Griffin Capital Essential Asset REIT Inc., a publicly registered non-traded real estate investment trust, has sold a 273,241-square-foot office property located at 1800 Tapo Canyon, Simi Valley, California for $24.5 million. The company also disclosed that it collected 99 percent of all contractual portfolio rent due during the period most impacted by the COVID-19 pandemic.
1800 Tapo Canyon, which is 100 percent leased to Bank of America through December 2020, was purchased in August 2015 along with another Simi Valley property located at 450 American Street that is also leased to Bank of America. The original acquisition price for both properties was $57 million.
Bank of America had previously announced that it planned to vacate the 1800 Tapo Canyon property when the lease expired, the company said.
“Despite the tenant’s plan to not renew its lease upon expiration, our sale price, combined with the attractive cash flows received over the lease term, allowed us to meet our original return expectations, thus serving as verification of our original investment thesis,” said chief executive officer Michael Escalante.
“When we acquired the property, we were attracted by the strong yield, especially given the investment grade tenancy, the tenant’s long-standing operating history in the area and stated preference to renew its lease at this facility,” he added. “Our downside was mitigated by the potential to redevelop the asset and capitalize on the significant industrial demand in the market should the tenant decide to not renew its lease at expiration.”
Escalante continued, “After preparing a plan to redevelop the property, we received unsolicited purchase offers from credible buyers. Based on rigorous financial analysis, we determined that a sale would provide an attractive risk-adjusted return that was superior to the potential risks that might arise with the redevelopment alternative.”
In other news, the REIT collected 99 percent of contractual rent for the month of June, and also received payments for a portion of unpaid rent otherwise due in April and May, resulting in an updated collection rate of 99 percent for each of those months.
“We continue to be pleased with our rent collections since the onset of the COVID-19 pandemic and believe that these achievements reflect the importance and value of tenant credit quality and diversification during periods of economic distress,” Escalante commented. “That said, the pandemic continues to have a significant impact on our economy and many of our tenants, and therefore we are steadfast in our belief that an abundance of prudence is appropriate at this time.”
Escalante indicated that the company is being proactive in the management of its portfolio management by negotiating lease extensions in exchange for amendments to existing leases including rent deferrals, accelerated capital improvements, and other minor alterations to lease provisions.
Griffin Capital Essential Asset REIT’s portfolio primarily consists of single tenant business essential properties throughout the United States. As of June 30, 2020, the portfolio consisted of 122 office and industrial buildings, totaling approximately 27 million rentable square feet, located in 25 states, and representing a total enterprise value of approximately $4.7 billion.