Griffin Capital Essential Asset REIT Reports 2020 First Quarter Results
May 15, 2020
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 Ended March 31, 2020:
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 Acquisitions
• 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.
Subsequent Events
• In April 2020, an additional $125.0 million was drawn down on the revolving credit facility. Further, the borrowing capacity of this facility was increased by approximately $200.0 million as a result of adding seven properties as collateral.
• In April 2020, we signed an approximately 183,000 square-foot lease to a major Fortune 100 company at our Arlington Heights, Illinois property for a term of over 10 years. Simultaneously with execution of the lease, we entered into a termination agreement with the previous tenant for a payment of $10.8 million.
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.
Source: SEC
