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Subsequent Events | 3 Months Ended
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Mar. 31, 2019
Subsequent Events [Abstract] |
Subsequent Events | Subsequent Events Status of the Offering As of May 13, 2019, the Company had issued 7,396,052 and and 1,030,404 shares of the Company’s common stock pursuant to the DRP and Follow-On Offering, respectively, for approximately $70.3 million and $10.0 million, respectively. Declaration of Distributions Effective April 30, 2019, the Board declared a cash distribution in the amount of $0.00150684932 per day, subject to adjustments for class-specific expenses, per Class E share, Class T share, Class S share, Class D share, Class I share, Class A share, Class AA share and Class AAA share of common stock payable to stockholders of record at the close of business on each day during the period commencing on May 1, 2019 and ending on June 30, 2019. The Board also declared a stock distribution in the amount of $0.000273973 worth of shares of the applicable class per day, per Class E share, Class T share, Class S share, Class D share, Class I share, Class A share, Class AA share and Class AAA share of common stock payable to stockholders of record at the close of business on each day during the period commencing on May 1, 2019 and ending on June 30, 2019. Such distributions payable to each stockholder of record during a month will be paid on such date of the following month as the Company's Chief Executive Officer may determine. Mergers On April 30, 2019, pursuant to the Merger Agreement, (i) GCEAR merged with and into Merger Sub, with Merger Sub surviving as a direct, wholly-owned subsidiary of the Company and (ii) the Operating Partnership merged with and into the GCEAR Operating Partnership, with the GCEAR Operating Partnership surviving the Partnership Merger. At such time, (i) in accordance with the applicable provisions of the Maryland General Corporation Law and the Maryland Limited Liability Company Act, the separate existence of GCEAR ceased and (ii) in accordance with the Delaware Revised Uniform Limited Partnership Act, the separate existence of the Operating Partnership ceased. In addition, on April 30, 2018, following the Partnership Merger, Merger Sub merged into the Company. At the effective time of the Company Merger, each issued and outstanding share of GCEAR’s common stock (or fraction thereof), $0.001 par value per share (the “GCEAR Common Stock”), converted into the right to receive 1.04807 shares of the Company's Class E common stock, $0.001 par value per share (the “Class E Common Stock”), and each issued and outstanding share of GCEAR’s Series A cumulative perpetual convertible preferred stock converted into the right to receive one share of the Company's Series A cumulative perpetual convertible preferred stock. Stockholders of GCEAR who were enrolled in GCEAR's distribution reinvestment plan are automatically enrolled in the Company's DRP, unless such stockholder requests of the Company to not be enrolled in the Company's DRP. At the effective time of the Partnership Merger, each GCEAR Operating Partnership unit outstanding immediately prior to the effective time of the Partnership Merger converted into the right to receive 1.04807 Class E operating units in the surviving partnership and each Operating Partnership unit outstanding immediately prior to the effective time of the Partnership Merger converted into the right to receive one operating unit of like class in the surviving partnership. The special limited partnership interest of the Operating Partnership was automatically redeemed, canceled and retired as described in the Merger Agreement. As of April 30, 2019, the Company owned 124 buildings located on 101 properties in 25 states, encompassing approximately 27.2 million rentable square feet, with a weighted average remaining lease term of 7.48 years. Fifth Amended and Restated Limited Partnership Agreement of the GCEAR Operating Partnership On April 30, 2019, in connection with the Partnership Merger, the Company entered into a Fifth Amended and Restated Limited Partnership Agreement of Griffin Capital Essential Asset Operating Partnership, L.P. (the "Operating Partnership Agreement"), which amends and supersedes the Fourth Amended and Restated Limited Partnership Agreement. The Operating Partnership Agreement reflects, among other things, the change of the general partner of the GCEAR Operating Partnership to the Company, the exchange of classes of units of limited partnership interest pursuant to the Partnership Merger, the authorization of additional classes of units of limited partnership interest of the Operating Partnership that were outstanding prior to the Mergers and were issued in connection with the Mergers, and to make other updates to reflect the effects of the Mergers. Terms of the Operating Partnership Agreement are included in the Company's Form 8-K filed on May 1, 2019. Advisory and Property Management Fees Prior to the execution of the Merger Agreement, the Company's Advisor and Property Manager provided services to the Company, including asset acquisition and disposition decisions, asset management, operating and leasing of properties, property management, and other general and administrative responsibilities. Subsequent to the Company Merger, advisory or property management fees paid by the Company are intercompany transactions and will be eliminated in consolidation. Second Amended and Restated Credit Agreement On April 30, 2019, the Company, through the GCEAR Operating Partnership (the “KeyBank Borrower”), entered into that certain second amended and restated credit agreement (the "Second Amended and Restated Credit Agreement") related to a revolving credit facility and three term loans described below (the "Term Loans" and collectively with the revolving credit facility, the "KeyBank Loans") with a syndicate of lenders, under which KeyBank serves as administrative agent, and various notes related thereto. In addition, the Company entered into a guaranty agreement. The Second Amended and Restated Credit Agreement, the various notes, the guaranty agreement, and the various other related documents are collectively referred to herein as the "KeyBank Loan Documents." Pursuant to the Second Amended and Restated Credit Agreement, the Company was provided with a revolving credit facility (the "Revolving Credit Facility") in an initial commitment amount of $750 million (the "Revolving Commitment"), an existing five-year term loan (the "2023 Term Loan") in an initial commitment amount of $200 million (the "2023 Term Commitment"), a new five-year term loan (the "2024 Term Loan") in an initial commitment amount of $400 million (the "2024 Term Commitment"), and a new seven-year term loan (the "2026 Term Loan") in an initial commitment amount of $150 million (the "2026 Term Commitment"), which commitments may be increased under certain circumstances up to a maximum total commitment of $2.0 billion. Any increase in the total commitment will be allocated to the Revolving Credit Facility and/or the Term Loans in such amounts as the KeyBank Borrower and KeyBank may determine. The KeyBank Loans are evidenced by promissory notes that are substantially similar related to each lender and the amount committed by such lender. Increases in the commitment amount must be made in amounts of not less than $25 million, and increases of $25 million in increments in excess thereof, provided that such increases do not exceed the maximum total commitment amount of $2.0 billion. The KeyBank Borrower may also reduce the amount of the Revolving Commitment in increments of $50 million, provided that at no time will the Revolving Credit Facility be less than $150 million, and such a reduction will preclude the KeyBank Borrower's ability to later increase the commitment amount. The Revolving Credit Facility may be prepaid and terminated, in whole or in part, at any time without fees or penalty. The Revolving Credit Facility also provides for same day swingline advances to be provided by KeyBank, Bank of America, N.A., and Wells Fargo Bank, N.A., on a pro rata basis, up to $125 million in the aggregate. Such swingline advances will reduce dollar for dollar the availability under the Revolving Credit Facility, and must be repaid within 10 business days. The Revolving Credit Facility has an initial term of approximately three years, maturing on June 28, 2022. The Revolving Credit Facility may be extended for a one-year period if certain conditions are met and the KeyBank Borrower pays an extension fee. Payments under the Revolving Credit Facility are interest only and are due on the first day of each quarter. Amounts borrowed under the Revolving Credit Facility may be repaid and reborrowed, subject to the terms of the Second Amended and Restated Credit Agreement. The 2023 Term Loan has an initial term of approximately five years, maturing on June 28, 2023. Payments under the 2023 Term Loan are interest only and are due on the first day of each quarter. Amounts borrowed under the 2023 Term Loan may not be repaid and reborrowed. The 2024 Term Loan has an initial term of five years, maturing on April 30, 2024. Payments under the 2024 Term Loan are interest only and are due on the first day of each quarter. Amounts borrowed under the 2024 Term Loan may not be repaid and reborrowed. The 2026 Term Loan has an initial term of seven years, maturing on April 30, 2026. Payments under the 2026 Term Loan are interest only and are due on the first day of each quarter. Amounts borrowed under the 2026 Term Loan may not be repaid and reborrowed. The KeyBank Loans have an interest rate calculated based on LIBOR plus the applicable LIBOR margin, as provided in the Second Amended and Restated Credit Agreement, or the Base Rate plus the applicable base rate margin, as provided in the agreement. The applicable LIBOR margin and base rate margin are dependent on the consolidated leverage ratio of the KeyBank Borrower, the Company, and the Company's subsidiaries, as disclosed in the periodic compliance certificate provided to our administrative agent each quarter. If the KeyBank Borrower obtains an investment grade rating of its senior unsecured long term debt from Standard & Poor's Rating Services, Moody's Investors Service, Inc., or Fitch, Inc., the applicable LIBOR margin and base rate margin will be dependent on such rating. The Second Amended and Restated Credit Agreement relating to the Revolving Credit Facility provides that the Borrower must maintain a pool of unencumbered real properties (each a "Pool Property" and collectively the "Pool Properties") that meet certain requirements contained in the Second Amended and Restated Credit Agreement. The agreement sets forth certain covenants relating to the Pool Properties, including, without limitation, the following:
• | there must be no less than 15 Pool Properties at any time;
• | no greater than 15% of the aggregate pool value may be contributed by a single Pool Property or tenant;
• | no greater than 15% of the aggregate pool value may be contributed by Pool Properties subject to ground leases;
• | no greater than 20% of the aggregate pool value may be contributed by Pool Properties which are under development or assets under renovation;
• | the minimum aggregate leasing percentage of all Pool Properties must be no less than 90%; and
• | other limitations as determined by KeyBank upon further due diligence of the Pool Properties.
Borrowing availability under the Second Amended and Restated Credit Agreement is limited to the lesser of (i) an unsecured leverage ratio of no greater than 60%, or (ii) an unsecured interest coverage ratio of no less than 2.00:1.00. In connection with the KeyBank Loans, the KeyBank Borrower paid closing costs, including arrangement fees, commitment fees and legal fees, of approximately $5.7 million. The KeyBank Borrower will pay KeyBank an administrative agent fee of $25,000 per year. In addition, an unused fee will be payable quarterly which is calculated based on the amount of the unused revolving loan commitments and is equal to 15 basis points if 50% or more of the loan commitments are used or 20 basis points if less than 50% of the loan commitments are used. At the time that the applicable LIBOR margin and base rate margin are determined in accordance with the Borrower's investment grade rating as provided above, the KeyBank Borrower will pay a quarterly facility fee at a rate that is dependent on such rating and is based upon the total commitments. In the event that any of the 2023 Term Commitment is not advanced on April 30, 2019 (including the amount of any 2023 Term Loans previously advanced under the existing credit agreement), such unadvanced amount will incur an unused fee equal to 0.25% annually multiplied by the average daily amount of the unadvanced portion of the 2023 Term Commitment. Such unused fee will be payable quarterly in arrears and will start accruing on April 30, 2019 and will stop accruing on the first to occur of (a) the date the 2023 Term Commitments are fully advanced, or (b) July 30, 2019. Guarantors of the KeyBank Loans include us, each special purpose entity that owns a Pool Property, and each of our other subsidiaries which owns a direct or indirect equity interest in a special purpose entity that owns a Pool Property. In addition to customary representations, warranties, covenants, and indemnities, the KeyBank Loans require us to comply with the following at all times, which will be tested on a quarterly basis:
• | a maximum consolidated leverage ratio of 60%, or, the ratio may increase to 65% for up to four consecutive quarters after a material acquisition;
• | a minimum consolidated tangible net worth of 75% of our consolidated tangible net worth at closing of the Revolving Credit Facility, or approximately $2.0 billion, plus 75% of net future equity issuances (including units of operating partnership interests in the KeyBank Borrower), minus 75% of the amount of any payments used to redeem our stock or the KeyBank Borrower's stock or our operating partnership units, minus any amounts paid for the redemption or retirement of or any accrued return on the preferred equity issued under the preferred equity investment made in GCEAR in August 2018 by SHBNPP Global Professional Investment Type Private Real Estate Trust No. 13 (H) (the "2018 Preferred Equity");
• | upon consummation, if ever, of an initial public offering, a minimum consolidated tangible net worth of 75% of our consolidated tangible net worth plus 75% of net future equity issuances (including units of operating partnership interests in the KeyBank Borrower) should we publicly list on the New York Stock Exchange;
• | a minimum consolidated fixed charge coverage ratio of not less than 1.50:1.00;
• | a maximum total secured debt ratio of not greater than 40%, which ratio will increase by five percentage points for four quarters after closing of a material acquisition that is financed with secured debt;
• | a minimum unsecured interest coverage ratio of 2.00:1.00;
• | a maximum total secured recourse debt ratio, excluding recourse obligations associated with interest rate hedges, of 10% of our total asset value;
• | aggregate maximum unhedged variable rate debt of not greater than 30% of our total asset value; and
• | a maximum payout ratio of not greater than 95% commencing for the quarter ended September 30, 2019.
Furthermore, the activities of the KeyBank Borrower, the Company, and the Company's subsidiaries must be focused principally on the acquisition, operation, and maintenance of income producing office and industrial real estate properties. The Second Amended and Restated Credit Agreement contains certain restrictions with respect to the investment activities of the KeyBank Borrower, including, without limitation, the following: (i) unimproved land may not exceed 5% of total asset value; (ii) developments that are pre-leased assets under development may not exceed 20% of total asset value; (iii) investments in unconsolidated affiliates may not exceed 10% of total asset value; (iv) investments in mortgage notes receivable may not exceed 15% of total asset value; and (v) leased assets under renovation may not exceed 10% of total asset value. These investment limitations cannot exceed 25% in the aggregate, based on total asset value, as defined in the Second Amended and Restated Credit Agreement. Perpetual Convertible Preferred Shares On April 29, 2019, the Company filed with the State Department of Assessments and Taxation of Maryland Articles Supplementary (“Articles Supplementary”) to its First Articles of Amendment and Restatement (as amended or supplemented, the "Charter") designating 10,000,000 authorized but unissued shares of preferred stock as the Series A Preferred Shares (defined below). In connection with the Company Merger, on April 30, 2019, the Company issued 5,000,000 shares of its Series A cumulative perpetual convertible preferred stock (the “Series A Preferred Shares”) to holders of GCEAR’s Series A cumulative perpetual convertible preferred stock. Holders of Series A Preferred Shares are entitled to receive distributions quarterly in arrears at an initial annual distribution rate of 6.55%. Holders of Series A Preferred Shares have the right to redeem or convert their shares if certain conditions are not met, as set forth in the applicable Articles Supplementary. The shares of the Company's common stock issuable upon conversion of the Series A Preferred Shares have not been registered under the securities act and may not be offered or sold in the United States in the absence of an effective registration statement or an applicable exemption from the registration requirements. Company Offer On May 6, 2019, the Company commenced a self-tender offer (the “Company Offer”) for up to $100 million in shares of the Company’s Class A, Class AA, Class AAA, Class T, Class D, Class S, Class I and Class E shares, collectively, par value $0.001 per share, for cash at a purchase price equal to $9.56 per Class A, Class AA or Class AAA share, $9.66 per Class T share, $9.64 per Class D share, $9.65 per Class S share, $9.64 per Class I share, and $9.56 per Class E share. The Company Offer expires on Monday, June 10, 2019, unless extended or withdrawn per the terms of the Company Offer. Employment Agreements With Officers In connection with the Mergers and Michael J. Escalante's appointment as Chief Executive Officer of the Company, the Company assumed, from GCEAR, an employment agreement dated December 14, 2018, for Mr. Escalante to serve as GCEAR's Chief Executive Officer and President (the “Escalante Employment Agreement”). The Company assumed GCEAR's obligations under the Escalante Employment Agreement in its entirety. The Escalante Employment Agreement has an initial term of five years and will automatically renew for additional one year periods thereafter, unless either the Company or Mr. Escalante provide advance written notice of its or his intent not to renew or unless sooner terminated in accordance with the terms thereof. The Company also assumed employment agreements entered into by GCEAR with each of Javier F. Bitar, Howard S. Hirsch, Louis K. Sohn and Scott Tausk. Each of such employment agreements (collectively, the “Employment Agreements”) was entered into on December 14, 2018 and is substantially similar to the material terms of the Escalante Employment Agreement. Terms of the Escalante Employment Agreement and Employment Agreements are included in the Company's Form 8-K filed on May 1, 2019. Issuance of Restricted Stock Units to Executive Officers Pursuant to the terms of the Escalante Employment Agreement and the other Employment Agreements, on May 1, 2019, the Company entered into Time-Based Restricted Stock Unit Agreements with each of Messrs. Escalante, Bitar, Hirsch, Sohn and Tausk for the issuance of each of their respective Initial Equity Awards (collectively, the "Restricted Stock Unit Award Agreements"), pursuant to which the Company issued restricted stock units to such executive officers under the Employee and Director Long-Term Incentive Plan in the following amounts (the "RSUs"): 732,218 RSUs to Mr. Escalante; 104,603 RSUs to Mr. Bitar; 67,992 RSUs to Mr. Hirsch; 52,301 RSUs to Mr. Sohn; and 52,301 RSUs to Mr. Tausk.

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- Definition The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 855 -URI http://asc.fasb.org/topic&trid=2122774 + Details
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