Griffin Capital Essential Asset REIT Reports 2018 Third Quarter Results
November 14, 2018

Griffin Capital Essential Asset REIT Reports 2018 Third Quarter Results

El Segundo, Calif. (November 14, 2018) - Griffin Capital Essential Asset REIT, Inc. (the “REIT”), announced its results for the quarter ended September 30, 2018.

“In the third quarter of 2018, we signed over 525,000 square feet of leases which includes three 10-year leases for approximately 267,000 square feet. We believe these actions demonstrate our continued ability to solidify our existing portfolio to offer value and generate consistent income to our shareholders,” said Kevin Shields, Chairman and CEO of the REIT.

As of September 30, 2018, the REIT’s portfolioconsisted of 76 assets encompassing approximately 20.1 million rentable square feet of space in 20 states.

Highlights and Accomplishments in Third Quarter 2018 and Results as of September 30, 2018:

Portfolio Overview

  • During the quarter ended September 30, 2018, we renewed and executed leases totaling 525,484 square feet, including a 10-year lease renewal with DynCorp International, Inc. for 119,001 square feet in Fort Worth, TX, a short-term lease with McDermott, Inc. for 134,058 square feet in Houston, TX, a new 8-year lease with Fidelity Information Services, LLC for 124,550 square feet in Milwaukee, WI, and two new 10-year leases with Equiniti Trust Co. for 29,907 square feet in Milwaukee, WI, and PPG Industries, Inc. for 117,968 square feet in Cranberry Township, PA.
  • The total capitalization of our portfolio as of September 30, 2018 was $3.3 billion2.
  • Our weighted average remaining lease term was approximately 6.58 years with average annual rent increases of approximately 2.1%.
  • Approximately 63.7% of our portfolio’s net rental revenue3 was generated by properties leased to tenants and/or guarantors with investment grade credit ratings or whose non-guarantor parent companies have investment grade credit ratings4.

Financial Results

  • Total revenue was $85.0 million, or $0.51 per basic and diluted share, an increase in $0.02 per share for the quarter ended September 30, 2018, compared to $85.1 million or $0.49 per basic and diluted share for the quarter ended September 30, 2017.
  • Net income attributable to common stockholders was $7.4 million or $0.04 per basic and diluted share for the quarter ended June 30, 2018, compared to $8.8 million or $0.05 per basic and diluted share for the quarter ended June 30, 2017.
  • Net income attributable to common stockholders was $2.9 million or $0.02 per basic and diluted share for the quarter ended September 30, 2018, compared to $9.0 million or $0.05 per basic and diluted share for the quarter ended September 30, 2017. The decrease in net income attributable to common stockholders during the period was primarily due to higher interest costs.
  • The ratio of debt to total real estate acquisition value as of September 30, 2018 was 45.2%1.

Equity Issuance

  • On August 8, 2018, we issued $125 million of Series A Cumulative Perpetual Convertible Preferred Stock in a private exempt offering.

Financing

  • On August 31, 2018, we executed four interest rate swap agreements to hedge future variable cash flows associated with London Interbank Offered Rate ("LIBOR"). The forward-starting interest rate swaps with a total notional amount of $425 million become effective on July 1, 2020 and have a term of five years.

Non-GAAP Measures

  • Adjusted funds from operations, or AFFO, was approximately $37.2 million for the quarter ended September 30, 2018, compared to approximately $39.3 million for the same period in 2017. Funds from operations, or FFO5, was approximately $33.8 million and $38.3 million for the quarters ended September 30, 2018 and 2017, respectively. Please see the financial reconciliation tables and notes at the end of this release for more information regarding AFFO and FFO.
  • Our Adjusted EBITDA, as defined per our credit facility agreement, was approximately $53.8 million for the quarter ended September 30, 2018 with a fixed charge and interest coverage ratio of 3.21 and 3.85, respectively. Please see the financial reconciliation tables and notes at the end of this release for more information regarding adjusted EBITDA and related ratios.

Subsequent Events

  • On November 2, 2018, the Company sold the Quad Graphics property located in Loveland, Colorado for total proceeds of $10.7 million, which includes $3.9 million in termination fees, less closing costs and other closing credits. The carrying value of the property on the closing date was approximately $9.9 million.

About Griffin Capital Essential Asset REIT

Griffin Capital Essential Asset REIT, Inc. is a publicly-registered, non-traded REIT with a portfolio, as of September 30, 2018, of 76 office and industrial properties totaling 20.1 million rentable square feet, located in 20 states, representing total REIT capitalization of approximately $3.3 billion. Griffin Capital Essential Asset REIT, Inc. is one of several REITs sponsored or co-sponsored by Griffin Capital Company, LLC ("Griffin Capital").

About Griffin Capital Company, LLC

Griffin Capital is a leading alternative investment asset manager that owns, manages, or co-sponsors approximately $11.2 billion* in assets. Founded in 1995, the privately held firm is led by a seasoned team of senior executives with more than two decades of investment and real estate experience and who collectively have executed more than 650 transactions valued at over $22.0 billion.

The firm manages, sponsors or co-sponsors a suite of carefully curated, institutional quality investment solutions distributed by Griffin Capital Securities, LLC to retail investors through a community of partners, including independent and insurance broker-dealers, wirehouses, registered investment advisory firms and the financial advisors who work with these enterprises. Additional information is available at www.griffincapital.com.

*Includes the property information related to interests held in certain joint ventures. As of September 30, 2018.

This press release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Because such statements include risks, uncertainties and contingencies, actual results may differ materially from the expectations, intentions, beliefs, plans or predictions of the future expressed or implied by such forward-looking statements. These risks, uncertainties and contingencies include, but are not limited to: uncertainties relating to changes in general economic and real estate conditions; uncertainties relating to the implementation of our real estate investment strategy; uncertainties relating to financing availability and capital proceeds; uncertainties relating to the closing of property acquisitions; uncertainties related to the timing and availability of distributions; and other risk factors as outlined in the REIT’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission (the "SEC"). This is neither an offer nor a solicitation to purchase securities.

1 Excludes the property information related to the acquisition of an 80% ownership interest in a joint venture with affiliates of Digital Realty Trust, L.P. and 45% ownership interest in the Heritage Common X joint venture property.
2 Total capitalization includes the outstanding debt balance plus total equity raised and issued, including operating partnership units, preferred shares and shares issued pursuant to the DRP, net of redemptions.
3 Net rent is based on (a) the contractual base rental payments assuming the lease requires the tenant to reimburse us for certain operating expenses or the property is self-managed by the tenant and the tenant is responsible for all, or substantially all, of the operating expenses; or (b) contractual rent payments less certain operating expenses that are our responsibility for the 12-month period subsequent to September 30, 2018 and includes assumptions that may not be indicative of the actual future performance of a property, including the assumption that the tenant will perform its obligations under its lease agreement during the next 12 months.

4 Approximately 63.7% of our portfolio's net rental revenue was generated by properties leased to tenants and/or guarantors with investment grade credit ratings or whose non-guarantor parent companies have investment grade ratings or what management believes are generally equivalent ratings. Of the 63.7% investment grade tenant ratings, 54.8% is from a Nationally Recognized Statistical Rating Organization (NRSRO) credit rating, with the remaining 8.9% being from a non-NRSRO, but having a rating that we believe is generally equivalent to an NRSRO investment grade rating. Bloomberg’s default risk rating is an example of a non-NRSRO rating.
5 FFO, as described by National Association of Real Estate Investment Trusts ("NAREIT"), is adjusted for non-controlling interest and redeemable preferred distributions.

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