Pepsi
March 05, 2020

Griffin Capital Essential Asset REIT Reports Fourth Quarter and Year Ended December 31, 2019 Results

El Segundo, Calif. (March 5, 2020) - Griffin Capital Essential Asset REIT, Inc. (the “REIT”) announced its results for the quarter and year ended December 31, 2019. The REIT reported cumulative leases signed in 2019 of 1.8 million square feet. In addition, as a result of becoming an internally managed company, the REIT experienced a significant reduction in corporate operating expenses(1) which declined by over 40% compared to the year ended December 31, 2018.

“We are pleased with our performance and accomplishments over the last year,” said Michael Escalante, Chief Executive Officer of the REIT. “2019 was a transformative year with the completion of our merger in April to grow into a $4.6 billion internally managed REIT while continually demonstrating our experience as operators of real estate with robust leasing activity and accretive capital transactions. These achievements will meaningfully contribute to our future performance and provide a solid example of our proactive approach to managing net lease real estate.”

As of December 31, 2019, the REIT’s portfolio(2) consisted of 99 office and industrial properties (122 buildings), encompassing approximately 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 $387.1 million for the year ended December 31, 2019 compared to $336.4 million for the year ended December 31, 2018 predominantly as a result of the merger discussed below.
  • Net income attributable to common stockholders was $24.8 million, or $0.11 per basic and diluted share for the year ended December 31, 2019, compared to net income attributable to common stockholders of $17.6 million, or $0.10 per basic and diluted share, for the year ended December 31, 2018.

Non-GAAP Measures

  • Adjusted funds from operations, or AFFO, was approximately $153.5 million for the year ended December 31, 2019, compared to approximately $138.6 million for the same period in 2018. Funds from operations, or FFO (6), was approximately $175.4 million and $139.2 million for the years ended December 31, 2019 and 2018, 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 $270.3 million for the year ended December 31, 2019 with a fixed charge and interest coverage ratio of 3.1x and 3.7x, 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 December 31, 2019 was $4.6 billion.(3)
  • Our weighted average remaining lease term was approximately 7.4 years with average annual rent increases of approximately 2.2%.
  • Our portfolio as of December 31, 2019 was 91.3% leased.
  • Approximately 65.5% of our portfolio’s net rental revenue(4) 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)
  • 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 December 31, 2019 was 48.2% and 45.0%, respectively. (2)

Leasing Activity

  • During the quarter ended December 31, 2019, we renewed leases totaling 139,621 square feet, which included a 34 month lease extension with SoftBank for 103,948 square feet in San Carlos, CA and a 5 month lease extension with Tenable for 30,098 square feet in Columbia, MD.
  • or the year ended December 31, 2019, we executed leases totaling 1.8 million square feet with a weighted average lease term of 7.8 years, certain of these leases commence beyond 2019.
  • Nine leases to new tenants totaling 0.7 million square feet and renewals with eight tenants totaling 0.8 million square feet commenced during 2019.

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.

Completion of Merger

  • On April 30, 2019, we announced the completion of the merger with the entity formerly known as Griffin Capital Essential Asset REIT, Inc. (“EA-1”). The merger created a self-managed REIT with significantly greater size and scale and generated numerous other benefits for shareholders, including substantial corporate operating expense savings, increased operating efficiencies and immediate accretion to earnings and cash flows.

Subsequent Events

  • On February 5, 2020, we acquired a 526,320 square-foot industrial property, fully occupied by Pepsi Bottling Ventures and located at 390 Business Park Drive, Winston-Salem, North Carolina. The purchase price for the property was approximately $34.9 million.

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 December 31, 2019, consists of 99 office and industrial properties (122 buildings), totaling 27 million rentable square feet, located in 25 states, representing a total enterprise value of approximately $4.6 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 Corporate operating expenses included general and administrative expenses as well as fees and expense reimbursements paid to the Company's former Sponsor, Griffin Capital Company, LLC, and its affiliates. The calculation does not include those fees and expenses paid by Griffin Capital Essential Asset REIT II, Inc., prior to the merger Griffin Capital Essential Asset REIT, Inc. but if included would result in a decline of approximately 50%.

2 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.

3 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. Amount includes $80.0 million of borrowing used to redeem investors in January 2020. Total outstanding shares includes limited partnership units issued and shares issued pursuant to the DRP, net of redemptions. The increase in capitalization is a result of the merger on April 30, 2019. Prior period balance was restated due to change in methodology in calculating market capitalization.

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 December 31, 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 65.5% 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; 54.5% generated from tenants with a Nationally Recognized Statistical Rating Organization (NRSRO) credit rating, and the remaining 11.0% 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 FFO, as described by the National Association of Real Estate Investment Trusts ("NAREIT"), is adjusted for non-controlling interest and redeemable preferred distributions.

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