Zest 1 grapefruit to make 2 teaspoons zest; set aside. Peel and segment grapefruits; set aside. Squeeze juice from remaining pulp, reserving 1/2 cup plus 1 tbsp.; set aside.
Heat oven to 350°. Butter and flour a 9" x 13" baking dish; set aside. In a bowl, whisk together flour, baking powder, and salt; set aside. Into a large bowl, beat remaining butter and sugar with a handheld mixer until fluffy. Beat in eggs one at a time. Add 1/2 cup of the reserved juice, milk, and vanilla; stir. Add flour mixture; stir until combined. Line bottom of pan with half the reserved grapefruit; add batter; smooth top with a spatula. Bake until a toothpick inserted into the cake comes out clean, 40–45 minutes; let cool.
In a large bowl, beat reserved zest, remaining juice, and cream cheese until fluffy. Add confectioners' sugar 1/2 cup at a time; beat until smooth. Spread frosting over cake; top with the remaining grapefruit segments. Chill.