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Griffin Capital Essential Asset REIT II Reports Third Quarter of 2017 Results

November 20, 2017

Griffin Capital Essential Asset REIT II Reports Third Quarter of 2017 Results

November 16, 2017 | Griffin Capital Company, LLC

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EL SEGUNDO, Calif., Nov. 16, 2017 (GLOBE NEWSWIRE) — Griffin Capital Essential Asset REIT II, Inc. (the “REIT”) announced its operating results for the third quarter of 2017. 

Michael Escalante, President of the REIT commented, “Our delivery of increased top and bottom line financial results for the third quarter validates our consistent, twofold approach of combining highly selective acquisition activities with disciplined portfolio management skills.  Our continued acquisition of top quality commercial real estate assets with well-established corporate tenants and average remaining leases exceeding 10 years adds layers of current and potential future value creation for our shareholders.  Our third quarter results underscore the strong tailwind we are enjoying as we move forward under market and economic conditions that favor our REIT’s strategy.  We look forward to continuously enhancing shareholder value by delivering steady, consistent results through current income and long-term capital appreciation events.”

As of September 30, 2017, our portfolio consisted of 27 properties (35 buildings) encompassing approximately 7.3 million square feet of space in 17 states. 

Highlights and Accomplishments for the Third Quarter of 2017 and Results as of September 30, 2017:
                
Follow-On Offering

On September 20, 2017, we commenced a follow-on offering consisting of up to $2.2 billion shares of the REIT.
Portfolio Overview

The total capitalization(1) of our portfolio was approximately $1.2 billion.
Our weighted average remaining lease term was approximately 10.6 years with average annual rent increases of approximately 2.4%. 
Our portfolio is 100% leased and occupied(2).
Approximately 82.7% 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).
Financial Results

Net income attributable to common stockholders was approximately $3.1 million or $0.04 per basic and diluted share for the quarter ended September 30, 2017 compared to $2.7 million loss or $(0.05) per basic and diluted share for the same period in 2016.
Total revenue for the quarter ended September 30, 2017 was approximately $27.3 million, representing year-over-year growth of 67% from the same period in 2016.
As of September 30, 2017, our debt to total real estate acquisition value was 42.3%.
Non-GAAP Measures

Modified funds from operations, or MFFO, as defined by the Investment Program Association (IPA), was approximately $10.3 million for the quarter, representing year-over-year growth of approximately 65% for the same period in 2016. Funds from operations, or FFO, was approximately $14.3 million and $4.6 million for the quarters ended September 30, 2017 and 2016, respectively. Please see financial reconciliation tables and notes at the end of this release for more information regarding MFFO and FFO.
Our Adjusted EBITDA, as defined per our credit facility agreement, was approximately $15.5 million for the quarter with a fixed charge and interest coverage ratio of 4.27 each. Please see financial reconciliation tables and notes at the end of this release for more information regarding Adjusted EBITDA and related ratios.
About Griffin Capital Essential Asset REIT II
Griffin Capital Essential Asset REIT II, Inc. is a publicly registered non-traded REIT focused on acquiring 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. As of September 30, 2017, Griffin Capital Essential Asset REIT II, Inc. has acquired 35 office and industrial buildings totaling approximately 7.3 million rentable square feet and asset acquisition value of approximately $1.1 billion.  Griffin Capital Essential Asset REIT II, Inc. is one of several REITs sponsored or co-sponsored by Griffin Capital Company, LLC (“Griffin Capital”).

About Griffin Capital Company, LLC
Griffin Capital is a leading alternative investment asset manager with approximately $9.6 billion* in assets under management. Founded in 1995, the privately-held firm is led by a seasoned team of senior executives with more than two decades of investment and real estate experience and who collectively have executed more than 650 transactions valued at over $22 billion. Additional information is available at www.griffincapital.com.
*As of September 30, 2017. 

This press release may contain certain 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. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Because such statements include risks, uncertainties and contingencies, actual results may differ materially from the expectations, intentions, beliefs, plans or predictions of the future expressed or implied by such forward-looking statements. These risks, uncertainties and contingencies include, but are not limited to: uncertainties relating to changes in general economic and real estate conditions; uncertainties relating to the implementation of our real estate investment strategy; uncertainties relating to financing availability and capital proceeds; uncertainties relating to the closing of property acquisitions; uncertainties related to the timing and availability of distributions; and other risk factors as outlined in the REIT’s prospectus, annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the Securities and Exchange Commission. This is neither an offer nor a solicitation to purchase securities.

1 Total capitalization includes the outstanding debt balance, plus total equity raised in our public offerings, net of redemptions.
2 There is no guarantee that our properties will remain 100% leased.
3 Net rent 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, 2017, 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. 
4 Of the 82.7% investment grade tenant ratings, 71.0% is from Nationally Recognized Statistical Rating Organization (NRSRO) credit rating, with the remaining 11.7% being from non-NRSRO, but having a rating that is equivalent to a NRSRO investment grade rating. Bloomberg’s default risk rating is one example of a non-NRSRO rating. 

 

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Gil Armour, CFP
February 3, 2016

I have been using Blue Vault Partners for the past five years.  I have found them to be a valuable, unbiased resource when it comes to evaluating and comparing non-traded REITs.  The reports help me analyze which sponsors are doing a responsible job of managing their offerings.  This allows me to limit my REIT recommendations to only the most competitive products, and then track those REITs throughout their life cycle.