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

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

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

“2018 was another strong year for the REIT - we acquired three new properties which added approximately 1.9 million square feet to our portfolio and we announced two transformative transactions, positioning us well for the future,” said Michael Escalante, Chief Executive Officer and President of the REIT. “We believe the completed self-administration transaction and pending merger with Griffin Capital Essential Asset REIT II will generate significant long term benefits for our stockholders, including substantial cost savings, increased operating efficiencies, and immediate accretion to earnings and cash flow. We are enthusiastic about the future of these combined companies with a focused and aligned management team dedicated to the success and future of the REIT.”

As of December 31, 2018, the REIT’s portfolio1 consisted of 74 assets encompassing approximately 19.9 million rentable square feet of space in 20 states.

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

Portfolio Overview

  • The total capitalization of our portfolio as of December 31, 2018 was $3.5 billion2.
  • Our weighted average remaining lease term was approximately 6.55 years with average annual rent increases of approximately 2.1%.
  • Our portfolio was 96.5% leased.
  • Approximately 61.4% 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.
  • During the year ended December 31, 2018, we executed new and renewal leases totaling approximately 686 thousand and 1.9 million square feet, which included the execution of a new 12-year lease with Floor & Decor for approximately 185 thousand square feet in Atlanta, GA, and 7-year lease with Dohmen Life Science Service, LLC for approximately 78 thousand square feet in Mason, OH during the quarter ended December 31, 2018.
  • During the year ended December 31, 2018, we acquired three properties for a total of $183.1 million and approximately 1.9 million square feet, which completed our 1031 exchange transaction related to sale of the DreamWorks Animation Headquarters and Studio Campus ("Dreamworks") in 2017.
  • On November 2, 2018, we sold the Quad/Graphics Property located in Loveland, Colorado for total proceeds of $10.7 million, including a termination fee, less closing costs and other closing credits. The carrying value of the property on the closing date was approximately $10.3 million. Upon the sale of the property, we recognized a gain of approximately $0.4 million.
  • On December 28, 2018, we sold the Bridgestone Property located in Bloomingdale, Illinois for total proceeds of $2.5 million, less closing costs and other closing credits. The carrying value of the property on the closing date was approximately $2.8 million. Upon the sale of the property, we recognized a loss of approximately $0.3 million.

Financial Results

  • Total revenue was $336.4 million for the year ended December 31, 2018, compared to $346.5 million for the prior year.
  • Net income attributable to common stockholders was $17.6 million, or $0.10 per basic and diluted share for the year ended December 31, 2018, compared to $140.7 million or $0.81 per basic and diluted share for the year ended December 31, 2017. The decrease during the period was primarily due to the gain on sale of $116.4 million for the ITT, Dreamworks and One Century Plaza properties, which sold in the prior year, as well as higher interest expense in the current year.
  • The ratio of debt to total real estate acquisition price as of December 31, 2018 was 45.4%1.

Self- Administration/ Merger Transaction

  • On December 14, 2018, we and our Operating Partnership entered into the Self Administration Transaction, with Griffin Capital Company, LLC ("GCC") and Griffin Capital LLC ("GC LLC"), pursuant to which GCC and GC LLC contributed to the Operating Partnership all of the membership interests in Griffin Capital Real Estate Company, LLC ("GRECO") and certain assets related to the business of GRECO, in exchange for 20,438,684 units of limited partnership interest in our Operating Partnership, plus additional cash and limited partnership units as earn-out consideration. As a result of the Self Administration Transaction, we are now self-managed and acquired the advisory, asset management and property management business of GRECO.
  • On December 14, 2018, our Operating Partnership, Griffin Capital Essential Asset REIT II , Inc. ("GCEAR II"), Griffin Capital Essential Asset Operating Partnership II, L.P. and Globe Merger Sub, LLC, a wholly owned subsidiary of GCEAR II, entered into an Agreement and Plan of Merger, which has been approved by GCEAR II stockholders. The combined company will have a total capitalization of approximately $4.72 billion, and will own 101 properties in 25 states, consisting of approximately 27.2 million square feet.

Non-GAAP Measures

  • Adjusted funds from operations, or AFFO, was approximately $138.6 million for the year ended December 31, 2018, compared to approximately $148.7 million for the same period in 2017. Funds from operations, or FFO(5), was approximately $139.2 million and $157.2 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 credit facility agreement, was approximately $228.6 million for the year ended December 31, 2018 with a fixed charge and interest coverage ratio of 3.76 and 4.21, respectively. Please see the financial reconciliation tables and notes at the end of this release for more information regarding adjusted EBITDA and related ratios.

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, 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.

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 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 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 61.4% 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 61.4% investment grade tenant ratings, 56.2% is from a Nationally Recognized Statistical Rating Organization (NRSRO) credit rating, with the remaining 5.2% 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.

News & Updates

Finsbury
Ben Rosner

Associate Director