approximately  $4.2  million.  Other
warrants, representing 337,827 common shares, expired on January 29, 2002.

EMPLOYEE STOCK PURCHASE PLAN

      The Grubb & Ellis Company  Employee  Stock  Purchase Plan provides for the
purchase of up to  1,750,000  shares of common stock by employees of the Company
at a 15% discount from market price, as defined, through payroll deductions. The
numbers of shares  purchased  under this plan were 178,012,  182,683 and 272,310
during the fiscal years ended June 30, 2002, 2001 and 2000, respectively.

      The Company has a 401(k) plan  covering  eligible  employees  and provides
that employer  contributions may be made in common stock of the Company or cash.
Discretionary contributions by the Company for the plans (net of forfeitures and
reimbursements received pursuant to property and corporate facilities management
services  agreements)  amounted to  approximately  $1,209,000,  $1,083,000,  and
$514,000  for  the  plan  years  ended   December  31,  2001,   2000  and  1999,
respectively.

PRO FORMA INFORMATION

      Pro forma  information  regarding  net  income and  earnings  per share is
required  by  Statement  123,  and has been  determined  as if the  Company  had
accounted for options granted subsequent to July 1, 1996, and therefore includes
grants under the 1990 Amended and Restated Stock Option Plan,  1993 Stock Option
Plan for Outside  Directors,  1998 Stock  Option Plan and 2000 Stock Option Plan
and purchases made under the Grubb & Ellis  Employee Stock Purchase Plan,  under
the fair value  method of that  Statement.  The fair value for the  options  was
estimated  at the date of grant  using a  Black-Scholes  option  pricing  model.
Weighted-average assumptions for options granted for fiscal years 2002, 2001 and
2000, respectively, are as follows:

<TABLE>
<CAPTION>
                                                                                  2002         2001          2000
                                                                                --------     --------      --------
<S>                                                                             <C>          <C>           <C>
Risk free interest rates ..................................................     4.43%        5.23%         5.99%
Dividend yields ...........................................................        0%           0%            0%
Volatility factors of the expected market price
  Of the common stock .....................................................      607         .587          .598
Weighted-average expected lives ...........................................     6.00 years   6.00 years    6.00 years
</TABLE>



                                       34
<PAGE>


                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8.  STOCK OPTIONS, WARRANTS, STOCK PURCHASE AND 401(K) PLANS--(CONTINUED)

      The  Black-Scholes  option  valuation  model  was  developed  for  use  in
estimating  the fair value of traded  options that have no vesting  restrictions
and are fully  transferable.  In addition,  option  valuation models require the
input of highly  subjective  assumptions  including  the  expected  stock  price
volatility.  Because changes in these assumptions can materially affect the fair
value estimate,  in management's opinion, the existing models do not necessarily
provide a reliable  single  measure of the fair  value of options  granted.  The
weighted  average fair values of options  granted by the Company in fiscal years
2002, 2001 and 2000 using this model were $2.24, $4.86 and $2.90, respectively.

      The effects on fiscal year 2002, 2001 and 2000 pro forma net income (loss)
and pro forma  earnings  (loss) per common  share of  amortizing  to expense the
estimated fair value of stock options are not necessarily  representative of the
effects on net income  (loss) to be reported in future  years due to such things
as the vesting  period of the stock  options,  and the potential for issuance of
additional stock options in future years. For purposes of pro forma disclosures,
the  estimated  fair value of the  options  is  amortized  to  expense  over the
options' vesting period.  The pro forma effect of applying  Statement 123's fair
value method to the Company's stock-based awards results in net income (loss) of
approximately ($17,258,000),  ($246,000) and $14,614,000,  basic earnings (loss)
per share of ($1.22),  ($.01) and $.74, and diluted earnings (loss) per share of
($1.22),  ($.01) and $.69 for the fiscal  years  ended June 30,  2002,  2001 and
2000, respectively.

STOCK REPURCHASE PLAN

      In August  1999,  the  Company  announced a program  through  which it may
repurchase  up to $3.0  million of its common stock on the open market from time
to time as market  conditions  warrant.  As of June 30,  2002,  the  Company had
repurchased  359,900 shares of stock at an aggregate price of approximately $2.0
million.  No shares were repurchased under this program during fiscal years 2002
or 2001.

9.  RELATED PARTY TRANSACTIONS

      The Company provides both  transaction and management  services to parties
which are related to  principal  stockholders  and/or  directors of the Company,
primarily Kojaian affiliated entities  (collectively,  "Kojaian  Companies") and
Archon  Group,  L.P.  ("Archon").  In  addition,  the  Company  also paid  asset
management  fees to the Kojaian  Companies and Archon  related to properties the
Company  manages on their  behalf.  Revenue  earned by the Company for  services
rendered to these and other affiliates,  including joint ventures,  officers and
directors and their  affiliates,  was as follows for the fiscal years ended June
30, 2002, 2001 and 2000 (in thousands):

<TABLE>
<CAPTION>
                                                                                2002         2001          2000
                                                                                ----         ----          ----
<S>                                                                           <C>           <C>          <C>
Transaction Services
   Kojaian Companies ....................................................     $    700      $  1,686     $  1,742
   Archon ...............................................................        4,176        10,999        8,947
   Others ...............................................................          481           654        1,208
                                                                              --------      --------     --------
                                                                                 5,357        13,339       11,897
                                                                              --------      --------     --------
Management Services
   Kojaian Companies ....................................................        6,064         5,446        3,348
   Archon ...............................................................        3,476         3,604        3,221
                                                                              --------      --------     --------
                                                                                 9,540         9,050        6,569
   Less: asset management fees
   Kojaian Companies ....................................................        2,750         2,061        1,277
   Archon ...............................................................          242           175           28
                                                                              --------      --------     --------
                                                                                 6,548         6,814        5,264
                                                                              --------      --------     --------
   Total ................................................................     $ 11,905      $ 20,153     $ 17,161
                                                                              ========      ========     ========
</TABLE>



                                       35
<PAGE>


                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

9.  RELATED PARTY TRANSACTIONS--(CONTINUED)

      In August 2002, the Company entered into a lease for 16,800 square feet of
office  space in  Southfield,  Michigan  within a  building  owned by an  entity
related to the Kojaian Companies.  The lease provides for an annual average base
rent of $365,400 over the ten year life of the lease.

      The Company entered into certain  contractual  employment and compensation
agreements with its new chief executive, financial and operating officers during
fiscal  years 2002 and 2001.  Terms of these  agreements  included,  among other
things,  i) signing  bonuses  totaling  $528,500,  ii)  guaranteed  initial year
bonuses totaling $810,000, iii) loans totaling $1.8 million with repayment terms
tied to retention bonuses and continued  employment,  iv) retention bonuses, net
of taxes, sufficient to repay the executive loan obligations in (iii) above, and
v) options to purchase 850,000 shares of the Company's common stock, exercisable
at current market prices, none of which have been exercised as of June 30, 2002.
All payments  related to the signing bonuses and loans were made to the officers
by August 15,  2001,  and the  guaranteed  initial  year  bonuses,  along with a
retention bonus sufficient to repay $500,000 of the loans, were paid in June and
July 2002.

      In July 2002, the chief operating officer's  employment agreement with the
Company was terminated.  Non-recurring  expenses totaling approximately $900,000
will be recognized during the first quarter of fiscal year 2003.

10.  COMMITMENTS AND CONTINGENCIES

NON-CANCELABLE OPERATING LEASES

      The Company has  non-cancelable  operating  lease  obligations  for office
space  and  certain  equipment  ranging  from one to nine  years,  and  sublease
agreements  under which the Company acts as  sublessor.  The office space leases
provide for annual rent increases  based on the Consumer  Price Index,  or other
specific terms, and typically  require payment of property taxes,  insurance and
maintenance costs.

      Future minimum  payments  under  non-cancelable  operating  leases with an
initial  term  of one  year or  more  were as  follows  at  June  30,  2002  (in
thousands):

             Year Ending June 30,                Lease Obligations
          ------------------------            -----------------------
                      2003                        $     18,029
                      2004                              13,588
                      2005                              11,463
                      2006                               8,666
                      2007                               5,999
                Thereafter                              15,090

      Lease and rental  expense for the fiscal years ended June 30,  2002,  2001
and 2000 amounted to $22,695,000, $22,288,000, and $21,268,000, respectively.

LITIGATION/RECOVERY OF LOSS RESERVES

      JOHN W. MATTHEWS, ET AL. V KIDDER,  PEABODY & Co., ET AL. AND HSM INC., ET
AL.  filed on January  23,  1995 in the  United  States  District  Court for the
Western District of Pennsylvania,  was a class action on behalf of approximately
6,000 limited  partners who invested  approximately  $85 million in three public
real  estate  limited  partnerships  (the  "Partnerships")   during  the  period
beginning in 1982 and continuing  through 1986. The defendants include HSM Inc.,
a wholly owned subsidiary of the Company,  and several subsidiaries of HSM Inc.,
along with other parties  unrelated to HSM Inc. The complaint  alleged violation
under  the  Racketeer   Influenced  and  Corrupt   Organizations  Act  ("RICO"),
securities  fraud,  breach of  fiduciary  duty and  negligent  misrepresentation
surrounding the defendants' organization,  promotion, sponsorship and management
of the  Partnerships.  Specific  damages were not pled, but treble,  punitive as
well as compensatory damages and restitution were sought.



                                       36
<PAGE>


                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

10.  COMMITMENTS AND CONTINGENCIES--(CONTINUED)



      On  August  18,  2000,  the  district  court  issued an  opinion  granting
defendants'  motions for summary judgment  dismissing the federal RICO claims as
time-barred  under the  statute of  limitations.  As to the state law claims for
breach of fiduciary duty and negligent misrepresentation,  the court declined to
exercise  supplemental  jurisdiction and dismissed them without  prejudice.  The
court declined to rule on  defendants'  motion to decertify the class because it
was moot. Plaintiffs appealed the summary judgment to the Third Circuit Court of
Appeals.  On July 31, 2001,  the appeals court affirmed and upheld the dismissal
of the Plaintiffs' claims. The Plaintiffs'  petition for rehearing was denied on
August 28,  2001,  and the  Plaintiffs'  time for filing any further  appeals or
related  claims  expired in both federal and state  courts in the quarter  ended
December 31, 2001. Accordingly,  the Company has recognized a non-recurring item
in relation to the recovery of loss reserves  previously  recorded in connection
with this case. (See Note 13 of Notes to Consolidated Financial Statements.)

ENVIRONMENTAL

      A corporate  subsidiary  of the Company  owns a 33%  interest in a general
partnership,  which in turn owns  property  in the  State of Texas  which is the
subject  of an  environmental  assessment  and  remediation  effort,  due to the
discovery of certain  chemicals  related to a release of dry cleaning solvent in
the soil and groundwater of the partnership's  property and adjacent properties.
Prior  assessments  had  determined  that  minimal  costs  would be  incurred to
remediate  the  release.   However,   subsequent  findings  at  and  around  the
partnership's   property  have  increased  the   probability   that   additional
remediation  costs will be necessary.  The partnership is working with the Texas
Natural Resource Conservation Commission and the local municipality to implement
a multi-faceted  plan, which includes both remediation and ongoing monitoring of
the affected  properties.  Both the Company and each of the partnership's  other
partners have  contributed new capital to finance the continuing  assessment and
remediation  efforts,  although  there  can be no  assurance  that  such  future
contributions  will  be made by the  other  partners.  The  Company's  share  of
anticipated  costs to  remediate  and monitor  this  situation  is  estimated at
approximately  $818,000.  As of June 30,  2002,  approximately  $351,000 of this
amount has been paid and the  remaining  $467,000  has been  reflected as a loss
reserve  for such  matters in the  consolidated  balance  sheet.  The  Company's
management  believes  that the outcome of these  events will not have a material
adverse effect on the consolidated financial position of the Company.

INSOLVENT INSURANCE PROVIDER

      In fiscal years 1999 and 2000, the Company's  primary errors and omissions
insurance  carrier was Reliance  Insurance  Company (of Illinois and California,
collectively  "Reliance").  The Company has six open claims that were covered by
Reliance  policies upon the exhaustion of a self-insured  retention.  In October
2001,  Reliance  was  placed  in  liquidation  by order of the  Commonwealth  of
Pennsylvania,  and as a result casts doubt on the recovery of the Company's open
claims.  The Company has established loss reserves for the estimated  settlement
costs of the claims  and  recognized  a  non-recurring  charge in its  financial
statements  for the quarter  ended  December 31, 2001.  (See Note 13 of Notes to
Consolidated Financial Statements.) The Company is seeking reimbursement for the
costs  of  defense,  settlement  and/or  judgment  on  these  claims  both  from
appropriate state insurance guaranty  associations and from the liquidator.  The
Company  is unable to  estimate  the  probability  and  timing of any  potential
reimbursement  at this  time,  and  therefore  has  not  assumed  any  potential
recoveries in establishing its reserves.

GENERAL

      The Company is involved in various  other claims and lawsuits  arising out
of the conduct of its business,  as well as in connection with its participation
in various joint ventures, partnerships, a trust and appraisal business, many of
which may not be covered by the Company's insurance policies.  In the opinion of
management,  the eventual outcome of such claims and lawsuits is not expected to
have a material adverse effect on the Company's financial position or results of
operations.

11.  CONCENTRATION OF CREDIT RISK

      Financial  instruments that potentially subject the Company to credit risk
consist principally of trade receivables and interest-bearing investments. Users
of real estate services account for a substantial  portion of trade  receivables
and



                                       37
<PAGE>


                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

11.  CONCENTRATION OF CREDIT RISK--(CONTINUED)

collateral   is  generally  not  required.   The  risk   associated   with  this
concentration  is limited due to the large number of users and their  geographic
dispersion.

      The Company places substantially all of its  interest-bearing  investments
with major financial  institutions and limits the amount of credit exposure with
any one financial institution.

      The  Company   believes   it  has  limited   exposure  to  the  extent  of
non-performance  by the  counterparties  of each interest rate swap agreement as
each counterparty is a major financial institution and, accordingly, the Company
does not anticipate their non-performance.

12.  SELF-TENDER OFFER

      On December  15,  2000,  the  Company  commenced  a  self-tender  offer to
purchase up to 7.0 million shares of its outstanding  common stock at a price of
$7 per share in cash.  Shares  issuable upon the exercise of  outstanding  stock
options and warrants were also eligible for the buyback. On January 25, 2001 the
Company announced the expiration of the offer period.

      The Company  subsequently  disbursed net proceeds of  approximately  $48.8
million to buy back and concurrently retire  approximately 7.0 million shares of
common stock, including 281,901 shares from options exercised by option holders,
and fund direct costs of the self-tender offer.

      Holders of the Company's  outstanding stock warrants chose not to exercise
such warrants and tender any underlying  shares in respect of the warrants.  The
tender offer was  financed  through a $40 million term loan (See Note 5 of Notes
to Consolidated  Financial  Statements.)  and $8.8 million of the Company's cash
reserves.  Direct expenses totaling approximately $795,000 related to the tender
offer were charged to stockholders' equity during the fiscal year ended June 30,
2001.

      The option  exercises,  and the  subsequent  repurchase  of the  resulting
shares by the Company  through the  completion of the tender offer,  resulted in
non-recurring  compensation  expense of  approximately  $970,000  to the Company
during the quarter  ended March 31,  2001.  APB Opinion No. 25,  Accounting  for
Stock Issued to Employees, and related interpretations require that compensation
expense be recognized to the extent that the fair value of stock  repurchased by
a company  exceeds the exercise  price of the underlying  option,  whenever such
purchases are made within six months of the option exercise date.

13.  IMPAIRMENT AND OTHER NON-RECURRING EXPENSES

      During the fiscal year ended June 30,  2002,  the Company  concluded  long
standing  litigation  proceedings  on the JOHN W.  MATTHEWS,  ET AL.  V  KIDDER,
PEABODY & CO., ET AL. AND HSM INC.,  ET AL.  ("Matthews")  case for which it had
previously  recorded  loss  reserves.  (See  Note 10 of  Notes  to  Consolidated
Financial  Statements.)  In addition,  during this period,  loss  reserves  were
recorded  as a result  of the  liquidation  proceedings  surrounding  one of the
Company's insurance carriers ("Reliance" liquidation).  (See Note 10 of Notes to
Consolidated  Financial  Statements.) The positive outcome of the Matthews case,
partially  offset  by  the  additional  exposure  on the  Reliance  liquidation,
resulted in $2.2 million of net income from claim related reserves.  The Company
also incurred a $500,000  non-recurring  expense  related to a write-down of the
carrying basis of an investment in a commercial  real estate  services  internet
venture.  The Company's  decision to write-down  its interest in the venture was
due to a dilution in the Company's ownership position, as well as uncertainty in
the  venture's  ability to achieve  its  business  plan.  The  Company  recorded
additional charges of $3.4 million to other non-recurring  expenses,  consisting
of $1.0 million of severance costs related to a reduction of salaried  overhead,
$2.1  million  related to office  closure  costs and  $300,000  related to costs
incurred for the retirement of the Warburg Pincus  $5,000,000  Subordinated Note
and for the evaluation of an unsolicited purchase offer from a third party. As a
result of these events,  the Company has recognized a net non-recurring  expense
of $1,749,000 in the fiscal year ended June 30, 2002.

      In accordance with Financial  Accounting Standards No. 121 "Accounting for
the  Impairment  of Long Lived  Assets and for Long Lived  Assets to be Disposed
of", the net carrying  value of goodwill is reviewed by  management if facts and
circumstances  suggest  that  an  impairment  may  exist.  Such  impairment  was
identified  related to the  remaining  goodwill  associated  with the April 1998
acquisition of White Commercial Real Estate. A significant majority of the sales



                                       38
<PAGE>


                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

13.  IMPAIRMENT AND OTHER NON-RECURRING EXPENSES--(CONTINUED)

force  terminated  their  relationship  with the  Company,  and the  office  was
subsequently   closed  with  the  remaining  staff  relocated  to  the  Oakland,
California office.  The Company believed that the future estimated  undiscounted
cash flows of this  operation  were not sufficient to support the carrying value
of such goodwill,  and wrote off the remaining  asset totaling  $2,150,000,  and
recorded  such charge to other  non-recurring  expenses in the fiscal year ended
June 30, 2001.

      The Company also incurred other  non-recurring  expense in the fiscal year
ended June 30, 2001 totaling  $736,000,  primarily  professional  services fees,
related to its  recent  review of  strategic  initiatives,  including  potential
acquisitions,  sales and mergers,  $970,000 of stock option compensation expense
related to the in the money portion of the options  exercised in connection with
the Company's self-tender offer, $1,516,000 of executive severance costs related
to senior  management  changes,  and  $850,000  related to a  write-down  of the
carrying  basis of an  investment in commercial  real estate  services  internet
venture.

      During the fiscal year ended June 30,  2000,  the Company  recorded a $2.7
million charge for incremental non-recurring costs related to the resignation of
Neil Young,  the Company's former chairman and chief executive  officer,  on May
25, 2000.  The Company and Mr. Young  entered into a separation  agreement  that
provided  for  payments  totaling  $2.7  million,  prior to  certain  contingent
amounts.  The  payments  included  $1.6  million in return for  cancellation  of
options to purchase 465,000 shares of common stock of the Company.

14.  CHANGE IN ACCOUNTING PRINCIPLE

      In December  1999, the  Securities  and Exchange  Commission  issued Staff
Accounting Bulletin No. 101, Revenue  Recognition in Financial  Statements ("SAB
101").  SAB 101 summarizes the SEC staff's views  regarding the  recognition and
reporting of revenues in  financial  statements.  At June 30, 2001,  the Company
changed its method of accounting for revenue recognition for leasing commissions
and consulting  fees, in compliance  with SAB 101, and reported such change as a
cumulative effect of a change in accounting  principle,  effective July 1, 2000.
As such,  operating  results  for the  years  ended  June 30,  2002 and 2001 are
presented  in  compliance  with  the  requirements  of this  accounting  change.
Historically,  the Company had recognized leasing  commissions at the earlier of
receipt of full payment or receipt of partial payment when lease and commissions
agreements  had been  executed and no  significant  contingencies  existed.  The
Company  had  recognized  consulting  fees as  employee  time was  incurred on a
project.  Under the new accounting method,  adopted retroactive to July 1, 2000,
the Company's  leasing  commissions that are payable upon certain events such as
tenant  occupancy  or  commencement  of rent  will  now be  recognized  upon the
occurrence of such events. In addition, consulting fees will be recognized under
SAB 101 generally upon the delivery of agreed upon services to the client. While
this  accounting  change  affects  the  timing of  recognition  of  leasing  and
consulting revenues (and corresponding services commission expense), it does not
impact the Company's cash flow from operations.

      The cumulative effect of the accounting change for prior years resulted in
a reduction to income for fiscal year 2001 of $3.1  million,  net of  applicable
taxes of $2.1  million.  The  effect of the  change  in fiscal  year 2001 was to
increase revenues by $2.6 million and income before the cumulative effect of the
accounting change by $632,000, or $.04 per diluted common share.

      For the fiscal years ended June 30, 2002 and 2001, the Company  recognized
revenue, net of related services commission expense,  totaling $319,000 and $4.1
million, respectively,  that was included in the $5.2 million pre-tax cumulative
effect adjustment at July 1, 2000.

15.  BUSINESS ACQUISITIONS AND RELATED INDEBTEDNESS

FISCAL 2002 ACQUISITION

     In February 2002, the Company acquired  substantially  all of the assets of
the Wadley-Donovan Group, Inc., a professional real estate services firm located
in  northern  New  Jersey.  Wadley-Donovan  Group,  Inc.  specializes  in   site



                                       39
<PAGE>


                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

15.  BUSINESS ACQUISITIONS AND RELATED INDEBTEDNESS--(CONTINUED)

selection,  consulting and providing economic  development  strategies primarily
for Fortune 100 companies and state, local and regional  government agencies and
municipalities.  Consideration  given to the  seller  at  closing  equaled  $2.3
million.  The Company has recorded the acquisition  under the purchase method of
accounting.  All operations  subsequent to the acquisition date are reflected in
the Company's financial statements.

FISCAL 2000 ACQUISITION

      In July 1999,  the  Company  acquired  substantially  all of the assets of
Landauer  Associates,   Inc.  a  real  estate  valuation  and  consulting  firm.
Consideration  to the seller at closing  included  cash, a common stock  warrant
(See Note 8 of Notes to Consolidated Financial Statements.),  and the assumption
of certain  liabilities.  The Company has  recorded  the  acquisition  under the
purchase method of accounting,  and all operations subsequent to the acquisition
date are reflected in the Company's financial statements.

      Substantially all of the purchase prices in the fiscal years 2002 and 2000
acquisitions were allocated to goodwill.

16.  SEGMENT INFORMATION

      The Company has two reportable  segments - Transaction  Services (formerly
described as "Advisory Services" in prior reports) and Management Services.

      The Transaction  Services segment advises buyers,  sellers,  landlords and
tenants on the sale,  leasing and valuation of commercial  property and includes
the  Company's   national   accounts  groups  and  national   affiliate  program
operations.

      The Management  Services segment provides property  management and related
services for owners of investment  properties and facilities management services
for corporate users.

      The  fundamental   distinction   between  the  Transaction   Services  and
Management  Services  segments  lies in the nature of the  revenue  streams  and
related cost structures.  Transaction Services generates revenues primarily on a
commission  or project  fee basis.  Therefore,  the  personnel  responsible  for
providing these services are compensated  primarily on a commission  basis.  The
Management  Services revenues are generated  primarily by long term (one year or
more) contractual fee  arrangements.  Therefore,  the personnel  responsible for
delivering these services are compensated primarily on a salaried basis.

      The Company evaluates segment performance and allocates resources based on
earnings before  interest,  taxes,  depreciation  and  amortization  ("EBITDA"),
excluding other  non-recurring  or  extraordinary  items. In evaluating  segment
performance,  the  Company's  management  utilizes  EBITDA as a  measure  of the
segment's  ability  to  generate  cash flow  from its  operations.  Other  items
contained within the measurement of net income,  such as interest and taxes, and
non-recurring  items, are generated and managed at the corporate  administration
level rather than the segment  level.  In  addition,  net income  measures  also
include non-cash amounts such as depreciation and amortization expense.

      Management believes that EBITDA as presented with respect to the Company's
reportable  segments is an important  measure of cash generated by the Company's
operating activities. EBITDA is similar to net cash flow from operations because
it excludes  certain  non-cash  items,  however,  it also excludes  interest and
income taxes.  Management  believes  that EBITDA is relevant  because it assists
investors in evaluating the Company's ability to service its debt by providing a
commonly used measure of cash  available to pay  interest.  EBITDA should not be
considered as an  alternative  to net income (loss) or cash flows from operating
activities  (which are determined in accordance  with GAAP),  as an indicator of
operating  performance  or a  measure  of  liquidity.  EBITDA  also  facilitates
comparison of the Company's  results of operations with those  companies  having
different  capital  structures.  Other companies may define EBITDA  differently,
and, as a result, such measures may not be comparable to the Company's EBITDA.



                                       40
<PAGE>


                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

16.  SEGMENT INFORMATION--(CONTINUED)

<TABLE>
<CAPTION>
                                                                             TRANSACTION    MANAGEMENT     COMPANY
                                                                               SERVICES      SERVICES      TOTALS
                                                                             -----------    ----------     -------
                                                                                    (AMOUNTS IN THOUSANDS)
<S>                                                                           <C>            <C>         <C>
Fiscal year ended June 30, 2002
  Total Revenues ........................................................     $262,077       $51,399     $313,476
  EBITDA ................................................................          598        (2,347)      (1,749)
  Total Assets ..........................................................       60,866        20,111       80,977

Fiscal year ended June 30, 2001
  Total Revenues ........................................................     $358,462       $53,500     $411,962
  EBITDA ................................................................       32,433        (4,514)      27,919
  Total Assets ..........................................................       61,863        21,134       82,997

Fiscal year ended June 30, 2000
  Total Revenues ........................................................     $355,704       $58,215     $413,919
  EBITDA ................................................................       40,871        (1,899)      38,972

RECONCILIATION OF SEGMENT EBITDA TO STATEMENTS OF OPERATIONS (IN THOUSANDS):

                                                                                   FISCAL YEAR ENDED JUNE 30,
                                                                             -------------------------------------
                                                                                2002          2001          2000
                                                                             ---------      --------      --------
Total Segment EBITDA ....................................................     $ (1,749)     $ 27,919     $ 38,972
 Less:
 Depreciation & amortization ............................................      (10,706)      (11,635)     (10,521)
 Non-recurring expenses .................................................       (1,749)       (6,222)      (2,650)
 Net interest income (expense) ..........................................       (2,460)          218           87
                                                                              --------      --------     --------
   Income before income taxes ...........................................     $(16,664)     $ 10,280     $ 25,888
                                                                              ========      ========     ========

RECONCILIATION OF SEGMENT ASSETS TO BALANCE SHEET (IN THOUSANDS):

                                                                                                AS OF JUNE 30,
                                                                                            ---------------------
                                                                                              2002          2001
                                                                                            --------      -------
Total segment assets .................................................................      $ 80,977     $ 82,997
Current tax assets ...................................................................         6,890        4,598
Deferred taxes assets ................................................................         2,510        4,831
                                                                                            --------     --------
  Total Assets .......................................................................      $ 90,377     $ 92,426
                                                                                            ========     ========
</TABLE>

17.  SUBSEQUENT EVENTS

ISSUANCE OF PREFERRED STOCK

      On September 19, 2002, Kojaian Ventures,  L.L.C.  ("KV"), a related party,
exercised  its right to  convert a  subordinated  debt  instrument  it held into
preferred stock of the Company.  (See Note 6 for additional  information.)  As a
result of this  conversion,  11,725 shares of the  Company's  Series A Preferred
Stock were  issued,  with a stated  value of $1,000 per share.  The  outstanding
related party principal and interest  obligations  totaling  $10,967,000 (net of
issuance costs of $758,000), will be reclassified to stockholders' equity.

      The preferred  stock  contains  liquidation  preference  and voting rights
equal to 1,007 common  shares for each share of preferred  stock,  or a total of
11,807,075 common share equivalents.  As a consequence of the conversion,  there
has been a change in the control of the  Company,  as these  equivalents,  along
with 3,762,884 shares of outstanding common stock owned by KV or its affiliates,
represent  approximately  58% of the  total  voting  power of the  Company.  The
preferred stock is not convertible  into any other  securities of the Company or
subject to redemption. Warburg Pincus, which currently



                                       41
<PAGE>


                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

17.  SUBSEQUENT EVENTS--(CONTINUED)

owns  approximately  39% of the  issued  and  outstanding  common  stock  of the
Company, has approximately 22% of the voting power.

SECURITIES EXCHANGE LISTING

     The  Company's  common  stock is  currently  listed  on the New York  Stock
Exchange ("NYSE") pursuant to a listing  agreement.  As previously  disclosed by
the Company,  the NYSE had  accepted the  Company's  proposed  business  plan to
attain  compliance  with the NYSE's listing  standard on or before July 4, 2003.
This plan had been  submitted  in  response  to a  notification  received by the
Company on January 4, 2002 regarding non-compliance with such listing standards.
As a result of the  business  plan's  acceptance,  the  Company's  common  stock
continued  to be traded on the  exchange,  subject  to the  Company  maintaining
compliance  with the plan and periodic  review by the NYSE. Upon completion of a
recent review,  the NYSE announced on October 8, 2002 that the Company's  common
stock will be de-listed from the NYSE, due primarily to the Company's book value
and market  capitalization  value being below minimum  levels  required by their
listing standards.  The Company is making  arrangements to have its common stock
traded on the over-the-counter  market ("OTC") and is scheduled to cease trading
on the NYSE prior to the opening on  Thursday  October 17,  2002.  Although  the
Company is seeking an orderly transition and has reason to believe the NYSE will
effectuate  the same,  there can be no  assurance  that the OTC will  accept the
Company's shares for listing prior to their de-listing from the NYSE, or at all,
and that there will be no  interruption  of the public  listing of the Company's
common stock.

18.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  Fiscal Year Ended June 30, 2002
                                                              (in thousands, except per share amounts)
                                            --------------------------------------------------------------------------
                                            First Quarter        Second Quarter       Third Quarter      Fourth Quarter
                                            -------------        --------------      --------------      -------------
<S>                                         <C>                   <C>                 <C>                <C>
Operating revenue .......................   $      76,788         $     101,358       $      58,185      $      77,145
                                            =============         =============       =============      =============
Operating income (loss) .................   $      (3,373)        $       3,230       $     (10,780)     $      (3,281)
                                            =============         =============       =============      =============
Income (loss) before extraordinary item .   $      (2,266)        $       1,294       $      (6,586)     $      (7,919)
                                            =============         =============       =============      =============
Net (loss) income .......................   $      (2,266)        $       1,294       $      (6,586)     $      (7,919)
                                            =============         =============       =============      =============
Income (loss) before extraordinary item
  and cumulative effect per common share:
Basic-- .................................   $        (.17)        $         .10       $        (.45      $        (.53)
                                            =============         =============       =============      =============
  Weighted average common
     shares outstanding .................          13,447                13,545              14,585             15,032
                                            =============         =============       =============      =============
Diluted-- ...............................   $        (.17)        $         .09       $        (.45)     $        (.53)
                                            =============         =============       =============      =============
  Weighted average common
     shares outstanding .................          13,447                13,679              14,585             15,032
                                            =============         =============       =============      =============
EBITDA ..................................   $        (573)        $       4,320       $      (5,715)     $         219
                                            =============         =============       =============      =============
Common stock market
  price range (high: low) ...............   $5.40 : $3.35         $4.10 : $2.31       $3.10 : $2.35      $4.25 : $2.30
                                            =============         =============       =============      =============
</TABLE>




                                       42
<PAGE>


                              GRUBB & ELLIS COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

18.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)--(CONTINUED)


<TABLE>
<CAPTION>
                                                                  Fiscal Year Ended June 30, 2002
                                                              (in thousands, except per share amounts)
                                            --------------------------------------------------------------------------
                                            First Quarter        Second Quarter       Third Quarter      Fourth Quarter
                                            -------------        --------------      --------------      -------------
<S>                                         <C>                   <C>                 <C>                <C>
Operating revenue .......................   $     108,100         $     141,737       $      80,160      $      81,965
                                            =============         =============       =============      =============
Operating income (loss) .................   $       4,841         $       9,655       $      (2,460)     $      (1,974)
                                            =============         =============       =============      =============
Income (loss) before extraordinary item
and cumulative effect ...................   $       3,032         $       4,943       $      (1,485)     $      (1,582)
                                            =============         =============       =============      =============
Net (loss) income .......................   $        (101)        $       4,537       $      (1,485)     $      (1,582)
                                            =============         =============       =============      =============
Income (loss) before extraordinary item
  and cumulative effect per common share:
Basic-- .................................   $         .15         $         .25       $        (.10)     $        (.12)
                                            =============         =============       =============      =============
  Weighted average common
     shares outstanding .................          19,856                19,922              15,028             13,315
                                            =============         =============       =============      =============
Diluted-- ...............................   $         .14         $         .24       $        (.10)     $        (.12)
                                            =============         =============       =============      =============
  Weighted average common
     shares outstanding .................          21,020                20,879              15,028             13,315
                                            =============         =============       =============      =============
EBITDA ..................................   $       7,717         $      15,411       $       1,459      $       3,332
                                            =============         =============       =============      =============
Common stock market
  price range (high: low) ...............   $6.50 : $5.50         $6.38 : $4.13       $6.30 : $4.80      $6.07 : $4.50
                                            =============         =============       =============      =============
</TABLE>

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

      None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      The  information  called for by Item 10 is  incorporated by reference from
the  registrant's  definitive proxy statement to be filed pursuant to Regulation
14A under the Securities Exchange Act of 1934 (the "Exchange Act") no later than
120 days after the end of the 2002 fiscal year.

ITEM 11. EXECUTIVE COMPENSATION

      The  information  called for by Item 11 is  incorporated by reference from
the  registrant's  definitive proxy statement to be filed pursuant to Regulation
14A  under the  Exchange  Act no later  than 120 days  after the end of the 2002
fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The  information  called for by Item 12 is  incorporated by reference from
the  registrant's  definitive proxy statement to be filed pursuant to Regulation
14A  under the  Exchange  Act no later  than 120 days  after the end of the 2002
fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The  information  called for by Item 13 is  incorporated by reference from
the  registrant's  definitive proxy statement to be filed pursuant to Regulation
14A  under the  Exchange  Act no later  than 120 days  after the end of the 2002
fiscal year.




                                       43
<PAGE>

                              GRUBB & ELLIS COMPANY

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)    The following documents are filed as part of this report:

1.     The following Report of Independent  Auditors and Consolidated  Financial
       Statements are submitted herewith:

            Report of Independent Auditors

            Consolidated Balance Sheets at June 30, 2002 and June 30, 2001.

            Consolidated  Statements of Operations  for the years ended June 30,
            2002, 2001 and 2000.

            Consolidated Statements of Stockholders' Equity  for the years ended
            June 30, 2002, 2001 and 2000

            Consolidated  Statements  of Cash Flows for the years ended June 30,
            2002, 2001 and 2000.

            Notes to Consolidated Financial Statements.

2.     All schedules for which  provision is made in the  applicable  accounting
       regulations of the  Securities  and Exchange  Commission are not required
       under the related instructions,  are inapplicable,  or the information is
       contained in the Notes to Consolidated Financial Statements and therefore
       have been omitted.

3.     Exhibits required to be filed by Item 601 of Regulation S-K:

       (3)  Articles of Incorporation and Bylaws

3.1    Certificate of Incorporation of the Registrant as restated to include all
       amendments  through  November 1, 1994,  which was filed with the Delaware
       Secretary of State on May 19, 1995,  incorporated  herein by reference to
       Exhibit 3.2 to the Registrant's Annual Report on Form 10-K filed on March
       31, 1995.

3.2    Amendment to the Restated  Certificate of Incorporation of the Registrant
       as filed  with the  Delaware  Secretary  of State on  December  9,  1997,
       incorporated  herein by  reference  to  Exhibit  4.4 to the  Registrant's
       Statement on Form S-8 filed on December 19, 1997 (File No. 333-42741).

3.3    Certificate  of  Retirement  with  Respect  to  130,233  Shares of Junior
       Convertible  Preferred  Stock of Grubb & Ellis  Company,  filed  with the
       Delaware Secretary of State on January 22, 1997,  incorporated  herein by
       reference  to Exhibit 3.3 to the  Registrant's  Quarterly  Report on Form
       10-Q filed on February 13, 1997.

3.4    Certificate of Retirement with Respect to 8,894 Shares of Series A Senior
       Convertible   Preferred   Stock,   128,266  Shares  of  Series  B  Senior
       Convertible  Preferred  Stock,  and 19,767  Shares of Junior  Convertible
       Preferred  Stock  of  Grubb & Ellis  Company,  filed  with  the  Delaware
       Secretary State on January 22, 1997,  incorporated herein by reference to
       Exhibit 3.4 to the  Registrant's  Quarterly  Report on Form 10-Q filed on
       February 13, 1997.

3.5    Certificate  of  Designations,  Number,  Voting Powers,  Preferences  and
       Rights of Series A Preferred  Stock of the  Registrant  as filed with the
       Secretary of State of the State of Delaware on March 8, 2002 incorporated
       herein by reference to Exhibit 4 to the  Registrant's  Current  Report on
       Form 8-K filed on March 12, 2002.

3.6    Certificate of Amendment of Certificate of Designations,  Number,  Voting
       Powers,  Preferences  and Rights of Series A  Preferred  Stock of Grubb &
       Ellis  Company,  incorporated  herein by  reference  to  Exhibit 4 to the
       Registrant's Current Report on Form 8-K filed on May 14, 2002.

3.7    Bylaws of the Registrant, as amended and restated effective May 31, 2000,
       incorporated  herein by  reference  to  Exhibit  3.5 to the  Registrant's
       Annual Report on Form 10-K filed on September 28, 2000.

3.8    Amended and Restated Certificate of Designations,  Number, Voting Powers,
       Preferences  and  Rights  of  Series A  Preferred  Stock of Grubb & Ellis
       Company,  as filed with the  Secretary  of State of Delaware on September
       13, 2002.




                                       44
<PAGE>


(4)    INSTRUMENTS   DEFINING   THE  RIGHTS  OF  SECURITY   HOLDERS,   INCLUDING
       INDENTURES.

4.1    Stock  Purchase  Agreement  dated  as of  December  11,  1996  among  the
       Registrant,  Mike  Kojaian,  Kenneth J. Kojaian and C.  Michael  Kojaian,
       incorporated  herein by  reference  to  Exhibit  4.3 to the  Registrant's
       Current Report on Form 8-K filed on December 20, 1996.

4.2    Registration  Rights  Agreement  dated as of December  11, 1996 among the
       Registrant,  Warburg,  Pincus  Investors,  L.P.,  Joe  F.  Hanauer,  Mike
       Kojaian,  Kenneth J. Kojaian and C. Michael Kojaian,  incorporated herein
       by reference to Exhibit 4.1 to the  Registrant's  Current  Report on Form
       8-K filed on December 20, 1996.

4.3    Purchase  Agreement  dated as of January 24, 1997 between the  Registrant
       and Warburg, Pincus Investors,  L.P., incorporated herein by reference to
       Exhibit  4.1 to the  Registrant's  Current  Report  on Form 8-K  filed on
       February 4, 1997.

4.4    Stock  Purchase  Agreement  dated as of  January  24,  1997  between  the
       Registrant and Archon Group,  L.P.,  incorporated  herein by reference to
       Exhibit  4.2 to the  Registrant's  Current  Report  on Form 8-K  filed on
       February 4, 1997.

4.5    Registration  Rights  Agreement  dated as of January 24, 1997 between the
       Registrant and Archon Group,  L.P.,  incorporated  herein by reference to
       Exhibit  4.3 to the  Registrant's  Current  Report  on Form 8-K  filed on
       February 4, 1997.

4.6    Securities  Purchase  Agreement dated May 13, 2002 by and between Grubb &
       Ellis  Company  and  Kojaian  Ventures,  L.L.C.,  incorporated  herein by
       reference  to Exhibit 2 to the  Registrant's  Current  Report on Form 8-K
       filed on May 14, 2002.

4.7    Convertible  Subordinated  Promissory Note and Security  Agreement in the
       principal amount of $11,237,500  dated May 13, 2002 and executed by Grubb
       & Ellis  Company,  incorporated  herein by  reference to Exhibit 3 to the
       Registrant's Current Report on Form 8-K filed on May 14, 2002.

4.8    Stock  Subscription  Warrant  No. A-1 dated July 30, 1999 issued to Aegon
       USA Realty Advisors,  Inc.,  incorporated  herein by reference to Exhibit
       4.20 to the  Registrant's  Annual  Report on Form 10-K filed on September
       28, 1999.

4.9    Amended and Restated Credit  Agreement  among the  Registrant,  the other
       financial  institutions  from  time  to  time  parties  thereto,  Bank of
       America,  N.A.,  American  National Bank and Trust Company of Chicago and
       LaSalle  Bank  National  Association,  dated  as of  December  31,  2000,
       incorporated  herein by reference to Exhibit  (b)(1) to the  Registrant's
       Amendment  No. 2 to Tender  Offer  Statement  on  Schedule  TO/A filed on
       January 10, 2001.

4.10   Note executed by the  Registrant in favor of Bank of America,  N.A. dated
       as of December  31,  2000,  incorporated  herein by  reference to Exhibit
       (b)(2) to the  Registrant's  Amendment No. 2 to Tender Offer Statement on
       Schedule TO/A filed on January 10, 2001.

4.11   Note  executed  by the  Registrant  in favor  of  LaSalle  Bank  National
       Association  dated  as of  December  31,  2000,  incorporated  herein  by
       reference to Exhibit (b)(3) to the Registrant's Amendment No. 2 to Tender
       Offer Statement on Schedule TO/A filed on January 10, 2001.

4.12   Note executed by the  Registrant  in favor of American  National Bank and
       Trust  Company of Chicago  dated as of December  31,  2000,  incorporated
       herein by reference to Exhibit (b)(4) to the Registrant's Amendment No. 2
       to Tender Offer Statement on Schedule TO/A filed on January 10, 2001.

4.13   Swingline  Loan  Note  executed  by the  Registrant  in  favor of Bank of
       America,  N.A. in the amount of $2,000,000 dated as of December 31, 2000,
       incorporated  herein by reference to Exhibit  (b)(5) to the  Registrant's
       Amendment  No. 2 to Tender  Offer  Statement  on  Schedule  TO/A filed on
       January 10, 2001.

4.14   First  Amendment  dated  August 22, 2001 to Amended and  Restated  Credit
       Agreement among the Registrant,  the other  financial  institutions  from
       time to time parties thereto,  Bank of America,  N.A.,  American National
       Bank and Trust Company of Chicago and LaSalle Bank National  Association,
       dated as of  December  31,  2000,  incorporated  herein by  reference  to
       Exhibit  4.19 to the  Registrant's  Annual  Report on Form 10-K  filed on
       September 28, 2001.



                                       45
<PAGE>


4.15   Second  Amendment  dated November 29, 2001 to Amended and Restated Credit
       Agreement among the Registrant,  the other  financial  institutions  from
       time to time parties thereto,  Bank of America,  N.A.,  American National
       Bank and Trust Company of Chicago and LaSalle Bank National  Association,
       dated as of December 31, 2000 incorporated herein by reference to Exhibit
       4.1 to the  Registrant's  Quarterly Report on Form 10-Q filed on February
       14, 2002.

4.16   Third  Amendment  dated  March 7, 2002 to  Amended  and  Restated  Credit
       Agreement  dated as of  December  31,  2000 by and among the  Registrant,
       various   financial   institutions,   and  Bank  of  America,   N.A.,  as
       Administrative Agent incorporated herein by reference to Exhibit 1 to the
       Registrant's Current Report on Form 8-K filed on March 12, 2002.

4.17   Form of Subordination  Agreement,  executed by Warburg, Pincus Investors,
       L.P. in favor of Bank of America,  N.A., as Agent, and the Lenders, which
       is an Exhibit to the Option  Purchase  Agreement  incorporated  herein by
       reference  to Exhibit 2 to the  Registrant's  Current  Report on Form 8-K
       filed on March 12, 2002.

4.18   Option  Purchase   Agreement  dated  March  7,  2002  by  and  among  the
       Registrant, Warburg, Pincus Investors, L.P. and Bank of America, N.A., as
       Administrative Agent incorporated herein by reference to Exhibit 3 to the
       Registrant's Current Report on Form 8-K filed on March 12, 2002.

4.19   Fourth  Amendment  dated as of May 13, 2002 to the  Amended and  Restated
       Credit Agreement among the Registrant,  the other financial  institutions
       from  time to time  parties  thereto,  Bank of  America,  N.A.,  American
       National  Bank and Trust  Company of Chicago  and LaSalle  Bank  National
       Association,  dated as of  December  31,  2000,  incorporated  herein  by
       reference  to Exhibit 5 to the  Registrant's  Current  Report on Form 8-K
       filed on May 14, 2002.

4.20   Copy of $5,000,000  Convertible  Promissory  Note and Security  Agreement
       dated  March  7,  2002  issued  by  the  Registrant  to  Warburg,  Pincus
       Investors,  L.P.  incorporated  herein by  reference  to Exhibit 5 to the
       Registrant's Current Report on Form 8-K filed on March 12, 2002.

4.21   Form of $6,000,000  Convertible Promissory Note and Security Agreement of
       the Registrant which is an Exhibit to the Option Purchase Agreement to be
       payable to the order of  Warburg,  Pincus  Investors,  L.P.  incorporated
       herein by reference to Exhibit 6 to the  Registrant's  Current  Report on
       Form 8-K filed on March 12, 2002 (Commission File No. 1-8122).

4.22   Securities  Purchase  Agreement dated May 13, 2002 by and between Grubb &
       Ellis  Company  and  Kojaian  Ventures,  L.L.C.,  incorporated  herein by
       reference  to Exhibit 2 to the  Registrant's  Current  Report on Form 8-K
       filed on May 14, 2002.

4.23   Copy of Convertible  Subordinated  Promissory Note and Security Agreement
       in the principal  amount of $11,237,500  dated May 13, 2002 issued by the
       Registrant to Kojaian Ventures, L.L.C.,  incorporated herein by reference
       to Exhibit 3 to the Registrant's  Current Report on Form 8-K filed on May
       14, 2002.

On an  individual  basis,  instruments  other than  Exhibits  listed above under
Exhibit 4 defining the rights of holders of long-term debt of the Registrant and
its  consolidated  subsidiaries  and  partnerships  do not exceed ten percent of
total consolidated assets and are, therefore, omitted; however, the Company will
furnish  supplementally  to the  Commission  any such  omitted  instrument  upon
request.

       (10) MATERIAL CONTRACTS

10.1*  Employment  Agreement  entered  into  between  Barry M.  Barovick and the
       Registrant dated as of May 15, 2001,  incorporated herein by reference to
       Exhibit 10.1 to the  Registrant's  Quarterly Report on Form 10-Q filed on
       May 12, 2001.

10.2*  Stock Purchase  Agreement  entered into between Barry M. Barovick and the
       Registrant dated as of May 15, 2001,  incorporated herein by reference to
       Exhibit 4.8 to the Registrant's  registration statement on Form S-8 filed
       on June 15, 2001 (File No. 333-63136).

10.3*  Loan Agreement and Retention  Bonus Program entered into between Barry M.
       Barovick  and  the  Registrant,  and  Promissory  Note  executed  by  Mr.
       Barovick,  dated as of May 15, 2001,  incorporated herein by reference to
       Exhibit  10.3 to the  Registrant's  Annual  Report on Form 10-K  filed on
       September 28, 2001.



                                       46
<PAGE>


10.4*  Employment  Agreement  entered  into  between  Mark R.  Costello  and the
       Registrant dated as of July 5, 2001,  incorporated herein by reference to
       Exhibit  10.4 to the  Registrant's  Annual  Report on Form 10-K  filed on
       September 28, 2001.

10.5*  Loan Agreement and Retention  Bonus Program  entered into between Mark R.
       Costello  and  the  Registrant,  and  Promissory  Note  executed  by  Mr.
       Costello,  dated as of July 23, 2001, incorporated herein by reference to
       Exhibit  10.5 to the  Registrant's  Annual  Report on Form 10-K  filed on
       September 28, 2001.

10.6*  Separation  Agreement  entered  into  between  Mark R.  Costello  and the
       Registrant,  and General Release  executed by Mr.  Costello,  dated as of
       July 12, 2002.

10.7*  Employment Agreement entered into between Ian Y. Bress and the Registrant
       dated as of June 18,  2001,  incorporated  herein by reference to Exhibit
       10.6 to the  Registrant's  Annual Report on Form 10-K, filed on September
       28, 2001.

10.8*  First Amendment to Employment Agreement entered into between Ian Y. Bress
       and the Registrant  dated as of October 3, 2001,  incorporated  herein by
       reference to Exhibit 10.1 to the  Registrant's  Quarterly  Report on Form
       10-Q, filed on November 14, 2001.

10.9*  Employment  Agreement  entered  into  between  Robert J.  Walner  and the
       Registrant  dated  as  of  December  14,  2001,  incorporated  herein  by
       reference to Exhibit 10.1 to the  Registrant's  Quarterly  Report on Form
       10-Q, filed on February 14, 2002.

10.10* Change of Status and  Separation  Agreement  entered into  between  Blake
       Harbaugh and the Registrant dated as of July 26, 2001.

10.11* Grubb & Ellis 1990  Amended and Restated  Stock  Option Plan,  as amended
       effective  as of June 20,  1997,  incorporated  herein  by  reference  to
       Exhibit 4.6 to the Registrant's  Registration Statement on Form S-8 filed
       on December 19, 1997 (Registration No. 333-42741).

10.12* 1993 Stock  Option Plan for  Outside  Directors,  incorporated  herein by
       reference to Exhibit 4.1 to the  Registrant's  registration  statement on
       Form S-8 filed on November 12, 1993 (Registration No. 33-71484).

10.13* First  Amendment  to the 1993 Stock  Option Plan for  Outside  Directors,
       effective November 19, 1998,  incorporated herein by reference to Exhibit
       10.1 to the Registrant's  Quarterly Report on Form 10-Q filed on February
       12, 1999.

10.14* Grubb & Ellis 1998 Stock Option  Plan,  effective as of January 13, 1998,
       incorporated  herein by  reference  to Exhibit  10.6 to the  Registrant's
       Annual Report on Form 10-K filed on September 28, 1999.

10.15* First Amendment to the Grubb & Ellis 1998 Stock Option Plan, effective as
       of February 10, 2000, incorporated herein by reference to Exhibit 10.7 to
       the Registrant's Quarterly Report on Form 10-Q filed on May 12, 2000.

10.16* Grubb & Ellis  Company  2000 Stock Option  Plan,  effective  November 16,
       2000,  incorporated  by  herein  by  reference  to  Exhibit  10.2  to the
       Registrant's Quarterly Report on Form 10-Q filed on February 14, 2001.

10.17* Description  of  Grubb  &  Ellis  Company   Executive  Officer  Incentive
       Compensation  Plan,  incorporated  herein by reference to Exhibit 10.4 to
       the Registrant's Annual Report on Form 10-K filed on September 28, 1999.

10.18* Executive  Change  of  Control  Plan,  effective  as of May 10,  1999 and
       attached  form  of  Acknowledgement  Agreement,  incorporated  herein  by
       reference to Exhibit 10.7 to the Registrant's  Annual Report on Form 10-K
       filed on September 28, 1999.

10.19* First Amendment to the Executive Change of Control Plan,  effective as of
       February  10, 2000,  incorporated  herein by reference to Exhibit 10.6 to
       the Registrant's Quarterly Report on Form 10-Q filed on May 12, 2000.

10.20* Second Amendment to the Executive Change of Control Plan, effective as of
       June  1,  2000,   and  attached   form  of   Acknowledgement   Agreement,
       incorporated  herein by  reference to Exhibit  10.12 to the  Registrant's
       Annual Report on Form 10-K filed on September 28, 2000.



                                       47
<PAGE>


10.21* Executive  Incentive  Bonus and Severance  Plan,  effective as of June 1,
       2000,   incorporated   herein  by  reference  to  Exhibit  10.13  to  the
       Registrant's Annual Report on Form 10-K filed on September 28, 2000.

10.22  Pledge Agreement between Landauer Realty Group, Inc. and Bank of America,
       N.A.,  as   Administrative   Agent,   dated  as  of  December  31,  2000,
       incorporated  herein by  reference  to Exhibit  10.3 to the  Registrant's
       Quarterly Report on Form 10-Q filed on February 14, 2001.

10.23  Pledge  Agreement  between the Registrant  and Bank of America,  N.A., as
       Administrative  Agent, dated as of October 15, 1999,  incorporated herein
       by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form
       10-Q filed on November 12, 1999.

10.24  Pledge Agreement between Grubb & Ellis Management Services, Inc. and Bank
       of America,  N.A., as Administrative  Agent, dated as of October 15, 1999
       incorporated  herein by  reference  to Exhibit  10.2 to the  Registrant's
       Quarterly Report on Form 10-Q filed on November 12, 1999.

10.25  Pledge  Agreement  between  HSM  Inc.  and  Bank  of  America,  N.A.,  as
       Administrative Agent, dated as of October 15, 1999 incorporated herein by
       reference to Exhibit 10.3 to the  Registrant's  Quarterly  Report on Form
       10-Q filed on November 12, 1999.

10.26  Guarantee and  Collateral  Agreement by the Registrant and certain of its
       Subsidiaries in favor of Bank of America,  N.A., as Administrative Agent,
       dated as of October 15, 1999 incorporated  herein by reference to Exhibit
       10.4 to the Registrant's  Quarterly Report on Form 10-Q filed on November
       12, 1999.

10.27  Collateral  Trademark  Security  Agreement by the  Registrant in favor of
       Bank of America,  N.A., as Administrative  Agent, dated as of October 15,
       1999 incorporated herein by reference to Exhibit 10.5 to the Registrant's
       Quarterly Report on Form 10-Q filed on November 12, 1999.

10.28  Letter  Agreement  dated April 14, 2002 by and between the Registrant and
       Kojaian Ventures,  L.L.C.,  incorporated herein by reference to Exhibit 1
       to the Registrant's Current Report on Form 8-K filed April 19, 2002.

10.29  Letter  Amendment dated May 13, 2002 by and between Grubb & Ellis Company
       and Kojaian Ventures, L.L.C., incorporated herein by reference to Exhibit
       1 to the Registrant's Current Report on Form 8-K filed May 14, 2002.


*Management contract or compensatory plan or arrangement.

(21) SUBSIDIARIES OF THE REGISTRANT

(23) CONSENT OF INDEPENDENT AUDITORS
        23.1 Consent of Ernst & Young LLP

(24) POWERS OF ATTORNEY

(99)

99.1 SARBANES-OXLEY ACT, SECTION 906 CERTIFICATION

99.2 ANNUAL EARNINGS RELEASE FOR THE FISCAL YEAR ENDED JUNE 30, 2002

(B)  REPORTS FILED ON FORM 8-K

      A  Current  Report on Form 8-K dated  April  15,  2002 was filed  with the
Securities and Exchange Commission on April 19, 2002,  disclosing under Item 1 a
change in control of the Registrant due to certain financing transactions.

      A  Current  Report  on Form 8-K dated  May 13,  2002,  was filed  with the
Securities and Exchange  Commission on May 14, 2002,  disclosing  under Item 1 a
change in control of the Registrant due to certain financing transactions.




                                       48
<PAGE>


                                   SIGNATURES

      Pursuant  to the  requirements  of Section 13 or 15 (d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

GRUBB & ELLIS COMPANY
(REGISTRANT)

                 /s/ Barry M. Barovick                   October 11, 2002
             -----------------------------
                   Barry M. Barovick
   President, Chief Executive Officer and a director

      Pursuant to the requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.

PRINCIPAL EXECUTIVE OFFICER

                 /s/ Barry M. Barovick                   October 11, 2002
             -----------------------------
                   Barry M. Barovick
   President, Chief Executive Officer and a director

PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER

                   /s/ Ian Y. Bress                      October 11, 2002
             -----------------------------
                     Ian Y. Bress
                Chief Financial Officer

DIRECTORS
                                                         October 11, 2002
             -----------------------------
              R. David Anacker, Director
                          **                             October 11, 2002
             -----------------------------
              Anthony G. Antone, Director
                          **                             October 11, 2002
             -----------------------------
             C. Michael Kojaian, Director
                          **                             October 11, 2002
             -----------------------------
             Reuben S. Leibowitz, Director
                          **                             October 11, 2002
             -----------------------------
                Ian C. Morgan, Director
                          **                             October 11, 2002
             -----------------------------
             Steven H. Shepsman, Director
                                                         October 11, 2002
             -----------------------------
              Todd A. Williams, Director



                   /s/ Ian Y. Bress
             -----------------------------
**By: Ian Y. Bress, Attorney-in-Fact, pursuant to Powers Of Attorney




                                       49
<PAGE>


                                 CERTIFICATIONS

     I, Barry M. Barovick, certify that:

     1.   I have  reviewed  this  annual  report  on Form  10-K of Grubb & Ellis
          Company;

     2.   Based on my knowledge,  this annual report does not contain any untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this  annual  report,  fairly  present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this annual report;

     Date: October 11, 2002

                                             /s/ Barry M. Barovick
                                     ------------------------------------
                                               Barry M. Barovick
                               President, Chief Executive Officer and a director




                                       50
<PAGE>


                                 CERTIFICATIONS

     I, Ian Y. Bress, certify that:

     1.   I have  reviewed  this  annual  report  on Form  10-K of Grubb & Ellis
          Company;

     2.   Based on my knowledge,  this annual report does not contain any untrue
          statement  of a  material  fact  or  omit to  state  a  material  fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this  annual  report,  fairly  present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this annual report;

     Date: October 11, 2002

                                                /s/ Ian Y. Bress
                                     ------------------------------------
                                                  Ian Y. Bress
                                             Chief Financial Officer




                                       51
<PAGE>


                     GRUBB & ELLIS COMPANY AND SUBSIDIARIES

                                  EXHIBIT INDEX
                     FOR THE FISCAL YEAR ENDED JUNE 30, 2002


EXHIBIT

(3)     ARTICLES OF INCORPORATION AND BYLAWS

3.8     Amended and Restated Certificate of Designations, Number, Voting Powers,
        Preferences,  and  Rights of Series A  Preferred  Stock of Grubb & Ellis
        Company,  as filed with the  Secretary of State of the State of Delaware
        on September 13, 2002.

(10)    MATERIAL CONTRACTS

10.6    Separation  Agreement  entered  into  between  Mark R.  Costello and the
        Registrant,  and General Release executed by Mr.  Costello,  dated as of
        July 12, 2002.

(21)    SUBSIDIARIES OF THE REGISTRANT

(23)    CONSENT OF INDEPENDENT AUDITORS

23.1    Consent of Ernst & Young LLP

(24)    POWERS OF ATTORNEY

(99)

99.1    Sarbanes-Oxley Act, Section 906 Certification

99.2    Annual Earnings Release for the fiscal year ended June 30, 2002

(A)     Exhibits  incorporated  by reference are listed in Item 14 (a) 3 of this
        Report




                                       52