Griffin Capital Essential Asset REIT Reports 2020 Third Quarter Results
El Segundo, Calif. (November 10, 2020) – Griffin Capital Essential Asset REIT, Inc. (“GCEAR”) announced its results for the quarter ended September 30, 2020.
Highlights for the Quarter Ended September 30, 2020
- Total revenue of approximately $100.0 million for the quarter, a 2.6 percent increase compared to the same quarter last year.
- Adjusted Funds from Operations available to common stockholders and limited partners, or AFFO,1 of $0.15 per basic and diluted share, which was consistent with the same quarter last year.
- Commenced 515,134 square feet of previously executed leases, which were offset by 300,294 square feet of lease expirations, resulting in positive net absorption of 214,840 square feet.
- Collected approximately 100 percent of contractual rent due during the quarter.
Highlights Subsequent to September 30, 2020
- Collected approximately 100 percent of contractual rent due in October.
- On October 1st, executed a 10-year, full-building lease extension with WABCO Air Compressor Holdings, Inc. at our 145,200 square foot industrial property in North Charleston, SC such that the remaining lease term is now approximately 13 years.
- On October 29th, entered into a definitive merger agreement to acquire Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”) for approximately $1.2 billion in a stock-for-stock transaction. The combined company would consist of 125 properties totaling 31 million square feet and would have a total asset value of approximately $5.8 billion.2
“Our financial results continue to reflect the strength and resiliency of our portfolio as do our rent collections. We believe our merger with CCIT II, once consummated, will serve to further enhance these qualities by materially increasing our size and scale, improving our leasing and leverage metrics and reducing the overall operating costs of the combined company,” said Michael Escalante, GCEAR’s Chief Executive Officer.
Results for the Quarter Ended September 30, 2020
- Total revenue was approximately $100.0 million for the quarter ended September 30, 2020 compared to approximately $97.4 million for the quarter ended September 30, 2019.
- Net income (loss) attributable to common stockholders was approximately $(8.6) million, or $(0.04) per basic and diluted share, for the quarter ended September 30, 2020, compared to approximately $8.9 million, or $0.04 per basic and diluted share, for the quarter ended September 30, 2019. The decline was primarily a result of non-cash impairments and a loss from investment in unconsolidated entities recorded during the quarter.
- AFFO1 was approximately $39.7 million, or $0.15 per basic and diluted share, for the quarter ended September 30, 2020, compared to approximately $41.6 million, or $0.15 per basic and diluted share, for the same period in 2019. Funds from Operations attributable to common stockholders and limited partners, or FFO,1 was approximately $39.8 million, or $0.15 per basic and diluted share, and $41.4 million, or $0.15 per basic and diluted share, for the quarter ended September 30, 2020 and 2019, 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 $64.6 million for the quarter ended September 30, 2020 with a fixed charge and interest coverage ratio of 2.7x 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.
- Commenced one new lease, three renewal leases and three expansion leases during the quarter for a total of 515,134 square feet which were offset by 300,294 square feet of expirations, resulting in positive net absorption of 214,840 square feet during the quarter. Combined with leases signed but not yet commenced on vacant properties, the portfolio was 88.6 percent leased as of September 30, 2020.
Portfolio Overview as of September 30, 2020
- Enterprise value as of September 30, 2020 was approximately $4.5 billion.
- Our weighted average remaining lease term was approximately 7.0 years with approximately 2.1 percent average annual rent growth for the remainder of the existing term for all leases combined.
- Our portfolio as of September 30, 2020 was 88.6 percent leased.
- Approximately 59.4 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 total real estate acquisition value and net debt (pro rata share) to total enterprise value as of September 30, 2020 were 48.0 percent and 45.8 percent, respectively.3
- The ratio of net debt (pro rata share) to Adjusted EBITDA as of September 30, 2020 was 8.0x.
About Griffin Capital Essential Asset REIT, Inc.
Griffin Capital Essential Asset REIT, Inc. – America’s Blue-Chip LandlordTM – is a self-managed, publicly registered, non-traded REIT with a portfolio consisting primarily of single-tenant, business essential office and industrial properties throughout the United States, diversified by corporate credit, physical geography, product type, and lease duration. GCEAR’s portfolio,6 as of September 30, 2020, consisted of 99 office and industrial properties (122 buildings), totaling 27.1 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.
ADDITIONAL INFORMATION ABOUT THE MERGER
In connection with the proposed merger, GCEAR intends to file a registration statement on Form S-4 with the SEC that will include a proxy statement of CCIT II and will also constitute a prospectus of GCEAR. This communication is not a substitute for the registration statement, the proxy statement/prospectus or any other documents that will be made available to the stockholders of CCIT II. In connection with the proposed merger, GCEAR and CCIT II also plan to file relevant materials with the SEC. STOCKHOLDERS OF CCIT II ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE RELEVANT PROXY STATEMENT/PROSPECTUS, WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. A definitive proxy statement/prospectus will be sent to CCIT II’s stockholders. Investors may obtain a copy of the proxy statement/prospectus (if and when it becomes available) and other relevant documents filed by GCEAR and CCIT II free of charge at the SEC’s website, www.sec.gov. Copies of the documents filed by GCEAR with the SEC will be available free of charge on GCEAR’s website at http://www.gcear.com or by contacting GCEAR’s Investor Services at (888) 926-2688, as they become available. Copies of the documents filed by CCIT II with the SEC will be available free of charge on CCIT II’s external advisor’s website, at website at http://www.cimgroup.com or by contacting CCIT II’s Investor Relations at ShareholderRelations@cimgroup.com.
PARTICIPANTS IN SOLICITATION RELATING TO THE MERGER
CCIT II, GCEAR, CIM Group, LLC and CCIT II’s external advisor and their respective directors and executive officers and other members of management and employees, may be deemed to be participants in the solicitation of proxies from CCIT II stockholders in respect of the proposed merger among GCEAR, CCIT II and their respective subsidiaries.
Information regarding the directors, executive officers and external advisor of CCIT II is contained in the Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 30, 2020, as amended on April 27, 2020. Information about directors and executive officers of GCEAR is available in the proxy statement for its 2020 annual meeting of stockholders, which was filed with the SEC on April 15, 2020. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials filed with the SEC regarding the proposed merger when they become available. Stockholders of CCIT II should read the proxy statement/prospectus carefully when it becomes available before making any voting or investment decisions. Investors may obtain free copies of these documents from GCEAR or CCIT II using the sources indicated above.
NO OFFER OR SOLICITATION
This communication and the information contained herein does not constitute an offer to sell or the solicitation of an offer to buy or sell any securities or a solicitation of a proxy or of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. This communication may be deemed to be solicitation material in respect of the proposed merger.
Disclaimer on Forward-Looking Statements
This press release contains statements that constitute 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. Statements can generally be identified as forward-looking because they include words such as “believes,” “anticipates,” “expects,” “would,” “could,” or words of similar meaning. Statements that describe future plans and objectives are also forward-looking statements. These statements are based on the companies’ current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements; GCEAR can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from GCEAR’s expectations include, but are not limited to, the risk that the merger will not be consummated within the expected time period or at all; the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement; the failure to satisfy the conditions to the consummation of the proposed merger, including the approval of the stockholders of CCIT II; statements about the benefits of the proposed merger involving GCEAR and CCIT II and statements that address operating performance, events or developments that GCEAR expects or anticipates will occur in the future, including but not limited to statements regarding anticipated synergies and G&A savings, future financial and operating results, plans, objectives, expectations and intentions, expected sources of financing, anticipated asset dispositions, anticipated leadership and governance, creation of value for stockholders, benefits of the proposed merger to customers, employees, stockholders and other constituents of the Combined Company, the integration of GCEAR and CCIT II, cost savings and the expected timetable for completing the proposed merger, and other non-historical statements; risks related to the disruption of management’s attention from ongoing business operations due to the proposed merger; the availability of suitable investment or disposition opportunities; changes in interest rates; the availability and terms of financing; the impact of the COVID-19 pandemic on the operations and financial condition of each of GCEAR and CCIT II and the real estate industries in which they operate, including with respect to occupancy rates, rent deferrals and the financial condition of their respective tenants; general financial and economic conditions, which may be affected by government responses to the COVID-19 pandemic; market conditions; legislative and regulatory changes that could adversely affect the business of GCEAR or CCIT II; and other factors, including those set forth in the section entitled “Risk Factors” in GCEAR’s and CCIT II’s most recent Annual Reports on Form 10-K, as amended, and Quarterly Reports on Form 10-Q filed with the SEC, and other reports filed by GCEAR and CCIT II with the SEC, copies of which are available on the SEC’s website, www.sec.gov. Forward-looking statements are not guarantees of performance or results and speak only as of the date such statements are made. Except as required by law, neither GCEAR nor CCIT II undertakes any obligation to update or revise any forward-looking statement in this communication, whether to reflect new information, future events, changes in assumptions or circumstances or otherwise.
1 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.
2 Pro-forma as of June 30, 2020. Real estate values based on appraised values.
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 rental revenue 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 September 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 59.4 percent 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 percent generated from tenants with a Nationally Recognized Statistical Rating Organization (“NRSRO”) credit rating; and the remaining 5.0 percent 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 Excludes the property information related to the acquisition of an 80 percent ownership interest in a joint venture with affiliates of Digital Realty Trust, L.P.