GAV Grubb & Ellis Realty Advisors,

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No. 3)

Filed by the Registrant þ
Filed by a Party other than the Registrant o

Check the appropriate box:

þ       Preliminary Proxy Statement
o       Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o       Definitive Proxy Statement
o       Definitive Additional Materials
o       Soliciting Material Pursuant to §240.14a-12

GRUBB & ELLIS REALTY ADVISORS, INC .

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

o		No fee required.
o		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)		Title of each class of securities to which transaction applies:
			Common stock of Grubb & Ellis Realty Advisors, Inc.
	(2)		Aggregate number of securities to which transaction applies:
			29,834,403 shares
	(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
			Actual consideration paid ($42,738,708) plus the aggregate amount of mortgage debt assumed ($120,500,000) totaling an aggregate transaction value of $163,238,708
	(4)		Proposed maximum aggregate value of transaction:
	(5)		Total fee paid:

þ		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	(1)		Amount Previously Paid:
	(2)		Form, Schedule or Registration Statement No.:
	(3)		Filing Party:
	(4)		Date Filed:

This proxy statement is dated           and is first being mailed to GERA stockholders on or about .

 

Grubb & Ellis Realty Advisors, Inc.

500 West Monroe Street, Suite 2800

Chicago, Illinois 60661

 

 

 

 

 

date,           , are entitled to vote and have their votes counted at the special meeting and any adjournments or postponements of the special meeting. GERA will not transact any other business at the special meeting or any adjournment or postponement of it.

 

The Properties Acquisition Proposal must be approved by the holders of a majority of the GERA common stock issued in its initial public offering (the “IPO”), present in person or represented by proxy and entitled to vote at the special meeting. The Article Sixth Amendment Proposal must be approved by the holders of a majority of the outstanding shares of GERA common stock, and the 2007 Equity Plan Proposal, Director Nomination Proposal and E&Y Ratification Proposal must be approved by the holders of a majority of the shares of GERA common stock present in person or represented by proxy and entitled to vote at the special meeting.

 

The adoption of the Article Sixth Amendment Proposal, the 2007 Equity Plan Proposal, the Director Nomination Proposal and the E&Y Ratification Proposal are not conditions to the Properties Acquisition Proposal but, if the Properties Acquisition Proposal is not approved, the Article Sixth Amendment Proposal and the 2007 Equity Plan Proposal will not be presented for adoption at the special meeting.

 

Each GERA stockholder who holds shares of common stock issued in the IPO has the right to vote against the Properties Acquisition Proposal and at the same time demand that GERA convert such stockholder’s shares into cash equal to such stockholder’s pro rata portion of the funds from the IPO that are being held in a trust account (including interest thereon, but excluding taxes on such interest and any amounts representing the underwriters’ deferred discount); provided, however, that a GERA stockholder shall only be entitled to receive such cash for the conversion of its shares if the Properties Acquisition Proposal is approved and the acquisition contemplated by the LLC Acquisition Agreement is consummated. The exact per share conversion amount will be determined as of a date which is two business days prior to the consummation of the acquisition. The exercise of conversion rights will have no effect on the warrants that are owned by a stockholder. On          , the record date for the special meeting of stockholders, the conversion amount would have been approximately $ in cash for each share of GERA common stock. If, however, the holders of 20% (4,791,667) or more shares of the common stock issued in the IPO vote against the Properties Acquisition Proposal and demand conversion of their shares, GERA will not consummate the acquisition. PRIOR TO EXERCISING CONVERSION RIGHTS, GERA STOCKHOLDERS SHOULD VERIFY THE MARKET PRICE OF GERA’S COMMON STOCK AS THEY MAY RECEIVE HIGHER PROCEEDS FROM THE SALE OF THEIR COMMON STOCK IN THE PUBLIC MARKET THAN FROM EXERCISING THEIR CONVERSION RIGHTS. Shares of GERA’s common stock are quoted on American Stock Exchange under the symbol GAV. On          , the record date, the last sale price of GERA’s common stock was $     .

 

GERA’s initial stockholders who purchased their shares of common stock prior to the IPO, and presently own an aggregate of approximately     % of the outstanding shares of GERA common stock, have agreed to vote all of the shares they purchased prior to the IPO on the Properties Acquisition Proposal in accordance with the vote of the majority of the votes cast by the holders of shares issued in the IPO. The initial stockholders have also indicated that they will vote such shares “FOR” the adoption of the Article Sixth Amendment Proposal, the 2007 Equity Plan Proposal, the Director Nomination Proposal and the E&Y Ratification Proposal, and will vote any shares they acquired in and after the IPO “FOR” all of the proposals.

 

After careful consideration, GERA’s board of directors, acting on the unanimous recommendation of a special committee composed of directors who are not officers or employees of

GERA and who the board of directors believes meet the American Stock Exchange criteria as “independent directors,” has determined that the Properties Acquisition Proposal is fair to and in the best interests of GERA and its stockholders. GERA’s board of directors has also determined that the Article Sixth Amendment Proposal, 2007 Equity Plan Proposal, Director Nomination Proposal and E&Y Ratification Proposal, are in the best interests of GERA’s stockholders. GERA’s board of directors unanimously recommends that you vote or give instruction to vote “FOR” the adoption of the Properties Acquisition Proposal, the Article Sixth Amendment Proposal, the 2007 Equity Plan Proposal, the Director Nomination Proposal and the E&Y Ratification Proposal.

 

All GERA stockholders are cordially invited to attend the special meeting in person. To ensure your representation at the special meeting, however, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible. If you are a stockholder of record of GERA common stock, you may also cast your vote in person at the special meeting. If your shares are held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your shares. If you do not vote or do not instruct your broker or bank how to vote, it will have the same effect as voting against the Article Sixth Amendment Proposal.

 

A complete list of GERA stockholders of record entitled to vote at the special meeting will be available for 10 days before the special meeting at the principal executive offices of GERA for inspection by stockholders during ordinary business hours for any purpose germane to the special meeting.

 

Your vote is important regardless of the number of shares you own. Whether you plan to attend the special meeting or not, please sign, date and return the enclosed proxy card as soon as possible in the envelope provided.

Thank you for your participation. We look forward to your continued support.

 

By Order of the Board of Directors

 

C. Michael Kojaian

Chairman of the Board

 

[date]

 

Neither the Securities and Exchange Commission (“SEC”) nor any state securities commission has determined if this proxy statement is truthful or complete. Any representation to the contrary is a criminal offense.

 

SEE “RISK FACTORS” FOR A DISCUSSION OF VARIOUS FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH THE ACQUISITION.

TABLE OF CONTENTS

 

 

SUMMARY OF THE MATERIAL TERMS OF THE ACQUISITION

 

The parties to the acquisition are:

 

 

On closing of the acquisition, GERA will acquire the Properties through its ownership of Property Acquisition. The consideration to be paid by GERA for the acquisition of Property Acquisition will represent the amounts invested in or advanced to Property Acquisition by GBE to fund the aggregate purchase price paid by Property Acquisition for the Properties plus interest expense, imputed interest on cash advanced to Property Acquisition or any of the SPE’s by GBE and costs and expenses associated with the evaluation, acquisition, financing and operation of the Properties. See the section entitled “The Properties Acquisition Proposal.”

 

GBE’s Investment in Property Acquisition

 

As of September 30, 2007, GBE’s investment in Property Acquisition was approximately $165.2 million. The investment in Property Acquisition consists of $120.5 million of mortgage debt secured by the Properties and an aggregate equity investment of approximately $44.7 million.

 

Property Acquisition purchased the Properties for an aggregate contract purchase price of $122.2 million ($20.0 million for the Dallas Property, $21.45 million for the Rosemont Property and $80.75 million for the Danbury Property) and as a result of adjustments at the closings of the purchases of the Properties received aggregate credits against the purchase prices of approximately $6.6 million. In addition, through September 30, 2007, Property Acquisition paid an aggregate of approximately $1.3 million in other direct acquisition costs. GBE has calculated an imputed interest cost on amounts it has advanced to Property Acquisition at GBE’s incremental borrowing rate which has averaged approximately 8.8% since GBE began advancing amounts to Property Acquisition through September 30, 2007. The imputed interest totals approximately $2.4 million and reflects GBE’s cost of funds on amounts advanced to Property Acquisition. In addition, Property Acquisition funded the Wachovia Reserves (as hereinafter defined) of approximately $43.6 million and paid approximately $2.4 million in fees in connection with the mortgage loans discussed below for a total investment of approximately $165.2 million.

 

On June 15, 2007, simultaneously with the acquisition of the Danbury Property by GERA Danbury, LLC, Property Acquisition’s SPEs, received mortgage loans from Wachovia Bank, N.A. totaling $120.5 million secured by the Properties. One mortgage loan is in the amount of $42.5 million, which is secured jointly by the Dallas Property and the Rosemont Property (the “Dallas and

Rosemont Wachovia Loan”) (GBE has internally allocated approximately $22 million to the Rosemont Property and approximately $20.5 million to the Dallas Property), and the other mortgage loan is in the amount of $78 million which is secured by the Danbury Property (the “Danbury Wachovia Loan”; the Dallas and Rosemont Wachovia Loan and the Danbury Wachovia Loan, collectively, the “Wachovia Mortgage Loans”). The aggregate proceeds of the Wachovia Mortgage Loans were $120.5 million which were used as follows: (i) $72.3 million to pay the purchase price of the Danbury Property (net of closing adjustments); (ii) $43.6 million to fund required tax, insurance, interest, engineering, debt and leasing reserves which are held by Wachovia (the “Wachovia Reserves”); (iii) $2.4 million to pay the lender’s fees and costs; and (iv) $2.2 million to reduce GBE’s aggregate equity in the Properties.

 

Purchase Price of Property Acquisition

 

If the business combination was consummated on September 30, 2007, GERA would acquire the Properties, which have an aggregate contract price of $122.2 million, as well as assume the debt and equity financings with respect to the Properties, which includes the Wachovia Reserves. As a consequence, the aggregate amount of consideration paid by GERA would be approximately $165.2 million consisting of cash of approximately $44.7 million (which is the amount of GBE’s equity in Property Acquisition as of such date) plus the indirect assumption of $120.5 million in debt under the Wachovia Mortgage Loans. The amount of cash consideration paid to GBE at the closing of the business combination will be adjusted pursuant to the LLC Acquisition Agreement to reflect imputed interest through the closing date on amounts invested in or advanced to Property Acquisition by GBE to fund the aggregate purchase price paid by Property Acquisition for the Properties and on cash advanced to Property Acquisition or any of the SPE’s by GBE and to reflect any additional costs and expenses associated with the evaluation, acquisition, financing and operation of the Properties. For more information on the calculation of the purchase price please see the section entitled “Purchase Price of Property Acquisition” on page 80 and footnote (B) of the “Notes to Unaudited Pro Forma Condensed Combined Balance Sheet” on page 92.

 

Additionally, on the closing of the acquisition, and pursuant to the master agreement for services dated February 27, 2006 among GERA and GBE (the “Services Agreement”), GERA will pay GBE an acquisition fee equal to one percent of the acquisition price for each of the Properties. Accordingly, in addition to the LLC Purchase Price, at the closing of the LLC Acquisition Agreement, GERA shall pay GBE an acquisition fee of approximately $1.2 million with respect to the Properties. See the section entitled “The LLC Acquisition Agreement—Acquisition Consideration.”

 

Furthermore, in addition to the LLC Purchase Price and acquisition fee GBE is to receive from GERA at the closing of the transactions contemplated by the LLC Acquisition Agreement, GBE received a commission from Danbury Buildings Co., L.P. and Danbury Buildings, Inc. (collectively, “Buildings Co.”), the seller of the Danbury Property, in an amount equal to 1% of the purchase price of the Danbury Property ($807,500) at the time of GBE’s acquisition of the Danbury Property pursuant to a pre-existing agreement between Buildings Co. and GBE effective as of June 27, 2006 whereby GBE was retained to find a buyer for the Danbury Property.

 

Peter J. Solomon Company L.P., the financial advisor to the special committee of our board of directors, has advised GERA that, in undertaking its analysis of whether the aggregate consideration to be paid by GERA under the terms of the LLC Acquisition Agreement is fair from a financial point of view to GERA, it took into account the fee paid to GBE by the seller of the Danbury Property.

 

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS

 

 

 

 

 

Corporate Secretary

Grubb & Ellis Realty Advisors, Inc.

500 West Monroe, Suite 2800

Chicago, Illinois 60661

Tel: (312) 698-4900

 

Continental Stock Transfer & Trust Company

17 Battery Place, 8th Floor

New York, New York 10004

Tel: (212) 845-3287

 

SUMMARY OF THE PROXY STATEMENT

 

This summary highlights selected information from this proxy statement and does not contain all of the information that is important to you. To better understand the Properties Acquisition Proposal, you should read this entire document carefully, including the LLC Acquisition Agreement attached as Annex A to this proxy statement. The LLC Acquisition Agreement is the legal document that governs the acquisition and the other transactions that will be undertaken in connection with the acquisition. It is also described in detail elsewhere in this proxy statement.

 

The Parties

 

Grubb & Ellis Realty Advisors, Inc.

 

GERA is a blank check company organized as a corporation under the laws of the State of Delaware on September 7, 2005. The Company was formed for the purpose of acquiring, through a purchase, asset acquisition or other business combination, one or more United States commercial real estate properties and/or assets. In March 2006, the Company consummated the IPO of its equity securities, from which it derived net proceeds of approximately $133,400,000, including proceeds from the exercise of the underwriters’ over-allotment option. Approximately $132,325,004 of the net proceeds of the IPO, along with the initial capital from GBE ($2,500,000) and a deferred underwriting discount ($2,675,000), were placed in a trust account. Such funds, with the interest earned thereon, will be released to GERA upon consummation of the business acquisition, and will also be used to pay any amounts payable to GERA stockholders who vote against the business acquisition and exercise their conversion rights. Remaining proceeds, if any, will be used for working capital, which to the extent available will be used to fund organic growth and additional acquisitions.

 

The remainder of the net proceeds of the IPO, or approximately $1,075,000, was held outside of the trust account and has been and will be used by GERA to pay the expenses incurred in its pursuit of a business combination and/or acquisition. As of September 30, 2007, the amount in the trust account including accrued interest but net of taxes and deferred underwriter’s discount was approximately $142,200,000 and as of September 30, 2007 GERA had approximately $17,000 remaining out of trust, and approximately $862,000 of accrued expenses. Other than the IPO and the pursuit of a business combination, GERA has not engaged in any business to date.

 

In the event that the acquisition of Property Acquisition is not consummated by March 3, 2008, GERA must be liquidated. Upon approval of GERA’s stockholders, GERA will dissolve and promptly distribute to its public stockholders the amount in its trust account plus remaining net assets after payment of its liabilities from non-trust account funds.

 

The GERA common stock, warrants to purchase common stock and units (each unit consisting of one share of common stock and two warrants to purchase common stock) are quoted on the American Stock Exchange (“AMEX”) under the symbols GAV for the common stock, GAV.WS for the warrants and GAV.U for the units.

 

The mailing address of GERA’s principal executive office is Grubb & Ellis Realty Advisors, Inc., 500 West Monroe Street, Suite 2800, Chicago, Illinois 60661 and its telephone number is (312) 698-4900.

GBE

 

GBE, the sponsor and an affiliate of GERA, is a corporation formed in Delaware in 1980. Property Acquisition is a limited liability company formed in Delaware, on October 2, 2006, and a wholly owned subsidiary of GBE. GBE formed Property Acquisition as a holding company, which in turn established the SPEs, to acquire the Dallas Property, the Rosemont Property and the Danbury Property. See the section entitled “Business of GBE and Property Acquisition.”

 

GBE’s principal executive offices, which are also the executive offices of GERA, are located at 500 West Monroe Street, Suite 2800, Chicago, Illinois 60661 and its telephone number is (312) 698-6700.

 

The Acquisition

 

The LLC Acquisition Agreement provides for a business combination transaction in which GERA will acquire Property Acquisition, which, in turn, owns 100% of the SPEs that own the Properties. This will be accomplished through a purchase by GERA of all the issued and outstanding membership interests of Property Acquisition from GBE in exchange for the LLC Purchase Price. Such consideration represents the amounts invested in or advanced to Property Acquisition by GBE to fund the aggregate purchase price paid by Property Acquisition for the Properties plus interest expense, imputed interest on cash advanced to Property Acquisition or any of the SPEs by GBE, and costs and expenses associated with the evaluation, acquisition and operation of the Properties. The SPEs and the Properties will be subject to the Wachovia Mortgage Loans at the time of the Company’s acquisition of Property Acquisition.

 

GERA and GBE have agreed that pursuant to the Services Agreement, GERA will pay GBE an acquisition fee equal to one percent of the acquisition price for each of the Properties. Accordingly, in addition to the LLC Purchase Price, at the closing of the LLC Acquisition Agreement, GERA shall pay GBE an acquisition fee of $1,222,000 with respect to the Properties.

 

GERA plans to complete the business combination promptly after the GERA special meeting provided that:

 

 

The Article Sixth Amendment Proposal

 

An amendment to GERA’s certificate of incorporation is being proposed, upon consummation of the acquisition, to eliminate certain provisions that are applicable to GERA only prior to its completion of a business combination. As a result of the amendment, after the acquisition, Article Sixth of GERA’s certificate of incorporation will address only its classified board of directors, with existing provisions that relate to it as a blank check company being deleted.

 

The 2007 Equity Plan Proposal

 

The plan is designed to attract, retain and motivate selected eligible employees and key non-employees of the Company and its affiliates, and reward them for making major contributions to the success of the Company and its affiliates. These objectives are accomplished by making long-term incentive awards under the plan that will offer participants an opportunity to have a greater proprietary interest in, and closer identity with, the Company and its affiliates and their financial success. The various types of incentive awards that may be provided under the plan will enable GERA to respond to changes in compensation practices, tax laws, accounting regulations and the size and diversity of its business. The plan is attached as Annex C to this proxy statement. We encourage you to read the plan in its entirety.

 

The Director Nomination Proposal

 

Our board of directors is divided into three classes, each of which will generally serve for a term of three years with only one class of directors being elected in each year. The term of office of the first class of directors, consisting of William Downey, is expiring at the special meeting. Our board of directors has unanimously approved the nomination of William Downey as a member of our board of directors to serve for a three-year term expiring in 2010.

 

The E&Y Ratification Proposal

 

The Audit Committee has appointed Ernst & Young LLP (“E&Y”) as GERA’s independent registered public accounting firm for the year 2007. E&Y was first retained as GERA’s independent registered public accounting firm in September 2005. Although this appointment is not required to be submitted to a vote of the stockholders, the board of directors believes it appropriate at this time to request that the stockholders ratify the appointment of the independent registered public accounting firm for the year 2007. In the event a majority of the votes cast at the special meeting are not voted in favor of this proposal, the Audit Committee will reconsider the appointment, but may decide to maintain its appointment of E&Y.

 

We anticipate that a representative of E&Y will be present at the special meeting. The representative will be given the opportunity to make a statement if he or she desires to do so, and is expected to be available to respond to any appropriate questions that may be submitted by stockholders at the special meeting.

 

GERA’s Recommendations to Stockholders; Reasons for the Acquisition

 

After careful consideration of the terms and conditions of the LLC Acquisition Agreement, the certificate of incorporation amendment, the incentive compensation plan, the election of William Downey, and E&Y’s ratification, the board of directors of GERA has determined that the proposed acquisition, the certificate of incorporation amendment, the incentive compensation plan, the election of William Downey, and E&Y’s ratification, are fair to and in the best interests of GERA and its stockholders. In reaching its decision with respect to the LLC Acquisition Agreement and the transactions contemplated thereby, the board of directors of GERA relied on the unanimous recommendation of a special committee composed of directors who are not officers or employees of GERA and who the board of directors believes meet the

American Stock Exchange criteria as “independent directors.” Accordingly, GERA’s board of directors unanimously recommends that GERA stockholders vote:

 

 

GERA Inside Stockholders

 

As of October 8, 2007, Messrs. Kojaian, Rose, Downey, Lazar and Stillman, and GBE (the “GERA Inside Stockholders”) beneficially owned and were entitled to vote 7,792,736 shares of GERA common stock, or approximately 26.12% of GERA’s outstanding common stock, 5,876,069 of which (“Original Shares”) were issued to the GERA Inside Stockholders prior to the IPO at approximately $0.43 per share and the balance of which were purchased in the IPO or in open market transactions. In connection with the IPO, GERA and Deutsche Bank Securities Inc., the managing underwriter of the IPO, entered into agreements with each of the GERA Inside Stockholders pursuant to which each GERA Inside Stockholder agreed to vote his or its Original Shares on the Properties Acquisition Proposal in accordance with the majority of the votes cast by the holders of shares issued in the IPO. Accordingly, the vote of the Original Shares has no bearing on the outcome of the Properties Acquisition Proposal. The GERA Inside Stockholders have also indicated that they intend to vote their Original Shares in favor of all other proposals being presented at the special meeting and that they will vote the shares they purchased in the IPO or in open market transactions in favor of all of the proposals being presented at the special meeting, including the Properties Acquisition Proposal. Mr. Kojaian is currently the chairman of our board, Mr. Rose is currently our chief executive officer and a director, and Messrs. Downey, Lazar and Stillman are currently directors and members of the special committee. Each of the Company and its officers, directors, and affiliates have the right to purchase shares of the Company’s common stock either in open market or privately negotiated transactions subsequent to the Company’s mailing of this proxy statement, provided, however, that unless a proxy with respect to the shares acquired in a privately negotiated transaction is also separately acquired at the same time, any shares acquired after the date of the mailing of this proxy statement would not afford the purchaser of such shares the right to vote with respect to the proposed business combination, as the shares would have been acquired after the record date. In the event, however that any shares are acquired after the record date in a privately negotiated transaction, and an accompanying proxy is also acquired with respect to such shares, then to the extent that the seller of such shares may have voted against the business combination and demanded conversion of the shares, the purchaser of such shares and accompanying proxy would have the right, prior to the meeting, to change the vote with respect to such shares and vote such shares in favor of the business combination and withdraw the demand for conversion. At this time, however, there is no intention on the part of the Company, or any of its officers, directors and affiliates, and there are no understandings, agreements or arrangements by the Company or any of its officers, directors or affiliates, to effect any such purchases of shares either in the open market or in privately negotiated transactions, or to acquire any proxies in connection with shares purchased in privately negotiated transactions.

 

Acquisition Consideration

 

Upon closing of the LLC Acquisition Agreement, GBE will receive from GERA the LLC Purchase Price in cash. Such consideration represents the amounts invested in or advanced to Property Acquisition by GBE to fund the aggregate purchase price paid by Property Acquisition for the Properties plus interest expense, imputed interest on cash advanced to Property Acquisition or any of the SPEs by GBE, and costs and expenses associated with the evaluation, acquisition and operation of the Properties. Moreover, GERA and GBE have agreed that pursuant to the Services Agreement, GERA will pay GBE an acquisition fee equal to one percent of the acquisition price for each of the Properties. Accordingly, in addition to the LLC Purchase Price, at the closing of the LLC Acquisition Agreement, GERA shall pay GBE an acquisition fee of $1,222,000 with respect to the Properties.

 

GERA’s board or directors determined that the aggregate fair market value of the Properties is equal to at least 80% of GERA’s net assets based upon the amount of proceeds held in a trust account as of September 30, 2007.

 

Fairness Opinion

 

Peter J. Solomon Company L.P., or PJSC, delivered an opinion to the special committee of our board of directors, to the effect that, as of June 4, 2007, based upon the qualifications, assumptions, limitations and other matters set forth in its written opinion, the aggregate consideration to be paid by GERA under the terms of the LLC Acquisition Agreement is fair from a financial point of view to GERA. The full text of the written opinion of PJSC, dated June 4, 2007, which sets forth the assumptions made, the matters considered, and the qualifications and limitations on the review undertaken by PJSC in connection with its opinion, is attached as Annex E to this proxy statement. The opinion was provided to the special committee for use in connection with its consideration as to whether the aggregate consideration to be paid by GERA under the terms of the LLC Acquisition Agreement is fair from a financial point of view to GERA. The opinion did not constitute a recommendation to the special committee, our board of directors or any holder of shares of our common stock as to how to vote in connection with the transactions contemplated by the LLC Acquisition Agreement.

 

Under the terms of the engagement letter between GERA and PJSC, PJSC provided the special committee financial advisory services and GERA agreed to pay PJSC certain fees for such services. Upon the signing of the engagement letter, PJSC received a non-refundable fee of $50,000. Upon the delivery of its opinion, PJSC was paid an additional $125,000, resulting in total compensation to PJSC of $175,000.

 

Date, Time and Place of Special Meeting of GERA’s Stockholders

 

The special meeting of the stockholders of GERA will be held at 10:00 a.m., Eastern Time, on          , at           to consider and vote upon the Properties Acquisition Proposal, the Article Sixth Amendment Proposal, the 2007 Equity Plan Proposal, the Director Nomination Proposal and the E&Y Ratification Proposal.

 

Voting Power; Record Date

 

You will be entitled to vote or direct votes to be cast at the special meeting if you owned shares of GERA common stock at the close of business on          , which is the record date for the special meeting. You will have one vote for each share of GERA common stock you owned at

the close of business on the record date. GERA warrants do not have voting rights. On the record date, there were           shares of GERA common stock outstanding.

 

Approval of GBE

 

GBE’s board of directors has approved the LLC Acquisition Agreement and the transactions contemplated thereby at a meeting convened by the board of directors of GBE on June 6, 2007. No further action by GBE is needed to approve the sale of Property Acquisition by GBE.

 

Quorum and Vote of GERA Stockholders

 

A quorum of GERA stockholders is necessary to hold a valid special meeting. A quorum will be present at the GERA special meeting if a majority of the outstanding shares entitled to vote at the special meeting are represented in person or by proxy. Abstentions and broker non-votes will count as present for the purposes of establishing a quorum.

 

 

A consequence of the difference in these voting requirements is that the vote of holders of fewer shares may be required for the approval of the Properties Acquisition Proposal, the 2007 Equity Plan Proposal, the Director Nomination Proposal and the E&Y Ratification Proposal, than for the approval of the Article Sixth Amendment Proposal being presented at the special meeting.

 

Abstentions will have the same effect as a vote “AGAINST” all of the proposals. Broker non-votes, while considered present for the purposes of establishing a quorum, will have the effect of votes “AGAINST” the proposal to amend the certificate of incorporation, but will have no effect on the Properties Acquisition Proposal, the 2007 Equity Plan Proposal, the Director Nomination Proposal and the E&Y Ratification Proposal. Please note that you cannot seek conversion of your shares unless you affirmatively vote against the Properties Acquisition Proposal.

 

Relation of Proposals

 

The approval of the Article Sixth Amendment Proposal, 2007 Equity Plan Proposal, Director Nomination Proposal and E&Y Ratification Proposal are not conditions to the consummation of the acquisition but, if the Properties Acquisition Proposal is not approved, the Article Sixth Amendment Proposal and 2007 Equity Plan Proposal will not be presented at the special meeting for adoption. The 2007 Equity Plan Proposal and the E&Y Ratification Proposal have

been approved by GERA’s board of directors and will take effect upon consummation of the acquisition, subject to stockholder approval of the plan.

 

Conversion Rights

 

Pursuant to GERA’s certificate of incorporation, a holder of shares of GERA’s common stock issued in the IPO may, if the stockholder affirmatively votes against the Property Acquisition Proposal and complies with the other terms described in this proxy statement, demand that GERA convert such shares into cash. Demand may be made by checking the box on the proxy card provided for that purpose and returning the proxy card in accordance with the instructions provided. Demand may also be made in any other writing that clearly states that conversion is demanded and is delivered so that it is received by GERA at any time prior to the special meeting. Additionally, holders seeking conversion must tender their stock certificates to our transfer agent within the period specified in a notice you will receive from the Company, which will be not less than 20 days from the date of such notice, after the special meeting. If properly demanded, GERA will convert each share of common stock issued in the IPO in respect of which a conversion request is made into a pro rata portion of the trust account (including interest thereon, but excluding taxes on such interest and any amounts representing the underwriters’ deferred discount), calculated as of two business days prior to the anticipated consummation of the acquisition. As of July 24, 2007, this would amount to approximately $5.89 per share. If you exercise your conversion rights, then you will be exchanging your shares of GERA common stock for cash and will no longer own the shares. You will be entitled to receive cash for these shares only if you affirmatively vote against the Properties Acquisition Proposal, properly demand conversion, and tender your stock certificate to our transfer agent within the period specified in a notice you will receive from the Company, which period will be not less than 20 days from the date of such notice. If the LLC Acquisition Agreement is not consummated, these shares will not be converted into cash. However, if the contemplated business combination is not consummated by March 3, 2008, we will be forced to liquidate and all holders of shares issued in the IPO will receive a pro rata portion of the trust account (including interest thereon, but excluding taxes on such interest), calculated as of two business days prior to the anticipated consummation of the acquisition.

 

The acquisition will not be consummated if the holders of 20% or more of the common stock issued in the IPO (4,791,667 shares or more) exercise their conversion rights.

 

Appraisal Rights

 

GERA stockholders do not have appraisal rights in connection with the acquisition under the DGCL.

 

Proxies

 

Proxies may be solicited by mail, telephone or in person. GERA has engaged [          ] to assist in the solicitation of proxies.

 

If you grant a proxy, you may still vote your shares in person if you revoke your proxy before the special meeting.

 

Interests of GERA and GBE Directors and Officers in the Acquisition

 

When you consider the recommendation of GERA’s board of directors in favor of adoption of the Properties Acquisition Proposal, you should keep in mind that GERA’s executive officers

and some members of GERA’s board are also executive officers of GBE and members of GBE’s board of directors and, as a result, have interests in the acquisition transaction that are different from, or in addition to, your interests as a stockholder. These interests include, among other things:

 

 

 

 

 

The agency leasing agreement for the Rosemont Property shall remain in effect through May 1, 2009, unless sooner terminated in accordance with the terms of the agreement. The term of the agency leasing agreement for the Dallas Property shall, unless sooner terminated, remain in effect through March 1, 2010. The term of the agency leasing agreement for the Danbury Property shall, unless sooner terminated, remain in effect through June 14, 2008. Each of the agency leasing agreements may be terminated by either the owner or the broker by providing thirty days advance written notice of termination to the other party.

 

 

 

Conditions to the Closing of the Acquisition

 

Consummation of the LLC Acquisition Agreement is conditioned on the holders of a majority of the shares of GERA common stock that were issued in the IPO present in person or represented by proxy and entitled to vote at the special meeting voting to approve the Properties Acquisition Proposal. The GERA stockholders will also be asked to approve the 2007 Equity Plan Proposal, the Article Sixth Amendment Proposal, the Director Nomination Proposal and the E&Y Ratification Proposal. The acquisition is not dependent on the approval of such other proposals. If stockholders owning 20% or more of the shares issued in the IPO vote against the Properties Acquisition Proposal and exercise their right to convert their shares purchased in the IPO into a pro-rata portion of the funds held in trust by GERA for the benefit of the holders of shares purchased in the IPO, then the acquisition cannot be consummated.

 

In addition, the consummation of the LLC Acquisition Agreement is conditioned upon no governmental entity having enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and which has the effect of making the transactions contemplated by the LLC Acquisition Agreement illegal or otherwise prohibiting or restraining the consummation of such transactions on substantially the terms contemplated by the LLC Acquisition Agreement.

 

GBE’s Conditions to Closing of the Acquisition under the LLC Acquisition Agreement

 

The obligations of GBE to consummate the transactions contemplated by the LLC Acquisition Agreement, in addition to the conditions described above, are conditioned upon each of the following, among other things:

 

 

 

GERA’s Conditions to Closing of the Acquisition under the LLC Acquisition Agreement

 

The obligations of GERA to consummate the transactions contemplated by the LLC Acquisition Agreement, in addition to the conditions described above, are conditioned upon each of the following, among other things:

 

 

The term “Material Adverse Effect” is defined in the LLC Acquisition Agreement as any change, event, violation, inaccuracy, circumstance or effect which, individually or when aggregated with all other changes, events, violations, inaccuracies, circumstances or effects, has had or is reasonably likely to have a material adverse effect on the business, assets (including intangible assets), condition (financial or otherwise) or results of operations of Property Acquisition, the SPEs or the Properties taken as a whole, it being understood that none of the following alone or in combination shall be deemed, in and of itself, to constitute a Material Adverse Effect: (i) changes directly attributable to the public announcement or pendency of the transactions contemplated by the LLC Acquisition Agreement, (ii) changes in general national or general regional economic conditions, or (iii) any SEC rulemaking requiring enhanced disclosure of reverse acquisition transactions with a public shell; provided, however, that the matters referred to in the foregoing clauses (ii) and (iii) shall be considered in determining whether a Material Adverse Effect has occurred if such matters affect Property Acquisition, any of the SPEs or any of the Properties in a materially disproportionate manner when compared to the effect of such matters on other persons engaged in the same industry in which Property Acquisition or the SPEs operate.

 

Termination of the LLC Acquisition Agreement

 

The LLC Acquisition Agreement may be terminated at any time, but not later than the closing, as follows:

 

 

Regulatory Matters

 

The transactions contemplated by the LLC Acquisition Agreement are not subject to any additional federal or state regulatory approval, including under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or HSR Act.

 

Risk Factors

 

In evaluating the Properties Acquisition Proposal, you should carefully read this proxy statement and especially consider the factors discussed in the section entitled “Risk Factors.”

 

SELECTED HISTORICAL FINANCIAL INFORMATION

 

We are providing the following selected financial information to assist you in your analysis of the financial aspects of the acquisition.

 

GERA’s balance sheet data as of June 30, 2007 and its statement of operations data for the year ended June 30, 2007 and for the period from September 7, 2005 (inception) to June 30, 2006 are derived from the GERA historical financial statements included elsewhere in this proxy statement.

 

GERA’s balance sheet data as of September 30, 2007 and statement of operations data for the three months ended September 30, 2007 and the three months ended September 30, 2006 are derived from GERA’s unaudited historical interim financial statements which are included elsewhere in this proxy statement. In the opinion of GERA’s management, the unaudited interim financial statements include all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of such financial statements.

 

The selected financial information of GERA is only a summary and should be read in conjunction with GERA’s historical consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this proxy statement. The information presented is not indicative of future performance of GERA after the acquisition.

 

 

 

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION

 

We have presented below selected unaudited pro forma condensed combined financial information that reflects the Properties Acquisition Proposal, including the Wachovia Mortgage Loans. We are providing this information to aid you in your analysis of the financial aspects of the Properties Acquisition Proposal including the Wachovia Mortgage Loans. The following selected unaudited pro forma condensed combined financial information has been derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial statements and related notes thereto included elsewhere in this proxy statement.

 

The unaudited pro forma condensed combined financial information has been derived from and should be read in conjunction with the following financial statements which are included elsewhere in this proxy:

 

 

 

 

 

This information should also be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this proxy statement.

 

The selected unaudited pro forma condensed combined balance sheet data at September 30, 2007 reflects the historical information of GERA as of such date, as adjusted to give pro forma effect to the Properties Acquisition Proposal including the Wachovia Mortgage Loans as if they had occurred on September 30, 2007. The assets and liabilities of the acquired Properties pursuant to the Properties Acquisition Proposal have been recorded at fair value in accordance with Statement of Financial Accounting Standards No. 141—Business Combinations. The purchase price allocation has not been finalized and is subject to change based upon recording of actual transaction costs, finalization of working capital adjustments, and completion of appraisals of tangible and intangible assets of the acquired Properties.

 

The selected unaudited pro forma condensed combined statements of operations data for the three months ended September 30, 2007 and for the year ended June 30, 2007 reflect the historical information of GERA adjusted to give pro forma effect to the Properties Acquisition Proposal, including the Wachovia Mortgage Loans, as if they had occurred on July 1, 2006. Amounts for the Properties have also been adjusted for fiscal year presentation.

 

The selected unaudited pro forma condensed combined financial information have been prepared using two different levels of approval of the transaction by GERA stockholders, as follows:

 

 

The pro forma adjustments are based upon available information and assumptions that we believe are reasonable. The selected unaudited pro forma condensed combined statements of operations data and the selected unaudited pro forma condensed combined balance sheet data do not purport to represent the results of operations which would have occurred had such transactions been consummated on the dates indicated or the financial position for any future date or period.

 

 

RISK FACTORS

 

You should carefully consider the following risk factors, together with all of the other information included in this proxy statement, before you decide whether to vote or instruct your vote to be cast to adopt the Properties Acquisition Proposal.

 

Risks Related to our Business and Operations Following the Acquisition of Property Acquisition

 

The real estate market in general is subject to a number of economic conditions that are not within our control.

 

The commercial real estate market is subject to various risks and fluctuations and cycles in value and demand for real estate in local markets, many of which are beyond our control. 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, our revenue and our corresponding cash flow and financial condition could be materially and adversely impacted by changes in these factors. These factors include:

 

 

 

 

 

 

 

 

 

 

Major unexpected mechanical or building system failures may result in adverse changes in the performance of our properties and harm our financial condition.

 

Major unexpected mechanical or building system failures may result in the disruption of building operations resulting in loss of rents as well as require us to make significant, unbudgeted capital expenditures. Such expenditures and loss of rents could reduce our cash flows and funds available for future dividends.

Increasing competition for the acquisition of real estate may impede our ability to make future acquisitions, which could adversely affect our operating results and financial condition.

 

The commercial real estate industry is highly competitive on an international, regional and local level. We will face competition from REITs, institutional pension funds, and other public and private real estate companies and private real estate investors. Although many of our competitors are local or regional firms that are substantially smaller than we are as a whole, some of these firms are substantially larger than we are in the local or regional area in which we actually compete with these firms. These competitors may prevent us from acquiring desirable properties or increase the price we must pay for real estate. Our competitors may have greater resources than we do, and may be willing to pay more or may have a more compatible operating philosophy with our acquisition targets. In particular, REITs may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. Our competitors may also adopt transaction structures similar to ours, which would decrease our competitive advantage in offering flexible transaction terms. In addition, the number of entities and the amount of funds competing for suitable investment properties may increase, resulting in increased demand and increased prices paid for such properties. If we pay higher prices for properties, our profitability may decrease and we may experience a lower return on our investments. Increased competition for properties may also preclude us from acquiring those properties that would generate the most attractive returns to us.

 

Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties and harm our financial condition.

 

Because real estate investments are relatively illiquid, our ability to promptly sell one or more properties or investments in our portfolio in response to changing economic, financial and investment conditions may be limited. In particular, these risks could arise from weakness in or even the lack of an established market for a property, changes in the financial condition or prospects of prospective purchasers, changes in national or international economic conditions, and changes in laws, regulations or fiscal policies of jurisdictions in which the property is located. We may be unable to realize our investment objectives by sale, other disposition or to refinance at attractive prices within any given period of time or may otherwise be unable to complete any exit strategy.

 

Increasing interest rates could have a negative impact our real estate investments in multiple ways.

 

An environment of rising interest rates creates the risk of incurring increased interest rate payments on any current financings, such as the Wachovia Mortgage Loans, new financings or re-financings that we may pursue or higher interest rates if an interest rate adjustment occurs as a term of an existing loan on any of the properties.

 

Rising interest rates also may be accompanied by weakening economic conditions, which will typically lead to constrained business expansion by companies. Such a condition may have a direct impact on the commercial real estate market. Businesses that would otherwise accommodate their growth by leasing space in commercial buildings may no longer pursue an expansion strategy.

In addition, higher interest rates may create financial pressures on existing tenants causing them to vacate or reduce the amount of space they occupy or cause a tenant to delay paying its rent or cause them to default on their rental payments. Under such a situation a tenant may ask for rent forgiveness. In extreme situations a tenant may decide to declare bankruptcy.

 

Reduced demand for space and increasing vacancy resulting from increasing interest rates may affect our ability to achieve our leasing objectives in terms of occupancy, rental rates and leasing concessions. When tenant demand for leased space falls, rental rates may follow suit. Weakening market conditions can trigger higher tenant concessions that may become necessary to provide a financial inducement to attract new tenants to lease vacant space in the properties and to entice existing tenants to renew their leases. These incentives usually take the form of free rent and tenant improvement allowances of a higher amount than we had otherwise planned on providing.

 

Under each of the scenarios described above there could be a reduction in the amount of cash flow available to fund operations, improve the properties or to distribute as dividends to stockholders. If the conditions become too severe, there is always the risk that we may not be able to meet debt service payments resulting in the lender initiating foreclosure proceedings on the loan. When the property has been offered as collateral for the loan the lender would acquire title to the property as a result of the foreclosure and we would lose our ownership interests and rights in the property.

 

A rising interest rate environment combined with deteriorating real estate market fundamentals could also affect investor demand for real estate and ultimately the value of real estate. Higher interest rates affect our ability to underwrite transactions and may impair our ability to meet future targeted returns. When debt becomes more costly, buyers relying on financing to fund their acquisitions will either leave the market or they will be forced to submit offers at lower prices, making them less competitive. The absence of this group of buyers may reduce the competition among buyers, which may affect the price the remaining active buyers will bid for a property.

 

Deteriorating market fundamentals may cause buyers to modify how they underwrite their purchases. If they are more cautious in their interpretation of market trends, the value of our properties when we sell them may be less than what we paid for them. In addition to the risk of a loss on the sale of a property there is the further risk of the value being insufficient to repay the principal on any loans that may be outstanding.

 

Rising operating expenses and decrease in rents at our properties could reduce our cash flow and funds available for future dividends.

 

Our properties will likely be subject to operating risks common to real estate in general, any or all of which may negatively affect us. In addition, the Properties are subject to certain floating operating expenses for market based purchases (such as, electricity, gas and other utilities) that have short term fluctuation risk. Furthermore, if any property is not fully occupied or if rents are being paid in an amount that is insufficient to cover operating expenses, we could be required to expend funds for that property’s operating expenses. If our competitors offer space at rental rates below market rates, or below the rental rates we charge our tenants, we may lose existing or potential tenants and we may be pressured to reduce our rental rates below those we charge in order to retain tenants when our tenants’ leases expire. Our properties could also be subject to increases in real estate and other tax rates, utility costs, operating expenses,

insurance costs, repairs and maintenance and administrative expenses. Increases in operating expenses and loss of rents could reduce our cash flows and funds available for future dividends.

 

Our ability to pay dividends is limited and we may be unable to pay future dividends.

 

GERA has not paid cash dividends in the past and does not expect to pay dividends in the foreseeable future. The holders of our common stock are entitled to receive dividends when and if declared by our board of directors out of funds available therefore. As part of our consideration to pay cash dividends, we intend to retain adequate funds from future earnings to support the development and growth of our business. Furthermore, the payment of future dividends is at the discretion of GERA’s board of directors and is subject to a number of factors, including results of operations, general business conditions, growth, financial condition, contractual restrictions and other factors deemed relevant by GERA’s board of directors. Such factors may also prevent GERA from issuing dividends in the foreseeable future.

 

Environmental regulation and issues, over certain of which we may have no control, may adversely impact our business.

 

Federal, state and local laws and regulations impose environmental controls, disclosure rules and zoning restrictions which directly impact the management, development, use, and/or sale of real estate. Such laws and regulations tend to discourage sales and leasing activities and mortgage lending with respect to some properties, and may therefore adversely affect us specifically, and the real estate industry in general. Failure by us to uncover and adequately protect against environmental issues in connection with a target acquisition may subject us to liability as buyer of such property or asset. 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. We may be held liable for such costs as a subsequent owner of such property. Liability can be imposed even if the original actions were legal and we had no knowledge of, or were not responsible for, the presence of the hazardous or toxic substances. Further, we may also be held responsible for the entire payment of the liability if we are subject to joint and several liability and the other responsible parties are unable to pay. We 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 which could adversely affect us.

 

Certain environmental conditions exist at the Danbury Property that will require remediation in accordance with applicable state law.

 

Environmental assessments conducted at the Danbury Property revealed that certain additional remediation will be required in connection with two underground heating oil storage tanks removed from the property in 1992. The Danbury Property is subject to the Connecticut Transfer Act (the “Transfer Act”) which requires that environmental conditions at the property be assessed and remediated in connection with a sales transaction. Buildings Co., the sellers of the Danbury Property, are responsible for compliance with the Transfer Act and have agreed to perform and pay all costs associated with completing, in accordance with the requirements of the Transfer Act, all required assessments and remediation of any environmental conditions (including conditions related to the removal of the underground storage tanks) existing at the

property prior to closing identified by such assessments. In addition, to secure the performance of its obligations, at the closing, Buildings Co. deposited $2,000,000 in an escrow account which will remain in place until the completion of the Transfer Act requirements, and Buildings Co., together with Buckeye Casa Grande, L.P. and Bridgewater Investments, Inc. have agreed to indemnify Property Acquisition with respect to substantially all liabilities which may be incurred under the Transfer Act in connection with the remediation of existing hazardous substances at the Danbury Property or caused by Building Co.’s remediation activities. A Phase I Environmental Site Assessment revealed that in addition to conditions related to the removal of the underground storage tanks, additional investigation may be required with respect to potential environmental impacts from visible staining and leakage of hydraulic oil in the area of a trash compactor and loading docks adjacent to a trench drain, and visible staining within the chauffer garage adjacent to a storm drain. The remediation of the conditions related to the removal of the underground storage tanks and the remaining assessment work will be completed at the expense of Buildings Co. If Buildings Co. fails to perform its obligations under the Transfer Act and Buckeye Casa Grande, L.P. and Bridgewater Investments, Inc. do not satisfy their indemnification obligations, Property Acquisition may incur such liability as the current owner of the Danbury Property. Furthermore, any subsequent transfer of the Danbury Property prior to the completion of the Transfer Act requirements will also be subject to the requirements of the Transfer Act. Transfer of the Danbury Property subsequent to completion of the Transfer Act requirements may also be subject to the Transfer Act if certain hazardous materials activities occur at the Danbury Property thereafter.

 

Our properties may contain or develop harmful mold, which could lead to liability for adverse health effects and costs of remediating the problem.

 

When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Concern about indoor exposure to mold has been increasing as exposure to mold may cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold at any of our properties could require us to undertake a costly remediation program to contain or remove the mold from the affected property. In addition, the presence of significant mold could expose us to liability from our tenants, employees of our tenants and others if property damage or health concerns arise.

 

Our properties may contain asbestos which could lead to liability for adverse health effects and costs of remediating asbestos.

 

Certain laws and regulations govern the removal, encapsulation or disturbance of asbestos containing materials (or ACMs), when those materials are in poor condition or in the event of building renovation or demolition, impose certain worker protection and notification requirements and govern emissions of and exposure to asbestos fibers in the air. These laws may also impose liability for a release of ACMs and may enable third parties to seek recovery against us for personal injury associated with ACMs. There may be ACMs at certain of the properties we acquire.

Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make substantial unintended expenditures.

 

Any properties we acquire will be required to comply with the Americans with Disabilities Act of 1990, or the ADA. The ADA has separate compliance requirements for “public accommodations” and “commercial facilities,” but generally requires that buildings be made accessible to people with disabilities. Compliance with the ADA requirements could require removal of access barriers and non-compliance could result in imposition of fines by the U.S. government or an award of damages to private litigants, or both. While the tenants to whom we lease properties will be obligated by law to comply with the ADA provisions, and the tenants under our net leases will typically be obligated to cover costs associated with compliance, if required changes involve greater expenditures than anticipated, or if the changes must be made on a more accelerated basis than anticipated, the ability of such tenants to cover costs could be adversely affected and we could be required to expend our own funds to comply with the provisions of the ADA, which could adversely affect our results of operations and financial condition. In addition, we will be required to operate our properties in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to our properties. We may be required to make substantial capital expenditures to comply with those requirements.

 

Failure of our tenants to pay rent could seriously harm our operating results and financial condition.

 

We will rely on rental payments from tenants of a target acquisition as a source of cash. At any time, any of our tenants may experience a downturn in its business that may weaken its financial condition. As a result, a tenant may delay lease commencement, fail to make rental payments when due, decline to extend a lease upon its expiration, become insolvent or declare bankruptcy. Any tenant bankruptcy, insolvency, or failure to make rental payments when due could result in the termination of the tenant’s lease and material losses to our company. A default by a large tenant on one of these properties could have a material adverse effect on our operating results and financial condition.

 

In particular, if any of our significant tenants becomes insolvent, suffers a downturn in its business and decides not to renew its lease or vacates a property and prevents us from leasing that property by continuing to pay base rent for the balance of the term, it may seriously harm our business. Failure on the part of a tenant to comply with the terms of a lease may give us the right to terminate the lease, repossess the applicable property and enforce the payment obligations under the lease; however, we would be required to find another tenant. We cannot assure you that we would be able to find another tenant without incurring substantial costs, or at all, or that, if another tenant was found, we would be able to enter into a new lease on favorable terms.

 

The bankruptcy or insolvency of our tenants under their leases could seriously harm our operating results and financial condition.

 

Any bankruptcy filings by or relating to one of our tenants could bar us from collecting pre-bankruptcy debts from that tenant or its property. A tenant bankruptcy could delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude full collection of these sums. If a lease is assumed by the tenant in bankruptcy, all pre-bankruptcy balances due under the lease must be paid to us in full. However, if a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages. Any unsecured claim

we hold against a bankrupt entity may be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims. We may recover substantially less than the full value of any unsecured claims, which would harm our operating results and financial condition.

 

Increases in our property taxes could adversely affect our cash flow and financial condition.

 

Each of our properties will be subject to real and personal property taxes. These taxes on our properties may increase as tax rates change and as the properties are assessed or reassessed by taxing authorities. Many U.S. states and localities are considering increases in their income and/or property tax rates (or increases in the assessments of real estate) to cover revenue shortfalls. If property taxes increase, it may adversely affect our cash flow and financial condition.

 

Uninsured and underinsured losses may adversely affect operations.

 

We, or in certain instances, tenants of our properties, are likely to carry commercial general liability, fire and extended coverage insurance with respect to our properties. We plan to obtain coverage that has policy specifications and insured limits that we believe are customarily carried for similar properties. However, certain types of losses, generally of a catastrophic nature, such as earthquakes and floods, may be either uninsurable or not economically insurable. Should a property sustain damage, we may incur losses due to insurance deductibles, to co-payments on insured losses or to uninsured losses. In the event of a substantial property loss, the insurance coverage may not be sufficient to pay the full current market value or current replacement cost of the property. In the event of an uninsured loss, we could lose some or all of our capital investment, cash flow and anticipated profits related to one or more properties. Inflation, changes in building codes and ordinances, environmental considerations, and other factors also might make it not feasible to use insurance proceeds to replace a property after it has been damaged or destroyed. Under such circumstances, the insurance proceeds we receive might not be adequate to restore our economic position with respect to such property.

 

In the event of an underinsured loss with respect to a property relating to a title defect, the insurance proceeds we receive might not be adequate to restore our economic position with respect to such property. In the event of a significant loss at one or more of the properties covered by the blanket policy, the remaining insurance under our policy, if any, could be insufficient to adequately insure our remaining properties. In this event, securing additional insurance, if possible, could be significantly more expensive than our current policy.

 

If we are unable to promptly relet or renew leases as they expire, our cash flow and ability to service our indebtedness, may be adversely affected.

 

We are subject to the risks that upon expiration of leases for space located in our buildings (a) such leases may not be renewed, (b) such space may not be relet or (c) the terms of renewal or reletting, taking into account the cost of required renovations, may be less favorable than the current lease terms. If we are unable to promptly relet, or renew the leases for, a substantial portion of the space located in our buildings, or if the rental rates upon such renewal or reletting are significantly lower than expected rental rates, or if our reserves for these purposes prove inadequate, our cash flow and ability to service our indebtedness may be adversely affected.

The Company’s officer and directors will allocate some portion of their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to the Company’s affairs.

 

The Company’s officers and directors are not required to commit their full time to the Company’s affairs, which could create a conflict of interest when allocating their time between the Company’s operations and their other commitments. The Company does not intend to have any full time employees after the consummation of a business combination. All of the Company’s executive officers are currently employed by GBE and are not obligated to devote any specific number of hours to the Company’s affairs. If GBE requires them to devote more substantial amounts of time to its business and affairs, it could limit their ability to devote time to the Company’s affairs and could have a negative impact on the Company.

 

Risks Related to the Acquisition

 

Our working capital will be reduced if GERA stockholders exercise their right to convert their shares into cash. This would reduce our cash reserve after the acquisition.

 

Pursuant to our certificate of incorporation, holders of shares issued in the IPO may vote against the acquisition and demand that we convert their shares, calculated as of two business days prior to the anticipated consummation of the acquisition, into a pro rata share of the trust account where a substantial portion of the net proceeds of the IPO are held. We will not consummate the acquisition if holders of 4,791,667 or more shares of common stock issued in the IPO exercise these conversion rights. To the extent the acquisition is consummated and holders have demanded to so convert their shares, there will be a corresponding reduction in the amount of funds available to us following the acquisition. As of          , the record date, assuming the Properties Acquisition Proposal is approved, the maximum amount of funds that could be disbursed to our stockholders upon the exercise of their conversion rights is approximately $ , or approximately 20% of the funds held in the trust account. Any payment upon exercise of conversion rights will reduce our cash after the acquisition, which may limit our ability to implement our business plan.

 

If GERA stockholders fail to vote or abstain from voting on the Properties Acquisition Proposal, they may not exercise their conversion rights to convert their shares of common stock of GERA into a pro rata portion of the trust account.

 

GERA stockholders holding shares of GERA stock issued in the IPO who affirmatively vote against the Properties Acquisition Proposal may, at the same time, demand that we convert their shares into a pro rata portion of the trust account, calculated as of two business days prior to the anticipated consummation of the acquisition. GERA stockholders who seek to exercise this conversion right must affirmatively vote against the acquisition and tender their stock certificates to our transfer agent within the period specified in a notice you will receive from the Company, which period will be not less than 20 days from the date of such notice. Any GERA stockholder who fails to vote or who abstains from voting on the Properties Acquisition Proposal or who fails to tender their stock certificate (physically or electronically) within the period specified in a notice you will receive from the Company, which period will be not less than 20 days from the date of such notice, may not exercise his conversion rights and will not receive a pro rata portion of the trust account for conversion of his shares.

GBE currently owns shares of the Company’s stock and warrants which will not participate in liquidation distributions. Consequently, they may have a conflict of interest.

 

GBE owns 5,667,719 shares of the Company’s common stock that were issued prior to the IPO, but has waived its right to receive distributions with respect to those shares upon the Company’s liquidation if the Company is unable to consummate a business combination. Additionally, GBE has purchased approximately 4.6 million warrants for an aggregate purchase price excluding commissions of approximately $2.2 million in the open market. These shares of common stock and warrants owned by GBE will be worthless if the Company does not consummate a business combination.

 

Certain of our current directors and executive officers own shares of common stock and warrants that will be worthless if the acquisition is not approved. Consequently, they may have a conflict of interest.

 

Our chief executive officer, Mark E. Rose and all of our directors and certain of their affiliates beneficially own stock in GERA that they were issued prior to the IPO. Additionally, certain of these persons purchased units in connection with the IPO, which contained           warrants and also purchased          warrants in the public market after the IPO. Our executives and directors and their affiliates are not entitled to receive any of the cash proceeds that may be distributed upon our liquidation with respect to shares they acquired prior to the IPO. Therefore, if the acquisition is not approved and we are forced to liquidate, such shares held by such persons will be worthless, as will the warrants.

 

If we do not consummate the acquisition and are forced to dissolve and liquidate, payments from the trust account to our public stockholders may be delayed.

 

In the event that the LLC Acquisition Agreement is not consummated by March 3, 2008, GERA must be liquidated. We anticipate that, if we are forced to liquidate, the following will occur:

 

 

 

 

 

We expect that all costs associated with the implementation and completion of our plan of dissolution and liquidation will be funded by any remaining net assets not held in the trust account, although we cannot assure you that there will be sufficient funds for such purpose.

 

We will not liquidate the trust account unless and until our stockholders approve our plan of dissolution and liquidation. Accordingly, the foregoing procedures may result in substantial delays in our liquidation and the distribution to our public stockholders of the funds in our trust account and any remaining net assets as part of our plan of dissolution and liquidation.

 

Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them.

 

If we are unable to complete the acquisition of Property Acquisition, we will dissolve and liquidate pursuant to Section 275 of the DGCL. Under Sections 280 through 282 of the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in dissolution. Pursuant to Section 280, if the corporation complies with certain procedures intended to ensure that it makes reasonable provisions for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of a stockholder with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. Although we will seek stockholder approval to liquidate the trust account to our public stockholders as part of our plan of dissolution and liquidation, we will seek to conclude this process as soon as possible and as a result do not intend to comply with those procedures. Because we will not be complying with those procedures, we are required, pursuant to Section 281 of the DGCL, to adopt a plan that will provide for our payment, based on facts known to us at such time, of (i) all existing claims, (ii) all pending claims and (iii) all claims that may be potentially brought against us within the subsequent 10 years. Accordingly, we would be required to provide for any creditors known to us at that time or those that we believe could be potentially brought against us within the subsequent 10 years prior to distributing the funds held in the trust to stockholders. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them in dissolution (but no more) and any liability of our stockholders may extend well beyond the third anniversary of such dissolution. Accordingly, we cannot assure you that third parties will not seek to recover from our stockholders amounts owed to them by us.

 

Additionally, if we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us that is not dismissed, any distributions received by stockholders in our dissolution might be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders in our dissolution. Furthermore, because we intend to distribute the proceeds held in the trust account to our public stockholders as soon as possible after our dissolution, this may be viewed or interpreted as giving preference to our public stockholders over any potential creditors with respect to access to or distributions from our assets. Furthermore, our board of directors may be viewed as having breached their fiduciary duties to our creditors and/or may have acted in bad faith, and thereby exposing itself and our company to claims of punitive damages, by paying public stockholders from the trust

account prior to addressing the claims of creditors and/or complying with certain provisions of the DGCL with respect to our dissolution and liquidation. We cannot assure you that claims will not be brought against us for these reasons.

 

The Company has entered into a long term brokerage services agreement, a long term property management agreement and a long term project management agreement with GBE without the benefit of the oversight or approval of a separate committee of independent directors and therefore may not reflect the terms that may have been negotiated by third parties.

 

The Company has entered into a long term brokerage services agreement, a long term property management agreement and a long term project management agreement with GBE. Although these agreements were entered into at the time of the IPO upon the unanimous approval of the board of directors of both the Company and GBE based upon what the parties believed were then current market rates, they were not negotiated or approved by a special committee of independent directors, and as such may not reflect the terms that may have been negotiated by third parties. Pursuant to these agreements, GBE will serve as the Company’s exclusive agent with respect to commercial real estate brokerage and property management, and will perform project management services at the Company’s request. As a result, GBE will stand to earn substantial fees and revenues in accordance with the terms and conditions of these agreements.

 

Due to the fact that all of the Company’s current officers are employed by GBE and certain of the Company’s directors also serve on the board of directors of GBE, a conflict of interest may arise.

 

Due to the fact that the Company’s officers are also officers of GBE and certain of the Company’s directors are also directors of GBE, a conflict of interest could arise when determining whether the terms, conditions and timing of a particular business combination are appropriate and in the Company’s stockholders’ best interest. In addition, GBE, as a commercial real estate broker, has relationships with a significant number of clients pursuant to which GBE would be expected to provide commercial real estate properties that could also be appropriate for presentation to the Company. The Company is one of GBE’s numerous clients to whom GBE is expected to provide commercial real estate properties opportunities. The Company does not have preferential rights to be presented with any such properties. Accordingly, although GBE is the Company’s exclusive agent with respect to commercial real estate brokerage and facilities management, it provides such services to the Company on a non-exclusive basis.

 

FORWARD-LOOKING STATEMENTS

 

We believe that some of the information in this proxy statement constitutes forward-looking statements within the definition of the Private Securities Litigation Reform Act of 1995. However, the safe-harbor provisions of that act do not apply to statements made in this proxy statement. You can identify these statements by forward-looking words such as “may,” “expect,” “anticipate,” “contemplate,” “believe,” “estimate,” “intends,” and “continue” or similar words. You should read statements that contain these words carefully because they:

 

 

 

 

We believe it is important to communicate our expectations to our stockholders. However, there may be events in the future that we are not able to predict accurately or over which we have no control. The risk factors and cautionary language discussed in this proxy statement provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by us in such forward-looking statements, including among other things:

 

 

 

 

 

 

 

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement.

 

All forward-looking statements included herein attributable to any of GERA, Property Acquisition or any person acting on either party’s behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, GERA and GBE undertake no obligations to update these forward-looking statements to reflect events or circumstances after the date of this proxy statement or to reflect the occurrence of unanticipated events.

 

Before you grant your proxy or instruct how your vote should be cast or vote on the adoption of the Properties Acquisition Proposal, you should be aware that the occurrence of the events described in the “Risk Factors” section and elsewhere in this proxy statement could have a material adverse effect on GERA, Property Acquisition and/or GBE.

 

SPECIAL MEETING OF GERA STOCKHOLDERS

 

General

 

We are furnishing this proxy statement to GERA stockholders as part of the solicitation of proxies by our board of directors for use at the special meeting of GERA stockholders to be held on          , and at any adjournment or postponement thereof. This proxy statement is first being furnished to our stockholders on or about           in connection with the vote on the Properties Acquisition Proposal, the Article Sixth Amendment Proposal, the 2007 Equity Plan Proposal, the Director Nomination Proposal, and the E&Y Ratification Proposal. This document provides you with the information you need to know to be able to vote or instruct your vote to be cast at the special meeting.

 

Date, Time and Place

 

The special meeting of stockholders will be held on          , at 10:00 a.m., Eastern Time, at           .

 

Purpose of the GERA Special Meeting

 

At the special meeting, we are asking holders of GERA common stock to:

 

 

 

 

 

 

Recommendation of GERA Board of Directors

 

Our board of directors:

 

 

 

 

 

 

 

 

The recommendation of our board of directors with respect to the Properties Acquisition Proposal is based in part on the unanimous recommendation of the special committee of the board that was formed to consider and evaluate the transaction.

 

Record Date; Who is Entitled to Vote

 

We have fixed the close of business on          , as the “record date” for determining GERA stockholders entitled to notice of and to attend and vote at the special meeting. As of the close of business on          , there were          shares of our common stock outstanding and entitled to vote. Each share of our common stock is entitled to one vote per share at the special meeting.

 

Pursuant to agreements with us, the 5,876,069 shares of our common stock held by stockholders who purchased their shares of common stock prior to the IPO will be voted on the Properties Acquisition Proposal in accordance with the majority of the votes cast at the special meeting.

 

Quorum

 

The presence, in person or by proxy, of a majority of all the outstanding shares of common stock constitutes a quorum at the special meeting.

 

Abstentions and Broker Non-Votes

 

Proxies that are marked “abstain” and proxies relating to “street name” shares that are returned to us but marked by brokers as “not voted” will be treated as shares present for purposes of determining the presence of a quorum on all matters. The latter will not be treated as shares entitled to vote on the matter as to which authority to vote is withheld from the broker. If you do not give the broker voting instructions, under the rules of the National Association of Securities Dealers (“NASD”), your broker may not vote your shares on the Properties Acquisition Proposal, the Article Sixth Amendment Proposal, the 2007 Equity Plan Proposal, the Director Nomination Proposal, or the E&Y Ratification Proposal. Since a stockholder must affirmatively vote against the Properties Acquisition Proposal to have conversion rights, individuals who fail to vote or who abstain from voting may not exercise their conversion rights. Beneficial holders of shares held in “street name” that are voted against the Properties Acquisition Proposal may exercise their conversion rights, provided that they have their shares delivered to our transfer agent within the period specified in a notice you will receive from the Company, which period will be not less than 20 days from the date of such notice. See the information set forth in “Special Meeting of GERA Stockholders—Conversion Rights.”

 

If you choose to have your shares certificated, we have been informed that our transfer agent, Continental Stock & Trust Company, will not charge any fees in connection with the tender of physical certificates. If you elect to have physical delivery of your share certificates, you would have to comply with the following steps. If your shares are held in street name, you must instruct

your account executive at your bank or broker to withdraw the shares from the your account and request that a physical certificate be issued in the your name. Our transfer agent, will be available to assist with this process. After the meeting, the Company will send a notice to all Converting Stockholders advising them of the requirement to deliver their shares to the transfer agent, which notice will specify the time period (which will be not less than 20 days from the date of the notice) during which such delivery must be made. Once you have received such notice, you must submit your certificated shares to the transfer agent within the period specified in the notice. Certificates that have not been tendered in accordance with these procedures will not be converted into cash.

 

Vote of Our Stockholders Required

 

The approval of the Properties Acquisition Proposal will require the affirmative vote of the holders of a majority of the shares of GERA common stock issued in the IPO present in person or represented by proxy and entitled to vote at the special meeting. Abstentions will have the same effect as a vote “AGAINST” the Properties Acquisition Proposal and broker non-votes, while considered present for the purposes of establishing a quorum, will have no effect on the Properties Acquisition Proposal. You cannot seek conversion unless you affirmatively vote against the Properties Acquisition Proposal.

 

The Article Sixth Amendment Proposal will require the affirmative vote of the holders of a majority of GERA common stock outstanding on the record date. Because this proposal to amend our charter requires the affirmative vote of a majority of the shares of common stock outstanding, abstentions and shares not entitled to vote because of a broker non-vote will have the same effect as a vote against this proposal.

 

The approval of the 2007 Equity Plan Proposal, the Director Nomination Proposal and the E&Y Ratification Proposal will require the affirmative vote of the holders of a majority of our common stock represented and entitled to vote at the special meeting. Abstentions are deemed entitled to vote on the proposals. Therefore, they have the same effect as a vote against the proposal. Broker non-votes are not deemed entitled to vote on the proposal and, therefore, they will have no effect on the vote on the proposal.

 

Voting Your Shares

 

Each share of GERA common stock that you own in your name entitles you to one vote. Your proxy card shows the number of shares of our common stock that you own.

 

There are two ways to vote your shares of GERA common stock at the special meeting:

 

 

 

IF YOU DO NOT VOTE YOUR SHARES OF OUR COMMON STOCK IN ANY OF THE WAYS DESCRIBED ABOVE, IT COULD HAVE THE SAME EFFECT AS A VOTE AGAINST THE ADOPTION OF THE PROPERTIES ACQUISITION PROPOSAL, BUT WILL NOT HAVE THE EFFECT OF A DEMAND FOR CONVERSION OF YOUR SHARES INTO A PRO RATA SHARE OF THE TRUST ACCOUNT IN WHICH A SUBSTANTIAL PORTION OF THE PROCEEDS OF THE IPO (AND THE INTEREST EARNED FROM THEREON) ARE HELD.

 

Revoking Your Proxy

 

If you give a proxy, you may revoke it at any time before it is exercised by doing any one of the following:

 

 

 

 

Who Can Answer Your Questions About Voting Your Shares

 

If you have any questions about how to vote or direct a vote in respect of your shares of our common stock, you may call [          ] , our proxy solicitor, at [          ] , or Robert Slaughter, our corporate secretary at (312) 698-6700.

 

No Additional Matters May Be Presented at the Special Meeting

 

This special meeting has been called only to consider the adoption of the Properties Acquisition Proposal, Article Sixth Amendment Proposal, 2007 Equity Plan Proposal, Director Nomination Proposal and E&Y Ratification Proposal. Other than procedural matters incident to the conduct of the special meeting, no other matters will be considered at the special meeting if they are not included in the notice of the special meeting.

 

Conversion Rights

 

Any of our stockholders holding shares of GERA common stock issued in the IPO as of the record date who affirmatively votes these shares against the Properties Acquisition Proposal may demand that we convert such shares into a pro rata portion of the trust account (including interest thereon, but excluding taxes on such interest and any amounts representing the underwriters’ deferred discount), calculated as of two business days prior to the anticipated consummation of the acquisition. Demand may be made by checking the box on the proxy card provided for that purpose and returning the proxy card in accordance with the instructions provided. Demand may also be made in any other writing that clearly states that conversion is demanded and is delivered so that it is received by GERA at any time prior to the special meeting. If demand is properly made, the Properties Acquisition Proposal is approved and the LLC Acquisition Agreement is consummated, we will convert these shares into a pro rata portion of funds held in the trust account (including interest thereon, but excluding taxes on such interest and any amounts representing the underwriters’ deferred discount), calculated as of two business days prior to the anticipated consummation of the acquisition.

GERA stockholders who seek to exercise this conversion right (“Converting Stockholders”) must affirmatively vote against the acquisition proposal. Abstentions and broker non-votes do not satisfy this requirement. Additionally, holders demanding conversion must deliver their stock certificates (either physically or electronically using Depository Trust Company’s DWAC (Deposit Withdrawal at Custodian) System) to our transfer agent after the meeting. After the meeting, the Company will send a notice to all Converting Stockholders advising them of the requirement to deliver their shares to the transfer agent, which notice will specify the time period (which will be not less than 20 days from the date of the notice) during which such delivery must be made. If you hold the shares in street name, you will have to coordinate with your broker to have your shares certificated or delivered electronically. Certificates that have not been tendered (either physically or electronically) in accordance with these procedures will not be converted into cash.

 

If you choose to have your shares certificated, we have been informed that our transfer agent, Continental Stock & Trust Company, will not charge any fees in connection with the tender of physical certificates. If you elect to have physical delivery of your share certificates, you would have to comply with the following steps. If your shares are held in street name, you must instruct your account executive at your bank or broker to withdraw the shares from the your account and request that a physical certificate be issued in the your name. Our transfer agent, will be available to assist with this process. After the meeting, the Company will send a notice to all Converting Stockholders advising them of the requirement to deliver their shares to the transfer agent, which notice will specify the time period (which will be not less than 20 days from the date of the notice) during which such delivery must be made. Once you have received such notice, you must submit your certificated shares to the transfer agent within the period specified in the notice. Certificates that have not been tendered in accordance with these procedures will not be converted into cash.

 

The closing price of our common stock on          (the record date) was $     and the per-share, pro-rata cash held in the trust account on the record date was approximately $     . Prior to exercising conversion rights, our stockholders should verify the market price of our common stock as they may receive greater proceeds from the sale of their common stock in the public market than from exercising their conversion rights if the market price per share is higher than the conversion price. We cannot assure our stockholders that they will be able to sell their shares of GERA common stock in the open market, even if the market price per share is higher than the conversion price stated above, as there may not be sufficient liquidity in our securities when our stockholders wish to sell their shares.

 

If the holders of 4,791,667 or more shares of common stock issued in the IPO (an amount equal to 20% or more of those shares), vote against the acquisition and properly demand conversion of their shares, we will not be able to consummate the acquisition.

 

If you exercise your conversion rights, then you will be exchanging your shares of our common stock for cash and will no longer own those shares. You will be entitled to receive cash for these shares only if you affirmatively vote against the acquisition proposal, properly demand conversion, and deliver your stock certificate (either physically or electronically) to our transfer agent after the meeting within the period specified in a notice that you will receive from the Company, which period will be not less than 20 days after the date of such notice.

 

Appraisal Rights

 

Stockholders of GERA do not have appraisal rights in connection with the acquisition under the DGCL.

 

Proxy Solicitation Costs

 

We are soliciting proxies on behalf of our board of directors. This solicitation is being made by mail but also may be made by telephone or in person. We and our directors, officers and employees may also solicit proxies in person, by telephone or by other electronic means.

 

We have hired [          ] to assist in the proxy solicitation process. We will pay [          ] a fee of approximately $     plus disbursements. Such fee will be paid with non-trust account funds.

 

We will ask banks, brokers and other institutions, nominees and fiduciaries to forward its proxy materials to their principals and to obtain their authority to execute proxies and voting instructions. We will reimburse them for their reasonable expenses.

 

THE PROPERTIES ACQUISITION PROPOSAL

 

The discussion in this document of the acquisition and the principal terms of the LLC Acquisition Agreement is qualified in its entirety by reference to the LLC Acquisition Agreement. A copy of the LLC Acquisition Agreement is attached as Annex A to this proxy statement.

 

General Description of the Acquisition

 

Pursuant to the LLC Acquisition Agreement, GERA will acquire all of the issued and outstanding membership interests of Property Acquisition and as a consequence thereof will indirectly acquire the Properties. Upon the closing of the transactions contemplated by the LLC Acquisition Agreement, GBE will receive from GERA the LLC Purchase Price in cash. The LLC Purchase Price represents the amounts invested in or advanced to Property Acquisition by GBE to fund the aggregate purchase price paid by Property Acquisition for the Properties plus interest expense, imputed interest on cash advanced to Property Acquisition or any of the SPEs by GBE, and costs and expenses associated with the evaluation, acquisition, financing and operation of the Properties.

 

GERA and GBE have also agreed that pursuant to the Services Agreement, GERA will pay GBE an acquisition fee equal to one percent of the acquisition price for each of the Properties. Accordingly, in addition to the LLC Purchase Price, at the closing of the LLC Acquisition Agreement, GERA shall pay GBE an acquisition fee of $1,222,000 with respect to the Properties.

 

Background of the Acquisition

 

GERA was formed on September 7, 2005 for the purpose of acquiring, through a purchase, asset acquisition or other business combination, one or more United States commercial real estate properties and/or assets. In March 2006, GERA consummated the IPO, from which it derived net proceeds of approximately $133.4 million, including proceeds from the exercise of the underwriters’ over-allotment option. Approximately $132.3 million of the net proceeds from the IPO, along with the initial capital from GBE of $2.5 million and a deferred underwriting discount of approximately $2.7 million, were placed in a trust account.

Following the completion of the IPO, GBE, acting on behalf of GERA established a group of professionals (the “GERA Acquisition Team”) led by Mark Chrisman, executive vice president of acquisitions of GBE and a member of our investment committee, to identify and review acquisition opportunities that fit within GERA’s identified investment strategy as set forth in the final prospectus for the IPO. In addition to sourcing investment opportunities for GERA through the GBE network of brokers, the GERA Acquisition Team marketed GERA’s business plan to, and sourced investment opportunities from, real estate professionals (including brokers and owners of large real estate portfolios) from outside of the GBE network of brokers. The GERA Acquisition Team reviewed acquisition opportunities that had an aggregate value of approximately $5.8 billion and that consisted of approximately 60 million square feet of rentable space in 30 states. The acquisition opportunities that were considered by the GERA Acquisition Team included entire companies, distinct property portfolios, individual properties and joint ventures.

 

As a result of the GERA Acquisition Team’s contacts with real estate professionals outside of the GBE network of brokers, the GERA Acquisition Team became aware of the availability of the Dallas Property in June 2006. The property was listed by CB Richard Ellis and presented to the GERA Acquisition Team directly by the listing broker. During August 2006, GERA tendered a non-binding letter of intent to acquire the Dallas Property and two other properties (all of which were owned by the same entity) located in the Dallas metropolitan area. The owner sold the other two properties to an unaffiliated purchaser, but as a consequence of the non-binding letter of intent tendered by GERA, in October 2006, pursuant to a “warehousing strategy” authorized by the GBE board, as more fully described below, Property Acquisition entered into a contract to acquire the Dallas Property. Pursuant to this contract, Property Acquisition had the right to terminate the contract for any reason without loss of its earnest money deposit or other penalty during a specified due diligence period. During December 2006 through February 2007, the contract for the Dallas Property was amended a number of times to, among other things, extend the due diligence period several times, reduce the purchase price, cause the terms of a tenant lease to be modified and extend the closing date. The Dallas Property was purchased by GERA Abrams Centre LLC, a wholly-owned subsidiary of Property Acquisition, on February 20, 2007 pursuant to this negotiated process.

 

As a result of the GERA Acquisition Team’s contacts with real estate professionals outside of the GBE network of brokers, the GERA Acquisition Team became aware of the availability the Rosemont Property in October 2006. The property, which since September 2005 was managed by GEMS, a wholly-owned subsidiary of GBE, was presented to the GERA Acquisition Team by the then owner of the property on a direct basis as an off-market transaction. The property was not marketed for sale by a listing broker. During December 2006, GERA entered into a non-binding letter of intent to acquire the Rosemont Property, and as a consequence of the non-binding letter of intent entered into by GERA, in February 2007, pursuant to the warehousing strategy being pursued by GBE, Property Acquisition entered into a contract to acquire the Rosemont Property. Pursuant to this contract, Property Acquisition had the right to terminate the contract for the Rosemont Property for any reason without loss of its earnest money deposit or other penalty during a specified due diligence period. The Rosemont Property was purchased by GERA 6400 Shafer LLC, a wholly-owned subsidiary of Property Acquisition, on February 28, 2007 pursuant to this negotiated process.

 

The GERA Acquisition Team became aware of the Danbury Property in July 2006. The property was listed by GBE and was managed by GEMS, a wholly-owned subsidiary of GBE. GBE became the leasing agent for the Danbury Property in April 2002 and GBE became the listing

broker of the sale of the Danbury Property in June 2006. GEMS entered into a contract in June 2006 to commence management of the Danbury Property in January 2007. GBE, in its capacity as the broker for Buildings Co., the seller of the Danbury Property, conducted an auction process for the Danbury Property. The GERA Acquisition Team did not participate in the auction process. As a result of the auction process, Buildings Co. with the assistance of GBE, in its capacity as the broker for Buildings Co., selected a preferred purchaser and entered into negotiations with this purchaser. However, Buildings Co. and the preferred purchaser from the auction process were unable to enter into a definitive agreement with respect to the transaction. Following the termination of the discussions between Buildings Co. and the preferred purchaser from the auction process, the GERA Acquisition Team entered into discussions with Buildings Co. and began its due diligence review of the Danbury Property. As a result of these discussions, in February 2007, Property Acquisition, in accordance with GBE’s warehousing strategy, entered into a contract to acquire the Danbury Property and another nearby parcel, which permitted Property Acquisition to terminate the contract for any reason without loss of its earnest money deposit or other penalty during a specified due diligence period. During March and April 2007, the contract was amended a number of times to, among other things, extend the due diligence period several times, reduce the purchase price, exclude the smaller parcel from the transaction, address certain environmental issues and extend the closing date. The Danbury Property was purchased by GERA Danbury LLC, a wholly-owned subsidiary of Property Acquisition, on June 15, 2007 through this negotiated process.

 

The concept of GBE warehousing properties for the GERA business combination was introduced to the GBE board of directors at its August 15, 2006 meeting. At this meeting, GBE’s chief executive officer, Mark Rose, provided the GBE board of directors with an update on the status of GBE’s review of acquisition opportunities identified by the GERA Acquisition Team to date. Mr. Rose explained to GBE’s board of directors that, because of the legal requirements that must be satisfied for GERA to accomplish its business combination, the process of identifying suitable acquisition opportunities for GERA and completing the business combination faced two principal challenges, transaction size and transaction speed. In order to address these challenges, Mr. Rose proposed to GBE’s board of directors a strategy under which GBE would purchase properties with the intention of re-selling them to GERA on a basis that is cost neutral to GBE at such time as GBE had accumulated assets of sufficient value for GERA to seek approval of a business combination from its stockholders. Mr. Rose then explained that the proposed strategy had not been considered by the members of the board of directors of GERA (other than persons who were also members of GBE’s board of directors) and, as a result, that there were no understandings, arrangements or agreements of any nature whatsoever between GERA and GBE with respect to any properties.

 

At a meeting of GBE’s board of directors on September 21, 2006, GBE management sought approval from GBE’s board of directors to pursue the warehousing strategy discussed at the board’s August 15, 2006 meeting and approval of the acquisition of the Dallas Property as part of the warehousing strategy. In connection with its proposals, GBE’s management reiterated to GBE’s board of directors that neither the purchase of the Dallas Property nor the warehousing strategy had been considered by GERA’s board of directors (other than persons who were also members of GBE’s board of directors) and, as a result, that there were no understandings, arrangements or agreements of any nature whatsoever between GERA and GBE with respect to any properties, including the Dallas Property.

 

At a meeting of GBE’s board of directors on September 25, 2006, GBE’s board of directors authorized the warehousing strategy and authorized GBE, through Property Acquisition, to

enter into a contract to purchase the Dallas Property pursuant to such strategy. GBE’s board of directors authorized GBE, through Property Acquisition, to enter into contracts to acquire the Rosemont Property and the Danbury Property on January 8, 2007. In addition, on February 10, 2007, GBE’s board of directors authorized GBE to enter into specific modifications to its credit facility to facilitate the warehousing strategy.

 

The warehousing concept was not introduced for consideration to GERA’s board of directors until GERA’s officers were reasonably comfortable that GBE would be able to aggregate properties that appeared to meet GERA’s acquisition strategy and that would collectively satisfy the criteria for a business combination.

 

On January 16, 2007, GERA held a telephonic meeting of its board of directors. All members of the board were present along with Mark Chrisman, executive vice president of acquisitions of GBE, Don Olinger, interim chief financial officer of GERA and interim chief financial officer of GBE, Robert Slaughter, executive vice president and general counsel of GBE, and Clifford Brandeis, Esq. of Zukerman Gore & Brandeis, LLP, outside counsel to GERA. Mark Rose, the chief executive officer of GERA and a member of the board of directors of GERA, who is also the chief executive officer and a member of the board of directors of GBE, opened the meeting by reminding the board of certain requirements and timing issues related to GERA completing a business combination. Mr. Rose specifically noted that: (a) GERA must complete a business combination by the beginning of September 2007 (or the beginning of March 2008, if GERA has entered into a letter of intent, agreement in principle or definitive agreement with respect to a business combination prior to the beginning of September 2007), and if GERA is unable to complete a business combination within this time frame, GERA would be liquidated and dissolved and the proceeds held in trust would be distributed to GERA’s public stockholders; (b) the business combination must have a fair market value equal to at least 80% of the amount held in trust from time to time; (c) the target entity, asset or property for the business combination must have audited financial statements; and (d) the business combination must be approved by the holders of a majority of GERA common stock issued in the IPO present in person or represented by proxy at the special meeting, and the holders of 20% or more of the common stock issued in the IPO must not vote against the business combination and exercise their conversion rights.

 

Mr. Rose then updated the GERA board of directors with respect to the actions taken by GBE on behalf of GERA since the closing of the IPO. Mr. Rose next explained to the GERA board the challenges that the GERA Acquisition Team encountered in connection with pursuing acquisition opportunities on behalf of GERA. Specifically, Mr. Rose explained to the board that speed was an issue in the competitive commercial real estate market and that, in the current environment, sellers of desirable commercial real estate properties were typically unwilling to agree to the uncertainty and lengthy delay between executing a definitive agreement and closing that would result in connection with selling properties to GERA due to the necessity to obtain stockholder approval, of which there could be no assurances. Mr. Rose then explained to the GERA board that in response to these challenges, and in an attempt to mitigate this competitive disadvantage, the GBE board of directors authorized GBE to pursue a warehousing strategy under which GBE would acquire commercial real estate properties with the intention of re-selling the properties to GERA in the business combination. Mr. Rose emphasized, however, that there were no understandings, arrangements or agreements of any nature whatsoever between GERA and GBE with respect to any properties.

 

At this same meeting, Mr. Chrisman advised the board that there were three properties GBE had identified to implement this strategy. Mr. Chrisman indicated that the subject properties fit

well with GERA’s acquisition strategy and would collectively satisfy the criteria for a business combination. Mr. Rose then explained to the board that GBE was prepared to own the properties for its own account in the event that the board did not want to pursue the proposed strategy or if the business combination was not ultimately approved by the board or the stockholders of GERA. Mr. Rose further explained to the board that, at the time, GBE was under contract to acquire the Dallas Property, close to signing a contact to acquire the Rosemont Property, and was in negotiations to acquire the Danbury Property. Mr. Rose reiterated to the board that GBE’s determination to enter into a definitive agreement in respect of the Dallas Property and to pursue the other Properties did not impose any obligation on the board to approve this strategy or on GERA to purchase the Properties, even if the board determined to undertake further investigation of the proposed strategy. Mr. Chrisman then described the Properties in detail and a discussion ensued regarding the proposed strategy, the Properties, the proposed terms of the purchase of the Properties by GBE, and the possible terms and structure of the purchase of the Properties by GERA from GBE, including the need to create a special committee of the board comprised solely of independent directors to consider and evaluate any such transaction between GBE and GERA.

 

In February 2007, GBE, through subsidiaries of Property Acquisition, acquired the Dallas Property for an aggregate purchase price of $20 million. In addition, on February 9, 2007, a subsidiary of GBE entered into a definitive agreement to acquire the Rosemont Property for an aggregate purchase price of $21.45 million, and the acquisition of this property was completed on March 1, 2007. On February 20, 2007, a subsidiary of GBE entered into a definitive agreement to acquire the Danbury Property for an aggregate purchase price of $86 million, and the acquisition of this property was completed on June 15, 2007.

 

On March 5, 2007, the board of directors of GERA held a meeting to discuss the proposed acquisition strategy outlined at its previous meeting, as well as issues relating to, and the structure of, a possible transaction with GBE. All of the board members were in attendance along with Richard W. Pehlke, executive vice president and chief financial officer of GBE (who was appointed chief financial officer of GERA at the meeting) and Messrs. Slaughter, Chrisman and Brandeis. During this meeting, Mr. Rose updated the board on the status of the acquisitions of the Properties by subsidiaries of GBE. Mr. Rose explained to the board that the acquisitions of the Dallas Property and the Rosemont Property were complete, and that a subsidiary of GBE had entered into a definitive agreement to acquire the Danbury Property. Mr. Rose then described for the board the terms of the acquisitions that had been completed, as well as the financial condition and other attributes of all of the Properties. In discussing the general attributes of the Properties, Mr. Rose noted for the board that the Properties fit well with the acquisition strategy of GERA described in its final IPO prospectus. The board then discussed the Properties, GBE’s due diligence of the Properties (including possible environmental issues at the Danbury Property), the plans for repositioning the Properties, the economic condition of the commercial real estate market generally and in the specific markets in which the Properties are located and potential exit strategies for the Properties.

 

Following Mr. Rose’s presentation, the board, including all of the independent members of the board, unanimously determined that pursuing the acquisition strategy was in the best interests of GERA and its public stockholders. Following this discussion, Messrs. Slaughter and Brandeis advised the board that due to the fact that pursuing the acquisition strategy would involve the purchase by GERA of assets from GBE, the founding stockholder of GERA, and the fact that two of the board members, Mr. Kojaian and Mr. Rose, were also affiliates of GBE, it would be advisable to establish a special committee of the board comprised solely of the

independent members of the board to consider and evaluate a possible transaction between GERA and GBE. Following this discussion, the board established a special committee consisting of William Downey, Melvin Lazar and Alan Stillman to consider and evaluate the proposed transaction with GBE. Each of Messrs. Downey, Lazar and Stillman are “independent directors” as defined by American Stock Exchange rules governing its listed companies.

 

On March 8, 2007, the special committee of the board retained Willkie Farr & Gallagher LLP, or Willkie Farr, as its counsel. Following its retention, and at the direction of the special committee, Willkie Farr began confirmatory due diligence of each of the Properties, focusing primarily on any issues that were identified by GBE and its counsel during their due diligence review of the Properties.

 

On March 21, 2007, a telephonic meeting of the special committee was held. All members of the special committee were present along with representatives from Willkie Farr. At the meeting, the special committee and Willkie Farr discussed the three Properties in detail, focusing primarily on the status of the acquisition of the Danbury Property, including the environmental due diligence issues that had been identified to date, as well as the anticipated special committee process.

 

On April 16, 2007, the board of directors of GERA held a telephonic meeting attended by all of the members of the board, including the members of the special committee. Also attending the meeting were Messrs. Pehlke, Slaughter, Chrisman and Brandeis. At the meeting, Mr. Rose advised the board that GBE was in the process of re-negotiating its agreement with respect to the proposed purchase of the Danbury Property, principally to bifurcate the purchase into two parcels so as to facilitate GBE’s purchase of the larger parcel as soon as practicable. Mr. Rose explained to the board that it was anticipated that this would result in a reduction of the proposed purchase price with respect to the Danbury Property of approximately $4.75 million. The board was advised that the Danbury Property was being divided so as to eliminate, for the time being, the smaller parcel from the transaction given certain potential environmental issues that had been identified during the course of due diligence.

 

Mr. Pehlke then advised the board that GBE had executed a term sheet with Wachovia Bank to provide financing with respect to the Properties. Mr. Pehlke also explained to the board that Wachovia Bank was in the process of obtaining independent appraisals of the Properties and preparing the documentation with respect to the loan transaction. Mr. Lazar requested that a copy of the term sheet be forwarded to the special committee’s counsel, Willkie Farr.

 

Mr. Rose then gave the board an update on the commercial real estate environment surrounding the Dallas Property and the Rosemont Property. Specifically, Mr. Rose advised the board that GBE believed that leasing prospects for the Dallas Property had improved since GBE acquired the property, as evidenced by the new leases that were being negotiated at the Dallas Property at higher rental rates. In addition, Mr. Rose advised the board that GBE believed that the value of the Dallas Property had appreciated since the date of acquisition because sales of comparable properties in the vicinity of the Dallas Property which were in process had per square foot sales prices that were greater than the per square foot purchase price paid by GBE for the Dallas Property. Mr. Rose also noted renewed interest in the Rosemont Property.

 

From March 21, 2007 through April 24, 2007, the special committee interviewed a number of prospective financial advisors and held several separate meetings. At a meeting of the special committee held on April 23, 2007, in addition to focusing on the interviews with the prospective financial advisors that had taken place to date, the special committee and Willkie Farr had

detailed discussions regarding the due diligence that Willkie Farr had undertaken since March 2007. In addition, at this meeting, Steven Seidman of Willkie Farr discussed with the special committee its fiduciary duties in the context of the proposed transaction. On April 24, 2007, at a meeting of the special committee, the special committee unanimously determined to retain Peter J. Solomon Company, or PJSC, as its financial advisor. On May 8, 2007, GERA entered into a letter agreement with PJSC with respect to its engagement as financial advisor to the special committee.

 

On April 30, 2007, Property Acquisition entered into an amendment to the purchase and sale agreement in respect of the Danbury Property. Under the terms of the amendment, among other things, the parties agreed to exclude from the transaction the smaller parcel located at the Danbury Property. As a result of the exclusion of the smaller parcel from the transaction, the aggregate purchase price was reduced by $5.25 million to $80.75 million.

 

On May 10, 2007, a telephonic meeting of the special committee was held. All of the members of the special committee were present along with representatives from Willkie Farr and Jeffrey Hornstein of PJSC. At the meeting, the special committee, Willkie Farr and PJSC discussed the various transactions that had been entered into or would be entered into between GERA and GBE or its affiliates in connection with the proposed transaction. At the meeting, Willkie Farr and PJSC also described for the special committee the transaction structure that was being proposed by GBE, which involved the purchase by GERA of all of the membership interests of Property Acquisition. Willkie Farr explained to the special committee that through GERA’s acquisition of all of the membership interests of Property Acquisition, GERA would indirectly acquire all of the Properties. Following this discussion, the special committee instructed Willkie Farr and PJSC to schedule a conference call with GBE and its advisors to discuss and clarify several aspects of the GBE proposal.

 

On May 11, 2007, a draft of the LLC Acquisition Agreement was distributed to the special committee and its advisors. On May 15, 2007, Willkie Farr distributed a mark-up of the LLC Acquisition Agreement to counsel for GBE.

 

On May 14, 2007, Willkie Farr and PJSC participated in a conference call with counsel to GBE. During this conference call, counsel to GBE clarified several matters for Willkie Farr and PJSC regarding the GBE proposal, including several questions regarding the computation of the purchase price in the proposed transaction. Specifically, on this conference call, counsel to GBE provided an explanation of the nature of the fees and expenses incurred by GBE in connection with its acquisition of each of the Properties, as well as an explanation of the computation of the imputed interest component of the purchase price. Counsel to GBE explained that the interest rate utilized for purposes of computing the imputed interest component of the purchase price was based on GBE’s borrowing cost under its senior secured credit facility.

 

On May 21, 2007, a telephonic meeting of the special committee was held. All of the members of the special committee were present along with representatives from Willkie Farr and Jeffrey Hornstein of PJSC. At the meeting, Willkie Farr and PJSC updated the special committee on the status of the negotiation of the proposed transaction, including the conference call held with counsel to GBE on May 14. Following this discussion, the special committee requested that Willkie Farr organize a conference call with Mark Rose, the chief executive officer and a member of the board of directors of GBE, to provide additional information regarding, among other things, certain of the terms contained in the agreements entered into between GBE and GERA.

On May 22, 2007, GBE announced that it had entered into a definitive merger agreement with NNN Realty Advisors. GBE announced that the merger would be effected through the issuance of shares of GBE common stock in exchange for all of the outstanding shares of common stock of NNN Realty, with the shareholders of NNN Realty owning approximately 59% of the common stock of the combined company following the completion of the merger.

 

On May 29, 2007, a conference call between the members of the special committee and Mr. Rose was held. Counsel to GBE participated in the conference call, as did representatives from Willkie Farr and Jeffrey Hornstein from PJSC. On the conference call, Mr. Rose provided additional information regarding certain of the terms contained in the agreements entered into between GBE and GERA. Mr. Rose and counsel to GBE also provided additional information with respect to the proposed transaction between GBE and NNN Realty, including the impact that the transaction would have on GERA. Mr. Rose and counsel to GBE explained that the proposed transaction between GBE and NNN Realty would not have any adverse effect on the proposed transaction between GBE and GERA, and that the transaction between GBE and NNN Realty would likely have a positive impact on GERA by expanding the scope of expertise that would be available to GERA.

 

On May 29, 2007, following the conference call with Mr. Rose and counsel to GBE, a meeting of the special committee was convened. At the meeting, the special committee, Willkie Farr and PJSC discussed the information provided by Mr. Rose and counsel to GBE on the conference call. In addition, the special committee, Willkie Farr and PJSC discussed corporate governance matters with respect to transactions that may be entered into between GBE and GERA in the future. Following this discussion, the special committee requested that Willkie Farr contact counsel to GBE to request that the board of directors of GERA adopt a resolution that, subject to limited exceptions, would require that a majority of the independent members of GERA’s board of directors approve any transaction between GERA or any subsidiary thereof, on the one hand, and GBE or any affiliate thereof (other than GERA or its subsidiaries), on the other hand, and that this resolution may not be revoked, amended or otherwise modified without the prior consent of a majority of the independent members of the board. In connection with this proposal, the special committee and Willkie Farr also discussed requiring that GERA amend its bylaws to take into account the terms of the proposed resolution.

 

On May 31, 2007, representatives from PJSC participated in a conference call with Mr. Chrisman regarding the services provided to and that would be provided to GERA in connection with its acquisition of real estate properties. Following this conference call, PJSC convened a conference call with Willkie Farr and Messrs. Lazar and Stillman, two of the three members of the special committee. On this conference call, PJSC updated Willkie Farr and Messrs. Lazar and Stillman on its discussions with Mr. Chrisman.

 

On June 1, 2007, representatives from Willkie Farr participated in a conference call with counsel to GBE regarding the remaining issues in the draft LLC Acquisition Agreement, primarily consisting of the scope of certain of the representations and warranties and the related indemnification provisions.

 

On June 4, 2007, counsel to GBE informed representatives from Willkie Farr that the request of the special committee regarding independent director approval of transactions entered into between GBE and GERA, together with the related amendment to GERA’s bylaws, was acceptable.

 

On June 4, 2007, a telephonic meeting of the special committee was held. All of the members of the special committee were present along with representatives from Willkie Farr and Jeffrey

Hornstein of PJSC. At the meeting, representatives from Willkie Farr led the special committee through a detailed discussion of the terms and conditions of the LLC Acquisition Agreement, as well as the draft resolution regarding independent director approval of certain related party transactions. Following this discussion, PJSC reviewed in detail for the special committee its analyses of the proposed transaction, including the aggregate consideration to be paid by GERA in connection with the proposed transaction. Following its presentation, PJSC provided orally to the special committee its opinion (which opinion was subsequently confirmed in writing), to the effect that, as of June 4, 2007, and based upon the qualifications, assumptions, limitations and other matters set forth in its written opinion, the aggregate consideration to be paid by GERA under the terms of the LLC Acquisition Agreement was fair from a financial point of view to GERA.

 

With the benefit of these presentations and advice, the special committee discussed the terms and merits of the proposed transaction in more detail. Following this discussion, the special committee unanimously resolved that the LLC Acquisition Agreement was fair to and in the best interests of GERA and recommended that the board of directors of GERA approve the LLC Acquisition Agreement and all of the transactions contemplated thereby, and that the board of directors recommend to the stockholders of GERA that they vote to approve the LLC Acquisition Agreement and all of the transactions contemplated thereby.

 

On June 5, 2007, a meeting of the full board of directors was convened. After receiving the special committee’s recommendation, the full board discussed and deliberated the proposed transaction. Thereafter, the board of directors unanimously determined that the LLC Acquisition Agreement and the transactions contemplated thereby were fair to and in the best interests of GERA, approved the LLC Acquisition Agreement in substantially the form presented to the special committee (subject to final revisions to the document as approved by the counsel to the special committee) and the transactions contemplated thereby, and recommended that the stockholders of GERA vote to approve the LLC Acquisition Agreement and the transactions contemplated thereby.

 

On June 6, 2007, a meeting of the board of directors of GBE was convened. At this meeting the board of directors of GBE approved GBE’s execution of the LLC Acquisition, in substantially the form presented to the board of directors (subject to final revisions to the document as approved by GBE’s counsel) and the consummation of the transactions contemplated thereby.

 

The Special Committee’s Reasons for the Recommendation of the LLC Acquisition Agreement

 

In the course of reaching its decision to recommend that the board of directors approve the LLC Acquisition Agreement and the transactions contemplated thereby, the special committee consulted with senior management of GBE and GERA and the special committee’s financial and legal advisors, and reviewed a significant amount of information and considered a number of factors weighing positively in favor of the transactions contemplated by the LLC Acquisition Agreement, including the following material factors:

 

from or otherwise capture any appreciation that may have accrued with respect to the Properties since the date of the acquisition thereof by GBE;

 

 

 

 

 

 

 

 

 

The special committee also considered a number of factors relating to the procedural safeguards involved in the negotiation of the transaction with GBE, each of which contributes to the special committee’s belief that the transaction is fair to our public stockholders and supports the determinations made by the special committee:

 

 

 

 

 

In the course of its deliberations, the special committee also considered a variety of risks and other countervailing factors weighing negatively against the proposed transaction with GBE, including:

 

 

 

 

 

 

 

 

 

 

The foregoing discussion of the factors considered by the special committee is not intended to be exhaustive, but it does set forth the principal factors considered by the special committee. The special committee reached the unanimous conclusion to recommend that our board of directors approve the LLC Acquisition Agreement and the transactions contemplated thereby in light of the various factors described above and other factors that each member of the special committee felt were appropriate. In view of the wide variety of factors considered by the special committee in connection with its evaluation of the transactions contemplated by the LLC Acquisition Agreement and the complexity of these matters, the special committee did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision. Rather, the special committee made its recommendation based on the totality of information presented to it and the investigation conducted by it and it advisors. In considering the factors discussed above, individual members of the special committee may have given different weights to different factors.

 

Recommendation of Our Board of Directors

 

Our board of directors, acting largely on the recommendation of the special committee, and after deliberation at a meeting on June 5, 2007 as described above, determined by unanimous vote that the LLC Acquisition Agreement and the transactions contemplated thereby are fair to and in the best interests of GERA and its stockholders, approved the LLC Acquisition Agreement and the transactions contemplated thereby, and recommended that the stockholders of GERA vote to approve the LLC Acquisition Agreement and the transactions contemplated thereby. Our board recommends that you vote “FOR” the approval of the Properties Acquisition Proposal.

 

In connection with approving the execution of the LLC Acquisition Agreement and the transactions contemplated thereby, our board of directors determined that the fair market value of the Properties was at least equal to 80% of our net assets (including the funds held in the trust account other than the portion representing the underwriters deferred discount) at the time of the execution of the LLC Acquisition Agreement. In reaching this conclusion, the Company’s board of directors considered the fact that the fair market value of an asset is generally determined by reference to the price at which a willing buyer would agree to purchase an asset from a willing seller. Cognizant that GBE had purchased each Property from an unaffiliated third party in an arms length negotiated transaction, the board of directors determined that the aggregate contract purchase price paid by GBE for the Properties of $122.2 million generally represented the aggregate fair market value of the Properties, and that such aggregate contract purchase price was in excess of 80% of the Company’s net assets at the time of the execution of the LLC Acquisition Agreement. At the time of the execution of the LLC Acquisition Agreement, the Company had net assets (including the funds held in the trust account other than the portion representing the underwriters deferred discount) of approximately $140.8 million, and therefore the aggregate contract purchase price for the Properties of $122.2 million (which the board of directors determined generally represented the fair market value of the Properties) was in excess of approximately $112.7 million, representing 80% of the Company’s net assets at that time (as of September 20, 2007, the Company had net assets

(including the funds held in the trust account other than the portion representing the underwriters deferred discount) of approximately $141.7 million, and 80% of this amount is equal to approximately $113.4 million). In addition, in reaching this conclusion, the board of directors considered the fairness opinion rendered by PJSC and the analysis undertaken by PJSC in connection therewith, as well as the actual and projected sales, earnings and cash flow of each Property.

 

Opinion of Peter J. Solomon Company L.P.

 

Pursuant to an engagement letter dated May 8, 2007, the special committee of the board of directors of GERA engaged PJSC to act as the financial advisor to the special committee with respect to the transactions contemplated by the LLC Acquisition Agreement, including to render to the special committee an opinion as to the fairness, from a financial point of view, to GERA of the aggregate consideration to be paid by GERA pursuant to the terms of the LLC Acquisition Agreement. On June 4, 2007, PJSC rendered its oral opinion to the special committee, which opinion was subsequently confirmed by delivery of a written opinion dated June 4, 2007, to the effect that, based upon the qualifications, assumptions, limitations and other matters set forth in its written opinion, as of the date of such opinion, the aggregate consideration to be paid by GERA under the terms of the LLC Acquisition Agreement is fair from a financial point of view to GERA.

 

The full text of PJSC’s opinion, which sets forth assumptions made, procedures followed, matters considered, and limitations on and scope of the review by PJSC in rendering its opinion, is attached as Annex E to this proxy statement. As set forth in the text of the written opinion attached as Appendix E to this proxy statement, PJSC has consented to the inclusion of its written opinion in this proxy statement. PJSC’s opinion was directed only to the fairness, from a financial point of view, to GERA of the aggregate consideration to be paid by GERA pursuant to the terms of the LLC Acquisition Agreement, was provided to the special committee in connection with its evaluation of the transactions contemplated by the LLC Acquisition Agreement, did not address GERA’s underlying business decision to undertake any part of the transactions or any other aspect of such transactions and did not, and does not, constitute a recommendation to any holder of GERA’s common stock or any other person as to how such holder or person should vote or act on any matter relating to any part of the proposed transaction with GBE described in this proxy statement or any other matter. The summary of PJSC’s opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. Holders of GERA common stock are encouraged to read PJSC’s opinion carefully and in its entirety.

 

In connection with PJSC’s opinion, PJSC:

 

 

 

 

 

 

 

PJSC assumed and relied upon the accuracy and completeness of the information provided to PJSC for the purposes of PJSC’s opinion and PJSC did not assume any responsibility for independent verification of such information, including, without limitation, the information set forth in the appraisals. With respect to the financial projections regarding the Properties that were provided to PJSC, PJSC assumed that such financial projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the future financial performance of the Properties. PJSC did not conduct a physical inspection of the Properties. In addition, PJSC did not conduct or assume any responsibility for any independent valuation or appraisal of the assets or liabilities of Property Acquisition, its subsidiaries or the Properties, nor was PJSC furnished with any such valuation or appraisal (other than the appraisals). Furthermore, PJSC did not consider any tax, accounting or legal effects of the consummation of the transactions contemplated by the LLC Acquisition Agreement (including the indirect purchase of the Properties) or the transaction structure on any person or entity.

 

PJSC also assumed that the transactions contemplated by the LLC Acquisition Agreement, the commitment letters for the Wachovia Mortgage Loans and the purchase and sale agreement for the Danbury Property would be consummated in full in accordance with the terms set forth therein, without waiver, modification or amendment of any material term, condition or agreement, or, that in the course of obtaining any regulatory or third party approvals or consents, if required, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on the Properties. PJSC’s opinion was necessarily based on economic, market and other conditions as in effect on, and information made available to PJSC as of, June 1, 2007. Furthermore, PJSC’s opinion did not address GERA’s underlying business decision to undertake the transactions contemplated by the LLC Acquisition Agreement. In addition, PJSC’s opinion did not address any other aspect or implication of the consummation of the transactions contemplated by the LLC Acquisition Agreement or any other agreement, arrangement or understanding entered into in connection with the consummation of such transactions or otherwise, except as expressly identified in PJSC’s opinion.

 

The following summarizes the significant financial analyses performed by PJSC and reviewed with the special committee of the board of directors of GERA on June 4, 2007 in connection with the delivery of PJSC’s opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand PJSC’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of PJSC’s financial analyses.

Illustrative Discounted Cash Flow Analysis

 

General

 

PJSC performed an illustrative discounted cash flow analysis on each Property. PJSC calculated the discounted cash flow values of each Property as the sum of the net present values of (i) the estimated future cash flow that each Property will generate during certain assumed holding periods, covering the period from 2008 through 2018, plus (ii) the terminal value of each Property determined by applying certain assumed terminal capitalization rates, or terminal cap rates, to the forecasted net operating income of each Property in the year following an assumed year of exit. The estimated future cash flows, as well as the forecasted amount of net operating income, were based on the financial projections for each Property for the years 2008 through 2017 that were prepared by GBE’s management, as well as financial projections that were contained in the appraisals of each of the Properties that were reviewed by PJSC. With respect to 2018, in certain cases, PJSC used certain assumed growth rates that were consistent with the growth rates utilized in management’s projections and in the appraisals. In addition, in performing this analysis, PJSC used certain assumed discount rates, as well as certain other market based assumptions that were contained in the projections provided to PJSC by management and in the appraisals, including with respect to market rent per square foot and market rent growth. The assumed discount rates were based on PJSC’s judgment of the estimated weighted average cost of capital of each of the Properties.

 

Dallas Property—Management Projections

 

In performing its illustrative discounted cash flow analysis on the Dallas Property using management’s projections, PJSC utilized an assumed terminal cap rate ranging from 7.0% to 8.0% and a discount rate ranging from 8.0% to 10.0%. In addition, in performing this analysis, PJSC utilized a variety of other management assumptions, including an assumed market rent per square foot of $13.50 and an assumed market rent growth rate of 7.41% for 2008 and 3.0% for 2009 and beyond. For purposes of this analysis, PJSC assumed holding periods of three, five, seven and ten years, and determined that the present value of the free cash flow generated during the applicable holding period plus the terminal value of the Dallas Property as of the assumed exit date, was in the range of $17.9 million to $28.5 million.

 

PJSC also performed a sensitivity analysis of the discounted cash flow value of the Dallas Property assuming certain deviations from management’s assumptions with respect to market rent per square foot and market rent growth rate. The following table sets forth the results of PJSC’s sensitivity analysis assuming a terminal cap rate of 7.5%, a discount rate of 9.0% and an assumed ten year holding period:

 

 

Dallas Property—Appraisal Projections

 

In performing its illustrative discounted cash flow analysis on the Dallas Property using the appraisal projections, PJSC utilized the same terminal cap rates and discount rates that it utilized in performing the analysis based on the management projections (terminal cap rate

ranging from 7.0% to 8.0% and discount rate ranging from 8.0% to 10.0%). In addition, in performing this analysis, PJSC utilized a variety of other assumptions that were contained in the appraisal of the Dallas Property, including an assumed market rent per square foot of $13.50 and an assumed market rent growth rate of 3.0% for 2008 and beyond. For purposes of this analysis, PJSC assumed holding periods of three, five, seven and ten years, and determined that the present value of the free cash flow generated during the applicable holding period plus the terminal value of the Dallas Property as of the assumed exit date, was in the range of $16.0 million to $24.6 million.

 

PJSC also performed a sensitivity analysis of the discounted cash flow value of the Dallas Property assuming certain deviations from the appraisal assumptions with respect to market rent per square foot and market rent growth rate. The following table sets forth the results of PJSC’s sensitivity analysis assuming a terminal cap rate of 7.5%, a discount rate of 9.0% and an assumed ten year holding period:

 

 

Rosemont Property—Management Projections

 

In performing its illustrative discounted cash flow analysis on the Rosemont Property using management’s projections, PJSC utilized an assumed terminal cap rate ranging from 7.0% to 8.0% and a discount rate ranging from 8.0% to 10.0%. In addition, in performing this analysis, PJSC utilized a variety of other management assumptions, including an assumed market rent per square foot of $12.00 and an assumed market rent growth rate of 5.0% for 2008 and beyond. For purposes of this analysis, PJSC assumed holding periods of three, five, seven and ten years, and determined that the present value of the free cash flow generated during the applicable holding period plus the terminal value of the Rosemont Property as of the assumed exit date, was in the range of $20.8 million to $26.9 million.

 

PJSC also performed a sensitivity analysis of the discounted cash flow value of the Rosemont Property assuming certain deviations from management’s assumptions with respect to market rent per square foot and market rent growth rate. The following table sets forth the results of PJSC’s sensitivity analysis assuming a terminal cap rate of 7.5%, a discount rate of 9.0% and an assumed ten year holding period:

 

 

Rosemont Property—Appraisal Projections

 

In performing its illustrative discounted cash flow analysis on the Rosemont Property using the appraisal projections, PJSC utilized the same terminal cap rates and discount rates that it utilized in performing the analysis based on the management projections (terminal cap rate

ranging from 7.0% to 8.0% and discount rate ranging from 8.0% to 10.0%). In addition, in performing this analysis, PJSC utilized a variety of other assumptions that were contained in the appraisal of the Rosemont Property, including an assumed market rent per square foot of $12.00 and an assumed market rent growth rate of 3.0% for 2008 and beyond. For purposes of this analysis, PJSC assumed holding periods of three, five, seven and ten years, and determined that the present value of the free cash flow generated during the applicable holding period plus the terminal value of the Rosemont Property as of the assumed exit date, was in the range of $19.0 million to $26.3 million.

 

PJSC also performed a sensitivity analysis of the discounted cash flow value of the Rosemont Property assuming certain deviations from the appraisal assumptions with respect to market rent per square foot and market rent growth rate. The following table sets forth the results of PJSC’s sensitivity analysis assuming a terminal cap rate of 7.5%, a discount rate of 9.0% and an assumed ten year holding period:

 

 

Danbury Property—Management Projections

 

In performing its illustrative discounted cash flow analysis on the Danbury Property using management’s projections, PJSC utilized an assumed terminal cap rate ranging from 8.0% to 9.0% and a discount rate ranging from 9.0% to 11.0%. In addition, in performing this analysis, PJSC utilized a variety of other management assumptions, including an assumed market rent per square foot of $20.99 (representing the blended market rent of office space and the data center at the Danbury Property) and an assumed market rent growth rate of 0.0% for 2008 and 3.0% for 2009 and beyond. For purposes of this analysis, PJSC assumed holding periods of three, five, seven and ten years, and determined that the present value of the free cash flow generated during the applicable holding period plus the terminal value of the Danbury Property as of the assumed exit date, was in the range of $82.7 million to $109.1 million.

 

PJSC also performed a sensitivity analysis of the discounted cash flow value of the Danbury Property assuming certain deviations from management’s assumptions with respect to market rent per square foot and market rent growth rate. The following table sets forth the results of PJSC’s sensitivity analysis assuming a terminal cap rate of 8.5%, a discount rate of 10.0% and an assumed ten year holding period:

 

 

Danbury Property—Appraisal Projections

 

In performing its illustrative discounted cash flow analysis on the Danbury Property using the appraisal projections, PJSC utilized the same terminal cap rates and discount rates that it

utilized in performing the analysis based on the management projections (terminal cap rate ranging from 8.0% to 9.0% and discount rate ranging from 9.0% to 11.0%). In addition, in performing this analysis, PJSC utilized a variety of other assumptions that were contained in the appraisal for the Danbury Property, including an assumed market rent per square foot of $21.50 (representing the market rent of office space (excluding the data center) at the Danbury Property) and an assumed market rent growth rate of 3.0% for 2008 and beyond. For purposes of this analysis, PJSC assumed holding periods of three, five, seven and ten years, and determined that the present value of the free cash flow generated during the applicable holding period plus the terminal value of the Danbury Property as of the assumed exit date, was in the range of $79.7 million to $104.6 million.

 

PJSC also performed a sensitivity analysis of the discounted cash flow value of the Danbury Property assuming certain deviations from the appraisal assumptions with respect to market rent per square foot and market rent growth rate. The following table sets forth the results of PJSC’s sensitivity analysis assuming a terminal cap rate of 8.5%, a discount rate of 10.0% and an assumed ten year holding period:

 

 

Illustrative Discounted Cash Flow Analysis—Summary

 

Based on the illustrative discounted cash flow analysis described above, PJSC determined that the aggregate theoretical present value of the Properties, taking into account both the management projections and the projections set forth in the appraisals, was in the range of $114.7 million to $164.5 million.

 

Analysis of Selected Precedent Transactions

 

To analyze the aggregate consideration to be paid by GERA under the terms of the LLC Acquisition Agreement relative to the purchase price paid by other purchasers of commercial real estate properties in selected similar precedent transactions, PJSC analyzed a list of selected similar precedent transactions in or surrounding the markets in which each Property is located.

 

Dallas Property

 

To analyze the consideration paid by a subsidiary of Property Acquisition in respect of the Dallas Property (and therefore the consideration to be indirectly paid by GERA for the Dallas Property through its acquisition of Property Acquisition) relative to the consideration paid by purchasers in selected similar precedent transactions, PJSC analyzed selected precedent transactions that, for purposes of PJSC’s analysis, PJSC deemed similar to the Dallas Property based on PJSC’s experience, including transactions involving the following buildings located in the Dallas metropolitan area:

 

 

 

 

 

 

Based on this information and other market information that PJSC deemed relevant, PJSC determined that the purchase price range for comparable transactions was between $70 and $95 per square foot. Based on this information, PJSC determined the implied valuation of the Dallas Property was in the range of $22.8 million to $30.9 million.

 

Rosemont Property

 

To analyze the consideration paid by a subsidiary of Property Acquisition in respect of the Rosemont Property (and therefore the consideration to be indirectly paid by GERA for the Rosemont Property through its acquisition of Property Acquisition) relative to the consideration paid by purchasers in selected similar precedent transactions, PJSC analyzed selected precedent transactions that, for purposes of PJSC’s analysis, PJSC deemed similar to the Rosemont Property based on PJSC’s experience, including transactions involving the following buildings located in the Chicago metropolitan area:

 

 

 

 

 

 

 

 

 

 

 

Based on this information and other market information that PJSC deemed relevant, PJSC determined that the purchase price range for comparable transactions was between $85 and $200 per square foot. Based on this information, PJSC determined the implied valuation of the Rosemont Property was in the range of $15.3 million to $36.0 million.

 

Danbury Property

 

To analyze the consideration paid by a subsidiary of Property Acquisition in respect of the Danbury Property (and therefore the consideration to be indirectly paid by GERA for the Danbury Property through its acquisition of Property Acquisition) relative to the consideration paid by purchasers in selected similar precedent transactions, PJSC analyzed selected precedent transactions that, for purposes of PJSC’s analysis, PJSC deemed similar to the Danbury Property based on PJSC’s experience, including transactions involving the following buildings located in or around the Danbury, Connecticut area:

 

 

 

 

 

 

Based on this information and other market information that PJSC deemed relevant, PJSC determined that the purchase price range for comparable transactions was between $135 and $210 per square foot. Based on this information, PJSC determined the implied valuation of the Danbury Property was in the range of $141.3 million to $219.8 million.

 

Analysis of Selected Precedent Transactions—Summary

 

Applying the analysis of selected precedent transactions described above, PJSC determined that the aggregate implied valuation of the Properties was in the range of $179.4 million to $286.7 million.

 

Miscellaneous

 

In arriving at its opinion, PJSC performed a variety of financial analyses, the material portions of which are summarized above. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analyses and the application of those methods to the particular circumstances and, therefore, such an opinion is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinion, PJSC did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to significance and relevance of each analysis and factor. Accordingly, PJSC believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering all such analyses, could create an incomplete view of the process underlying PJSC’s opinion.

In performing its analyses, PJSC relied on numerous assumptions made by management, the assumptions set forth in the appraisals and made certain judgments of its own, many of which, in each case, are beyond the control of GERA. Actual values will depend upon several factors, including changes in market conditions, general economic conditions and other factors that generally influence the commercial real estate market in the markets in which each of the Properties are located. The analyses performed by PJSC are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by such analyses. Such analyses were prepared solely as a part of PJSC’s analysis of the fairness, from a financial point of view, to GERA of the aggregate consideration to be paid by GERA under the terms of the LLC Acquisition Agreement and were provided to the special committee of the board of directors of GERA in connection with the delivery of PJSC’s opinion. The analyses do not purport to be appraisals or necessarily reflect the prices at which the Properties might actually be sold, which may be higher or lower than the purchase price to be paid by GERA under the terms of the LLC Acquisition Agreement and which are inherently subject to uncertainty. Because such analyses are inherently subject to uncertainty, neither GERA, PJSC nor any other person or entity assumes responsibility for their accuracy.

 

With regard to the selected precedent transactions analysis summarized above, PJSC used these transactions for reference purposes only; however, no transaction utilized as a comparison is identical to the proposed transaction and none of the individual properties included in this analysis is identical to any of the Properties. Accordingly, an analysis of the foregoing was not mathematical; rather, it involved complex considerations and judgments concerning differences in financial and operating characteristics (including the size) of the selected properties and other factors that could affect the acquisition value of the selected properties to which the Properties were being compared. The aggregate consideration to be paid under the terms of the LLC Acquisition Agreement generally represents the amount invested or advanced to Property Acquisition by GBE to fund the aggregate purchase price paid by Property Acquisition for the Properties plus interest expense, imputed interest on cash advanced to Property Acquisition or any of its subsidiaries by GBE, and costs and expenses associated with the evaluation, acquisition and operation of the Properties, and this aggregate consideration was approved by the special committee of the board of directors and the full board of directors of GERA. In addition, as described elsewhere in this proxy statement, PJSC’s opinion was one of many factors taken into consideration by the special committee of the board of directors of GERA in evaluating the transactions contemplated by the LLC Acquisition Agreement. Consequently, the PJSC analyses described above should not be viewed as determinative of the opinion of the special committee of the board of directors or the full board of directors with respect to the proposed transaction.

 

As part of its investment banking activities, PJSC is regularly engaged in the evaluation of businesses and their securities in connection with mergers and acquisitions, restructurings and valuations for corporate or other purposes. The special committee of the board of directors of GERA selected PJSC to deliver an opinion with respect to the fairness, from a financial point of view, to GERA of the aggregate consideration to be paid by GERA under the terms of the LLC Acquisition Agreement on the basis of such experience.

 

Upon the signing of the engagement letter, PJSC received a non-refundable fee of $50,000. Upon the delivery of its opinion, PJSC was paid an additional $125,000, resulting in total compensation to PJSC of $175,000. In addition, subject to certain limitations, GERA has agreed to reimburse PJSC for its reasonable out-of-pocket expenses incurred in connection with its engagement and to indemnify PJSC and certain related persons against liabilities and

expenses, including liabilities under the federal securities laws, relating to or arising out of its engagement.

 

PJSC has not received compensation during the last two years for providing investment banking services to GERA or GBE.

 

Projected Financial Information

 

Upon the closing of the proposed transaction, GERA does not intend as a matter of course to publicly disclose detailed long-term forecasts or internal projections as to future revenues, earnings or financial condition, and is especially wary of making such projections due to the unpredictability of the underlying assumptions and estimates (see the discussion regarding forward-looking statements based on estimates and assumptions under the heading entitled “ Forward-Looking Information” of this proxy statement). However, we have set forth below a summary of the financial projections for each of the Properties that were prepared by senior management of GBE in connection with GBE’s acquisition of the Properties, as well as the financial projections for each of the Properties that were contained in the appraisals for each of the Properties that were obtained by Wachovia Bank, N.A. in connection with the Wachovia Mortgage Loans. These financial projections are being included in this proxy statement because this information was made available to our board of directors, the special committee and PJSC prior to the execution and delivery of the LLC Acquisition Agreement. This information was not prepared with a view towards public disclosure, but rather was prepared to facilitate GBE’s and Wachovia Bank, N.A.’s, as the case may be, due diligence investigation and analysis of each of the Properties.

 

The projections reflect numerous estimates and assumptions with respect to general market information (including market rent per square foot and market rent growth) and general business, economic and financial conditions, as well as matters specific to our proposed business, many of which are beyond our control. As a result, there can be no assurance that the projected results will be realized or that actual results will not be significantly higher or lower than projected. Important factors that may affect actual results and result in the forecasted results not being achieved include, but are not limited to, the risks summarized under the heading entitled “ Risk Factors ” of this proxy statement. In addition, the projections cover multiple years and such information by its nature becomes less reliable with each successive year. The financial projections were prepared solely to facilitate GBE’s and Wachovia Bank, N.A.’s, as the case may be, due diligence investigation and analysis of each of the Properties, and were not prepared with a view toward public disclosure or toward complying with U.S. generally accepted accounting principles, the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Neither our independent registered public accounting firm, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability. Furthermore, the financial projections do not take into account any circumstances or events occurring after the date they were prepared.

 

You are cautioned not to place undue reliance on the projections set forth below. No one has made or makes any representation to any stockholder or any other person regarding the information included in these projections. The inclusion of projections in this proxy statement should not be regarded as an indication that such projections will be an accurate prediction of future events, and they should not be relied on as such. We undertake no obligation to update,

or otherwise revise the projections to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error.

 

 

 

 

The material assumptions utilized by GBE senior management in preparing these financial projections included (i) an assumed market rent per square foot of $13.50, (ii) assumed market rent growth rates of 7.41% for 2008 and 3.0% for 2009 and beyond, (iii) a stabilized occupancy rate of 93.0% and (iv) a renewal probability rate of 75.0%.

 

 

 

 

The material assumptions utilized by the appraiser in preparing these financial projections included (i) an assumed market rent per square foot of $13.50, (ii) assumed market rent growth rates of 3.0% for 2008 and beyond, (iii) a stabilized occupancy rate of 85.0% and (iv) a renewal probability rate of 70.0%.

 

Rosemont Property-Management’s Projections

 

The financial projections prepared by GBE’s senior management in connection with its acquisition of the Rosemont Property, which were provided to our board of directors, the

special committee and PJSC, included the following estimates of the future financial performance of the Rosemont Property (all amounts expressed in the table below are in millions):