Griffin Capital Essential Asset REIT II Reports Fourth Quarter and Full Year 2018 Results
March 19, 2019

Griffin Capital Essential Asset REIT II Reports Fourth Quarter and Full Year 2018 Results

EL SEGUNDO, Calif. (March 19, 2019) -  Griffin Capital Essential Asset REIT II, Inc. (the “REIT”), announced its operating results for the quarter ended December 31, 2018 and full year 2018.

“We ended 2018 with a fully leased and occupied portfolio and are excited about the pending merger with Griffin Capital Essential Asset REIT, once approved by their stockholders,” said Michael Escalante, President and Director of the REIT. "Looking ahead, we are excited to combine two highly complementary property portfolios with similar construction and investment mandates, having significantly increased size, scale, and diversification, and a management team focused solely on the REIT and having eliminated conflicts which, when combined, we believe will bring long term benefits to our stockholders.”

As of December 31, 2018, our portfolio consisted of 27 properties (35 buildings) encompassing approximately 7.3 million square feet of space in 17 states.

Results as of December 31, 2018 - Highlights and Accomplishments:

Portfolio Overview

  • The total capitalization1 of our portfolio was approximately $1.25 billion.
  • Our weighted average remaining lease term was approximately 9.3 years with average annual rent increases of approximately 2.4%.
  • Our portfolio was 96.5% leased.
  • Our portfolio was 100% leased and occupied2).
  • Approximately 75.8% of our portfolio’s net rental revenue(3) 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 for the year ended December 31, 2018 was approximately $106.4 million, compared to $107.4 million for the year ended December 31, 2017.
  • Net loss attributable to common stockholders was approximately $(3.3) million or $(0.04) per basic and diluted share for the year ended December 31, 2018, compared to net income attributable to common stockholders of $11.1 million or $0.15 per basic and diluted share for the same period in 2017 primarily related to higher interest expense and performance distributions.
  • As of December 31, 2018, the ratio of debt to total real estate acquisition price was 43.7%.

Non-GAAP Measures

  • Adjusted funds from operations, or AFFO, was approximately $37.0 million and $41.2 million for the years ended December 31, 2018 and 2017, respectively. Funds from operations, or FFO(5), was approximately $41.3 million and $55.1 million for the years ended December 31, 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 amended and restated credit agreement, was approximately $68.4 million for the quarter ended December 31, 2018 with both a fixed charge and interest coverage ratio of 3.82. Please see the financial reconciliation tables and notes at the end of this release for more information regarding Adjusted EBITDA and related ratios.

Merger Transaction

  • On December 14, 2018, we, Griffin Capital Essential Asset Operating Partnership II, L.P., our wholly owned subsidiary Globe Merger Sub, LLC, Griffin Capital Essential Asset REIT, Inc., and Griffin Capital Essential Asset Operating Partnership, L.P. entered into an Agreement and Plan of Merger, subject to stockholder approval.

About Griffin Capital Essential Asset REIT

Griffin Capital Essential Asset REIT, Inc. is a self-managed publicly registered, non-traded REIT with a portfolio consisting primarily of single tenant business essential properties throughout the United States, diversified by corporate credit, physical geography, product type, and lease duration. Griffin Capital Essential Asset REIT, Inc.’s portfolio, as of December 31, 2018, consists of 74 office and industrial properties totaling 19.9 million rentable square feet, located in 20 states, representing total REIT capitalization of approximately $3.5 billion.

About Griffin Capital Essential Asset REIT II, Inc

Griffin Capital Essential Asset REIT II, Inc. is a publicly registered, non-traded REIT focused on acquiring a portfolio consisting primarily of single tenant business essential properties throughout the United States, diversified by corporate credit, physical geography, product type, and lease duration. As of December 31, 2018, Griffin Capital Essential Asset REIT II, Inc. has acquired 35 office and industrial buildings totaling approximately 7.3 million rentable square feet and asset acquisition price of approximately $1.3 billion. Griffin Capital Essential Asset REIT II, Inc. is sponsored by Griffin Capital Essential Asset REIT, Inc.

Additional information is available at www.griffincapital.com.

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 prospectus, 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 Total capitalization includes the outstanding debt balance, plus total equity raised in our public offerings, net of redemptions.
2 There is no guarantee that our properties will remain 100% leased and occupied.
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 December 31, 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 75.8% 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 75.8% investment grade tenant ratings, 64.0% is from Nationally Recognized Statistical Rating Organization ("NRSRO") credit rating, with the remaining 11.8% 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 one 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 distributions.

News & Updates

Diana Keary
Senior Vice President
Griffin Capital Company

Finsbury
Ben Rosner

Associate Director