Griffin Capital Essential Asset REIT Reports 2020 Second Quarter Results
El Segundo, Calif. (August 12, 2020) – Griffin Capital Essential Asset REIT, Inc. (the “Company”) announced its results for the quarter ended June 30, 2020. The Company reported net income attributable to common stockholders of $0.01 per share. The Company also reported Adjusted Funds from Operations available to common stockholders and limited partners of $0.19 per basic and diluted share, an increase of $0.02 compared to the same period last year. In addition, the Company reported 191,300 square feet of leases signed during the quarter with a weighted average lease term of approximately 10.2 years, as well as the collection of approximately 99 percent of contractual rent due during the quarter and approximately 100 percent of contractual rent due during July.
“Despite a challenging market environment impacted by COVID-19, a situation which continues to evolve, we produced solid results in the second quarter. These results reflect the quality of our tenants and properties and the tireless efforts of our Management Team who has been proactively working with our tenants to further strengthen our relationships and pursue opportunities for long-term growth,” said Michael Escalante, the Company’s Chief Executive Officer.
Mr. Escalante further stated, “We persist in our belief that a conservative approach focused on capital preservation is key to navigating through this period of economic uncertainty and will best position us to strategically deploy capital in the future to retain the long-term value of the Company.”
As of June 30, 2020, the Company’s portfolio1 consisted of 99 office and industrial properties (122 buildings), encompassing over 27 million rentable square feet of space in 25 states.
Highlights and Accomplishments for the Quarter Ended June 30, 2020:
Financial Results
- Total revenue was $105.4 million for the quarter ended June 30, 2020 compared to $103.4 million for the quarter ended June 30, 2019.
- Net income attributable to common stockholders was $3.3 million, or $0.01 per basic and diluted share, for the quarter ended June 30, 2020, compared to $14.2 million, or $0.06 per basic and diluted share, for the quarter ended June 30, 2019. The decline was primarily a result of non-cash impairment charges during the quarter.
Non-GAAP Measures
- Adjusted Funds from Operations available to common stockholders and limited partners, or AFFO2, was approximately $50.0 million, or $0.19 per basic and diluted share, for the quarter ended June 30, 2020, compared to approximately $43.2 million, or $0.17 per basic and diluted share, for the same period in 2019. Funds from Operations attributable to common stockholders and limited partners, or FFO(2), was approximately $55.3 million, or $0.21 per basic and diluted share, and $54.1 million, or $0.21 per basic and diluted share, for the quarter ended June 30, 2020 and 2019, respectively. The increase in both AFFO and FFO was primarily attributable to lease termination income earned in the current period. 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 $69.6 million for the quarter ended June 30, 2020 with a fixed charge and interest coverage ratio of 3.2x and 3.8x, 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 June 30, 2020 was $4.5 billion.3
- Our weighted average remaining lease term was approximately 7.2 years with approximately 2.0 percent average annual rent growth for the remainder of the existing term for all leases combined.
- Our portfolio as of June 30, 2020 was 88.6 percent leased.
- Approximately 59.0 percent 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
- The ratio of net debt (pro rata share) to Adjusted EBITDA as of June 30, 2020 was 7.5x.
Leasing Activity
- Executed three leases during the quarter for 191,300 square feet with a weighted average lease term of approximately 10.2 years. Included in this total was an approximately 183,000 square foot lease to a major Fortune 100 e-commerce company at our Arlington Heights, Illinois property for a term of over 10 years. Simultaneous with the execution of the lease, we entered into a termination agreement with the previous tenant for a payment of $10.9 million.
- In addition, leases commencing during the quarter included three renewal leases and one new lease for a total of 785,138 square feet of space which was offset by 758,073 square feet of lease expirations and terminations, resulting in positive net absorption of 27,065 square feet. Combined with leases signed but not yet commenced on vacant properties, the portfolio is 88.6 percent leased as of June 30, 2020.
Strategic Dispositions
- On June 30, 2020, we completed the sale of a 273,241 square foot office property located in Simi Valley, California for $24.5 million which was 100 percent leased to Bank of America, N.A through December 2020. The sale price resulted in a gain of $4.3 million on the property’s carrying value.
COVID-19 Update
- Collected approximately 99 percent of contractual rent due in April, May and June to date.
- Collected approximately 100 percent of contractual rent due in July.
- To date, granted temporary rent relief for two tenants for three months of deferred rent, to be re-paid in 2021, which approximates 0.22 percent of our 12-month forward net rents as of June 30, 2020.
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(1), as of June 30, 2020, 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 $4.5 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 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 limited partners for all periods presented.
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. 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 June 30, 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.
5 Approximately 59.0% 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; 54.1% generated from tenants with a Nationally Recognized Statistical Rating Organization (“NRSRO”) credit rating; and the remaining 4.9% 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.
