The board of Griffin Capital Essential Asset REIT, a publicly registered non-traded REIT, approved a new estimated net asset value of $10.04 per share of common stock as of June 30, 2017. The new NAV is a decline of approximately 3.8 percent compared to the $10.44 NAV approved by the board as of Oct. 27, 1016.
The valuation was based on an estimated fair value of the company’s assets less the estimated fair value of its liabilities, divided by the number of shares of common stock outstanding. Robert A. Stanger & Co. prepared an appraisal report on 82 of the company’s 84 properties as well as a net asset value report upon which the board relied in their determination. The two remaining properties are pending disposition, the value of these transactions was also factored into the Stanger NAV report at their respective pending sale prices net of the advisor’s estimated closing costs.
According to sources at Griffin Capital, the decline in NAV is the result of discussions with the tenants of the portfolio, 17 of which indicated that their space use would decline over the “long-term,” primarily the result of corporate mergers and restructurings. Our sources indicated that the REIT would likely reap early termination fees from these tenants, which would offset costs to re-tenant the vacant space at more favorable market lease rates – the potential value of which cannot be accounted for in the current NAV.
As a result of the adoption of the new estimated NAV, the purchase price for share’s pursuant to the company’s distribution reinvestment plan will be reduced to $10.04 per share.
Griffin Capital Essential Asset REIT oversees a portfolio of 84 properties purchased for a total of $3.4 billion. The company’s initial public offering was declared effective by the U.S. Securities and Exchange Commission in November 2009. The REIT closed its follow-on offering in April 2014 after raising a total of approximately $1.5 billion in investor equity, according to Summit Investment Research.