[March 19, 2019] |
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Griffin Capital Essential Asset REIT Reports Fourth Quarter and Full Year 2018 Results
Griffin Capital Essential Asset REIT, Inc. (the "REIT") announced its
results for the quarter ended December 31, 2018 and full year 2018.
"2018 was another strong year for the REIT - we acquired three new
properties which added approximately 1.9 million square feet to our
portfolio and we announced two transformative transactions, positioning
us well for the future," said Michael Escalante, Chief Executive Officer
and President of the REIT. "We believe the completed self-administration
transaction and pending merger with Griffin Capital Essential Asset REIT
II will generate significant long term benefits for our stockholders,
including substantial cost savings, increased operating efficiencies,
and immediate accretion to earnings and cash flow. We are enthusiastic
about the future of these combined companies with a focused and aligned
management team dedicated to the success and future of the REIT."
As of December 31, 2018, the REIT's portfolio(1)
consisted of 74 assets encompassing approximately 19.9 million rentable
square feet of space in 20 states.
Results as of December 31, 2018 - Highlights
and Accomplishments:
Portfolio Overview
-
The total capitalization of our portfolio as of December 31, 2018 was
$3.5 billion(2).
-
Our weighted average remaining lease term was approximately 6.55 years
with average annual rent increases of approximately 2.1%.
-
Our portfolio was 96.5% leased.
-
Approximately 61.4% 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).
-
During the year ended December 31, 2018, we executed new and renewal
leases totaling approximately 686 thousand and 1.9 million square
feet, which included the execution of a new 12-year lease with Floor &
Decor for approximately 185 thousand square feet in Atlanta, GA, and
7-year lease with Dohmen Life Science Service, LLC for approximately
78 thousand square feet in Mason, OH during the quarter ended December
31, 2018.
-
During the year ended December 31, 2018, we acquired three properties
for a total of $183.1 million and approximately 1.9 million square
feet, which completed our 1031 exchange transaction related to sale of
the DreamWorks Animation Headquarters and Studio Campus ("Dreamworks")
in 2017.
-
On November 2, 2018, we sold the Quad/Graphics Property located in
Loveland, Colorado for total proceeds of $10.7 million, including a
termination fee, less closing costs and other closing credits. The
carrying value of the property on the closing date was approximately
$10.3 million. Upon the sale of the property, we recognized a gain of
approximately $0.4 million.
-
On December 28, 2018, we sold the Bridgestone Property located in
Bloomingdale, Illinois for total proceeds of $2.5 million, less
closing costs and other closing credits. The carrying value of the
property on the closing date was approximately $2.8 million. Upon the
sale of the property, we recognized a loss of approximately $0.3
million.
Financial Results
-
Total revenue was $336.4 million for the year ended December 31, 2018,
compared to $346.5 million for the prior year.
-
Net income attributable to common stockholders was $17.6 million, or
$0.10 per basic and diluted share for the year ended December 31,
2018, compared to $140.7 million or $0.81 per basic and diluted share
for the year ended December 31, 2017. The decrease during the period
was primarily due to the gain on sale of $116.4 million for the ITT,
Dreamworks and One Century Plaza properties, which sold in the prior
year, as well as higher interest expense in the current year.
-
The ratio of debt to total real estate acquisition price as of
December 31, 2018 was 45.4%(1).
Self- Administration/ Merger Transaction
-
On December 14, 2018, we and our Operating Partnership entered into
the Self Administration Transaction, with Griffin Capital Company, LLC
("GCC") and Griffin Capital LLC ("GC LLC"), pursuant to which GCC and
GC LLC contributed to the Operating Partnership all of the membership
interests in Griffin Capital Real Estate Company, LLC ("GRECO") and
certain assets related to the business of GRECO, in exchange for
20,438,684 units of limited partnership interest in our Operating
Partnership, plus additional cash and limited partnership units as
earn-out consideration. As a result of the Self Administration
Transaction, we are now self-managed and acquired the advisory, asset
management and property management business of GRECO.
-
On December 14, 2018, our Operating Partnership, Griffin Capital
Essential Asset REIT II , Inc. ("GCEAR II"), Griffin Capital Essential
Asset Operating Partnership II, L.P. and Globe Merger Sub, LLC, a
wholly owned subsidiary of GCEAR II, entered into an Agreement and
Plan of Merger, which has been approved by GCEAR II stockholders. The
combined company will have a total capitalization of approximately
$4.72 billion, and will own 101 properties in 25 states, consisting of
approximately 27.2 million square feet.
Non-GAAP Measures
-
Adjusted funds from operations, or AFFO, was approximately $138.6
million for the year ended December 31, 2018, compared to
approximately $148.7 million for the same period in 2017. Funds from
operations, or FFO(5), was approximately $139.2 million and
$157.2 million for the years ended December 31, 2018 and 2017,
respectively. Please see the financial reconciliation tables and notes
at the end of this release for more information regarding AFFO and FFO.
-
Our Adjusted EBITDA, as defined per our credit facility agreement, was
approximately $228.6 million for the year ended December 31, 2018 with
a fixed charge and interest coverage ratio of 3.76 and 4.21,
respectively. Please see the 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
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 December 31, 2018, of 74 office and industrial
properties totaling 19.9 million rentable square feet, located in 20
states, representing total REIT capitalization of approximately $3.5
billion.
Additional information is available at www.griffincapital.com.
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 Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q as filed with the Securities and Exchange
Commission (the "SEC"). This is neither an offer nor a solicitation to
purchase securities.
______________________________
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1
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Excludes the property information related to the acquisition of an
80% ownership interest in a joint venture with affiliates of Digital
Realty Trust, L.P. and 45% ownership interest in the Heritage Common
X joint venture property.
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2
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Total capitalization includes the outstanding debt balance plus
total equity raised and issued, including operating partnership
units, preferred shares and shares issued pursuant to the DRP, net
of redemptions.
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3
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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 December 31, 2018 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.
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4
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Approximately 61.4% of our portfolio's net rental revenue was
generated by properties leased to tenants and/or guarantors with
investment grade credit ratings or whose non-guarantor parent
companies have investment grade ratings or what management believes
are generally equivalent ratings. Of the 61.4% investment grade
tenant ratings, 56.2% is from a Nationally Recognized Statistical
Rating Organization (NRSRO) credit rating, with the remaining 5.2%
being from a non-NRSRO, but having a rating that we believe is
generally equivalent to an NRSRO investment grade rating.
Bloomberg's default risk rating is an example of a non-NRSRO rating.
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5
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FFO, as described by National Association of Real Estate Investment
Trusts ("NAREIT"), is adjusted for non-controlling interest and
redeemable preferred distributions.
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GRIFFIN CAPITAL ESSENTIAL ASSET REIT, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
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December 31,
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2018
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2017
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ASSETS
|
|
|
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Cash and cash equivalents
|
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$
|
48,478
|
|
|
$
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40,735
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Restricted cash
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15,807
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174,132
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Real estate:
|
|
|
|
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Land
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350,470
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342,021
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Building and improvements
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2,165,016
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2,024,865
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Tenant origination and absorption cost
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530,181
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495,364
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Construction in progress
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27,697
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7,078
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Total real estate
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3,073,364
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2,869,328
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Less: accumulated depreciation and amortization
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(538,412
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)
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(426,752
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)
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Total real estate, net
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2,534,952
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2,442,576
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Investments in unconsolidated entities
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30,565
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37,114
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Intangible assets, net
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17,099
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18,269
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Deferred rent
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55,163
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46,591
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Deferred leasing costs, net
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29,958
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19,755
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Goodwill
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229,948
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-
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Due from affiliate
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19,685
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|
-
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Other assets
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31,120
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|
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24,238
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Total assets
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$
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3,012,775
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$
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2,803,410
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LIABILITIES AND EQUITY
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Debt, net
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$
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1,353,531
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|
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$
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1,386,084
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Restricted reserves
|
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8,201
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|
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8,701
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Interest rate swap liability
|
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6,962
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|
|
-
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Redemptions payable
|
|
-
|
|
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20,382
|
|
Distributions payable
|
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12,248
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|
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6,409
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Due to affiliates
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42,406
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|
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3,545
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Below market leases, net
|
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23,115
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|
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23,581
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Accrued expenses and other liabilities
|
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80,616
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64,133
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Total liabilities
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1,527,079
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1,512,835
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Commitments and contingencies
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|
|
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Perpetual convertible preferred shares
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125,000
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|
|
-
|
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Common stock subject to redemption
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11,523
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33,877
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Noncontrolling interests subject to redemption; 531,000 units as of
December 31, 2018 and December 31, 2017
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4,887
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|
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4,887
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Stockholders' equity:
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Common Stock, $0.001 par value; 700,000,000 shares authorized;
166,285,021 and 170,906,111 shares outstanding, as of December 31,
2018 and December 31, 2017, respectively
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166
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|
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171
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Additional paid-in-capital
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1,556,778
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1,561,694
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Cumulative distributions
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|
(570,977
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)
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|
(454,526
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)
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Accumulated earnings
|
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128,525
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|
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110,907
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Accumulated other comprehensive (loss) income
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|
(2,409
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)
|
|
2,460
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|
Total stockholders' equity
|
|
1,112,083
|
|
|
1,220,706
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Noncontrolling interests
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232,203
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|
|
31,105
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Total equity
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|
1,344,286
|
|
|
1,251,811
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Total liabilities and equity
|
|
$
|
3,012,775
|
|
|
$
|
2,803,410
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|
|
|
|
|
|
|
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GRIFFIN CAPITAL ESSENTIAL ASSET REIT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
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Year Ended December 31,
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2018
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2017
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2016
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Revenue:
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|
|
|
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Rental income
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$
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247,442
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$
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257,465
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$
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267,654
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Lease termination income
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15,671
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|
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14,604
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|
|
1,211
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Property expense recoveries
|
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73,246
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|
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74,421
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|
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75,409
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Total revenue
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336,359
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|
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346,490
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|
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344,274
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Expenses:
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|
|
|
|
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Property operating expense
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49,509
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|
|
50,918
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|
|
50,986
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Property tax expense
|
|
44,662
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|
|
44,980
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|
|
45,789
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Asset management fees to affiliates
|
|
23,668
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|
|
23,499
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|
|
23,530
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Property management fees to affiliates
|
|
9,479
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|
|
9,782
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|
|
9,740
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Self administration transaction expense
|
|
1,331
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|
|
-
|
|
|
-
|
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Acquisition fees and expenses to non-affiliates
|
|
-
|
|
|
-
|
|
|
541
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|
Acquisition fees and expenses to affiliates
|
|
-
|
|
|
-
|
|
|
1,239
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|
General and administrative expenses
|
|
6,968
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|
|
7,322
|
|
|
6,544
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Corporate operating expenses to affiliates
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|
3,594
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|
|
2,652
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|
|
1,525
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Depreciation and amortization
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|
119,168
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|
|
116,583
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|
|
130,849
|
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Impairment provision
|
|
-
|
|
|
8,460
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|
|
-
|
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Total expenses
|
|
258,379
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|
|
264,196
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|
|
270,743
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Income before other income and (expenses)
|
|
77,980
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|
|
82,294
|
|
|
73,531
|
|
Other income (expenses):
|
|
|
|
|
|
|
Interest expense
|
|
(55,194
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)
|
|
(51,015
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)
|
|
(48,850
|
)
|
Loss from investment in unconsolidated entities
|
|
(2,254
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)
|
|
(2,065
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)
|
|
(1,640
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)
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Gain on acquisition of unconsolidated entity
|
|
-
|
|
|
-
|
|
|
666
|
|
Gain from disposition of assets
|
|
1,231
|
|
|
116,382
|
|
|
-
|
|
Other income
|
|
275
|
|
|
537
|
|
|
2,848
|
|
Net income
|
|
22,038
|
|
|
146,133
|
|
|
26,555
|
|
Distributions to redeemable preferred shareholders
|
|
(3,275
|
)
|
|
-
|
|
|
-
|
|
Net income attributable to noncontrolling interests
|
|
(789
|
)
|
|
(5,120
|
)
|
|
(912
|
)
|
Net income attributable to controlling interest
|
|
17,974
|
|
|
141,013
|
|
|
25,643
|
|
Distributions to redeemable noncontrolling interests attributable to
common stockholders
|
|
(356
|
)
|
|
(356
|
)
|
|
(358
|
)
|
Net income attributable to common stockholders
|
|
$
|
17,618
|
|
|
$
|
140,657
|
|
|
$
|
25,285
|
|
Net income attributable to common stockholders per share, basic and
diluted
|
|
$
|
0.10
|
|
|
$
|
0.81
|
|
|
$
|
0.14
|
|
Weighted average number of common shares outstanding, basic and
diluted
|
|
167,803,846
|
|
|
173,923,077
|
|
|
175,481,629
|
|
|
|
|
|
|
|
|
|
|
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GRIFFIN CAPITAL ESSENTIAL ASSET REIT, INC. Funds from
Operations and Adjusted Funds from Operations (in thousands)
Funds from Operations and Adjusted Funds from Operations
Our management believes that historical cost accounting for real estate
assets in accordance with GAAP implicitly assumes that the value of real
estate assets diminishes predictably over time. Since real estate values
have historically risen or fallen with market conditions, many industry
investors and analysts have considered the presentation of operating
results for real estate companies that use historical cost accounting to
be insufficient.
Management is responsible for managing interest rate, hedge and foreign
exchange risks. To achieve our objectives, we may borrow at fixed rates
or variable rates. In order to mitigate our interest rate risk on
certain financial instruments, if any, we may enter into interest rate
cap agreements or other hedge instruments and in order to mitigate our
risk to foreign currency exposure, if any, we may enter into foreign
currency hedges. We view fair value adjustments of derivatives,
impairment charges and gains and losses from dispositions of assets as
non-recurring items or items which are unrealized and may not ultimately
be realized, and which are not reflective of ongoing operations and are
therefore typically adjusted for when assessing operating performance.
In order to provide a more complete understanding of the operating
performance of a REIT, the National Association of Real Estate
Investment Trusts ("NAREIT") promulgated a measure known as funds from
operations ("FFO"). FFO is defined as net income or loss computed in
accordance with GAAP, excluding extraordinary items, as defined by GAAP,
and gains and losses from sales of depreciable operating property,
adding back asset impairment write-downs, plus real estate related
depreciation and amortization (excluding amortization of deferred
financing costs and depreciation of non-real estate assets), and after
adjustment for unconsolidated partnerships, joint ventures and preferred
distributions. Because FFO calculations exclude such items as
depreciation and amortization of real estate assets and gains and losses
from sales of operating real estate assets (which can vary among owners
of identical assets in similar conditions based on historical cost
accounting and useful-life estimates), they facilitate comparisons of
operating performance between periods and between other REITs. As a
result, we believe that the use of FFO, together with the required GAAP
presentations, provides a more complete understanding of our performance
relative to our competitors and a more informed and appropriate basis on
which to make decisions involving operating, financing, and investing
activities. It should be noted, however, that other REITs may not define
FFO in accordance with the current NAREIT definition or may interpret
the current NAREIT definition differently than we do, making comparisons
less meaningful.
Additionally, we use Adjusted Funds from Operations ("AFFO") as a
non-GAAP financial measure to evaluate our operating performance.
We previously used Modified Funds from Operations ("MFFO") (as defined
by the Institute for Portfolio Alternatives) as a non-GAAP measure of
operating performance. Management decided to replace the MFFO measure
with AFFO because AFFO provides investors with supplemental performance
information that is consistent with the performance models and analysis
used by management. In addition, AFFO is a measure used among our peer
group, which includes publicly traded REITs. We also believe that AFFO
is a recognized measure of sustainable operating performance by the REIT
industry. Further, we believe AFFO is useful in comparing the
sustainability of our operating performance with the sustainability of
the operating performance of other real estate companies.
Management believes that AFFO is a beneficial indicator of our ongoing
portfolio performance and ability to sustain our current distribution
level. More specifically, AFFO isolates the financial results of our
operations. AFFO, however, is not considered an appropriate measure of
historical earnings as it excludes certain significant costs that are
otherwise included in reported earnings. Further, since the measure is
based on historical financial information, AFFO for the period presented
may not be indicative of future results or our future ability to pay our
dividends. By providing FFO and AFFO, we present information that
assists investors in aligning their analysis with management's analysis
of long-term operating activities. As explained below, management's
evaluation of our operating performance excludes items considered in the
calculation of AFFO based on the following economic considerations:
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Deferred rent. Most of our leases provide for periodic minimum rent
payment increases throughout the term of the lease. In accordance with
GAAP, these periodic minimum rent payment increases during the term of
a lease are recorded on a straight-line basis and create deferred
rent. As deferred rent is a GAAP non-cash adjustment and is included
in historical earnings, FFO is adjusted for the effect of deferred
rent to arrive at AFFO as a means of determining operating results of
our portfolio.
-
Amortization of in-place lease valuation. Acquired in-place leases are
valued as above-market or below-market as of the date of acquisition
based on the present value of the difference between (a) the
contractual amounts to be paid pursuant to the in-place leases and (b)
management's estimate of fair market lease rates for the corresponding
in-place leases over a period equal to the remaining non-cancelable
term of the lease for above-market leases. The above-market and
below-market lease values are capitalized as intangible lease assets
or liabilities and amortized as an adjustment to rental income over
the remaining terms of the respective leases. As this item is a
non-cash adjustment and is included in historical earnings, FFO is
adjusted for the effect of the amortization of in-place lease
valuation to arrive at AFFO as a means of determining operating
results of our portfolio.
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Acquisition-related costs. We were organized primarily with the
purpose of acquiring or investing in income-producing real property in
order to generate operational income and cash flow that will allow us
to provide regular cash distributions to our stockholders. In the
process, we incur non-reimbursable affiliated and non-affiliated
acquisition-related costs, which in accordance with GAAP are
capitalized and included as part of the relative fair value when the
property acquisition meets the definition of an asset acquisition or
are expensed as incurred and are included in the determination of
income (loss) from operations and net income (loss), for property
acquisitions accounted for as a business combination. By excluding
acquisition-related costs, AFFO may not provide an accurate indicator
of our operating performance during periods in which acquisitions are
made. However, it can provide an indication of our on-going ability to
generate cash flow from operations and continue as a going concern
after we cease to acquire properties on a frequent and regular basis,
which can be compared to the AFFO of other non-listed REITs that have
completed their acquisition activity and have similar operating
characteristics to ours. Management believes that excluding these
costs from AFFO provides investors with supplemental performance
information that is consistent with the performance models and
analyses used by management.
-
Financed termination fee, net of payments received. We believe that a
fee received from a tenant for terminating a lease is appropriately
included as a component of rental revenue and therefore included in
AFFO. If, however, the termination fee is to be paid over time, we
believe the recognition of such termination fee into income should not
be included in AFFO. Alternatively, we believe that the periodic
amount paid by the tenant in subsequent periods to satisfy the
termination fee obligation should be included in AFFO.
-
Gain or loss from the extinguishment of debt. We use debt as a partial
source of capital to acquire properties in our portfolio. As a term of
obtaining this debt, we will pay financing costs to the respective
lender. Financing costs are presented on the balance sheet as a direct
deduction from the carrying amount of that debt liability, consistent
with debt discounts and amortized into interest expense on a
straight-line basis over the term of the debt. We consider the
amortization expense to be a component of operations if the debt was
used to acquire properties. From time to time, we may cancel certain
debt obligations and replace these canceled debt obligations with new
debt at more favorable terms to us. In doing so, we are required to
write off the remaining capitalized financing costs associated with
the canceled debt, which we consider to be a cost, or loss, on
extinguishing such debt. Management believes that this loss is
considered an event not associated with our operations, and therefore,
deems this write off to be an exclusion from AFFO.
-
Unrealized gains (losses) on derivative instruments. These adjustments
include unrealized gains (losses) from mark-to-market adjustments on
interest rate swaps and losses due to hedge ineffectiveness. The
change in the fair value of interest rate swaps not designated as a
hedge and the change in the fair value of the ineffective portion of
interest rate swaps are non-cash adjustments recognized directly in
earnings and are included in interest expense. We have excluded these
adjustments in our calculation of AFFO to more appropriately reflect
the economic impact of our interest rate swap agreements.
For all of these reasons, we believe the non-GAAP measures of FFO and
AFFO, in addition to income (loss) from operations, net income (loss)
and cash flows from operating activities, as defined by GAAP, are
helpful supplemental performance measures and useful to investors in
evaluating the performance of our real estate portfolio. However, a
material limitation associated with FFO and AFFO is that they are not
indicative of our cash available to fund distributions since other uses
of cash, such as capital expenditures at our properties and principal
payments of debt, are not deducted when calculating FFO and AFFO. The
use of AFFO as a measure of long-term operating performance on value is
also limited if we do not continue to operate under our current business
plan as noted above. AFFO is useful in assisting management and
investors in assessing our ongoing ability to generate cash flow from
operations and continue as a going concern in future operating periods,
and in particular, after the offering and acquisition stages are
complete. However, FFO and AFFO are not useful measures in evaluating
NAV because impairments are taken into account in determining NAV but
not in determining FFO and AFFO. Therefore, FFO and AFFO should not be
viewed as a more prominent measure of performance than income (loss)
from operations, net income (loss) or to cash flows from operating
activities and each should be reviewed in connection with GAAP
measurements.
Neither the SEC, NAREIT, nor any other applicable regulatory body has
opined on the acceptability of the adjustments contemplated to adjust
FFO in order to calculate AFFO and its use as a non-GAAP performance
measure. In the future, the SEC or NAREIT may decide to standardize the
allowable exclusions across the REIT industry, and we may have to adjust
the calculation and characterization of this non-GAAP measure.
Our calculation of FFO and AFFO is presented in the following table for
the years ended December 31, 2018, 2017 and 2016 (in thousands):
|
|
Year Ended December 31,
|
|
|
2018
|
|
2017
|
|
2016
|
Net income
|
|
$
|
22,038
|
|
|
$
|
146,133
|
|
|
$
|
26,555
|
|
Adjustments:
|
|
|
|
|
|
|
Depreciation of building and improvements
|
|
60,120
|
|
|
55,982
|
|
|
56,707
|
|
Amortization of leasing costs and intangibles
|
|
59,020
|
|
|
60,573
|
|
|
74,114
|
|
Impairment provision
|
|
-
|
|
|
8,460
|
|
|
-
|
|
Equity interest of depreciation of building and improvements -
unconsolidated entities
|
|
2,594
|
|
|
2,496
|
|
|
2,486
|
|
Equity interest of amortization of intangible assets -
unconsolidated entities
|
|
4,644
|
|
|
4,674
|
|
|
4,751
|
|
Gain from sale of depreciable operating property
|
|
(1,231
|
)
|
|
(116,382
|
)
|
|
-
|
|
Gain on acquisition of unconsolidated entity
|
|
-
|
|
|
-
|
|
|
(666
|
)
|
FFO
|
|
$
|
147,185
|
|
|
$
|
161,936
|
|
|
$
|
163,947
|
|
Distributions to redeemable preferred shareholders
|
|
(3,275
|
)
|
|
-
|
|
|
-
|
|
Distributions to noncontrolling interests
|
|
(4,737
|
)
|
|
(4,737
|
)
|
|
(4,493
|
)
|
FFO, net of noncontrolling interest and redeemable preferred
distributions
|
|
$
|
139,173
|
|
|
$
|
157,199
|
|
|
$
|
159,454
|
|
Reconciliation of FFO to AFFO:
|
|
|
|
|
|
|
FFO, net of noncontrolling interest and redeemable preferred
distributions
|
|
$
|
139,173
|
|
|
$
|
157,199
|
|
|
$
|
159,454
|
|
Adjustments:
|
|
|
|
|
|
|
Acquisition fees and expenses to non-affiliates
|
|
1,331
|
|
|
-
|
|
|
541
|
|
Acquisition fees and expenses to affiliates
|
|
-
|
|
|
-
|
|
|
1,239
|
|
Revenues in excess of cash received (straight-line rents)
|
|
(7,730
|
)
|
|
(11,372
|
)
|
|
(14,751
|
)
|
Amortization of (below) above market rent
|
|
(685
|
)
|
|
1,689
|
|
|
3,287
|
|
Amortization of debt premium (discount)
|
|
32
|
|
|
(414
|
)
|
|
(1,096
|
)
|
Amortization of ground leasehold interests (below market)
|
|
28
|
|
|
28
|
|
|
28
|
|
Amortization of deferred revenue
|
|
-
|
|
|
-
|
|
|
(1,228
|
)
|
Revenues in excess of cash received
|
|
(12,532
|
)
|
|
(12,845
|
)
|
|
(1,202
|
)
|
Financed termination fee payments received
|
|
15,866
|
|
|
11,783
|
|
|
1,322
|
|
Equity interest of revenues in excess of cash received
(straight-line rents) - unconsolidated entities
|
|
116
|
|
|
(311
|
)
|
|
(735
|
)
|
Unrealized (gain) loss on derivatives
|
|
-
|
|
|
(28
|
)
|
|
49
|
|
Equity interest of amortization of above/(below) market rent -
unconsolidated entities
|
|
2,956
|
|
|
2,968
|
|
|
2,984
|
|
AFFO
|
|
$
|
138,555
|
|
|
$
|
148,697
|
|
|
$
|
149,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GRIFFIN CAPITAL ESSENTIAL ASSET REIT, INC.
Adjusted EBITDA
(Unaudited; dollars in thousands)
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Year Ended December 31,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
ADJUSTED EBITDA(1):
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3,269
|
|
|
$
|
113,222
|
|
|
$
|
22,038
|
|
|
$
|
146,133
|
|
Depreciation and amortization
|
|
29,910
|
|
|
27,800
|
|
|
119,168
|
|
|
116,583
|
|
Interest expense
|
|
13,164
|
|
|
13,020
|
|
|
52,121
|
|
|
48,572
|
|
Amortization - Deferred financing costs
|
|
770
|
|
|
756
|
|
|
3,040
|
|
|
2,858
|
|
Amortization - Debt premium
|
|
8
|
|
|
8
|
|
|
31
|
|
|
(414
|
)
|
Amortization - In-place lease
|
|
(550
|
)
|
|
379
|
|
|
(685
|
)
|
|
1,689
|
|
Income taxes
|
|
278
|
|
|
230
|
|
|
632
|
|
|
1,944
|
|
Asset management fees
|
|
5,998
|
|
|
5,713
|
|
|
23,668
|
|
|
23,499
|
|
Property management fees
|
|
2,430
|
|
|
2,263
|
|
|
9,479
|
|
|
9,782
|
|
Self Administration transaction
|
|
1,331
|
|
|
-
|
|
|
1,331
|
|
|
-
|
|
Deferred rent
|
|
1,639
|
|
|
(2,864
|
)
|
|
(8,571
|
)
|
|
(11,372
|
)
|
Extraordinary Losses or Gains:
|
|
|
|
|
|
|
|
|
Termination fee
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(12,845
|
)
|
Gain on disposition
|
|
(73
|
)
|
|
(112,089
|
)
|
|
(1,231
|
)
|
|
(116,382
|
)
|
Loss on Impairment
|
|
-
|
|
|
2,785
|
|
|
-
|
|
|
8,460
|
|
Equity percentage of net (income) loss for the Parent's non-wholly
owned direct and indirect subsidiaries
|
|
637
|
|
|
554
|
|
|
2,254
|
|
|
2,065
|
|
Equity percentage of EBITDA for the Parent's non-wholly owned direct
and indirect subsidiaries
|
|
2,264
|
|
|
2,140
|
|
|
8,967
|
|
|
8,622
|
|
|
|
61,075
|
|
|
53,917
|
|
|
232,242
|
|
|
229,194
|
|
Less: Capital reserves
|
|
(931
|
)
|
|
(889
|
)
|
|
(3,682
|
)
|
|
(3,658
|
)
|
Adjusted EBITDA (per credit facility agreement)
|
|
$
|
60,144
|
|
|
$
|
53,028
|
|
|
$
|
228,560
|
|
|
$
|
225,536
|
|
|
|
|
|
|
|
|
|
|
Principal paid and due
|
|
$
|
1,598
|
|
|
$
|
1,741
|
|
|
$
|
6,494
|
|
|
$
|
6,491
|
|
Interest expense
|
|
13,710
|
|
|
13,463
|
|
|
54,335
|
|
|
50,911
|
|
|
|
$
|
15,308
|
|
|
$
|
15,204
|
|
|
$
|
60,829
|
|
|
$
|
57,402
|
|
|
|
|
|
|
|
|
|
|
Interest Coverage Ratio(2)
|
|
4.39
|
|
|
3.94
|
|
|
4.21
|
|
|
4.43
|
|
Fixed Charge Coverage Ratio(3)
|
|
3.47
|
|
|
3.49
|
|
|
3.76
|
|
|
3.93
|
|
(1)
|
|
Adjusted EBITDA, as defined in our credit facility agreement, is
calculated as net income before interest, taxes, depreciation and
amortization (EBITDA), plus acquisition fees and expenses, asset and
property management fees, straight-line rents and in-place lease
amortization for the period, further adjusted for acquisitions that
have closed during the quarter and certain reserves for capital
expenditures.
|
(2)
|
|
Interest coverage is the ratio of interest expense as if the
corresponding debt was in place at the beginning of the period to
adjusted EBITDA.
|
(3)
|
|
Fixed charge coverage is the ratio of principal amortization for the
period plus interest expense as if the corresponding debt were in
place at the beginning of the period plus preferred unit
distributions as if in place at the beginning of the period over
adjusted EBITDA.
|
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