Griffin Capital Essential Asset REIT II Reports 2018 First Quarter Results
El Segundo, Calif. (May 16, 2018) – Griffin Capital Essential Asset REIT II, Inc. (the “REIT”) announced its operating results for the quarter ended March 31, 2018.
“For the past year, we have continued to rely on the core strengths of our portfolio, under a guiding investment strategy that emphasizes current income, credit tenants, new properties, and long duration leases with embedded contractual growth,” said Michael Escalante, the REIT’s President. “Today, the REIT’s property portfolio is 100% leased and occupied. Our emphasis on being highly disciplined commercial property operators, together with our continued focus on acquiring only top quality assets under long-term leases to high quality corporate tenants, provide the REIT with significant forward momentum.”
As of March 31, 2018, our portfolio consisted of 27 properties (35 buildings) encompassing approximately 7.3 million square feet of space in 17 states.
Highlights and Accomplishments in First Quarter 2018 and Results as of March 31, 2018:
Portfolio Overview
- On September 20, 2017, we commenced a follow-on offering consisting of up to $2.2 billion in shares of common stock.
Portfolio Overview
- The total capitalization(1) of our portfolio was approximately $1.2 billion.
- Our weighted average remaining lease term was approximately 10.1 with average annual rent increases of approximately 2.4%.
- Our portfolio is 100% leased and occupied(2).
- Approximately 82.6% 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).
Financial Results
- Total revenue for the quarter ended March 31, 2018 was approximately $26.8 million, representing year-over-year growth of 3% from the same period in 2017.
- Net income attributable to common stockholders was approximately $0.8 million or $0.01 per basic and diluted share for the quarter ended March 31, 2018 compared to $3.1 million net income or $0.04 per basic and diluted share for the same period in 2017.
- As of March 31, 2018, the ratio of debt to total real estate acquisition value was 43.2%.
Non-GAAP Measures
- Adjusted funds from operations, or AFFO, was approximately $10.1 million and $10.4 million for the quarters ended March 31, 2018 and 2017, respectively. Funds from operations, or FFO(5), was approximately $11.8 million and $13.6 million for the quarters ended March 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 $16.7 million for the quarter ended March 31, 2018 with a fixed charge and interest coverage ratio of 4.25, each. Please see the financial reconciliation tables and notes at the end of this release for more information regarding Adjusted EBITDA and related ratios.
Subsequent Events
- On April 27, 2018, the REIT, through four special purpose entities owned by Griffin Capital Essential Asset Operating Partnership II, L.P., the operating partnership of the REIT, entered into a loan agreement with Bank of America, N.A. and KeyBank N.A. (collectively, the “Lender”) in which the Lender provided the four entities with a loan in the aggregate amount of $250.0 million. The loan is secured by various mortgages. The loan has a term of 10 years, maturing on May 1, 2028 and requires monthly payments of interest only at a fixed rate of 4.32%. The REIT utilized approximately $249.8 million of the proceeds provided by the loan to pay down a portion of the REIT’s revolving credit facility.
About Griffin Capital Essential Asset REIT II
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 March 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 value of approximately $1.1 billion. Griffin Capital Essential Asset REIT II, Inc. is one of several REITs sponsored or co-sponsored by Griffin Capital Company, LLC (“Griffin Capital”).
About Griffin Capital Company, LLC
Griffin Capital is a leading alternative investment asset manager with approximately $10.3* billion in assets under management . Founded in 1995, the privately-held firm is led by a seasoned team of senior executives with more than two decades of investment and real estate experience and who collectively have executed more than 650 transactions valued at over $22 billion. Additional information is available at www.griffincapital.com.
*As of March 31, 2018
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.
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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.
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, 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 82.6% of our portfolio’s net rental revenue was generated by properties leased to tenants and/or guarantors or whose non-guarantor parent companies have investment grade ratings or what management believes are generally equivalent ratings. Of the 82.6% investment grade tenant ratings, 70.9% is from Nationally Recognized Statistical Rating Organization (NRSRO) credit rating, with the remaining 11.7% 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 one example of a non-NRSRO rating.
5 FFO, as described by NAREIT, is adjusted for non-controlling interest distributions.
