Griffin Capital Essential Asset REIT Inc., a publicly registered non-traded real estate investment trust, has released its results for the quarter and full year ended December 31, 2020.
Results for the Fourth Quarter of 2020
The REIT had total revenue of approximately $96.3 million for the quarter ended December 31, 2020, a decline of $13.5 million compared to the same quarter last year.
The company noted that the decline was primarily attributable to $11.4 million of termination fee income recognized in the fourth quarter of last year. Excluding such income, the decline would have been $2.1 million, which was primarily attributable to dispositions that occurred in 2020 and the fourth quarter of 2019.
Net (loss) attributable to common stockholders was approximately $(8.4) million, or $(0.04) per basic and diluted share, for the quarter ended December 31, 2020, compared to approximately $(3.7) million, or $(0.02) per basic and diluted share, for the quarter ended December 31, 2019.
In addition to the noted impacts to revenue, the company said that the decline was primarily attributable to a $21.5 million gain recognized in the fourth quarter of 2019, which resulted from the sale of the BT Infonet property located in El Segundo, California. Net (loss) was also higher as a result of a $4.4 million write-off of previously capitalized transaction costs and $2.7 million in cash and non-cash employee separation costs, both of which were recognized as a component of general and administrative expenses in the fourth quarter of 2020.
The company explained that the transaction costs were previously capitalized in connection with a potential strategic transaction. The employee separation costs were incurred in connection with the resignation of one of the company’s executive officers, as disclosed on January 04, 2021.
The DI Wire reported on January 5th that the REIT’s chief legal officer and secretary Howard Hirsch submitted his resignation, which became effective January 29, 2021.
Adjusted funds from operations totaled approximately $37.2 million, or $0.14 per basic and diluted share, for the quarter ended December 31, 2020, a decline of $11.8 million, or $0.04 per basic and diluted share, compared to the same period in 2019.
Consistent with total revenue, the company said that the decline was primarily attributable to the termination fee income recognized in the fourth quarter of last year. Excluding such income, the decline would have been $0.4 million, which was primarily attributable to the previously noted dispositions that occurred in prior quarters.
Adjusted EBITDA was approximately $61.7 million for the quarter ended December 31, 2020. This resulted in fixed charge and interest coverage ratios of 2.6x and 3.2x, respectively, for the quarter.
The company signed three lease renewals for a total of 156,893 square feet, with a weighted average lease term of 9.3 years, and no leases expired during the quarter.
The company sold a 206,970-square-foot office property located in Simi Valley, California. The carrying value approximated the sale price which totaled $30 million.
In connection with its acquisition of Cole Office & Industrial REIT Inc., the company completed an amendment to its existing credit facilities. The amendment provides for a new $400 million senior unsecured, delayed draw, 5-year term loan as well as the option to increase the commitments under the revolving portion of the credit facility, increase existing term loans, and/or incur new term loans by up to an additional $600 million in the aggregate. The amendment also increased the maximum total commitment amount from $2 billion to $2.5 billion.
The REIT published its updated estimate of its net asset value as of December 31, 2020. The average NAV across all share classes increased by $0.05 to $8.95 per share compared to $8.90 per share as of September 30, 2020, or a 2.2 percent annualized increase.
The change was primarily due to an increase in interest rates during the fourth quarter, the company said. This caused a $5.7 million decrease in the unrealized loss on its interest rate swap valuations and a $2.0 million decrease in the mark-to-market valuation of its secured debt.
“We were pleased with our fourth-quarter and full-year results in light of the significant economic disruption caused by the COVID-19 pandemic,” said Michael J. Escalante, chief executive officer. “We collected nearly 100 percent of contractual rent due throughout the year, a testament to how our focus on high-quality tenants provides stability in periods of distress. However, our future revenues may be constrained by the significant decline in office leasing activity, with most tenants delaying leasing decisions until the pandemic further subsides.”
He added, “Despite these headwinds, our portfolio benefited from the proactive efforts of our asset management team. We signed leases totaling 957,606 square feet during the year, with a weighted-average lease term of 10.3 years. While the current leasing environment remains subdued, the rollout of COVID-19 vaccines is expected to generate a recovery in activity…”
Year-End Results for 2020
Total revenue of approximately $397.5 million for the year ended December 31, 2020, an increase of $10.3 million compared to the prior year. The increase was primarily a result of acquisitions that occurred in the first quarter of 2020 and the third quarter of 2019 as well as the company’s merger in April 2019, the company said.
Net (loss) attributable to common stockholders was approximately $(13.0) million, or $(0.06) per basic and diluted share, for the year ended December 31, 2020, compared to approximately $24.8 million, or $0.11 per basic and diluted share, for the year ended December 31, 2019.
The decline was primarily attributable to a net change in gains from dispositions of $25.8 million as well as the previously noted impacts to general and administrative expenses recognized in the fourth quarter of 2020.
AFFO was approximately $168.1 million, or $0.64 per basic and diluted share, for the year ended December 31, 2020, a decline of $3.3 million, or $0.04 per basic and diluted share, compared to the same period in 2019.
Adjusted EBITDA was approximately $259.3 million for the year ended December 31, 2020. This resulted in fixed charge and interest coverage ratios of 2.8x and 3.4x, respectively.
The company signed six lease renewals for 754,745 square feet of space and four new leases for 202,861 square feet of space, resulting in 957,606 square feet of leases signed during the year with a weighted average lease term of 10.3 years.
The REIT acquired one property during the year; a new 526,320-square-foot industrial property located in Winston-Salem, North Carolina for approximately $34.9 million. The property is leased by Pepsi Bottling Ventures for approximately 12 years of remaining lease term as of the date of acquisition.
The REIT sold two properties during the year for gross proceeds of $54.5 million, resulting in a net gain of $4.1 million for the year ended December 31, 2020.
Highlights Subsequent to December 31, 2020
The REIT collected approximately 100 percent of contractual rent due in January and February.
On January 11, 2021, it executed a 36-month, full-building lease extension with Renfro Corporation at the company’s 566,600-square-foot industrial property in Clinton, South Carolina.
On March 01, 2021, the REIT purchased Cole Office & Industrial REIT Inc. in a stock-for-stock merger transaction valued at approximately $1.2 billion. After the merger, the company’s portfolio consists of 123 properties with a total asset value of $5.8 billion.
Portfolio Overview as of December 31, 2020
The REIT’s portfolio had an enterprise value of approximately $4.5 billion and was 88.5 percent leased.
The weighted average remaining lease term was approximately 6.8 years with approximately 2.1 percent average annual rent growth for the remainder of the existing term for all leases combined.
The company said that approximately 64.3 percent of the portfolio’s 12-month forward net rental revenue was generated by properties leased and/or guaranteed, directly or indirectly, by companies that have investment grade credit ratings or what management believes are generally equivalent ratings.
The ratio of consolidated debt less cash and cash equivalents to total real estate was 46 percent.
Griffin Capital Essential Asset REIT is a self-managed REIT with a portfolio consisting primarily of single tenant business essential properties throughout the United States.