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Pepsi
May 13, 2020

Griffin Capital Essential Asset REIT Reports 2020 First Quarter Results

El Segundo, Calif. (May 13, 2020) - Griffin Capital Essential Asset REIT, Inc. (the “Company”) announced its results for the quarter ended March 31, 2020. The Company reported approximately 618,000 square feet of executed new and renewal leases during the quarter. Subsequent to March 31, 2020, the Company signed a full-building lease for approximately 183,000 square feet at its Arlington Heights, IL property to a major Fortune 100 company with a lease term of over 10 years. In addition, the Company collected 98% and 96% of April and May rents to date, respectively.

“We are pleased with our first quarter operating results and our rent collections over the last two months. We are cautiously approaching our path forward in light of the current global health crisis and its impact on the U.S. economy,” said Michael Escalante, the Company’s Chief Executive Officer. “Our team’s decades of experience have taught us that an abundance of caution, prudence and proactive management are essential in uncertain and challenging economic environments such as these.”

“Our strategy today is not significantly different from that which has served us well since our inception: to control and minimize risk while positioning the Company to capitalize on potential opportunities as they arise,” Escalante continued. Underpinning this approach is the solid, time-tested foundation of a diversified portfolio of more than 100 high-quality properties leased to blue-chip, credit-worthy tenants in a broad cross section of industries.”

As of March 31, 2020, the Company's portfolio(1) consisted of 100 office and industrial properties (123 buildings), encompassing over 27 million rentable square feet of space in 25 states.

Highlights and Accomplishments for the Quarter and Year Ended December 31, 2019:

Financial Results

  • Total revenue was $95.7 million for the quarter ended March 31, 2020 compared to $76.5 million for the quarter ended March 31, 2019, predominantly as a result of the merger in the second quarter of 2019.
  • Net income attributable to common stockholders was $0.7 million, or zero cents per basic and diluted share, for the quarter ended March 31, 2020, compared to $5.3 million, or $0.03 per basic and diluted share, for the quarter ended March 31, 2019.

Non-GAAP Measures

  • Adjusted funds from operations available to common stockholders and limited partners, or AFFO(5), was approximately $41.3 million, or $0.16 per basic and diluted share, for the quarter ended March 31, 2020, compared to approximately $37.7 million, or $0.19 per basic and diluted share, for the same period in 2019. Funds from operations attributable to common stockholders and limited partners, or FFO(5), was approximately $44.0 million, or $0.17 per basic and diluted share, and $43.2 million, or $0.22 per basic and diluted share, for the quarter ended March 31, 2020 and 2019, respectively. Please see the financial reconciliation tables and notes at the end of this release for more information regarding FFO and AFFO.
  • Our Adjusted EBITDA, as defined per our credit facility agreement, was approximately $63.5 million for the quarter ended March 31, 2020, 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 as of March 31, 2020 was $4.7 billion.(2)
  • Our weighted average remaining lease term was approximately 7.3 years with approximately 2.1% average rent growth for the remainder of the existing term for all leases combined.
  • Our portfolio as of March 31, 2020 was 89.0% leased.
  • Approximately 56.8% 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 ratings.(4)
  • The ratio of net debt (pro rata share) to total real estate acquisition price and adjusted net debt (pro rata share) to total enterprise value as of March 31, 2020 was 48.7% and 45.3%, respectively.(2)

Leasing Activity

  • During the quarter seven lease transactions totaling 618,000 square feet were executed, including a 267,000 square foot renewal with Nike, Inc. in Hillsboro, OR and a 321,000 square foot renewal with Hopkins Enterprises in Emporia, Kansas, both of which extend lease terms that would have otherwise expired December 31, 2020.
  • Additionally, seven previously executed leases to new tenants totaling 112,000 square feet commenced during the quarter, as did three renewals totaling 38,000 square feet. Combined with existing lease encumbrances on vacant space totaling 318,000 square feet, the portfolio is 89% leased.

Strategic Dispositions

  • On October 7, 2019, we sold the FedEx Freight property located in Columbus, Ohio, for total proceeds of $30.3 million, less closing costs and other closing credits. The property sold for a value which approximates carrying value.
  • On November 20, 2019, we sold the BT Infonet property, located in El Segundo, California, for total proceeds of $63.5 million, less closing costs and other closing credits. The carrying value of the property on the closing date was approximately $41.5 million. Upon the sale of the property, we recognized a gain of approximately $21.5 million, in addition to a termination fee of approximately $11.2 million.
  • For the year ended December 31, 2019, total proceeds from the sale of three properties and a land parcel were approximately $144.4 million, with combined gains of approximately $29.9 million.

Subsequent Events

  • On February 5, 2020, we acquired a new 526,320 square-foot industrial property, fully leased by Pepsi Bottling Ventures for approximately 12 years and located at 390 Business Park Drive, Winston-Salem, North Carolina. The purchase price was approximately $34.9 million. As part of the acquisition, the Company assumed a $18.9 million mortgage loan. The loan matures on October 1, 2024, has a fixed interest rate of 3.69%, and requires monthly payments of principal and interest.

COVID-19 Update

  • 98% of April rents collected to date
  • 96% of May rents collected to date
  • Received rent relief requests from 11 tenants. We continue to evaluate each tenant’s need for rent relief and to date have not approved any of these requests.
  • Rent relief will only be approved if warranted; we anticipate some of these rent relief amendments will result in positive lease modifications for the Company.

About Griffin Capital Essential Asset REIT, Inc.

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 March 31, 2020, consists of 100 office and industrial properties (123 buildings), totaling 27 million rentable square feet, located in 25 states, representing a total 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 relating 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.

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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 Total enterprise value includes the outstanding debt balance (excluding deferred financing costs and premium/discounts), plus unconsolidated debt - pro rata share, plus preferred equity, plus total outstanding shares multiplied by the NAV. Total outstanding shares includes limited partnership units issued 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 March 31, 2020 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 56.8% 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; 54.4% generated from tenants with a Nationally Recognized Statistical Rating Organization ("NRSRO") credit rating; and the remaining 2.4% 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 the National Association of Real Estate Investment Trusts ("NAREIT"), is adjusted for redeemable preferred distributions. Additionally, we use AFFO as a non-GAAP financial measure to evaluate our operating performance. FFO and AFFO have been revised to include amounts available to both common stockholders and limits partners for all periods presented.

News & Updates

Finsbury
Joe Berg

Director

310-633-9446

Diana Keary
Senior Vice President
Griffin Capital Company

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