Griffin Capital Essential Asset REIT Reports 2019 Third Quarter Results
November 12, 2019

Griffin Capital Essential Asset REIT Reports 2019 Third Quarter Results

El Segundo, Calif. (November 12, 2019) - Griffin Capital Essential Asset REIT, Inc. (the “REIT”) announced its results for the quarter ended September 30, 2019. The REIT reported a 14.5 percent increase in total revenue compared to the quarter ended September 30, 2018.

The REIT had an active third quarter successfully executing the following transactions: acquisition of a McKesson Office Campus (“McKesson II”) in Scottsdale, Arizona, sale of properties in Fort Worth, Texas, Lynwood, Washington and Denver, Colorado, and realization of occupancies from new leases totaling 211,048 square feet. These transactions highlight the company’s continued success in acquiring attractive institutional quality real estate while maximizing property values and maintaining stabilized portfolio occupancy levels.

“We continue to leverage the expertise of our asset management team, in particular their ability to execute full-cycle transactions and actively-manage our ongoing leasing opportunities," said Michael Escalante, Chief Executive Officer of the REIT. “These strengths are core to our investment strategy. I am extremely pleased with our results, the REIT's performance and the consistent value that we bring to our shareholders."

As of September 30, 2019, the REIT’s portfolio1 consisted of 101 assets encompassing approximately 27.1 million rentable square feet of space in 25 states.

Highlights and Accomplishments in Third Quarter 2019 and Results as of September 30, 2019:

Financial Results

  • Total revenue was $97.4 million for the quarter ended September 30, 2019 compared to $85.0 million for the quarter ended September 30, 2018.
  • Net income attributable to common stockholders was $8.9 million, or $0.04 per basic and diluted share for the quarter ended September 30, 2019, compared to $2.9 million or $0.02 per basic and diluted share for the quarter ended September 30, 2018. The increase during the period was primarily due to the merger.

Non-GAAP Measures

  • Adjusted funds from operations, or AFFO, was approximately $37.2 million for the quarter ended September 30, 2019, virtually equivalent to last year’s comparative period. Funds from operations, or FFO,2 was approximately $37.0 million and $33.8 million for the quarters ended September 30, 2019 and 2018, 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 $64.1 million for the quarter ended September 30, 2019 with a fixed charge and interest coverage ratio of 2.8X and 3.3X, respectively. Please see the financial reconciliation tables and notes at the end of this release for more information regarding adjusted EBITDA and related ratios.

Portfolio Overview

  • The enterprise value of our portfolio as of September 30, 2019 was $4.7 billion.3
  • Our weighted average remaining lease term was approximately 7.5 years with average annual rent increases of approximately 2.2%.
  • Approximately 61.5% of our portfolio’s net rental revenue4 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 ratings.5
  • Our portfolio as of September 30, 2019 was 91.6% leased.
  • The ratio of net debt6 to total real estate acquisition price and net debt to enterprise value as of September 30, 2019 was 48.8% and 43.7%, respectively.1

Acquisition

  • On September 20, 2019, we acquired McKesson II at a purchase price of $37.7 million, which is A two-story Class “A” office building totaling 124,879 square feet located in Scottsdale, Arizona. The Property is fully leased to McKesson Corporation until May 31, 2029.

Dispositions

  • On September 5, 2019, we sold 7601 Technology Way property located in Denver, Colorado, for $48.8 million, less closing costs and credits. The carrying value of the property was recently recorded at its estimated fair value of approximately $37.6 million as a result of the merger. Upon the sale of the property, we recognized a gain of approximately $8.1 million.
  • On July 30, 2019, we sold the Lynnwood IV land parcel located in Lynnwood, WA, for $1.8 million, less closing costs and credits. The carrying value of the land parcel was approximately $1.3 million. Upon the sale, we recognized a gain of approximately $0.3 million.
  • On July 17, 2019, the Heritage Common X Ltd. joint venture sold the Heritage X property located in Fort Worth, TX. At the time of the sale, the Company had an ownership interest of approximately 45% in the joint venture.

Leasing Activity

  • During the quarter ended September 30, 2019, we executed new leases totaling 211,048 square feet, which included the execution of a new 12-year lease with a Genuine Parts Company for 79,900 square feet in Atlanta, GA, three 10-year leases with Bohler Engineering NJ, LLC, Control Point Associates, Inc., and Whitestone Associates, Inc. for 65,800 square feet in Warren, NJ and a 10-year lease with EAN Holdings, LLC dba Enterprise Rental Car for 26,600 square feet in Renton, WA.
  • Leases commencing during the quarter totaled 636,900 square feet, including 268,000 square feet of renewal and 368,900 square feet of new leases.

Subsequent Events

  • On October 14, 2019, we sold the FedEx Freight property located in West Jefferson, Ohio for $30.3 million, less closing costs and credits. The property sold for approximately the carrying value.

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 September 30, 2019, consists of 101 office and industrial properties totaling 27.1 million rentable square feet, located in 25 states, representing total REIT enterprise value of approximately $4.7 billion.

Additional information is available at www.gcear.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 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.
  2. FFO, as described by the National Association of Real Estate Investment Trusts ("NAREIT"), is adjusted for non-controlling interest and redeemable preferred distributions.
  3. Total enterprise value includes the outstanding debt balance (excluding deferred financing costs and premium/discounts), plus unconsolidated debt - pro rate share, plus preferred equity, plus total outstanding shares multiplied by the NAV, less cash and cash equivalents - excludes restricted cash. Total outstanding shares includes limited partnership units issued and shares issued pursuant to the DRP, net of redemptions.
  4. 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, 2019 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.
  5. Approximately 61.5% 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 61.5% investment grade tenant ratings, 56.8% is from a Nationally Recognized Statistical Rating Organization (NRSRO) credit rating, with the remaining 4.7% 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.
  6. Net debt includes $100.0 million of borrowing used to redeem investors in October and pro rata share of unconsolidated debt, net of cash and cash equivalents.

News & Updates

Finsbury
Joe Berg

Director

310-633-9446

Diana Keary
Senior Vice President
Griffin Capital Company