EDGAR 10-K Filing

Company CIK: 1600626
Filing Year: 2022
Filename: 1600626_10-K_2022_0001600626-22-000021.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
The use herein of the words “GRT,” “the Company,” “we,” “us,” and “our” refer to Griffin Realty Trust, Inc, a Maryland corporation, and its subsidiaries, including GRT OP L.P., our operating partnership (the “GRT OP”), except where the context otherwise requires.
Overview
We are an internally managed, publicly-registered, non-traded real estate investment trust (“REIT”). We are a multi-billion-dollar enterprise committed to creating exceptional value for all of our stakeholders through the ownership and operation of a diversified portfolio of strategically-located, high-quality, business-essential office and industrial properties that are primarily leased to nationally-recognized single tenants we have determined to be creditworthy.
The GRT platform was founded in 2009 and has since grown to become one of the largest office and industrial-focused, net-lease REITs in the United States. Since our founding, our mission has been consistent - to generate long-term returns for our stockholders by combining the durability of high-quality corporate tenants, the stability of our revenue and the power of proactive management. To achieve this mission, we leverage the skills and expertise of our employees who have expertise across a range of disciplines including acquisitions, dispositions, asset management, property management, development, finance, law and accounting. They are led by an experienced senior management team with commercial real estate experience averaging approximately 30 years.
On July 1, 2021, we changed our name from Griffin Capital Essential Asset REIT, Inc. to Griffin Realty Trust, Inc. and our operating partnership changed its name from Griffin Capital Essential Asset Operating Partnership L.P. to GRT OP, L.P.
On March 1, 2021, we completed our acquisition of Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”) for approximately $1.3 billion, including transaction costs, in a stock-for-stock transaction (the “CCIT II Merger”). At the effective time of the CCIT II Merger, each issued and outstanding share of CCIT II Class A common stock and each issued and outstanding share of CCIT II Class T common stock was converted into the right to receive 1.392 shares of our Class E common stock.
As of December 31, 2021, we owned 121 properties (including one land parcel held for future development) in 26 states. Our contractual base rent before abatements and deducting base year operating expenses for gross modified leases (“Annualized Base Rent”) as of December 31, 2021 is approximately $361.9 million. As of December 31, 2021, our portfolio was approximately 94.5% leased (based on square footage), with a weighted average remaining lease term of 6.25 years and weighted average annual rent increases of approximately 2.0%. Approximately 67.0% of our Annualized Base Rent as of December 31, 2021 is 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. Management can provide no assurance as to the comparability of these ratings methodologies or that any particular rating for a company is indicative of the rating that a single Nationally Recognized Statistical Rating Organization (“NRSRO”) would provide in the event that it rated all companies for which the Company provides credit ratings; to the extent such companies are rated only by non-NRSRO ratings providers, such ratings providers may use methodologies that are different and less rigorous than those applied by NRSROs; moreover, because GRT provides credit ratings for some companies that are non-guarantor parents of Company's tenants, such credit ratings may not be indicative of the creditworthiness of the relevant tenants.
History and Structure
The GRT platform was founded in 2009 with the launch of Griffin Capital Essential Asset REIT, Inc. (“EA-1”), a publicly-registered, non-traded REIT that acquired a geographically diversified portfolio of strategically-located, high-quality corporate office and industrial properties primarily leased to single tenants. By the end of 2014, EA-1 had reached its maximum primary offering amount in its follow-on offering, having raised approximately $1.3 billion in gross equity proceeds in its public and private offerings. By the end of 2018, the EA-1 portfolio had grown to 74 properties encompassing 19.9 million square feet with an acquisition value of approximately $3.0 billion. This growth was supported by significant strategic transactions, including a $521.5 million portfolio acquisition of 18 office properties from Columbia Property Trust, Inc. and an
approximately $624.8 million stock-for-stock merger pursuant to which EA-1 acquired all of the ownership interests in Signature Office REIT, Inc.
As EA-1 completed its primary offering, Griffin Capital Essential Asset REIT II, Inc. (“EA-2”) was launched with the same focus and strategy as EA-1. By the end of 2018, EA-2 had raised approximately $734.0 million in gross equity proceeds and had a portfolio of 27 properties with an acquisition value of approximately $1.1 billion.
On December 14, 2018, EA-1 further aligned management with investors by internalizing management in a transaction whereby the former sponsor of EA-1 and EA-2, Griffin Capital Company, LLC (“GCC”), and Griffin Capital, LLC sold the advisory, asset management and property management business of Griffin Capital Real Estate Company, LLC to EA-1 for common limited partnership units of the GRT OP ("GRT OP Units"). Also, on December 14, 2018, EA-1, EA-2 and certain other related entities entered into a merger agreement pursuant to which, on April 30, 2019, EA-1 and EA-2 combined operations (the “EA Merger”). Following the EA Merger, the surviving company was renamed Griffin Capital Essential Asset, REIT, Inc.
We utilize a structure known as an “UPREIT” structure, pursuant to which we conduct all of our business through the GRT OP, with the GRT OP, directly or indirectly through subsidiaries, owning all of our assets and liabilities. As of December 31, 2021, GRT, as the sole general partner, controlled the GRT OP and owned approximately 91.0% of the GRT OP Units. The remaining 9.0% of GRT OP Units are owned by GCC and other affiliates of the Company, as well as unaffiliated, third-party limited partners.
Our Competitive Strengths
We believe the following competitive strengths distinguish us from other owners and operators of office and industrial properties:
•Diverse, High-Quality Property Portfolio: As of December 31, 2021, our portfolio was comprised of 121 properties (including one land parcel) located in 26 states with 131 tenants throughout the United States. As of December 31, 2021, our portfolio was approximately 94.5% leased (based on square footage). Our properties offer strong geographic distribution, with no state accounting for more than approximately 11.4% of our portfolio, measured by percentage of our Annualized Base Rent as of December 31, 2021.
•Diverse Portfolio of Creditworthy Tenants: We have a diverse tenant base, with no single tenant accounting for more than approximately 4.5% of our Annualized Base Rent as of December 31, 2021 and our ten largest tenants accounting for approximately 27.3% of our Annualized Base Rent as of December 31, 2021. Further, no single industry represents more than approximately 12.5% of our Annualized Base Rent as of December 31, 2021. As of December 31, 2021, our portfolio had a weighted average remaining lease term of 6.25 years, with weighted average annual rent increases of approximately 2.0% through the remainder of the lease terms. Our Annualized Base Rent as of December 31, 2021 is expected to be approximately $361.9 million, with approximately 67.0% to be generated by properties leased and/or guaranteed, directly or indirectly, by companies we have determined to be creditworthy.
•Proactive, Hands-On Portfolio and Asset Management: We employ a proactive and diligent approach to managing our assets in order to mitigate risks and identify opportunities to maintain and/or add value to our portfolio. We believe this focus allows us to generate superior risk-adjusted returns from our assets when compared to the typical passive net-lease strategy.
•Proven and Experienced Management Team: Our senior management team has an average of approximately 30 years of commercial real estate experience and a proven ability to acquire and proactively manage properties in order to maximize their value.
Our Business Strategy
Our primary business objectives are to provide regular cash distributions to our stockholders and maximize stockholder value. We seek to achieve these objectives by pursuing the following business strategies:
•Own and Operate Well-Located, Business-Essential, Single-Tenant Assets Leased to High-Quality Tenants: We seek to own properties that are essential to our tenants’ business operations and are leased to tenants that we have determined to be creditworthy, as we believe such assets offer greater relative default protection. Our properties are generally new or recent Class A construction quality and condition and are located in primary, secondary and select tertiary metropolitan statistical areas. They are typically subject to long-term leases with defined rental rate increases,
offering a consistent and predictable income stream across market cycles, or short-term leases that we have determined have a high probability of renewal and potential for increasing rent, offering income appreciation upon renewal.
•Achieve Stable and Predictable Cash Flows: We focus on generating durable cash flows for our investors. We seek to achieve this by focusing on high-quality properties and tenants that are subject to “net” leases with primarily annual contractual rental rate increases. We generally seek “net” leases, which mitigate cash flow volatility arising from fluctuations in property operating expenses and capital expenditure requirements. Under a “net” lease, the tenant pays certain operating expenses of the property in addition to “base rent,” which may include real estate taxes, special assessments, sales and use taxes, utilities, insurance, common area maintenance charges and building repairs. Additionally, in many of our leases, tenants are responsible for all or a portion of the costs of capital repairs and replacements. However, in some instances, we are responsible for some or all of these costs, which may include replacement and repair of the roof, structure, parking lots, and certain other major repairs and replacements with respect to the property. Our leases typically provide contractual rent increases, providing a potential hedge against inflation, insulation from short-term economic cycles resulting from the long-term nature of the underlying leases, enhanced stability resulting from diversified credit characteristics of corporate credits and portfolio stability promoted through geographic and product type investment diversification.
•Provide Proactive Portfolio and Asset Management Services: Our management team believes that a proactive approach to portfolio and asset management is essential for maximizing risk-adjusted returns for our stockholders. This focus often allows us to pre-identify risks in our portfolio and take appropriate steps to mitigate them. Examples of ways in which we proactively manage risks include engaging in stringent property and lease compliance oversight, making regular on-site visits, developing deep tenant relationships and continuously monitoring tenant credit. We also proactively seek to add value to our portfolio through strategic property improvements, dynamic re-leasing strategies and other value-add strategies.
•Utilize Highly Selective Acquisition Criteria for Income-Producing Properties with Potential for Future Appreciation: We seek to make investments that satisfy the primary investment objective of providing regular cash distributions to our stockholders. However, because a significant factor in the valuation of income-producing real property is its potential for future appreciation, some properties we acquire may have the potential both for growth in value and for providing regular cash distributions to our stockholders.
•Prudent Use of Leverage: We may incur indebtedness in the form of bank borrowings, purchase money obligations to the sellers of properties and publicly or privately placed debt instruments or financing from institutional investors or other lenders. We have an existing credit facility (the “Credit Facility”), which we may amend, modify, or replace from time to time. We may borrow using our Credit Facility or other financings or obtain separate loans for each acquisition. Our indebtedness may be unsecured or may be secured by mortgages, other interests in our properties, guarantees and/or pledges of membership interests and may involve securitization vehicles. We may use borrowing proceeds to finance acquisitions of new properties, to pay for capital improvements, repairs or buildouts, to repay or refinance existing indebtedness, to pay distributions, to fund redemptions of our shares or to provide working capital.
We may re-evaluate and change our debt strategy and policies in the future. Factors that we may consider when re-evaluating or changing our debt strategy and policies include then-current economic and market conditions, the relative cost of debt and equity capital, any acquisition opportunities, the ability of our properties to generate sufficient cash flow to cover debt service requirements and other similar factors. Further, we may increase or decrease our ratio of debt to equity in connection with any change of our borrowing policies.
•Use of Joint Ventures: We have acquired and may continue to acquire some of our properties through joint ventures, including general partnerships, co-tenancies and other participations with real estate developers, owners and others. We may enter into joint ventures for a variety of reasons, including to own and lease real properties that would not otherwise be available to us, to diversify our sources of equity, to create income streams that would not otherwise be available to us, to facilitate strategic transactions with unaffiliated third parties, and/or to further diversify our portfolio by geographic region or property type. These joint ventures may be programmatic relationships with domestic or international institutional sources of capital. In determining whether to invest in a particular joint venture, we will
evaluate the interests in real property that such joint venture owns or is being formed to own under the same criteria that we use to evaluate other real estate investments.
•Value Creation Through Strategic Capital Recycling: We pursue an efficient capital allocation strategy that seeks to maximize the value of our portfolio. We may also seek to make improvements to our properties if we believe such investments will generate an attractive return on our capital. For example, from time to time we will have tenants that elect to vacate our properties. While we will typically seek to immediately re-lease the property to a new tenant, there may be times where physical investment is necessary to maximize potential tenant demand. In such instances, we may elect to make such investments, but only if we believe both market demand and the increase in prospective rental rates justifies our investment on a risk-adjusted basis. If they do not, then we may elect to sell the asset and redeploy the proceeds in a manner that is consistent with our qualification as a REIT. We determine whether a particular property should be sold or otherwise disposed of based on factors including prevailing economic conditions, other investment opportunities and considerations specific to the condition, value and financial performance of the property and our portfolio. As of December 31, 2021, we had sold 17 properties and one land parcel since our inception, including three properties during the year ended December 31, 2021.
Investment Policies and our Organizational Documents
Our charter currently requires that we invest our funds in the manner required by various provisions of the Statement of Policy Regarding Real Estate Investment Trusts published by the North American Securities Administrators Association. The following is a summary of certain provisions of our charter and does not purport to be a complete description of each of the provisions and limitations contained therein. A complete copy of our charter can be found in the exhibit list to this Annual Report on Form 10-K.
Our charter requires that our independent directors review our investment policies at least annually to determine that our policies are in the best interests of our stockholders. Each determination and the basis therefor is required to be set forth in the applicable meeting minutes. The methods of implementing our investment policies may also vary as new investment techniques are developed.
A majority of the directors on our Board of Directors (the “Board”), including a majority of our independent directors, may alter the methods of implementing our investment objectives and policies, except as otherwise provided in our charter, without the approval of our stockholders. Certain investment policies and limitations specifically set forth in our charter, however, may only be amended by a vote of the stockholders holding a majority of our outstanding shares.
Our Board may change any and all such investment objectives or policies, including our focus on single-tenant, business-essential office and industrial properties, if it believes such changes are in the best interests of our stockholders. We intend to notify our stockholders of any change to our investment policies by disclosing such changes in a public filing.
Our organizational documents do not impose limitations on the number, size or type of properties that we may acquire or on the amount that may be invested in any particular property type or single property, though each acquisition is required to be approved by our Board.
Our organizational documents also do not impose limitations on the amount we can borrow for the purchase of any property. These documents provide that our aggregate borrowings, secured and unsecured, must be reasonable in relation to our net assets and must be reviewed by our Board at least quarterly. Our charter currently limits our borrowing to 300% of our net assets (equivalent to approximately 75% of the cost of our assets) unless any excess borrowing is approved by a majority of our independent directors and is disclosed to our stockholders in our next quarterly report, along with the justification for such excess.
We do not expect to engage in any significant lending and have not engaged in significant lending over the past three years. Certain of our corporate governance policies limit our ability to make loans to directors, executive officers and certain other related persons. However, we do not otherwise have a policy limiting our ability to make loans to other persons, although our ability to do so may be limited by applicable law, such as the Sarbanes-Oxley Act.
Our charter restricts us from engaging in various types of transactions with affiliates. A majority of our directors (including the independent directors) must generally approve any such transactions, as detailed further in our charter.
Exchange Listing and Other Strategic Transactions
While we are currently operating as a perpetual-life REIT, we may consider from time to time potential liquidity events (each, a “Strategic Transaction”). We are not prohibited by our charter or otherwise from engaging in such Strategic Transactions at any time. Subject to certain significant transactions that require stockholder approval, such as dissolution, merger into another entity in which we are not the surviving entity, consolidation or the sale or other disposition of all or substantially all of our assets, our Board maintains sole discretion to change our current strategy to pursue Strategic Transactions or otherwise if it believes such a pursuit is in the best interest of our stockholders.
Competition
The commercial real estate markets in which we operate are highly competitive. The leasing of real estate is also often highly competitive, and we may experience competition for tenants from owners and managers of competing projects. As a result, we may have to provide free rent, incur charges for tenant improvements, or offer other inducements, or we might not be able to timely lease the space, all of which may have material adverse effect on us. Competition may also lead to an increase in tenants electing to not renew their lease, seeking to reduce the amount of space they lease with us and/or seeking shorter lease terms, which may also have a material effect on us. At the time we elect to dispose of our properties, we will also be in competition with sellers of similar properties to locate suitable purchasers for our properties.
Overview
Our business is subject to many laws and governmental regulations. Changes in these laws and regulations, or their interpretation by agencies and courts, occur frequently. We and any of our operating subsidiaries that we may form may be subject to state and local tax in states and localities in which they or we do business or own property. The tax treatment of us, the GRT OP, any of our operating subsidiaries we may form and the holders of our shares in local jurisdictions may differ from our U.S. federal income tax treatment.
Americans with Disabilities Act
Under the Americans with Disabilities Act of 1990 (the “ADA”), all public accommodations and commercial facilities are required to meet certain federal requirements related to access and use by disabled persons. Failing to comply could result in the imposition of fines by the federal government or an award of damages to private litigants. Although we diligence compliance with laws, including the ADA, when we acquire properties, we may incur additional costs to comply with the ADA or other regulations related to access by disabled persons. Although we believe that these costs will not have a material adverse effect on us, if required changes involve a greater amount of expenditures than we currently anticipate, our ability to make expected distributions could be adversely affected.
Environmental Matters
Under various federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real property may be held liable for the costs of removing or remediating hazardous or toxic substances. These laws often impose clean-up responsibility and liability without regard to whether the owner or operator was responsible for, or even knew of, the presence of the hazardous or toxic substances. The costs of investigating, removing or remediating these substances may be substantial, and the presence of these substances may adversely affect our ability to lease or sell the property or to borrow using the property as collateral and may expose us to liability resulting from any release of or exposure to these substances. If we arrange for the disposal or treatment of hazardous or toxic substances at another location, we may be liable for the costs of removing or remediating these substances at the disposal or treatment facility, whether or not the facility is owned or operated by us. We may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from a site that we own or operate. Certain environmental laws also impose liability in connection with the handling of or exposure to asbestos-containing materials, pursuant to which third parties may seek recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials and other hazardous or toxic substances. We maintain a pollution insurance policy for all of our properties to insure against the potential liability of remediation and exposure risk.
Other Regulations
The properties we own and operate generally are subject to various federal, state and local regulatory requirements, such as zoning and state and local fire and life safety requirements. Failure to comply with these requirements could result in the imposition of fines by governmental authorities or awards of damages to private litigants. Through our due diligence process and protections in our leases, we aim to own and operate properties that are in material compliance with all such regulatory requirements. However, we cannot assure our stockholders that these requirements will not be changed or that new
requirements will not be imposed which would require significant unanticipated expenditures by us and could have an adverse effect on our financial condition and results of operations.
We conduct our operations so that we and our subsidiaries are not required to register as an investment company under the Investment Company Act of 1940, as amended (the “1940 Act”) and monitor the structure and nature of our assets so that we do not come within the definition of an "investment company" under the 1940 Act. If we or our subsidiaries fail to maintain an exception or exemption from the 1940 Act, we may be required to, among other things, substantially change the manner in which we conduct our operations to avoid being required to register as an investment company under the 1940 Act or register as an investment company under the 1940 Act.
Human Capital Management
GRT is internally managed by an experienced and proven team that specializes in office and industrial properties. As of December 31, 2021, we employed 41 people. We believe our employees are our greatest asset. Because of this perspective, we have implemented a number of programs to foster their professional growth and their growth as global citizens.
We offer all of our employees a comprehensive benefits and wellness package, which includes paid time off and parental leave, high-quality medical, dental and vision insurance, disability, pet and life insurance, fitness programs, 401(k) and long-term incentive plans. We also encourage internal mobility in our organization and provide career enhancement and education opportunities, as well as educational grants.
We believe that a wide range of opinions and experiences are key to our continued success, and we therefore value racial, gender, and generational diversity throughout our organization. As of December 31, 2021, approximately 51% of our employees were people of color/minorities and approximately 46% were women. In addition, as of December 31, 2021, half of our eight-member Board was composed of women and/or minorities.
Our social policy extends beyond the individuals within our organization and encourages our employees to have a positive impact on the community around us. Throughout our organization, we have a shared passion and dedication to giving back to the communities in which we live and work.
Available Information
We make available on the “SEC Filings” subpage of the investor section of our website (www.grtreit.com) free of charge our annual reports on Form 10-K, including this Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, ownership reports on Forms 3, 4 and 5 and any amendments to those reports as soon as practicable after we electronically file such reports with the SEC. Our electronically filed reports can also be obtained on the SEC’s internet site at http://www.sec.gov. Further, copies of our Code of Ethics and the charters for the Audit, Compensation, and Nominating and Corporate Governance Committees of our Board are also available on the “Governance Documents” subpage of our website.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
Stockholders should carefully consider the following risks in evaluating our company and our common shares. If any of the following risks were to occur, our business, prospects, financial condition, liquidity, NAV per share, results of operations, cash flow, ability to satisfy our debt obligations, returns to our stockholders, the value of our stockholders’ investment in us and/or our ability to make distributions to our stockholders could be materially and adversely affected, which we refer herein collectively as a “material adverse effect on us.” Some statements in this Annual Report on Form 10-K, including statements in the following risk factors, constitute forward-looking statements. Refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements" for additional information regarding these forward-looking statements.
Risks Related to COVID-19
The COVID-19 pandemic, and the future outbreak of other highly infectious or contagious diseases, could have a material adverse effect on us.
The COVID-19 pandemic has had, and another outbreak in the future could have, repercussions across regional and global economies and financial markets. We cannot predict when pandemic-related restrictions currently in place will be lifted to some extent or entirely and whether and when any new restrictions could be imposed. The COVID-19 pandemic is negatively impacting many industries in the United States, directly or indirectly, including industries in which the Company and our
tenants operate, which could result in a general decline in rents, an increased incidence of defaults under existing leases and negatively impact our ability to achieve new leases as existing leases expire. The extent to which federal, state or local governmental authorities grant rent relief or other relief or enact amnesty programs applicable to our tenants in response to the COVID-19 pandemic may exacerbate the negative impacts that a slow down or recession could have on us.
Demand for office space nationwide has declined and is likely to continue to decline due to the current economic downturn, bankruptcies, downsizing, layoffs, government regulations and restrictions on travel and permitted businesses operations that may be extended in duration and become recurring, increased usage of remote working arrangements and cost cutting resulting from the COVID-19 pandemic, which could lead to our office tenants electing to not renew their leases, or to renew their leases for less space than they currently occupy, which could increase vacancy rates and decrease rental income. The increase in remote work practices is likely to continue in a post-pandemic environment. Changes to tenants’ space requirements and configurations may require us to spend increased amounts for property improvements. Additionally, if substantial office space reconfiguration is required, tenants may pursue relocating to other office space more attractive than renewing their leases and renovating the existing space, which could have a material adverse effect on us.
The significance, extent, and duration of the overall operational and financial impact of the COVID-19 pandemic on our business is highly uncertain and cannot be predicted with confidence, including the continued severity, duration, transmission rate and geographic spread of COVID-19 in the United States, the speed of the vaccine distribution, effectiveness and willingness of people to take COVID-19 vaccines, the duration of associated immunity and efficacy against emerging variants of COVID-19, the extent and effectiveness of other containment measures taken, and the response of the overall economy, the financial markets and the population, particularly in areas in which we operate. If we cannot operate our properties so as to meet our financial expectations, because of these or other risks, we may be prevented from growing the values of our properties and it may have a material adverse effect on us.
Furthermore, we cannot predict the impact that the COVID-19 pandemic will have on our tenants and other business partners; however, any material effect on these parties could have a material adverse effect on us.
Risks Related to Our Common Stock
There is currently no public trading market for shares of our common stock and there may never be one; therefore, it will be difficult for our stockholders to sell their shares. Our stockholders may be unable to sell their shares of our common stock under our SRP, and even if our stockholders are able to sell their shares under our SRP, they may not be able to recover the amount of their investment in shares of our common stock.
There is currently no public market for shares of our common stock and there may never be one.
Our SRP includes numerous restrictions on a stockholder’s ability to sell their shares to us. These restrictions include a prohibition on the sale of shares to use until the conclusion of a holding period of one year. Further, our SRP generally imposes a quarterly cap on aggregate redemptions of shares of our common stock. Our Board may limit, suspend, terminate or amend any provision of our SRP at any time upon 30 days’ notice. Our Board has previously suspended our SRP, including most recently on October 1, 2021. Even if the SRP is active and in effect, we may not have sufficient cash to satisfy the permitted quarterly value of redemption requests.
Furthermore, to ensure that we do not fail to qualify as a REIT, our charter also prohibits the ownership by any Person (as defined in our charter) of more than 9.8% (in value or in number, whichever is more restrictive, as determined in good faith by our Board) of the aggregate of our common stock or more than 9.8% of the value (as determined in good faith by our Board) of the aggregate of outstanding Shares (as defined in our charter), unless waived by our Board. Such restriction may inhibit large investors from desiring to purchase a stockholder’s shares, including in connection with a takeover that could otherwise result in a premium price for our stockholders, and could impose further impediments to a stockholder’s ability to sell shares of our common stock.
Our published NAV per share amounts may change materially if the appraised values of our properties materially change from prior appraisals or if actual operating results differ from our historical and/or anticipated results. Additionally, no NAV per share that we publish will reflect changes in our NAV that are immediately quantifiable, including potentially material changes.
We update our NAV per share on a yearly basis based on third-party appraisals of our properties, which are impacted by real estate market events that are known to be material to our NAV. The valuations reflect information provided to the appraisers with a reasonable time to analyze such information. Annual third-party appraisals of our properties using an appraisal report format are conducted on a rolling basis, such that properties will be appraised at different times throughout any given year with each property generally appraised at least once per calendar year. These appraisals involve subjective judgments and
are not necessarily representative of the price at which an asset or liability would sell pursuant to negotiation between an arms’ length buyer and seller. We will not retroactively adjust the NAV per share of any class reported. Therefore, because a new annual appraisal may differ materially from the prior appraisal or the actual results from operations may be better or worse than what we previously assumed, the adjustment to reflect the new appraisal or actual operating results may cause the NAV per share for any class of our common stock to increase or decrease. Additionally, notification of property and real estate market events may lag the actual event and events may be missed, unknown or difficult to value. Furthermore, the NAV per share that we publish will not reflect changes in NAV that are not immediately quantifiable, including potentially material changes, and the NAV per share of each class published after the announcement of a material event may differ significantly from our actual NAV per share for such class until such time as the financial impact is quantified and our NAV is appropriately adjusted in accordance with our valuation procedures.
On October 1, 2021, we reported that we had temporarily suspended our quarterly publishing of net asset value per share of common stock. Our Board authorized the suspension in light of the pursuit of certain strategic initiatives. We intend to resume publishing a net asset value per share of common stock at such time as our Board determines is appropriate and no later than one year from the most recent net asset value publication, which was as of June 30, 2021. As a result, our net asset value may be materially different than our most recent published net asset value.
Our NAV is not a GAAP measure and involves certain subjective judgments by the Company, the independent valuation management firms and other parties involved in valuing our assets and liabilities.
Our valuation procedures are not subject to GAAP and our NAV is not a GAAP measure. Our NAV may differ from prior appraisals and/or actual operating results, even if we were required to adopt a fair value basis of accounting for GAAP financial statement purposes. In addition, the implementation and coordination of our valuation procedures include certain subjective judgments of the Company, such as whether the independent valuation management firms should be notified of events specific to our properties that could affect the valuations of such properties. Such valuation procedures also include subjective judgements on the part of the independent valuation management firms and other parties we engage, as to whether adjustments to asset and liability valuations are appropriate. Accordingly, our stockholders must rely entirely on our Board to adopt appropriate valuation procedures and on the independent valuation management firm and other parties we engage in order to arrive at our NAV, which may not correspond to realizable value upon a sale of our assets. Our NAV is not audited or reviewed by our independent registered public accounting firm.
Our NAV may not be comparable to NAV reported by other public REITs and no rule or regulation requires that we calculate our NAV in a certain way, and our Board, including a majority of our independent directors, may adopt changes to our valuation procedures.
Our NAV may not be comparable to NAV reported by other public REITs because our calculation of NAV may be different from the NAV calculations used by other public REITs. While the Institute for Portfolio Alternatives sets forth certain “best practices” guidelines for non-traded REITs to use in calculating NAV, there are no existing rules or regulatory bodies that specifically govern the manner in which we calculate our NAV. Other public REITs may use different methodologies or assumptions to determine their NAV. In addition, each year our Board, including a majority of our independent directors, reviews the appropriateness of its valuation procedures and may, at any time, adopt changes to the valuation procedures. During such review, our Board may change aspects of our valuation procedures, which changes may have a material adverse effect on us.
We may be unable to maintain cash distributions or increase distributions over time.
We may be unable to maintain cash distributions or increase distributions over time. The amount of cash available for distribution will be affected by many factors, such as our operating expense levels, and many other variables. Actual cash available for distribution may vary substantially from estimates. We cannot assure our stockholders that we will be able to pay or maintain distributions or that distributions will increase over time, nor can we give any assurance that rents from the properties will increase. Our actual results may differ significantly from the assumptions used by our Board in establishing the distribution rate to our stockholders.
Our stockholders are subject to the risk that our business and operating plans may change, including that we may pursue a Strategic Transaction.
We may consider Strategic Transactions from time to time. We are not prohibited by our charter or otherwise from engaging in Strategic Transactions at any time. Subject to certain significant transactions that require stockholder approval, our Board maintains sole discretion to change our current strategy to pursue Strategic Transactions or otherwise if it believes such a change is in the best interest of our stockholders. There can be no assurance, however that any Strategic Transaction will occur.
Our Board may also change our investment objectives, targeted investments, borrowing policies or other corporate policies without stockholder approval.
The value ascribed to our shares of common stock in connection with any Strategic Transaction may be lower than our published NAV, any given stockholder’s initial investment cost and/or the value of our assets under the fair value basis of accounting for GAAP financial statements and our stockholders could suffer a loss in the event that they seek liquidity at a Strategic Transaction price per share. Furthermore, because we have a large amount of outstanding shares of stock which are readily tradable, access to liquidity may trigger significant pent-up demand to sell shares of our common stock. Significant sales of shares of our common stock, or the perception that significant sales of such shares could occur, may cause any market price of our common stock to decline significantly.
In the event that we complete a Strategic Transaction, the value of our shares in connection with such Strategic Transaction may be lower than our published NAV, any given stockholder’s initial investment cost and/or the value of our assets under the fair value basis of accounting for GAAP financial statement. For example, if our shares are listed on a national securities exchange, the price at which the shares are listed may be lower than the most recent published NAV per share of our common stock.
Furthermore, because our common stock is not listed on any national securities exchange, the ability of our stockholders to liquidate their investments is limited. As a result, there may be significant pent-up demand to sell shares of our common stock. A large volume of sales of shares of our common stock could decrease the prevailing market price of our common stock significantly. Regardless of whether a substantial number of sales of our shares of common stock actually occurs, the mere perception of the possibility of these sales could depress the market price of our common stock, and have a material adverse effect on us.
Risks Related to Our Conflicts of Interest
Conflicts of interest may exist or could arise in the future between the interests of our stockholders and the interests of holders of GRT OP Units, which may impede business decisions that could benefit our stockholders. Additionally, the chairman of our Board is a controlling person of entities that own GRT OP Units, and therefore may face conflicts with regard to his fiduciary duties to the Company and those entities.
Conflicts of interest exist or could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and the GRT OP or any partner thereof, on the other. Our directors and officers have duties to the Company under applicable Maryland law in connection with their management of the Company. At the same time, we, as the general partner of the GRT OP, have fiduciary duties, and obligations to the GRT OP and its limited partners under Delaware law and the partnership agreement of the GRT OP in connection with the management of the GRT OP. Our fiduciary duties and obligations as general partner to the GRT OP and its partners may come into conflict with the duties of our directors and officers to the Company. Additionally, the partnership agreement provides that we and our directors and officers will not be liable for monetary damages to the GRT OP, any partners or assignees for losses sustained or liabilities incurred as a result of errors in judgment or of any act or omission if we acted in good faith. Moreover, the partnership agreement provides that the GRT OP is required to indemnify us, as general partner, any of our officers, directors or employees and other persons as we may designate from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including reasonable legal fees and expenses), judgments, fines, settlements and other amounts incurred in connection with any claims, demands, actions, suits or proceedings, relating to the operations of the GRT OP. No reported decision of a Delaware appellate court has interpreted provisions similar to the provisions of the partnership agreement of the GRT OP that modify and reduce our fiduciary duties or obligations as the general partner or reduce or eliminate our liability for money damages to the GRT OP and its partners. Additionally, the chairman of our Board is a controlling person of entities that own GRT OP Units which may be exchanged for our common stock in the future. The chairman of our Board may also make decisions on behalf of those entities.
Risks Related to Our Corporate Structure
Our charter and bylaws, the partnership agreement of our operating partnership and Maryland law contain provisions that may delay, defer or prevent a change of control transaction that might involve a premium price for our shares or that our stockholders otherwise believe to be in their best interest.
Our charter contains certain ownership limits with respect to our shares.
Generally, to maintain our qualification as a REIT, no more than 50% in value of our outstanding shares may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of our taxable year (except with respect to the first taxable year for which an election to be taxed as a REIT is made). The Code defines “individuals” for purposes of the requirement described in the preceding sentence to include some types of entities. Our charter authorizes our Board to take such
actions as it determines are necessary or appropriate to preserve our qualification as a REIT. Our charter prohibits the ownership by any Person (as defined in our charter) of more than 9.8% (in value or in number, whichever is more restrictive, as determined in good faith by our Board) of the aggregate of our common stock or more than 9.8% of the value (as determined in good faith by our Board) of the aggregate of our outstanding Shares (as defined in our charter), unless waived by our Board. For these purposes, our charter includes a “group” as that term is used for purposes of Section 13(d)(3) of the Exchange Act in the definition of “Person.” Our Board may exempt a person, prospectively or retroactively, from these ownership limits if certain conditions are satisfied.
This ownership limit and the other restrictions on ownership and transfer of our shares contained in our charter may:
• discourage a tender offer or other transactions or a change in management or of control that might involve a premium price for our shares or that our stockholders might otherwise believe to be in their best interest; or
•result in the transfer of shares acquired in excess of the restrictions to a trust for the benefit of a charitable beneficiary and, as a result, the forfeiture by the acquirer of the benefits of owning the additional shares.
Certain provisions of Maryland law could inhibit changes in control, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that might involve a premium price for our shares or that our stockholders might otherwise believe to be in their best interest.
Certain provisions of the MGCL may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of common stock with the opportunity to realize a premium price for our common stock, including:
• “business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested shareholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof or an affiliate or associate of ours who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of our then-outstanding voting shares at any time within the two-year period immediately prior to the date in question) for five years after the most recent date on which the shareholder becomes an interested shareholder, and thereafter impose fair price and/or supermajority shareholder voting requirements on these combinations; and
• “control share” provisions that provide that a shareholder’s “control shares” of our Company (defined as shares (other than shares acquired directly from us) that, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights with respect to their control shares, except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
As permitted by the MGCL, we have elected to opt out of the business combination and control share provisions of the MGCL. However, we cannot assure you that our Board will not opt to be subject to such provisions of the MGCL in the future, including opting to be subject to such provisions retroactively.
Further, Maryland statutory law provides that an act of a director relating to or affecting an acquisition or a potential acquisition of control of a corporation may not be subject to a higher duty or greater scrutiny than is applied to any other act of a director. Hence, directors of a Maryland corporation by statute are not required to act in certain takeover situations under the same standards of care, and are not subject to the same standards of review, as apply in Delaware and other corporate jurisdictions.
Our stockholders’ investment return would be reduced if we were required to register as an investment company under the 1940 Act and we would not be able to continue our business unless and until we registered under the 1940 Act.
We conduct our operations so that we and our subsidiaries are not required to register as an investment company under the 1940 Act.
To maintain compliance with our 1940 Act exemption, we may be unable to sell assets we would otherwise want to sell and may sell assets we would otherwise wish to retain. If we or our subsidiaries fail to maintain an exception or exemption from the 1940 Act, we may be required to, among other things, substantially change the manner in which we conduct our operations
to avoid being required to register as an investment company under the 1940 Act or alternatively, register as an investment company under the 1940 Act. If we were required to register as an investment company but failed to do so, we would be prohibited from engaging in our business, and criminal and civil actions could be brought against us. In addition, our contracts would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of the Company and liquidate our business.
Our stockholders’ interest in the Company will be diluted if we issue additional shares or if GRT OP issues additional units.
Our stockholders’ interest in the Company will be diluted if we issue additional shares. Our stockholders do not have preemptive rights to any shares issued by us in the future. Subject to Maryland law, our Board may increase the number of authorized shares of stock, increase or decrease the number of shares of any class or series of stock designated, or reclassify any unissued shares without obtaining stockholder approval. Further, our outstanding and any later-issued Series A Preferred Shares may be converted into our common stock under certain circumstances. Existing stockholders will experience dilution of their equity investment or voting power in the Company if we issue additional shares in the future, including issuing shares of restricted common stock or restricted stock units (“RSUs”) to our independent directors and executive officers, issuing shares in connection with an exchange of limited partnership interests of the GRT OP, or converting shares of the outstanding tranche of our Series A Preferred Shares into shares of our common stock and an additional tranche of Series A Preferred Shares that we are obligated to issue under certain circumstances and/or issuing shares under our DRP. Furthermore, because we own all of our assets and liabilities through the GRT OP, directly or indirectly through subsidiaries, to the extent we issue additional GRT OP unit, our stockholders' overall interest in our company will be diluted.
Our rights and the rights of our stockholders to recover claims against our officers and directors are limited, which could reduce our stockholders’ and our recovery against them if they cause us to incur losses.
Maryland law provides that a director has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in the corporation’s best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our charter requires us to indemnify our directors and officers to the maximum extent permitted under Maryland law. Additionally, our charter limits the liability of our directors and officers for monetary damages to the maximum extent permitted under Maryland law. The former directors and officers of EA-1 also have indemnification agreements that we previously assumed for claims relating to such person’s status as a former director or officer of EA-1. Further, our charter permits the Company, with the approval of our Board, to provide such indemnification and advancement of expenses to any of our employees or agents. As a result, we and our stockholders may have more limited rights against our directors, officers, employees and agents, than might otherwise exist under common law, which could reduce our stockholders’ and our recovery against them. In addition, we may be obligated to fund the defense costs incurred by our directors, officers, employees and agents in some cases which would decrease the cash otherwise available for distribution to our stockholders.
Holders of our Series A Preferred Shares have a right to require us to redeem the Series A Preferred Shares for cash in the event that we have not listed our securities on a national exchange by a certain date. This redemption obligation requires us to allocate cash to such redemption on limited notice when there may be a shortage of cash or when we may prefer to allocate cash to other uses consistent with our business plans. Such holders also have a right to convert their Series A Preferred Shares into common shares as soon as August 2023 and such conversion would dilute the interests of our other stockholders. Furthermore, we may be obligated to issue a second tranche of such securities, increasing the holder’s interest in our Company and further diluting the interests of other stockholders. Any of the foregoing risks could have a material adverse effect on us.
We have issued 5,000,000 Series A Preferred Shares that rank senior to all other shares of our stock, including our common stock, and grant the holder certain rights that are superior or additional to the rights of common stockholders, including with respect to the payment of distributions, liquidation preference, redemption rights, and conversion rights. Distributions on the Series A Preferred Shares are cumulative and are declared and payable quarterly in arrears. We are obligated to pay the holder of the Series A Preferred Shares its current distributions and any accumulated and unpaid distributions prior to any distributions being paid to our common stockholders and, therefore, any cash available for distribution is used first to pay distributions to the holder of the Series A Preferred Shares. The Series A Preferred Shares also have a liquidation preference in the event of our voluntary or involuntary liquidation, dissolution, or winding up of our affairs (a “liquidation”) which could negatively affect any payments to the common stockholders in the event of a liquidation. Under the terms of the original purchase agreement for the Series A Preferred Shares, the holder of the Series A Preferred Shares agreed to purchase an additional 5,000,000 Series A Preferred Shares at a later date for an additional purchase price of $125.0 million, subject to satisfaction of certain conditions. Accordingly, under certain circumstances, we may be obligated to issue a second tranche of the Series A Preferred Shares.
The holder of the Series A Preferred Shares has a right to require us to redeem the Series A Preferred Shares (including any second tranche) for cash in the event that there has not been a listing by August 2023. This redemption obligation would require us to allocate cash to such redemption on limited notice when there may be a shortage of cash or when we would prefer to allocate cash to other uses consistent with our business plans. In addition, the holder of the Series A Preferred Shares has the right to convert any or all of the Series A Preferred Shares held by the holder into shares of our common stock beginning as soon as August 2023. Such conversion of the Series A Preferred Shares, whether the current tranche or both the current and second tranche, would be dilutive to our common stockholders, and, in the event of the issuance of a second tranche and the conversion of both tranches, would result in the holder of the Series A Preferred Shares owning approximately 8.0% of our common stock.
If we fail to pay distributions on the Series A Preferred Shares for six quarters (whether or not consecutive), the holder will be entitled to elect two additional directors of the Company (the Preferred Shares Directors”). The election will take place at the next annual meeting of stockholders, or at a special meeting of the holder of Series A Preferred Shares called for that purpose, and such right to elect Preferred Stock Directors shall continue until all distributions accumulated on the Series A Preferred Shares have been paid in full for all past distribution periods and the accumulated distribution for the then current distribution period shall have been authorized, declared and paid in full or authorized, declared and a sum sufficient for the payment thereof irrevocably set apart for payment in trust.
If any of the foregoing risks were to materialize, it could have a material adverse effect on us.
We are uncertain of our sources of funding our future capital needs. If we cannot obtain funding on acceptable terms, our ability to make necessary capital improvements to our properties may be impaired or delayed.
To continue to qualify as a REIT, we generally must distribute to our stockholders at least 90% of our taxable income each year, excluding capital gains. Because of this distribution requirement, it is not likely that we will be able to fund a significant portion of our future capital needs from retained earnings. We have not identified all of our sources of funding, and such sources of funding may not be available to us on favorable terms or at all. If we do not have access to sufficient funding in the future, we may not be able to make necessary capital improvements to our properties, pay other expenses or expand our business.
Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our stockholders.
Our bylaws provide that, unless we consent in writing to the selection of a different forum, the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the U.S. District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach by any director, officer or other employee of the Company of a duty owed to the Company or our stockholders or of any standard of conduct set forth in the Maryland General Corporation Law (“MGCL”), (iii) any action asserting a claim arising pursuant to any provision of the MGCL including, but not limited to, the meaning, interpretation, effect, validity, performance or enforcement of our charter or our bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine. This exclusive forum provision does not apply to claims under the Securities Act, the
Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction Any person or entity purchasing or otherwise acquiring or holding any interest in shares of our common stock will be deemed to have notice of and to have consented to these provisions of our bylaws, as they may be amended from time to time. Our Board, without stockholder approval, adopted this provision of our bylaws so that we may respond to such litigation more efficiently and reduce the costs associated with our responses to such litigation, particularly litigation that might otherwise be brought in multiple forums. This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder believes is favorable for disputes with the Company or our directors, officers, agents or employees, if any, and may discourage lawsuits against us and our directors, officers, agents or employees, if any. Alternatively, if a court were to find this provision of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings notwithstanding that the MGCL expressly provides that the charter or bylaws of a Maryland corporation may require that any internal corporate claim be brought only in courts sitting in one or more specified jurisdictions, we may incur additional costs that we do not currently anticipate associated with resolving such matters in other jurisdictions, which could have a material adverse effect on us.
Risks Related to Our Business
We are primarily dependent on single-tenant leases for our revenue, and the bankruptcy, insolvency, or downturn in the business of, or a lease termination or election by a tenant not to renew could have a material adverse effect on us.
Our properties are primarily leased to single tenants or will derive a majority of their rental income from single tenants and, therefore, the success of those properties is materially dependent on the financial stability of the companies to which we have leased and/or who have guaranteed such leases. Lease payment defaults, including those caused by the current economic climate, could cause us to reduce the amount of distributions we pay and/or force us to find an alternative source of revenue to meet a debt payment and prevent a foreclosure if the property is subject to a mortgage. In the event of a default under a lease, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-letting the property. If a lease is terminated or an existing tenant elects not to renew a lease upon its expiration, there is no assurance that we will be able to lease the property for the rent previously received or sell the property without incurring a loss. A default by a tenant, the failure of a guarantor to fulfill its obligations, a premature termination of a lease, or a tenant’s election not to extend a lease upon its expiration, could have a material adverse effect on us. Additionally, in certain instances, we may enter into leases that do not include a credit party guaranty. Moreover, we can provide no assurance that our strategy of owning and operating office and industrial properties that are primarily leased to single tenants will be successful or that we will attain our investment and portfolio management objectives. Furthermore, although we have no current intention to do so, we may also invest in single-tenant, leased office and industrial properties outside of the United States and we can provide no assurance that we will have success in any such investments. The occurrence of any of the foregoing could have a material adverse effect on us.
We currently rely on five tenants for a meaningful amount of revenue and adverse effects to their business could have a material adverse effect on us.
Our five largest tenants, based on Annualized Base Rent as of December 31, 2021, were Amazon.com, Inc. located in Illinois, Ohio and Virginia (approximately 4.5%), Keurig Green Mountain, Inc., located in Massachusetts (approximately 3.2%), General Electric Company located in Georgia, Ohio and Texas (approximately 3.1%), Wood Group USA, Inc. located in Texas (approximately 2.7%) and Cigna Corporation located in Alabama (approximately 2.5%). The revenues generated by the properties leased and/or guaranteed by these companies are substantially reliant upon the financial condition of such companies and, accordingly, any event of bankruptcy, insolvency, or a general downturn in the business of any of these tenants may result in the failure or delay of such tenant’s rental payments, which could have a material adverse effect on us.
Approximately a quarter of the leases in our portfolio are scheduled to expire in the next three years and more than a third of our leases are scheduled to expire in the next four years, which may cause a loss in the value of our stockholders’ investment until the affected properties are re-leased or sold, increase our exposure to downturns in the real estate market during the time that we are trying to re-lease or sell such space, and increase our capital expenditure requirements during the re-leasing or sale period, any of which could have a material adverse effect on us.
Our lease expirations by year based on Annualized Base Rent as of December 31, 2021 are as follows (dollars in thousands):
Year of Lease Expiration (1)
Annualized Base Rent
(unaudited)
Number of Leases Approx. Square Feet Percentage of Annualized Base Rent
2022 $ 10,652 9 871,400 2.9 %
2023 27,969 12 1,262,300 7.7
2024 47,231 20 4,349,400 13.1
2025 40,416 24 3,052,100 11.2
2026 28,691 11 2,425,900 7.9
2027 33,228 16 1,614,700 9.2
>2028 173,734 63 13,961,400 48.0
Vacant - - 1,604,900 -
Total $ 361,921 155 29,142,100 100.0 %
(1) Expirations that occur on the last day of the month are shown as expiring in the subsequent month.
We may experience concentrations of lease expiration dates in the future. As the expiration date of a lease for a single-tenant building approaches, the value of the property generally declines because of the risk that the building may not be re-leased upon expiration of the existing lease or may not be re-leased on terms as favorable as those of the current lease(s).
Therefore, if we were to liquidate any of these assets prior to the favorable re-leasing of the space, we may suffer a loss on our investment. Our stockholders may also suffer a loss (and a reduction in distributions) after the expiration of the applicable lease term if we are not able to re-lease such space on favorable terms. These expiring leases, therefore, increase our risk to real estate downturns during and approaching these periods of concentrated lease expirations. To meet our need for cash during these times, we may have to increase borrowings or reduce our distributions, or both. The occurrence of any of the foregoing risks could have a material adverse effect on us.
Our portfolio has geographic market concentrations that make us especially susceptible to adverse developments in those geographic markets.
In addition to general, regional, national and international economic conditions, our operating performance is impacted by the economic conditions of the specific geographic markets in which we have concentrations of properties. We have significant property concentrations based on ABR as of December 31, 2021 in Texas (11.4%), California (10.9%), Arizona (9.3%) and Ohio (8.4%). In the future, we may experience additional geographic concentrations, which could adversely affect our operating performance if conditions become less favorable in any of the states or markets within such states in which we have a concentration of properties. We cannot assure you that any of our markets will grow, not experience adverse developments or that such markets will not become less desirable to investors. Our operations may also be affected if competing properties are built in our markets. A downturn in the economy in the states or regions in which we have a concentration of properties, or markets within such states or regions, could adversely affect our tenants operating businesses in those states, impair their ability to pay rent to us and materially and adversely affect us.
We may be unable to benefit from increases in market rental rates because our leases typically are long-term, have initial lease term rent escalations that are fixed and contain limitations on market rental rate resets upon renewal.
Based on ABR, as of December 31, 2021, our weighted average lease term was approximately 6.25 years and approximately 98.6% of our leases contained fixed rental rate increases during the initial lease term. By entering into longer term leases, we are subject to the risk during the initial term that we would not be able to increase our rental rates to market rental rates if prevailing rental rates have increased. In addition, during periods of high inflation, fixed rental rate increases subject us to the risk of receiving lower rental revenue than we otherwise would have been entitled to receive if the rental rate increases were based on an increase in the consumer price index over a specified period. In addition, our leases often contain provisions (including caps, collars, fixed increases, etc.) that may limit our ability to reset rental rates to market rental rates upon expiration of the initial lease term. Any inability to take advantage of increases in prevailing rental rates could adversely impact the value of our properties and on the market price of our common shares.
Our real estate investments may include special use single tenant properties, and, as such, it may be difficult to re-lease or sell these properties, which could have a material adverse effect on us.
We focus our investments on office and industrial properties, a number of which may have special uses. Special use properties may be relatively illiquid compared to other types of real estate and financial assets. Upon expiration or early termination of a lease, this illiquidity could limit our ability to quickly change our portfolio in response to changes in economic, market or other conditions to an even greater extent than the typically illiquid nature of real estate assets. With these properties, we may be required to renovate or demolish a vacant property in order to try to re-lease or sell it, grant rent or other concessions and/or make significant capital expenditures to improve these properties in order to retain existing tenants. In addition, in the event we are forced to sell the property, we may have difficulty selling it to a party other than the company that has leased and/or guaranteed the lease of the property due to the special purpose for which the property may have been designed. These and other limitations could have a material adverse effect on us and may affect our ability to re-lease or sell these properties upon expiration or early termination of a lease, which could have a material adverse effect on us.
We face significant competition for tenants, which may decrease or prevent increases of the occupancy and rental rates of our properties, which could have a material adverse effect on us.
The commercial real estate markets in which we operate are highly competitive. The leasing of real estate is also often highly competitive, and we may experience competition for tenants from owners and managers of competing properties. An oversupply of properties in the industries and geographies in which we concentrate could further increase competition. As a result, we may have to reduce our rental rates or to offer more substantial rent abatements, tenant improvements, early termination rights, below-market renewal options or other lease incentive payments or we might not be able to timely lease the space. If our competitors offer space at rental rates below current market rates or below the rental rates we currently charge our tenants, we may lose existing or potential tenants and we may be pressured to reduce our rental rates or to offer more substantial rent abatements, tenant improvements, early termination rights, below-market renewal options or other lease incentives in order to retain tenants when our leases expire. Competition for companies that may lease or guarantee our
properties could decrease or prevent increases of the occupancy and rental rates of our properties. Furthermore, at the time we elect to dispose of our properties, we will also be in competition with sellers of similar properties to locate suitable purchasers for our properties. The occurrence of any of the foregoing could have a material adverse effect on us.
We depend on current key personnel for our future success, and the loss of such personnel or inability to attract and retain personnel could harm our business and the loss of services of one or more members of our executive management team, or our inability to attract and retain highly qualified personnel, could adversely affect our business, diminish our investment opportunities and weaken our business relationships with lenders, business partners, companies that may lease or guarantee our properties and other industry participants, any of which could have a material adverse effect on us.
Our future success will depend in large part on our ability to attract and retain a sufficient number of qualified personnel. Competition for such personnel is intense, and we cannot assure stockholders that we will be successful in attracting and retaining such skilled personnel. Our future success also depends upon the service of our executive management team, who we believe have extensive market knowledge and business relationships and will exercise substantial influence over the Company’s operating, financing, acquisition and disposition activity. Among the reasons that they are important to our success is that we believe that each has a national or regional industry reputation that is expected to attract business and investment opportunities and assist us in negotiations with lenders, companies that may lease or guarantee our properties and other industry personnel. As a result, the loss of one or more of them could harm our business. We believe that many of our other key executive personnel also have extensive experience and strong reputations in the industry. In particular, the extent and nature of the business relationships that these individuals have developed is critically important to the success of our business. The loss of services of one or more members of our executive management team, or our inability to attract and retain highly qualified personnel, could adversely affect our business and weaken our business relationships with lenders, business partners, companies that may lease or guarantee our properties and other industry participants, any of which could have a material adverse effect on us.
Cybersecurity risks and cyber incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, any of which could have a material adverse effect on us.
A cyber incident is any intentional or unintentional adverse event that threatens the confidentiality, integrity, or availability of our information resources and can include unauthorized persons gaining access to systems to disrupt operations, corrupting data or stealing confidential information. The risk of a cyber incident or disruption, including by computer hackers, foreign governments, information service interruptions and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks have increased globally. As our reliance on technology increases, so do the risks posed to our systems - both internal and external. Our primary risks that could directly result from the occurrence of a cyber incident are theft of assets; operational interruption; regulatory enforcement, lawsuits and other legal proceedings; damage to our relationships with our tenants; and private data exposure. A significant and extended disruption could damage our business or reputation, cause a loss of revenue, have an adverse effect on tenant relations, cause an unintended or unauthorized public disclosure, or lead to the misappropriation of proprietary, personally identifying, or confidential information, any of which could result in us incurring significant expenses to resolve these kinds of issues. Although we have implemented processes, procedures and controls based on published best practices cybersecurity controls to help mitigate the risks associated with a cyber incident, there can be no assurance that these measures will be sufficient for all possible situations. Even security measures that are appropriate, reasonable and/or in accordance with applicable legal requirements may not be sufficient to protect the information we maintain. Unauthorized parties, whether within or outside the Company, may disrupt or gain access to our systems, or those of third parties with whom we do business, through human error, misfeasance, fraud, trickery, or other forms of deceit, including break-ins, use of stolen credentials, social engineering, phishing, computer viruses or other malicious codes, and similar means of unauthorized and destructive tampering. Even the most well-protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted cyber incidents evolve and generally are not recognized until launched against a target. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, making it impossible for us to entirely mitigate this risk. The occurrence of any of the foregoing risks could have a material adverse effect on us.
To the extent we are unable to pass along our property operating expenses to our tenants, our financial condition, results of operations and cash flow, may be negatively impacted.
Operating expenses associated with owning a property typically include real estate taxes, insurance, maintenance, repair and renovation costs, the cost of compliance with governmental regulation (including zoning) and the potential for liability under applicable laws. We generally lease our properties to tenants pursuant to triple-net leases that require the tenant to pay their proportionate share of substantially all such property operating expenses. However, on a limited basis we lease our properties to tenants pursuant to leases that do not pass along all such property operating expenses (e.g., triple-net leases that
cap the amount by which certain operating expenses may grow on a per annum basis and be reimbursed by the tenant, net leases (single net or double net) that require the tenant to pay their proportionate share of one or more of real estate taxes and insurance costs, modified gross leases in which a tenant pays only base rent at the lease’s inception but, in subsequent years, pays the base rent plus a proportional share of some of the property operating expenses to the extent that a tenant’s pro rata share of expenses exceeds a base year level set forth in the lease, etc.). Occasionally, we have entered into leases pursuant to which we retain responsibility for the costs of structural repairs and maintenance. An increase in property operating expenses that we are unable to pass along to our tenants could negatively impact our financial condition, results of operations and cash
flow. Similarly, vacancy in our portfolio would negatively impact our financial condition, results of operations and cash flow, as we would be responsible for all property operating expenses that we have formerly passed on to our tenants.
If global market and economic conditions deteriorate, it could have a material adverse effect on us.
Weak economic conditions generally, sustained uncertainty about global economic conditions, a tightening of credit markets, business layoffs, downsizing, industry slowdowns and other similar factors that affect our tenants could negatively impact real estate fundamentals and result in lower occupancy, lower rental rates and declining values in our real estate portfolio. Additionally, these factors and conditions could have an impact on our lenders or tenants, causing them to fail to meet their obligations to us. No assurances can be given regarding such macroeconomic factors or conditions, and our ability to lease our properties and increase or maintain rental rates may be negatively impacted, which may have a material adverse effect on our business, financial condition and results of operations.
Inflation may materially and adversely affect us and our tenants.
Increased inflation could have a negative impact on variable rate debt we currently have or that we may incur in the future. During times when inflation is greater than the increases in rent provided by many of our leases, rent increases will not keep up with the rate of inflation. Increased costs may have an adverse impact on our tenants if increases in their operating expenses exceed increases in revenue, which may adversely affect the tenants’ ability to pay rent owed to us.
Corporate responsibility, specifically related to environmental, social, and governance (“ESG”) factors, may impose additional costs and expose us to new risks.
The importance of sustainability evaluations is becoming more broadly accepted by investors and shareholders. Certain organizations that provide corporate governance and other corporate risk information to investors and shareholders have developed scores and ratings to evaluate companies and investment funds based upon ESG or “sustainability” metrics. Many investment funds focus on positive ESG business practices and sustainability scores when making investments and may consider a company’s sustainability score as a reputational or other factor in making an investment decision. In addition, investors, particularly institutional investors, use these scores to benchmark companies against their peers, and if a company is perceived as lagging, these investors may engage with companies to require improved ESG disclosure or performance. We may face reputational damage in the event our corporate responsibility procedures or standards do not meet the standards set by various constituencies. A low sustainability score could result in a negative perception of the Company, or exclusion of our common stock from consideration by certain investors.
If we fail to maintain effective internal controls over financial reporting, we may not be able to accurately and timely report our financial results.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports, effectively prevent fraud and operate successfully. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. For so long as our common stock is not traded on a national securities exchange, we will be exempt from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and we can provide no assurance that the system and process evaluation and testing of our internal control over financial reporting that we perform to allow management to report on the effectiveness of such internal controls will be effective.
As a result of material weaknesses or significant deficiencies that may be identified in our internal control over financial reporting in the future, we may also identify certain deficiencies in some of our disclosure controls and procedures that we believe require remediation. If we or our independent registered public accounting firm discover any such material weaknesses or significant deficiencies, we will make efforts to further improve our internal control over financial reporting controls, but there is no assurance that we will be successful. Any failure to maintain effective controls or timely effect any necessary improvement of our internal control over financial reporting controls could harm operating results or cause us to fail to meet our reporting obligations. Ineffective internal control over financial reporting and disclosure controls could also cause investors to lose confidence in our reported financial information.
Risks Related to Investments in Real Estate
Our operating results will be affected by economic and regulatory changes that have an adverse impact on the real estate market in general, and we cannot assure our stockholders that we will be profitable or that we will realize growth in the value of our real estate properties.
We own and operate real estate and face risks related to investments in real estate. As of December 31, 2021, our real estate portfolio included 121 properties in 26 states and 134 lessees consisting substantially of office, industrial, and manufacturing facilities and one land parcel. Our operating results will be subject to risks generally incident to the ownership of real estate. These include risks described elsewhere in this "Risk Factors" section and other risks, including the following:
•the value of real estate fluctuates depending on conditions in the general economy and the real estate business. Additionally, adverse changes in these conditions may result in a decline in rental revenues, sales proceeds and occupancy levels at our properties and could have a material adverse effect on us. If rental revenues, sales proceeds and/or occupancy levels decline, we generally would expect to have less cash available to pay indebtedness and for distribution to stockholders;
•it may be difficult to sell real estate quickly, or potential buyers of our properties may experience difficulty in obtaining financing, which may limit our ability to dispose of properties promptly in response to changes in economic or other conditions. Additionally, we may be unable to identify, negotiate, finance or consummate dispositions of our properties, on favorable terms, or at all;
•our properties may be subject to impairment losses, which could have a material adverse effect on us;
•changes in tax, real estate, environmental or zoning laws and regulations;
•changes in property tax assessments and insurance costs;
•changes in interest rates and rising inflation;
•the cost and availability of credit may be adversely affected by illiquid credit markets and wider credit spreads, and our inability or the inability of our tenants to timely refinance maturing liabilities to meet liquidity needs could have a material adverse effect on us; and
•we may from time to time be subject to litigation, which may significantly divert the attention and resources of the Company’s management and result in defense costs, settlements, fines or judgments against us, some of which are not, or cannot be, covered by insurance, and any of which could have a material adverse effect on us.
These and other risks could have a material adverse effect on us and may prevent us from realizing value from our real estate properties.
We may obtain only limited warranties when we purchase a property.
The seller of a property will often sell such property in its “as is” condition on a “where is” basis and “with all faults,”
without any warranties of merchantability or fitness for a particular use or purpose. In addition, purchase agreements typically contain limited warranties, representations and indemnifications that will only survive for a limited period after the closing and subject to a floor and cap. Also, most sellers of large commercial properties are special purpose entities without assets other than the property itself and there is often no credit behind the surviving provisions of a purchase agreement. The purchase of properties with limited warranties and/or from undercapitalized sellers increases the risk that we may lose some or all of our invested capital in the property as well as the loss of rental income from that property and could expose us to unknown liabilities.
We may finance properties with lock-out provisions, which may prohibit us from selling a property, or may require us to maintain specified debt levels for a period of years on some properties.
Lock-out provisions are provisions that generally prohibit repayment of a loan balance for a certain number of years following the origination date of a loan. We may finance properties with lock-out provisions, which could materially restrict us from selling or otherwise disposing of or refinancing properties. These provisions would affect our ability to turn our investments into cash and thus affect cash available for distribution to our stockholders and may prohibit us from reducing the outstanding indebtedness with respect to any such properties by repaying or refinancing such indebtedness on a non-recourse basis at maturity, or increasing the amount of indebtedness with respect to such properties. Any mortgage debt that we place on our properties may also impose prepayment penalties upon the sale of the mortgaged property. If a lender invokes these penalties upon the sale of a property or prepayment of a mortgage on a property, the cost to the Company to sell, repay or refinance the property could increase substantially. Lock-out provisions could preclude us from participating in major transactions that could result in a disposition of our assets or a change in control even though that disposition or change in control might be in our stockholders’ best interests. The occurrence of any of the foregoing could have a material adverse effect on us.
If we suffer losses that are not covered by insurance or that are in excess of insurance coverage, it could have a material adverse effect on us.
We may suffer losses that are not covered by insurance or that are in excess of insurance. There are types of losses, generally of a catastrophic nature, such as losses due to wars, acts of terrorism, earthquakes, fires, floods, hurricanes, pollution or environmental matters, which are either uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. In addition, we may decide not to obtain, even though available, any or adequate earthquake or similar catastrophic insurance coverage because the premiums are too high. Generally, our leases require each tenant to procure, at its own expense, commercial general liability insurance, as well as property insurance covering the building for the full replacement value and naming the ownership entity and the lender, if applicable, as the additional insured on the policy. Tenants are required to provide proof of insurance by furnishing a certificate of insurance to us on an annual basis. The insurance certificates are tracked and reviewed for compliance by our property manager. Separately, we obtain, to the extent available, contingent liability and property insurance and flood insurance, rent loss insurance covering at least one year of rental loss, and a pollution insurance policy for all of our properties. However, the coverage and amounts of our environmental and flood insurance policies may not be sufficient to cover our entire risk. We cannot assure stockholders that we will have adequate coverage for losses. If we suffer losses that are not covered by insurance or that are in excess of insurance coverage, it could have a material adverse effect on us.
We are subject to risks from climate change and natural disasters such as earthquakes and severe weather conditions.
Our properties are located in areas that may be subject to climate change and natural disasters, such as earthquakes and wildfires, and severe weather conditions. Climate change and natural disasters, including rising sea levels, flooding, extreme weather, and changes in precipitation and temperature, may result in physical damage to, or a total loss of, our properties located in areas affected by these conditions, including those in low-lying areas close to sea level, and/or decreases in demand, rent from, or the value of those properties. In addition, we may incur material costs to protect these properties, including increases in our insurance premiums as a result of the threat of climate change, or the effects of climate change may not be covered by our insurance policies. Furthermore, changes in federal and state legislation and regulations on climate change could result in increased utility expenses and/or increased capital expenditures to improve the energy efficiency and reduce carbon emissions of our properties in order to comply with such regulations or result in fines for non-compliance.
The extent of our casualty losses and loss in operating income in connection with such events is a function of the severity of the event and the total amount of exposure in the affected area. When we have a geographic concentration of exposures, a single catastrophe (such as an earthquake) affecting an area in which we have a significant concentration of properties, such as in Texas, California, Ohio, Arizona, Georgia, Illinois or New Jersey, could have a material adverse effect on us. We also own at least one property near an earthquake fault line. As a result, our operating and financial results may vary significantly from one period to the next, and our financial results may be adversely affected by our exposure to losses arising from climate change, natural disasters or severe weather conditions.
Costs of complying with governmental laws and regulations, including those relating to environmental matters and the ADA, may have a material adverse effect on us.
Our operations conducted on real property are subject to federal, state and local laws and regulations relating to environmental protection and zoning and state and local fire and life safety requirements.
Under various federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real property may be held liable for the costs of removing or remediating hazardous or toxic substances. These laws often impose clean-up responsibility and liability without regard to whether the owner or operator was responsible for, or even knew of, the presence of the hazardous or toxic substances. The costs of investigating, removing or remediating these substances may be
substantial, and the presence of these substances may adversely affect our ability to lease or sell the property or to borrow using the property as collateral and may expose us to liability resulting from any release of or exposure to these substances, any of which could have a material adverse effect on us. If we arrange for the disposal or treatment of hazardous or toxic substances at another location, we may be liable for the costs of removing or remediating these substances at the disposal or treatment facility, whether or not the facility is owned or operated by us. We may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from a site that we own or operate. Certain environmental laws also impose liability in connection with the handling of or exposure to asbestos-containing materials, pursuant to which third parties may seek recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials and other hazardous or toxic substances. We maintain a pollution insurance policy for all of our properties to insure against the potential liability of remediation and exposure risk. Compliance with current and future laws and regulations may require us to incur material expenditures, which could have a material adverse effect on us. Some of these laws and regulations may impose joint and several liability on tenants, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may adversely affect our ability to sell, rent or pledge such property as collateral for future borrowings.
Additionally, our tenants’ operations, the existing condition of land when we acquired it, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our properties. There are various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply, and that may subject us to liability in the form of fines or damages for noncompliance, which could result in material expenditures. We cannot assure our stockholders that the independent third-party environmental assessments we obtain prior to acquiring any properties we purchase will reveal all environmental liabilities or that a prior owner of a property did not create a material environmental condition not known to us.
Under the ADA all public accommodations and commercial facilities are required to meet certain federal requirements related to access and use by disabled persons. The ADA generally requires that buildings and services, including restaurants and retail stores, be made accessible and available to people with disabilities. The ADA’s requirements could require removal of access barriers and could result in the imposition of injunctive relief, monetary penalties, or, in some cases, an award of damages. We aim to own and operate properties that comply with the ADA or may place the burden on a third party to ensure compliance with the ADA. However, we cannot assure our stockholders that we will be able to allocate responsibilities in this manner. Failing to comply could result in the imposition of fines by the federal government or an award of damages to private litigants. Although we diligence compliance with laws, including the ADA, when we acquire properties, we may incur additional costs to comply with the ADA or other regulations related to access by disabled persons. If required changes involve a greater amount of expenditures than we currently anticipate, it could have a material adverse effect on us.
Furthermore, our properties may be subject to various federal, state and local regulatory requirements, such as zoning and state and local fire and life safety requirements. Failure to comply with these requirements could result in the imposition of fines by governmental authorities or awards of damages to private litigants. Through our due diligence process and protections in our leases, we aim to own and operate properties that are in material compliance with all such regulatory requirements. However, we cannot assure our stockholders that these requirements will not be changed or that new requirements will not be imposed which would require significant unanticipated expenditures by us and could have a material adverse effect on us.
The occurrence of any of the foregoing could have a material adverse effect on us.
If we sell properties by providing financing to purchasers, defaults by the purchasers could have a material adverse effect on us.
When we provide financing to purchasers, we will bear the risk that the purchaser may default, which could have a material adverse effect on us. Even in the absence of a purchaser default, the distribution of the proceeds of sales to our stockholders, or their reinvestment in other assets, will be delayed until the promissory notes or other property we may accept upon the sale are actually paid, sold, refinanced or otherwise disposed of. In some cases, we may receive initial down payments in cash and other property in the year of sale in an amount less than the selling price and subsequent payments will be spread over a number of years. If any purchaser defaults under a financing arrangement with us, it could have a material adverse effect on us.
Risks Associated with Debt Financing
If we breach covenants under our unsecured credit agreement with KeyBank and other syndication partners, we could be held in default under such agreement, which could accelerate our repayment date could have a material adverse effect on us.
If we were to default under our credit agreement, the lenders would have the ability to immediately declare the loans due
and payable in whole or in part. In such event, we may not have sufficient available cash to repay such debt at the time it
becomes due, or be able to refinance such debt on acceptable terms or at all. Pursuant to the Second Amended and Restated Credit Agreement dated as of April 30, 2019 (as amended by the First Amendment to the Second Amended and Restated Credit Agreement dated as of October 1, 2020, the Second Amendment to the Second Amended and Restated Credit Agreement dated as of December 18, 2020 and the Third Amendment to the Second Amended and Restated Credit Agreement dated as of July 14, 2021 (the “Third Amendment”), the “Second Amended and Restated Credit Agreement”), with KeyBank, National Association (“KeyBank”), as administrative agent, and a syndicate of lenders, we, through GRT OP, L.P., a Delaware limited partnership and a subsidiary of the Company, as the borrower, have been provided with a $1.9 billion credit facility consisting of the Revolving Credit Facility maturing in June 2022 with (subject to the satisfaction of certain customary conditions) a one-year extension option, a $200 million senior unsecured term loan maturing in June 2023 (the “$200M 5-Year Term Loan”), a $400 million senior unsecured term loan maturing in April 2024 (the “$400M 5-Year Term Loan”), a delayed draw $400 million senior unsecured term loan maturing in December 2025 (the "$400M 5-Year Term Loan 2025”) (collectively, the “KeyBank Loans”), and a $150 million senior unsecured term loan maturing in April 2026 (the “$150M 7-Year Term Loan”). The credit facility also provides the option, subject to obtaining additional commitments from lenders and certain other customary conditions, to increase the commitments under the Revolving Credit Facility, increase the existing term loans and/or incur new term loans by up to an additional $600 million in the aggregate. In addition to customary representations, warranties, covenants, and indemnities, the Second Amended and Restated Credit Agreement contains a number of financial covenants as described in Note 5, Debt, to our consolidated financial statements included in this Annual Report on Form 10-K.
Any of the foregoing could have a material adverse effect on us.
We have broad authority to incur debt, and our indebtedness could have a material adverse effect on us.
Subject to certain limitations in our charter that may be eliminated in the future, we have broad authority to incur debt. High debt levels would cause us to incur higher interest charges, which would result in higher debt service payments, and could be accompanied by restrictive covenants.
Our indebtedness could have a material adverse effect on us, as well as:
•increasing our vulnerability to general adverse economic and industry conditions;
•limiting our ability to obtain additional financing to fund future working capital, acquisitions, capital expenditures and other general corporate requirements;
•requiring the use of an increased portion of our cash flow from operations for the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund working capital, acquisitions, capital expenditures and general corporate requirements;
•limiting our flexibility in planning for, or reacting to, changes in our business and our industry;
•putting us at a disadvantage compared to our competitors with less indebtedness; and
•limiting our ability to access capital markets or limiting the possibility of a listing on a national securities exchange.
We have placed, and intend to continue to place, permanent financing on our properties or increase our credit facility or other similar financing arrangement in order to acquire properties. We may also decide to later further leverage our properties or to rely on securitization vehicles. We may borrow funds for any purposes related to our business. A shortfall between the cash flow from our properties and the cash flow needed to service debt could have a material adverse effect on us.
Any of the foregoing could have a material adverse effect on us.
We have incurred, and intend to continue to incur, indebtedness secured by our properties. If we are unable to make our debt payments when required, a lender could foreclose on the property or properties securing such debt, which could have a material adverse effect on us.
Some of our borrowings to acquire properties will be secured by mortgages on our properties, and we may in the future rely on securitization vehicles. In addition, some of our properties contain mortgage financing. If we default on our secured
indebtedness, the lender may foreclose and we could lose our entire investment in the properties securing such loan or vehicle, which could have a material adverse effect on us. To the extent lenders require us to cross-collateralize our properties, or provisions in our loan documents contain cross-default provisions, a default under a single loan agreement could subject multiple properties to foreclosure. Foreclosures of one or more of our properties could have a material adverse effect on us.
Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders at our current level or otherwise have a material adverse effect on us.
When providing financing, a lender could impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt, including customary restrictive covenants, that, among other things, restrict our ability to incur additional indebtedness, to engage in material asset sales, mergers, consolidations and acquisitions, and to make capital expenditures, and maintain financial ratios. Loan documents we enter into may contain covenants that limit our ability to further mortgage the property or discontinue insurance coverage. These or other limitations may adversely affect our flexibility and limit our ability to make distributions to stockholders at our current level or otherwise have a material adverse effect on us.
Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to make distributions to stockholders at our current level or otherwise have a material adverse effect on us.
We expect that we will incur indebtedness in the future. Interest we pay on our indebtedness will reduce cash available for distribution. Additionally, if we incur variable rate debt, increases in interest rates would increase our interest costs could reduce our cash flows and our ability to make distributions to stockholders at our current level. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments in properties at times that may not permit realization of the maximum return on such investments. Any of the foregoing risks could have a material adverse effect on us.
Failure to hedge effectively against interest rate changes may adversely affect our financial condition, results of
operations, cash flow, per share trading price of our common shares and ability to make distributions to our shareholders.
The REIT provisions of the Code impose certain restrictions on our ability to utilize hedges, swaps and other types of
derivatives to hedge our liabilities. Subject to these restrictions, we have entered, and may continue to enter into, hedging transactions to protect ourselves from the effects of interest rate fluctuations on floating rate debt. Our hedging transactions include entering into interest rate swap agreements. These agreements involve risks, such as the risk that such arrangements would not be effective in reducing our exposure to interest rate changes or that a court could rule that such an agreement is not legally enforceable. In addition, interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates, which could reduce the overall returns on our investments. Failure to hedge effectively against interest rate changes could materially adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our shareholders. In addition, while such agreements would be intended to lessen the impact of rising interest rates on us, they could also expose us to the risk that the other parties to the agreements would not perform, and that the hedging arrangements may not be effective in reducing our exposure to interest rate changes. Should we desire to terminate a hedging agreement, there could be significant costs and cash requirements involved to fulfill our obligation under the hedging agreement.
A substantial portion of our indebtedness bears interest at variable interest rates based on US Dollar London Interbank Offered Rate and certain of our financial contracts are also indexed to USD LIBOR. Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect interest rates on our current or future indebtedness and could have a material adverse effect on us.
On March 5, 2021, LIBOR’s regulator, the Financial Conduct Authority, and administrator, ICE Benchmark Administration, Limited, announced that the publication of the one-week and two-month USD LIBOR maturities and non-USD LIBOR maturities will cease immediately after December 31, 2021, with the remaining USD LIBOR maturities ceasing immediately after June 30, 2023. In the U.S., the Alternative Rates Reference Committee (the “ARRC”), a group of market participants convened in 2014 to help ensure a successful transition away from USD LIBOR, has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. Liquidity in SOFR-linked products has increased significantly this year after the implementation of the SOFR First best practice as recommended by the Market Risk Advisory Committee of the Commodity Futures Trading Commission.
We have term loans totaling $950 million and interest swap agreements with a total notional amount of $750 million that currently use LIBOR as a reference rate and extend past June 30, 2023. Though an alternative reference rate for LIBOR, SOFR, exists, significant uncertainties still remain. We can provide no assurance regarding the future of LIBOR and when our LIBOR-
based instruments will transition from LIBOR as a reference rate to SOFR or another reference rate. The discontinuation of a benchmark rate or other financial metric, changes in a benchmark rate or other financial metric, or changes in market perceptions of the acceptability of a benchmark rate or other financial metric, including LIBOR, could, among other things, result in increased interest payments, changes to our risk exposures, or require renegotiation of previous transactions. In addition, any such discontinuation or changes, whether actual or anticipated, could result in market volatility, adverse tax or accounting effects, increased compliance, legal and operational costs, and risks associated with contract negotiations.
U.S. Federal Income Tax Risks
Failure to continue to qualify as a REIT would adversely affect our operations and our ability to make distributions because we would incur additional tax liabilities, which could have a material adverse effect on us.
We believe we operate in a manner that allows us to qualify as a REIT for U.S. federal income tax purposes under the Code. Qualification as a REIT involves highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. Our qualification as a REIT will depend upon our ability to meet, through investments, actual operating results, distributions and satisfaction of specific stockholder rules, and various other requirements imposed by the Code.
If we fail to qualify as a REIT for any taxable year, we will be subject to U.S. federal income tax on our taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax. In addition, distributions to our stockholders would no longer qualify for the dividends paid deduction, and we would no longer be required to make distributions.
Qualification as a REIT is subject to the satisfaction of tax requirements and various factual matters and circumstances that are not entirely within our control. New legislation, regulations, administrative interpretations, or court decisions could change the tax laws with respect to qualification as a REIT or the U.S. federal income tax consequences of being a REIT. Our failure to continue to qualify as a REIT could have a material adverse effect on us.
To qualify as a REIT, and to avoid the payment of U.S. federal income and excise taxes and maintain our REIT status, we may be forced to borrow funds, use proceeds from the issuance of securities, or sell assets to pay distributions, which may result in our distributing amounts that may otherwise be used for our operations, which could have a material adverse effect on us.
To qualify as a REIT, we will be required each year to distribute to our stockholders at least 90% of our REIT taxable income, generally determined without regard to the deduction for dividends paid and by excluding net capital gains. We will be subject to U.S. federal income tax on our undistributed taxable income and net capital gain and to a 4% nondeductible excise tax on any amount by which dividends we pay with respect to any taxable year are less than the sum of (i) 85% of our ordinary income, (ii) 95% of our capital gain net income, and (iii) 100% of our undistributed income from prior years. These requirements could cause us to distribute amounts that otherwise would be spent on the acquisition, maintenance or development of properties and it is possible that we might be required to borrow funds, use proceeds from the issuance of securities, or sell assets in order to distribute enough of our taxable income to maintain our REIT status and to avoid the payment of U.S. federal income and excise taxes. We may be required to make distributions to our stockholders at times it would be more advantageous to reinvest cash in our business or when we do not have cash readily available for distribution, and we may be forced to liquidate assets on terms and at times unfavorable to us, which could have a material adverse effect on us. These methods of obtaining funding could affect future distributions by increasing operating costs and decreasing available cash. In addition, such distributions may constitute a return of capital.
If the GRT OP fails to maintain its status as a partnership for U.S. federal income tax purposes, its income would be subject to taxation and our REIT status could be terminated.
We intend to maintain the status of the GRT OP as a partnership for U.S. federal income tax purposes. However, if the IRS were to successfully challenge the status of the GRT OP as a partnership, it would be taxable as a corporation. In such event, this would reduce the amount of distributions that the GRT OP could make. This would also result in our losing REIT status and becoming subject to a corporate level tax on our income. This would substantially reduce our cash available to pay distributions and the return on our stockholders’ investment, which could have a material adverse effect on us. In addition, if any of the entities through which the GRT OP owns its properties, in whole or in part, loses its characterization as a partnership for federal income tax purposes, the underlying entity would become subject to taxation as a corporation, thereby reducing distributions to the GRT OP and jeopardizing our ability to maintain REIT status.
In certain circumstances, even if we qualify as a REIT, we and our subsidiaries may be subject to certain federal, state, and other income taxes, which would reduce our cash available for distribution to our stockholders and could have a material adverse effect on us.
Even if we qualify and maintain our status as a REIT, we may be subject to certain U.S. federal, state and local income taxes on our income and assets, including taxes and undistributed income, built in gain tax on the taxable sale of assets, tax on income from some activities conducted as a result of a foreclosure, and non-U.S., state or local income, property and transfer taxes. Moreover, if we have net income from “prohibited transactions”, that income will be subject to a 100% tax. In addition, we could, in certain circumstances, be required to pay an excise or penalty tax (which could be significant in amount) in order to utilize one or more relief provisions under the Code to maintain our qualification as a REIT. We may also decide to retain income we earn from the sale or other disposition of our property and pay income tax directly on such income. In that event, our stockholders would be treated as if they earned that income and paid the tax on it directly. However, our stockholders that are tax-exempt, such as charities or qualified pension plans, would have no benefit from their deemed payment of such tax liability. We may also be subject to state and local taxes on our income or property, either directly or at the level of the GRT OP or at the level of the other companies through which we indirectly own our assets. In particular, we will be subject to U.S. federal and state income tax (and any applicable non-U.S. taxes) on the income earned by our taxable REIT subsidiaries. Any U.S. or federal, state or other taxes we pay will reduce our cash available for distribution to our stockholders and could have a material adverse effect on us.
We may be required to pay some taxes due to actions of our taxable REIT subsidiaries, which would reduce our cash available for distribution to our stockholders and could have a material adverse effect on us.
Any net taxable income earned directly by our taxable REIT subsidiaries, or through entities that are disregarded for U.S. federal income tax purposes as entities separate from our taxable REIT subsidiaries, will be subject to U.S. federal and possibly state corporate income tax. We have elected to treat Griffin Capital Essential Asset TRS, Inc. as a taxable REIT subsidiary, and we may elect to treat other subsidiaries as taxable REIT subsidiaries in the future. In this regard, several provisions of the laws applicable to REITs and their subsidiaries ensure that a taxable REIT subsidiary will be subject to an appropriate level of U.S. federal income taxation. For example, a taxable REIT subsidiary is limited in its ability to deduct certain interest payments made to an affiliated REIT. In addition, the REIT has to pay a 100% penalty tax on some payments that it receives or on some deductions taken by a taxable REIT subsidiary if the economic arrangements between the REIT, the REIT’s customers, and the taxable REIT subsidiary are not comparable to similar arrangements between unrelated parties. To the extent that we and our affiliates are required to pay U.S. federal, state and local taxes, we will have less cash available for distributions to our stockholders.
Complying with the REIT requirements may cause us to forgo otherwise attractive opportunities, which could have a material adverse effect on us.
To qualify as a REIT for U.S. federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of shares of our common stock. We may be required to make distributions to stockholders at disadvantageous times or when we do not have funds readily available for distribution, or we may be required to liquidate otherwise attractive investments in order to comply with the REIT tests, any of which could have a material adverse effect on us. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.
To the extent our distributions represent a return of capital for tax purposes, a stockholder could recognize an increased capital gain upon a subsequent sale of the stockholder’s common stock.
Distributions in excess of our current and accumulated earnings and profits and not treated by us as a dividend will not be taxable to a stockholder to the extent those distributions do not exceed the stockholder’s adjusted tax basis in his or her common stock, but instead will constitute a return of capital and will reduce such adjusted basis. (Such distributions to non-U.S. stockholders may be subject to withholding, which may be refundable.) If distributions exceed such adjusted basis, then such adjusted basis will be reduced to zero and the excess will be capital gain to the stockholder (assuming such stock is held as a capital asset for U.S. federal income tax purposes). If distributions result in a reduction of a stockholder’s adjusted basis in his or her common stock, then subsequent sales of such stockholder’s common stock potentially will result in recognition of an increased capital gain.
Legislation that modifies the rules applicable to partnership tax audits may affect us.
Under the Bipartisan Budget Act of 2015, liability is imposed on the partnership (rather than its partners) for adjustments to reported partnership taxable income resulting from audits or other tax proceedings. The liability can include an imputed underpayment of tax, calculated by using the highest marginal U.S. federal income tax rate, as well as interest and penalties on such imputed underpayment of tax. It is possible that the Bipartisan Budget Act of 2015 rules could result in partnerships in which we directly or indirectly invest (including our operating partnership) being required to pay additional taxes, interest and penalties as a result of an audit adjustment, and we, as a direct or indirect partner of these partnerships, could be required to bear the economic burden of those taxes, interest, and penalties even though we may have not been a partner in the partnership during the year to which the audit relates and we, as a REIT, may not otherwise have been required to pay additional corporate-level taxes as a result of the related audit adjustment. Using certain rules, partnerships may be able to transfer these liabilities to their partners. In the event any adjustments are imposed by the IRS on the taxable income reported by any subsidiary partnerships, we intend to utilize certain rules to the extent possible to allow us to transfer any liability with respect to such adjustments to the partners of the subsidiary partnerships who should properly bear such liability. However, there is no assurance that we will qualify under those rules or that we will have the authority to use those rules under the operating agreements for certain of our subsidiary partnerships.
The changes created by the Bipartisan Budget Act of 2015 rules are sweeping, and in many respects, dependent on the promulgation of future regulations or other guidance by the U.S. Department of the Treasury. Investors are urged to consult their tax advisors with respect to these changes and their potential impact on their investment in our common stock.
Legislative or regulatory tax changes related to REITs could materially and adversely affect our business.
The U.S. federal income tax laws and regulations governing REITs and their stockholders, as well as the administrative interpretations of those laws and regulations, are constantly under review and may be changed at any time, possibly with retroactive effect. No assurance can be given as to whether, when, or in what form, the U.S. federal income tax laws applicable to us and our stockholders may be enacted. Changes to the U.S. federal income tax laws and interpretations of U.S. federal tax laws could adversely affect an investment in our common stock.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
As of December 31, 2021, we owned a fee simple interest and a leasehold interest in 114 and 7 properties, respectively, encompassing approximately 29.2 million rentable square feet. See Part IV, Item 15. “Exhibits, Financial Statement Schedules-Schedule III-Real Estate and Accumulated Depreciation and Amortization,” of this Annual Report on Form 10-K for a detailed listing of our properties. See Note 5, Debt, to our consolidated financial statements included in this Annual Report on Form 10-K for more information about our indebtedness secured by our properties.
Revenue Concentration
No lessee or property, based on Annualized Base Rent as of December 31, 2021, pursuant to the respective in-place leases, was greater than 4.5% as of December 31, 2021.
The percentage of Annualized Base Rent as of December 31, 2021, by state, based on the respective in-place leases, is as follows (dollars in thousands):
State Annualized Base Rent
(unaudited)
Number of
Properties Percentage of Annualized Base Rent
Texas $ 41,117 14 11.4 %
California 39,546 9 10.9
Arizona 33,546 10 9.3
Ohio 30,258 12 8.4
Georgia 24,583 5 6.8
Illinois 21,676 7 6.0
New Jersey 18,113 5 5.0
North Carolina 17,408 9 4.8
Massachusetts 16,532 5 4.6
Colorado 14,010 6 3.9
All Others (1)
105,132 39 28.9
Total $ 361,921 121 100.0 %
(1)All others account for less than 3.7% of total Annualized Base Rent on an individual state basis.
The percentage of Annualized Base Rent as of December 31, 2021, by industry, based on the respective in-place leases, is as follows (dollars in thousands):
Industry (1)
Annualized Base Rent
(unaudited)
Number of
Lessees Percentage of Annualized Base Rent
Capital Goods $ 45,269 22 12.5 %
Health Care Equipment & Services 32,572 11 9.0
Materials 28,551 10 7.9
Consumer Services 27,461 12 7.6
Insurance 26,685 11 7.4
Telecommunication Services 21,724 6 6.0
Diversified Financials 19,037 5 5.3
Technology Hardware & Equipment 18,786 6 5.2
Consumer Durables & Apparel 18,228 8 5.0
Retailing 17,538 6 4.8
All others (2)
106,070 37 29.3
Total $ 361,921 134 100.0 %
(1) Industry classification based on the Global Industry Classification Standard.
(2) All others account for less than 4.5% of total Annualized Base Rent on an individual industry basis.
The percentage of Annualized Base Rent as of December 31, 2021, for the top 10 tenants, based on the respective in-place leases, is as follows (dollars in thousands):
Tenant Annualized Base Rent
(unaudited)
Percentage of Annualized Base Rent
Amazon.com, Inc. $ 16,176 4.5 %
Keurig Green Mountain, Inc. $ 11,419 3.2 %
General Electric Company $ 11,221 3.1 %
Wood Group USA, Inc. $ 9,817 2.7 %
Cigna Corporation $ 8,902 2.5 %
Southern Company Services, Inc. $ 8,866 2.4 %
McKesson Corporation $ 8,841 2.4 %
LPL Holdings, Inc. $ 8,404 2.3 %
Freeport Minerals Corporation $ 7,629 2.1 %
State Farm Mutual Automobile Insurance Company $ 7,507 2.1 %
The tenant lease expirations by year based on Annualized Base Rent as of December 31, 2021 are as follows (dollars in thousands):
Year of Lease Expiration (1)
Annualized Base Rent
(unaudited)
Number of
Leases Approx. Square Feet Percentage of Annualized Base Rent
2022 $ 10,652 9 871,400 2.9 %
2023 27,969 12 1,262,300 7.7
2024 47,231 20 4,349,400 13.1
2025 40,416 24 3,052,100 11.2
2026 28,691 11 2,425,900 7.9
2027 33,228 16 1,614,700 9.2
>2028 173,734 63 13,961,400 48.0
Vacant - - 1,604,900 -
Total $ 361,921 155 29,142,100 100.0 %
(1)Expirations that occur on the last day of the month are shown as expiring in the subsequent month.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may become subject to legal proceedings, claims and litigation arising in the ordinary course of our business. We are not a party to any material legal proceedings, nor are we aware of any pending or threatened litigation that would have a material adverse effect on our business, operating results, cash flows or financial condition should such litigation be resolved unfavorably.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
As of February 25, 2022, we had approximately 565,265 Class T shares, 1,801 Class S shares, 42,013 Class D shares, 1,911,819 Class I shares, 24,509,573 Class A shares, 47,592,118 Class AA shares, 926,936 Class AAA shares and 249,088,662 Class E shares of common stock outstanding, including common stock issued pursuant to our DRP and stock distributions held by a total of approximately 59,000 stockholders of record. There is currently no established public trading market for our common stock. Therefore, there is a risk that a stockholder may not be able to sell our stock at a time or price acceptable to the stockholder, or at all.
Pursuant to the terms of our charter, certain restrictions are imposed on the ownership and transfer of shares.
As described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we expect to pay distributions regularly unless our results of operations, our general financial condition, general economic conditions, or other factors inhibit us from doing so. Distributions will be authorized at the discretion of our Board, which will be directed, in substantial part, by its obligation to cause us to comply with the REIT requirements of the Code.
Recent Sales of Unregistered Securities
During the year ended December 31, 2021, there were no sales of unregistered securities.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
On October 1, 2021 the Company announced that it suspended the SRP beginning with the next cycle commencing fourth quarter 2021. Therefore, during the quarter ended December 31, 2021, we had no redemptions of common shares.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [Reserved]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the Company’s consolidated financial statements and the notes thereto contained in this Annual Report on Form 10-K.
Overview
Griffin Realty Trust, Inc. is an internally managed, publicly-registered, non-traded REIT. We are committed to creating exceptional value for all of our stakeholders through the ownership and operation of a diversified portfolio of strategically-located, high-quality, business-essential office and industrial properties that are primarily leased to nationally-recognized single tenants we have determined to be creditworthy.
The GRT platform was founded in 2009 and we have since grown to become one of the largest office and industrial-focused net-lease REITs in the United States. Since our founding, our mission has been consistent - to generate long-term results for our stockholders by combining the durability of high-quality corporate tenants, the stability of our revenue and the power of proactive management. To achieve this mission, we leverage the skills and expertise of our employees, who have experience across a range of disciplines including acquisitions, dispositions, asset management, property management, development, finance, law and accounting. They are led by an experienced senior management team with an average of approximately 30 years of commercial real estate experience.
On July 1, 2021, we changed our name from Griffin Capital Essential Asset REIT, Inc. to Griffin Realty Trust, Inc. and our operating partnership changed its name from Griffin Capital Essential Asset Operating Partnership L.P. to GRT OP, L.P.
On March 1, 2021, we completed our acquisition of Cole Office & Industrial REIT (CCIT II), Inc. (“CCIT II”) for approximately $1.3 billion, including transaction costs, in a stock-for-stock transaction (the “CCIT II Merger”). At the effective time of the CCIT II Merger, each issued and outstanding share of CCIT II Class A common stock and each issued and outstanding share of CCIT II Class T common stock was converted into the right to receive 1.392 shares of our Class E common stock.
As of December 31, 2021, we owned 121 properties (including one land parcel) in 26 states. Our Annualized Base Rent as of December 31, 2021 is expected to be approximately $361.9 million with approximately 67.0% expected to be generated by properties leased and/or guaranteed, directly or indirectly, by companies we have determined to be creditworthy. As of December 31, 2021, our portfolio was approximately 94.5% leased (based on square footage), with a weighted average remaining lease term of 6.25 years, weighted average annual rent increases of approximately 2.0%.
COVID-19 and Outlook
We are closely monitoring the continued impact of the COVID-19 pandemic on all aspects of our business and geographies, including how it has impacted, and may continue to impact, our tenants and business partners. We cannot predict when pandemic-related restrictions currently in place will be lifted to some extent or entirely, and to whether or not restrictions though currently lifted, may later be put back in place. As a result, the COVID-19 pandemic has negatively impacted almost every industry, directly or indirectly, including industries in which we and our tenants operate, which could result in a general decline in rents and an increased incidence of defaults under existing leases. The extent to which federal, state or local governmental authorities grant rent relief or other relief or enact amnesty programs applicable to our tenants in response to the COVID-19 outbreak may exacerbate the negative impacts that a slow down or recession could have on us. Demand for office space nationwide has declined and may continue to decline due to the current economic downturn, bankruptcies, downsizing, layoffs, government regulations and restrictions on travel and permitted businesses operations that may be extended in duration and become recurring, increased usage of teleworking arrangements and cost cutting resulting from the pandemic, which could lead to lower office occupancy.
While we did not incur significant disruptions from the COVID-19 pandemic during the year ended December 31, 2021, we are unable to predict the impact that the COVID-19 pandemic will have on our financial condition, results of operations and
cash flows due to numerous uncertainties. These uncertainties include the continued severity, duration, transmission rate and geographic spread of COVID-19 in the United States, the speed of the vaccine roll-out, effectiveness and willingness of people to take COVID-19 vaccines, the duration of associated immunity and their efficacy against emerging variants and mutations of COVID-19, the extent and effectiveness of other containment measures taken, and the response of the overall economy, the financial markets and the population, particularly in areas in which we operate. If we cannot operate our properties so as to meet our financial expectations, because of these or other risks, we may be prevented from growing the values of our real estate properties, and our financial condition, including our NAV per share, results of operations, cash flows, performance, or our ability to satisfy our debt obligations and/or to maintain our level of distributions to our stockholders may be adversely impacted or disrupted. We cannot predict the impact that the COVID-19 pandemic will have on our tenants and other business partners; however, any material effect on these parties could adversely impact us. As of February 25, 2022, we have received approximately 100% of our portfolio rent payments for the full year 2021 and January 2022. We are unable to predict the amount of future rent relief inquiries and our prior rent collections and rent relief requests to-date may not be indicative of collections or requests in any future period.
While the long-term impact of the COVID-19 pandemic on our business is not yet known, our management believes we are well-positioned from a liquidity perspective with $545.1 million of immediate liquidity as of December 31, 2021, consisting of $376.5 million undrawn on our $750.0 million senior unsecured revolving credit facility (the "Revolving Credit Facility") and $168.6 million of cash on hand. Included in these amounts is $125.0 million from our Revolving Credit Facility that we borrowed in April 2020 for potential upcoming capital expenditure requirements and to provide us with a flexible conservative cash management position. Additionally, our Second Amendment to the Second Amended and Restated Credit Agreement increased our credit facility availability from $1.5 billion to $1.9 billion. See Part I "Item 1A. Risk Factors", of this Annual Report on Form 10-K for a discussion about risks that COVID-19 directly or indirectly may pose to our business.
Our primary focus continues to be protecting the health and well-being of our employees and ensuring that there is limited operational disruption as a result of the COVID-19 pandemic. Some of the primary steps we have taken to accomplish these objectives were: (1) initially instituting elective telework arrangements and then following with mandatory telework arrangements with minor exceptions for certain “essential” business functions, (2) capital investment in technology solutions and hardware, as necessary, to allow for a fully remote workforce, (3) mandatory self-quarantines where necessary, (4) recommendations and FAQs to all employees regarding best practices to avoid infection, as well as steps to take in the event of an infection, (5) temporary prohibition of business travel, other than essential business travel approved by management, and (6) creation of an internal COVID-19 task force that meets to discuss additional safety measures to ensure the safe return of our employees to the office, which plans will be finalized in accordance with applicable local guidelines, when such guidelines are established.
Critical Accounting Estimates
We have established accounting policies which conform to GAAP in the United States as contained in the Financial Accounting Standards Board Accounting Standards Codification. The preparation of our consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. If our judgment or interpretation of the facts and circumstances relating to the various transactions had been different, it is possible that different estimates would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may use different estimates and assumptions that may impact the comparability of our financial condition and results of operations to those companies.
The following critical accounting estimates discussion reflects what we believe are the most significant estimates, assumptions, and judgments that have had or are reasonably likely to have a material impact on our financial condition or our results of operations. This discussion of our critical accounting estimates is intended to supplement the description of our accounting policies in the footnotes to our consolidated financial statements and to provide additional insight into the information used by management when evaluating significant estimates, assumptions, and judgments. For further discussion on our significant accounting policies, see Note 2, Basis of Presentation and Summary of Significant Accounting Policies, to our consolidated financial statements included in this Annual Report on Form 10-K.
Real Estate - Valuation and Purchase Price Allocation
When we acquire operating properties, we allocate the purchase price on an asset acquisition to the various components of the acquisition based upon the relative fair value of each component. The components typically include land, building and improvements, tenant improvements, intangible assets related to above and below market leases, intangible assets related to in-place leases, debt and other assumed assets and liabilities. Transaction costs are capitalized as a component of the cost of the asset acquisition.
We allocate the purchase price to the relative fair value of the tangible assets of a property by valuing the property as if it were vacant. This “as-if vacant” value is estimated using an income, or discounted cash flow, approach that relies upon Level 3 inputs, which are unobservable inputs based on our assumptions about the assumptions a market participant would use. These Level 3 inputs include discount rates, capitalization rates, market rents and comparable sales data for similar properties. Estimates of future cash flows are based on a number of factors, including historical operating results, known and anticipated trends, and market and economic conditions.
In determining the relative fair value of intangible lease assets or liabilities, we also consider Level 3 inputs. Acquired above- and below-market leases are valued based on the present value of the difference between prevailing market rates and the in-place rates measured over a period equal to the remaining term of the lease for above-market leases and the initial term plus the term of any below-market fixed rate renewal options for below-market leases, if applicable. The estimated relative fair value of acquired in-place at-market tenant leases are the costs that would have been incurred to lease the property to the occupancy level of the property at the date of acquisition. Such estimates include the value associated with leasing commissions, legal and other costs, as well as the estimated period necessary to lease such property that would be incurred to lease the property to its occupancy level at the time of its acquisition. Acquisition costs associated with an asset acquisition are capitalized as a component of the transaction.
The difference between the relative fair value and the face value of debt assumed in connection with an acquisition is recorded as a premium or discount and amortized to “interest expense” over the life of the debt assumed. The valuation of assumed liabilities is based on our estimate of the current market rates for similar liabilities in effect at the acquisition date.
For acquisitions that do not meet the accounting criteria of an asset acquisition, acquisition costs are expensed as incurred.
Impairment of Real Estate and Related Intangible Assets and Liabilities
We continually monitor events and changes in circumstances that could indicate that the carrying amounts of real estate and related intangible assets may not be recoverable. When indicators of potential impairment are present that indicate that the carrying amounts of real estate and related intangible assets may not be recoverable, management will assess the recoverability of the assets by determining whether the carrying value of the assets will be recovered through the undiscounted future operating cash flows expected from the use of the assets and the eventual disposition. If, based on this analysis, we do not believe that we will be able to recover the carrying value of the asset, we will record an impairment loss to the extent the carrying value exceeds the estimated fair value of the asset.
Projections of expected future undiscounted cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to re-lease the property and the number of years the property is held for investment. As of December 31, 2021, in connection with the preparation and review of the Company's financial statements, we recorded an impairment provision related to the building and land on two properties. See Note 3, Real Estate to our consolidated financial statements included in this Annual Report on Form 10-K for details.
Recently Issued Accounting Pronouncements
See Note 2, Basis of Presentation and Summary of Significant Accounting Policies, to our consolidated financial statements including in this Annual Report on Form 10-K.
Results of Operations
Overview
Our ability to re-lease space subject to expiring leases will impact our results of operations and is affected by economic and competitive conditions in our markets. Leases that comprise approximately 2.9% of our Annualized Base Rent as of December 31, 2021 are scheduled to expire during the period from January 1, 2022 to December 31, 2022. We assume, based upon internal renewal probability estimates, that some of our tenants will renew and others will vacate and the associated space will be re-let subject to market leasing assumptions. Using the aforementioned assumptions, we expect that the rental rates on the respective new leases may vary from the rates under existing leases expiring during the period from January 1, 2022 to December 31, 2022, thereby resulting in revenue that may differ from the current in-place rents.Additionally, over the next three years, approximately a quarter of the leases in our portfolio are scheduled to expire including approximately 2.9%, 7.7% and 13.1% of our Annualized Base Rent expiring in 2022, 2023 and 2024, respectively and more than a third of our leases are scheduled to expire in the next four years including 11.2% of our Annualized Base Rent expiring in 2025.
Segment Information
The Company internally evaluates all of the properties and interests therein as one reportable segment.
Recent Developments
The following are significant developments in our business during 2021:
•On March 1, 2021, we completed our previously announced acquisition of CCIT II for approximately $1.3 billion, including transaction costs, in a stock-for-stock transaction;
•Upon the closing of the CCIT II transaction, we amended the terms of our Revolving Credit Facility, which provided for a new $400 million delayed draw term loan and the option, subject to obtaining additional commitments from lenders and certain other customary conditions, to increase the commitments under the Revolving Credit Facility, increase the existing term loans and/or incur new term loans by up to an additional $600.0 million in the aggregate;
•On July 14, 2021, we executed a third amendment to our existing credit agreement, which decreased the applicable interest rate margin for the $150 million 7-year loan (see Liquidity and Capital Resource section);
•On October 1, 2021, we announced that, in light of certain strategic initiatives, we suspended our DRP and our SRP commencing with the fourth quarter of 2021; and
•We disposed of three properties for total proceeds of $11.5 million in April 2021, $10.5 million in June 2021, and $1.8 million in February 2021, respectively.
Same Store Analysis
For the year ended December 31, 2021, our "Same Store" portfolio consisted of 94 properties, encompassing approximately 24.7 million square feet, with an acquisition value of $4.0 billion and Annualized Base Rent as of December 31, 2021 was $288.0 million. Our "Same Store" portfolio includes properties which were held for a full period for all periods presented. The following table provides a comparative summary of the results of operations for the 94 properties for the years ended December 31, 2021 and 2020 (dollars in thousands):
Year Ended December 31, Increase/(Decrease) Percentage
Change
2021 2020
Rental income $ 380,189 $ 384,220 $ (4,031) (1) %
Property operating expense 52,465 52,565 (100) -
Property management fees to non-affiliates 3,409 3,414 (5) -
Property tax expense 36,479 36,107 372 -
Depreciation and amortization 160,022 156,069 3,953 3 %
Rental Income
Rental income decreased by approximately $4.0 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 primarily as a result of (1) an approximately $7.3 million decrease in termination income for the year ended December 31, 2021; and (2) approximately $5.3 million in expiring and early terminated leases; offset by (3) an approximately $6.3 million increase in lease commencements and amendments to existing tenant leases during the year ended December 31, 2021; and (4) an approximately $2.1 million increase in common area maintenance recoveries primarily due to $1.0 million in prior year operating expense (“OPEX”) concessions expiring in the current year and $1.0 million in prior year reconciliations and timing of OPEX.
Portfolio Analysis
Comparison of the Years Ended December 31, 2021 and 2020
The following table provides summary information about our results of operations for the years ended December 31, 2021 and 2020 (dollars in thousands):
Year Ended December 31, Increase/(Decrease) Percentage
Change
2021 2020
Rental income $ 459,872 $ 397,452 $ 62,420 16 %
Property operating expense 61,259 57,461 3,798 7 %
Property tax expense 41,248 37,590 3,658 10 %
Property management fees to non-affiliates 4,066 3,656 410 11 %
General and administrative expenses 40,479 38,633 1,846 5 %
Corporate operating expenses to affiliates 2,520 2,500 20 1 %
Depreciation and amortization 209,638 161,056 48,582 30 %
Impairment provision 4,242 23,472 (19,230) (82) %
Interest expense 85,087 79,646 5,441 7 %
Gain (loss) from investment in unconsolidated entities 8 (6,523) 6,531 (100) %
(Loss) gain from disposition of assets (326) 4,083 (4,409) (108) %
Rental Income
The increase in rental income of approximately $62.4 million during the year ended December 31, 2021 compared to the same period a year ago is primarily the result of (1) approximately $76.7 million primarily related to the CCIT II Merger during the year; (2) approximately $6.3 million in 2021 leasing activity and amendments to existing tenant leases; and (3) approximately $2.9 million in prior year operating expense concessions expiring and common area management reconciliations; offset by (4) approximately $11.4 million in lower termination income, which primarily includes termination income in the current year from tenants: Waste Management of Arizona, Inc. and Intermec Technologies Corp., compared to the same period a year ago; (5) approximately $5.3 million lower base rent income due to expiring leases and terminations; and (6) approximately $7.1 million as a result of the sale of two properties.
Property Operating Expense
The increase in property operating expense of approximately $3.8 million during the year ended December 31, 2021 compared to the same period a year ago is primarily the result of (1) approximately $7.9 million related to the CCIT II Merger during the year; offset by (2) approximately $4.0 million as a result of five properties sold.
Property Tax Expense
The increase in property operating expense of approximately $3.7 million during the year ended December 31, 2021 compared to the same period a year ago is primarily the result of (1) approximately $5.2 million related to the CCIT II Merger during the year; offset by (2) approximately $1.9 million as a result of five properties sold.
Property Management Fees to Non-Affiliates
The increase in property management fees to non-affiliates of approximately $0.4 million during the year ended December 31, 2021 compared to the same period a year ago is primarily the result of the CCIT II Merger during the year ended December 31, 2021.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2021 increased by approximately $1.8 million compared to the same period a year ago primarily due to (1) approximately $1.9 million in additional restricted stock expense primarily as a result of the amortization of 2021 restricted stock unit grants including a one-time grant associated with the CCIT Merger; (2) an increase of $2.5 million of professional and transfer agent fees; (3) an approximately $0.9 million in increase in information technology costs and state taxes; offset by (3) approximately $4.4 million write-off of project costs in the fourth quarter of 2020.
Depreciation and Amortization
Depreciation and amortization for the year ended December 31, 2021 increased by approximately $48.6 million as a result of (1) approximately $48.3 million as a result of the CCIT II Merger during the year ended December 31, 2021; and (2) $3.6 million related to fixed asset additions subsequent to December 31, 2020; offset by (3) approximately $3.5 million related to accelerated amortization due to terminated leases and assets sold in 2020.
Impairment Provision
The decrease in impairment provision of approximately $19.2 million for the year ended December 31, 2021 compared to the same period a year ago is primarily due to the recording of impairments of three properties in 2020: 2200 Channahon Road, Houston Westway I and 2275 Cabot Drive.
Interest Expense
The increase of approximately $5.4 million in interest expense for the year ended December 31, 2021 compared to the same period in the prior year is primarily the result of (1) approximately $6.6 million of interest and financing expenses related to the $400M 5-Year Term Loan 2025; offset by (2) approximately $0.9 million as a result of lower interest rates compared to the same period in the prior year.
Loss from Investment in Unconsolidated Entities
The reduction of approximately $6.5 million in loss from investment in unconsolidated entities in the year ended December 31, 2021 as compared to the same period in the prior year is primarily the result of an other-than-temporary impairment loss and winding down of our investments in our unconsolidated joint venture in the prior period.
Gain from Disposition of Assets
The decrease in gain from disposition of assets of approximately $4.4 million in the year ended December 31, 2021 as compared to the same period a year ago is primarily the result of the sale of Bank of America I property in 2020.
For additional information related to a comparison of the Company’s results for the years ended December 31, 2020 and 2019, please see the information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 26, 2021, which information under that section is incorporated herein by reference.
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. AFFO excludes non-routine and certain non-cash items such as revenues in excess of cash received, amortization of stock-based compensation net, deferred rent, amortization of in-place lease valuation, acquisition-related costs, financed termination fee, net of payments received, gain or loss from the extinguishment of debt, unrealized gains (losses) on derivative instruments, write-off transaction costs and other one-time transactions. FFO and AFFO have been revised to include amounts available to both common stockholders and limits partners for all periods presented.
AFFO is a measure used among our peer group, which includes daily NAV 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.
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, 2021, 2020 and 2019 (in thousands, except per share amounts):
Year Ended December 31,
2021 2020 2019
Net income (loss) $ 11,570 $ (5,774) $ 37,044
Adjustments:
Depreciation of building and improvements 125,388 93,979 80,393
Amortization of leasing costs and intangibles 84,598 67,366 73,084
Impairment provision 4,242 23,472 30,734
Equity interest of depreciation of building and improvements - unconsolidated entities - 1,438 2,800
Equity interest of amortization of intangible assets - unconsolidated entities - 1,751 4,632
Loss (Gain) from disposition of assets 326 (4,083) (29,938)
Equity interest of gain on sale - unconsolidated entities (8) - (4,128)
Impairment of unconsolidated entities - 1,906 6,927
FFO $ 226,116 $ 180,055 $ 201,548
Distributions to redeemable preferred shareholders (9,698) (8,708) (8,188)
FFO attributable to common stockholders and limited partners $ 216,418 $ 171,347 $ 193,360
Reconciliation of FFO to AFFO:
FFO attributable to common stockholders and limited partners $ 216,418 $ 171,347 $ 193,360
Adjustments:
Non-cash earn-out adjustment - (2,581) (1,461)
Revenues in excess of cash received, net (10,780) (25,686) (19,519)
Amortization of share-based compensation 7,470 4,108 2,614
Deferred rent - ground lease 2,064 2,065 1,353
Amortization of above/(below) market rent, net (1,323) (2,292) (3,201)
Amortization of debt premium/(discount), net 409 412 300
Amortization of below tax benefit amortization 1,252 - -
Amortization of ground leasehold interests (350) (290) (52)
Non-cash lease termination income - - (10,150)
Financed termination fee payments received - 7,557 6,065
Company's share of revenues in excess of cash received (straight-line rents) - unconsolidated entity - 505 528
Unrealized loss (gain) on investments (15) 31 307
Company's share of amortization of above market rent - unconsolidated entity - 1,419 3,696
Performance fee adjustment - - (2,604)
Unconsolidated joint venture valuation adjustment - 4,452 -
Employee separation expense 777 2,666 -
Write-off of reserve liability (1,166) - -
Write-off of transaction costs 65 4,427 252
Transaction expense 966 - -
AFFO available to common stockholders and limited partners $ 215,787 $ 168,140 $ 171,488
FFO per share, basic and diluted $ 0.63 $ 0.65 $ 0.76
AFFO per share, basic and diluted $ 0.63 $ 0.64 $ 0.68
Weighted-average common shares outstanding - basic EPS 309,250,873 230,042,543 222,531,173
Weighted-average OP Units 31,838,889 31,919,525 30,947,370
Weighted-average common shares and OP Units outstanding - basic FFO/AFFO 341,089,762 261,962,068 253,478,543
Liquidity and Capital Resources
Property rental income is our primary source of operating cash flow and is dependent on a number of factors including occupancy levels and rental rates, as well as the ability and willingness of our tenants’ to pay rent. Our assets provide a relatively consistent level of cash flow that enables us to pay operating expenses, distributions, including preferred equity distribution, redemptions, and for the payment of debt service on our outstanding indebtedness, including repayment of our Second Amended and Restated Credit Agreement, and property secured mortgage loans. Generally, we anticipate that cash needs will be met from funds from operations and our Credit Facility. We anticipate that cash flows from continuing operations and proceeds from financings, together with existing cash balances, will be adequate to fund our business operations, debt amortization, capital expenditures, distributions and other requirements over the next 12 months and in the longer term.
Financing Activities
Second Amended and Restated Credit Agreement
Pursuant to the Second Amended and Restated Credit Agreement , we, through the GRT OP as the borrower, have been provided with a $1.9 billion credit facility consisting of the Revolving Credit Facility maturing in June 2022 with (subject to the satisfaction of certain customary conditions) a one-year extension option, the $200M 5-Year Term Loan, the $400M 5-Year Term Loan, the $400M 5-Year Term Loan 2025, and the $150M 7-Year Term Loan. The credit facility also provides the option, subject to obtaining additional commitments from lenders and certain other customary conditions, to increase the commitments under the Revolving Credit Facility, increase the existing term loans and/or incur new term loans by up to an additional $600 million in the aggregate. As of December 31, 2021, the remaining capacity under the Revolving Credit Facility was $376.5 million.
Based on the terms of the Second Amended and Restated Credit Agreement as of December 31, 2021, the interest rate for the Credit Facility varies based on our consolidated leverage ratio and ranges (a) in the case of the Revolving Credit Facility, from LIBOR plus 1.30% to LIBOR plus 2.20%, (b) in the case of each of the $200M 5-Year Term Loan, the $400M 5-Year Term Loan and the Delayed Draw $400M 5-Year Term Loan, from LIBOR plus 1.25% to LIBOR plus 2.15% and (c) in the case of the $150M 7-Year Term Loan, from LIBOR plus 1.65% to LIBOR plus 2.50%. If the GRT OP 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 vary based on such rating and range (i) in the case of the Revolving Credit Facility, from LIBOR plus 0.825% to LIBOR plus 1.55%, (ii) in the case of each of the $200M 5-Year Term Loan, the $400M 5-Year Term Loan and the Delayed Draw $400M 5-Year Term Loan, from LIBOR plus 0.90% to LIBOR plus 1.75% and (iii) in the case of the $150M 7-Year Term Loan, from LIBOR plus 1.40% to LIBOR plus 2.35%. The Second Amended and Restated Credit Agreement provides procedures for determining a replacement reference rate in the event that LIBOR is discontinued. See Part I "Item 1A. Risk Factors", of this Annual Report on Form 10-K for a discussion about risks that the replacement of LIBOR with an alternative reference rate may adversely affect interest rates on our current or future indebtedness and may otherwise adversely affect our financial condition and results of operations.
On March 1, 2021, we exercised our right to draw on the $400M 5-Year Term Loan 2025 to repay CCIT II's existing debt balance in connection with the CCIT II Merger.
On July 14, 2021, we, through the GRT OP, entered into the Third Amendment, which amended the Second Amended and Restated Credit Agreement to decrease the applicable interest rate margin for the $150M 7-Year Term Loan.
Derivative Instruments
As discussed in Note 6, Interest Rate Contracts, to the consolidated financial statements, we entered into interest rate swap agreements to hedge the variable cash flows associated with certain existing or forecasted, LIBOR-based variable-rate debt, including our Second Amended and Restated Credit Agreement. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income ("AOCI") and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Derivatives were used to hedge the variable cash flows associated with existing variable-rate debt and forecasted issuances of debt. The ineffective portion of the change in the fair value of the derivatives is recognized directly in earnings.
The following table sets forth a summary of the interest rate swaps at December 31, 2021 and December 31, 2020 (dollars in thousands):
Fair Value (1)
Current Notional Amount
December 31, December 31,
Derivative Instrument Effective Date Maturity Date Interest Strike Rate 2021 2020 2021 2020
Assets/(Liabilities)
Interest Rate Swap 3/10/2020 7/1/2025 0.83% $ 1,648 $ (2,963) $ 150,000 $ 150,000
Interest Rate Swap 3/10/2020 7/1/2025 0.84% 1,059 (2,023) 100,000 100,000
Interest Rate Swap 3/10/2020 7/1/2025 0.86% 749 (1,580) 75,000 75,000
Interest Rate Swap 7/1/2020 7/1/2025 2.82% (7,342) (13,896) 125,000 125,000
Interest Rate Swap 7/1/2020 7/1/2025 2.82% (5,909) (11,140) 100,000 100,000
Interest Rate Swap 7/1/2020 7/1/2025 2.83% (5,899) (11,148) 100,000 100,000
Interest Rate Swap 7/1/2020 7/1/2025 2.84% (5,958) (11,225) 100,000 100,000
Total $ (21,652) $ (53,975) $ 750,000 $ 750,000
(1) We record all derivative instruments on a gross basis in the consolidated balance sheets, and accordingly, there are no offsetting amounts that net assets against liabilities. As of December 31, 2021, derivatives where in an asset or/liability position are included in the line item "Other assets or Interest rate swap liability," respectively, in the consolidated balance sheets at fair value.
Common Equity
Follow-On Offering
On September 20, 2017, we commenced a follow-on offering of up to $2.2 billion of shares, consisting of up to $2.0 billion of shares in our primary offering and $0.2 billion of shares pursuant to our DRP (collectively, the "Follow-On Offering"). Pursuant to the Follow-On Offering, we offered to the public four new classes of shares of our common stock: Class T shares, Class S shares, Class D shares, and Class I shares with NAV-based pricing. The share classes have different selling commissions, dealer manager fees, and ongoing distribution fees and eligibility requirements.
The Follow-On Offering terminated with the expiration of the registration statement on September 20, 2020. Following the termination of the Follow-On Offering, it will no longer be a potential source of liquidity for us.
Distribution Reinvestment Plan
On July 17, 2020, we filed a registration statement on Form S-3 for the registration of up to $100 million in shares pursuant to our DRP (the “DRP Offering”). The DRP Offering may be terminated at any time upon 10 days prior written notice to stockholders. As of December 31, 2021, we had sold 35,519,796 shares for approximately $341.1 million in our DRP Offering.
On October 1, 2021, the Company announced a suspension of our DRP, effective October 11, 2021, which remains in effect as of the date of this filing.
Share Redemption Program
Under parameters established by our Board in 2020 under the SRP, redemptions through September 30, 2021 were limited to those sought upon a stockholder's death, qualifying disability, or determination of incompetence or incapacitation in accordance with the terms of the SRP, and the quarterly cap on aggregate redemptions was equal to the aggregate NAV, as of the last business day of the previous quarter, of the shares issued pursuant to the DRP during such quarter. Settlements of share redemptions are made within the first three business days of the following quarter. During year ended December 31, 2021, we redeemed 2,232,476 shares.
On October 1, 2021, we announced a suspension of our SRP beginning with the next cycle commencing fourth quarter 2021, which suspension remains in effect as of the date of this filing.
Perpetual Convertible Preferred Shares
Upon consummation of the EA Mergers, we issued 5,000,000 Series A Preferred Shares to the Purchaser (defined below). We assumed the purchase agreement (the "Purchase Agreement") that EA-1 entered into on August 8, 2018 with SHBNPP Global Professional Investment Type Private Real Estate Trust No. 13(H) (acting through Kookmin Bank as trustee) (the "Purchaser") and Shinhan BNP Paribas Asset Management Corporation, as an asset manager of the Purchaser, pursuant to which the Purchaser agreed to purchase an aggregate of 10,000,000 shares of EA-1 Series A Cumulative Perpetual Convertible Preferred Stock at a price of $25.00 per share (the "EA-1 Series A Preferred Shares") in two tranches, each comprising 5,000,000 EA-1 Series A Preferred Shares.
Pursuant to the Purchase Agreement, the Purchaser has agreed to purchase an additional 5,000,000 Series A Preferred Shares (the "Second Issuance") at a later date (the "Second Issuance Date") for an additional purchase price of $125 million subject to approval by the Purchaser’s internal investment committee and the satisfaction of certain conditions set forth in the Purchase Agreement. Pursuant to the Purchaser is generally restricted from transferring the Series A Preferred Shares or the economic interest in the Series A Preferred Shares for a period of five years from the applicable closing date.
Distributions for Perpetual Convertible Preferred Shares
Subject to the terms of the applicable articles supplementary, the holder of the Series A Preferred Shares are entitled to receive distributions quarterly in arrears at a rate equal to one-fourth (1/4) of the applicable varying rate, as follows:
i.6.55% from and after August 8, 2018 until August 8, 2023, or if the Second Issuance occurs, the five year anniversary of the Second Issuance Date (the "Reset Date"), subject to paragraphs (iii) and (iv) below;
ii.6.75% from and after the Reset Date, subject to paragraphs (iii) and (iv) below;
iii.if a listing of our Class E shares of common stock or the Series A Preferred Shares on a national securities exchange registered under Section 6(a) of the Exchange Act, does not occur by August 1, 2020 (the "First Triggering Event"), 7.55% from and after August 2, 2020 and 7.75% from and after the Reset Date, subject to paragraph (iv) below and certain conditions as set forth in the articles supplementary; or
iv.if such a listing does not occur by August 1, 2021, 8.05% from and after August 2, 2021 until the Reset Date, and 8.25% from and after the Reset Date.
As of December 31, 2021, our annual distribution rate was 8.05% for the Series A Preferred Shares since no listing of either our Class E common stock or the Series A Preferred Shares occurred prior to August 1, 2021.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of the Series A Preferred Shares will be entitled to be paid out of our assets legally available for distribution to the stockholders, after payment of or provision for our debts and other liabilities, liquidating distributions, in cash or property at its fair market value as determined by the Board, in the amount, for each outstanding Series A Preferred Share equal to $25.00 per Series A Preferred Share (the "Liquidation Preference"), plus an amount equal to any accumulated and unpaid distributions to the date of payment, before any distribution or payment is made to holders of shares of common stock or any other class or series of equity securities ranking junior to the Series A Preferred Shares but subject to the preferential rights of holders of any class or series of equity securities ranking senior to the Series A Preferred Shares. After payment of the full amount of the Liquidation Preference to which they are entitled, plus an amount equal to any accumulated and unpaid distributions to the date of payment, the holders of Series A Preferred Shares will have no right or claim to any of our remaining assets.
Company Redemption Rights
The Series A Preferred Shares may be redeemed by the Company, in whole or in part, at our option, at a per share redemption price in cash equal to $25.00 per Series A Preferred Share (the "Redemption Price"), plus any accumulated and unpaid distributions on the Series A Preferred Shares up to the redemption date, plus, a redemption fee of 1.5% of the Redemption Price in the case of a redemption that occurs on or after the date of the First Triggering Event, but before August 8, 2023.
Holder Redemption Rights
In the event we fail to effect a listing of our shares of common stock or Series A Preferred Shares by August 1, 2023, the holder of any Series A Preferred Shares has the option to request a redemption of such shares on or on any date following August 1, 2023, at the Redemption Price, plus any accumulated and unpaid distributions up to the redemption date (the "Redemption Right"); provided, however, that no holder of the Series A Preferred Shares shall have a Redemption Right if such a listing occurs prior to or on August 1, 2023.
Conversion Rights
Subject to our redemption rights and certain conditions set forth in the articles supplementary, a holder of the Series A Preferred Shares, at his or her option, will have the right to convert such holder's Series A Preferred Shares into shares of our common stock any time after the earlier of (i) August 8, 2023, or if the Second Issuance occurs, five years from the Second Issuance Date or (ii) a Change of Control (as defined in the articles supplementary) at a per share conversion rate equal to the Liquidation Preference divided by the then Common Stock Fair Market Value (as defined in the articles supplementary).
Liquidity Requirements
Our principal liquidity needs for the next 12 months and in the longer term are to fund:
•normal recurring expenses;
•debt service and principal repayment obligations;
•capital expenditures, including tenant improvements and leasing costs;
•redemptions;
•distributions to shareholders, including preferred equity distribution and distributions to holders of GRT OP Units;
•possible acquisitions of properties.
Our long-term liquidity requirements consist primarily of funds necessary to acquire additional properties and repay indebtedness. We expect to meet our long-term liquidity requirements through various sources of capital, including proceeds from secured or unsecured financings from banks or other lenders, proceeds from the sale of properties and undistributed funds from operations, and entering into joint venture arrangements to acquire or develop facilities. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures. To the extent we are not able to secure additional financing in the form of a credit facility, securitization vehicle or other third party source of liquidity, we will be heavily dependent upon our current financing and income from operations. The success of our business strategy will depend, to a significant degree, on our ability to access these various capital sources.
To qualify as a REIT, we must meet a number of organizational and operational requirements on a continuing basis, including the requirement that we annually distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gain, to our stockholders. As a result of this requirement, we cannot rely on retained earnings to fund our business needs to the same extent as other entities that are not REITs. If we do not have sufficient funds available to us from our operations to fund our business needs, we will need to find alternative ways to fund those needs. Such alternatives may include, among other things, divesting ourselves of properties (whether or not the sales price is optimal or otherwise meets our strategic long-term objectives), incurring additional indebtedness or issuing equity securities in public or private transactions, the availability and attractiveness of the terms of which cannot be assured.
Cash Requirements
The Company’s material cash requirements as of as of December 31, 2021 including the following contractual obligations (in thousands):
Payments Due During the Years Ending December 31,
Total 2022 Thereafter
Outstanding debt obligations (1)
$ 2,541,515 $ 9,501 $ 2,532,014
Interest on outstanding debt obligations (2)
274,829 65,948 208,881
Interest rate swaps (3)
50,962 14,227 36,735
Ground lease obligations $ 300,734 2,197 298,537
Total $ 3,168,040 $ 91,873 $ 3,076,167
(1)Amounts only include principal payments. The payments on our mortgage debt do not include the premium/discount or debt financing costs.
(2)Projected interest payments are based on the outstanding principal amounts at December 31, 2021. Projected interest payments on the Credit Facility and Term Loan are based on the contractual interest rates in effect at December 31, 2021.
(3)The interest rate swaps contractual commitment was calculated based on the swap rate less the LIBOR as of December 31, 2021.
Capital Expenditures and Tenant Improvement Commitments
As of December 31, 2021, we had aggregate remaining contractual commitments for repositioning, capital expenditure projects, leasing commissions and tenant improvements of approximately $25.4 million.
Summary of Cash Flows
We expect to meet our short-term operating liquidity requirements with operating cash flows generated from our properties and draws from our KeyBank loans.
Our cash, cash equivalents and restricted cash activity decreased by approximately $107.2 million during the year ended December 31, 2021 compared to the same period a year ago and were primarily used in or provided by the following (in thousands):
Year Ended December 31,
2021 2020 Change
Net cash provided by operating activities $ 204,979 $ 164,538 $ 40,441
Net cash (used in) provided by investing activities $ (62,810) $ (24,971) $ (37,839)
Net cash provided by (used in) financing activities $ (159,335) $ (49,521) $ (109,814)
Operating Activities. Cash flows provided by operating activities are primarily dependent on the occupancy level, the rental rates of our leases, the collectability of rent and recovery of operating expenses from our tenants, and the timing of acquisitions. During the year ended December 31, 2021, we generated $205.0 million in cash from operating activities compared to $164.5 million for the year ended December 31, 2020. Net cash provided by operating activities before changes in operating assets and liabilities for the year ended December 31, 2021 increased by approximately $67.6 million to approximately $227.1 million compared to approximately $159.5 million for the year ended December 31, 2020, primarily related to the CCIT II Merger.
Investing Activities. Cash provided by investing activities for the years ended December 31, 2021 and 2020 consisted of the following (in thousands):
Year Ended December 31,
2021 2020 Increase (decrease)
Net cash (used in) provided by investing activities:
Distributions of capital from investment in unconsolidated entities $ 42 $ 8,531 $ (8,489)
Proceeds from disposition of properties 22,408 51,692 (29,284)
Real estate acquisition deposits - 1,047 (1,047)
Restricted reserves 1,078 (1,530) 2,608
Total sources of cash provided by investing activities $ 23,528 $ 59,740 $ (36,212)
Uses of cash for investing activities:
Cash acquired in connection with the Company Merger, net of acquisition costs $ (36,746) $ - $ (36,746)
Acquisition of properties, net - (16,584) 16,584
Payments for construction in progress (49,260) (58,938) 9,678
Investment in unconsolidated joint venture - (8,160) 8,160
Purchase of investments (332) (1,029) 697
Total uses of cash (used in) provided by investing activities $ (86,338) $ (84,711) $ (1,627)
Net cash (used in) provided by investing activities $ (62,810) $ (24,971) $ (37,839)
Financing Activities. Cash used in financing activities for the years ended December 31, 2021 and 2020 consisted of the following (in thousands):
Year Ended December 31,
2021 2020 Increase (decrease)
Sources of cash provided by financing activities:
Proceeds from borrowings - Term Loan $ 400,000 $ - $ 400,000
Proceeds from borrowings - Revolver/KeyBank Loans - 215,000 (215,000)
Issuance of common stock, net of discounts and underwriting costs - 4,698 (4,698)
Total sources of cash provided by financing activities $ 400,000 $ 219,698 $ 180,302
Uses of cash (used in) provided by financing activities:
Principal payoff of indebtedness - CCIT II Credit Facility $ (415,500) $ - $ (415,500)
Principal payoff of secured indebtedness - Revolver Loan - (53,000) 53,000
Principal payoff of secured indebtedness - Mortgage Debt (1,292) - (1,292)
Principal amortization payments on secured indebtedness (9,786) (7,362) (2,424)
Repurchase of common shares to satisfy employee tax withholding requirements (2,874) (751) (2,123)
Repurchase of common stock (25,517) (107,821) 82,304
Distributions to common stockholders (82,976) (72,143) (10,833)
Dividends paid on preferred units subject to redemption (9,542) (8,396) (1,146)
Distributions to noncontrolling interests (11,134) (13,290) 2,156
Deferred financing costs (567) (4,725) 4,158
Offering costs (47) (594) 547
Repurchase of noncontrolling interest - (1,137) 1,137
Financing lease payment (100) - (100)
Total sources of cash (used in) provided by financing activities $ (559,335) $ (269,219) $ (290,116)
Net cash (used in) provided by financing activities $ (159,335) $ (49,521) $ (109,814)
Distributions will be paid to our stockholders as of the record date selected by our Board. We expect to continue to pay distributions monthly based on daily declaration and record dates. We expect to pay distributions regularly unless our results of operations, our general financial condition, general economic conditions, or other factors inhibit us from doing so. Distributions will be authorized at the discretion of our Board, which will be directed, in substantial part, by its obligation to cause us to comply with the REIT requirements of the Code. The funds we receive from operations that are available for distribution may be affected by a number of factors, including the following:
•our operating and interest expenses;
•the amount of distributions or dividends received by us from our indirect real estate investments;
•our ability to keep our properties occupied;
•our ability to maintain or increase rental rates;
•tenant improvements, capital expenditures and reserves for such expenditures;
•the issuance of additional shares; and
•financings and refinancings.
Distributions may be funded with operating cash flow from our properties To the extent that we do not have taxable income, distributions paid will be considered a return of capital to stockholders. The following table shows distributions paid, and cash flow provided by operating activities during the year ended December 31, 2021 and December 31, 2020 (dollars in thousands):
Year Ended December 31, 2021 Year Ended December 31, 2020
Distributions paid in cash - noncontrolling interests $ 11,134 $ 13,290
Distributions paid in cash - common stockholders 82,976 72,143
Distributions paid in cash - preferred stockholders 9,542 8,396
Distributions of DRP 22,886 24,497
Total distributions $ 126,538 (1)
$ 118,326
Source of distributions (2)
Paid from cash flows provided by operations $ 103,652 82 % $ 93,829 79 %
Offering proceeds from issuance of common stock pursuant to the DRP 22,886 18 24,497 21
Total sources $ 126,538 (3)
100 % $ 118,326 100 %
Net cash provided by operating activities $ 204,979 $ 164,538
(1)Distributions are paid on a monthly basis in arrears. Distributions for all record dates of a given month are paid on or about the first business day of the following month. Total cash distributions declared but not paid as of December 31, 2021 were $10.6 million for common stockholders and noncontrolling interests.
(2)Percentages were calculated by dividing the respective source amount by the total sources of distributions.
(3)Allocation of total sources are calculated on a quarterly basis.
For the year ended December 31, 2021, we paid and declared cash distributions of approximately $108.7 million to common stockholders including shares issued pursuant to the DRP, and approximately $11.1 million to the limited partners of the GRT OP, as compared to FFO attributable to common stockholders and limited partners and AFFO available to common stockholders and limited partners for the year ended December 31, 2021 of approximately $216.4 million and $215.8 million, respectively. The payment of distributions from sources other than FFO or AFFO may reduce the amount of proceeds available for investment and operations or cause us to incur additional interest expense as a result of borrowed funds. From our inception through December 31, 2021, we paid approximately $967.4 million of cumulative distributions (excluding preferred distributions), including approximately $341.2 million reinvested through our DRP, as compared to net cash provided by operating activities of approximately $661.5 million.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks include risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market-sensitive instruments. We expect that the primary market risk to which we will be exposed is interest rate risk, including the risk of changes in the underlying rates on our variable rate debt. Our current indebtedness consists of the KeyBank loans and other loans and property secured mortgages as described in Note 5, Debt, to our consolidated financial statements included in this Annual Report on Form 10-K. These instruments were not entered into for trading purposes.
Our interest rate risk management objectives will be to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve our objectives, we may borrow at fixed rates or variable rates. We may also utilize a variety of financial instruments, including interest rate swap agreements, caps, floors, and other interest rate exchange contracts. We will not enter into these financial instruments for speculative purposes. The use of these types of instruments to hedge a portion of our exposure to changes in interest rates carries additional risks, such as counterparty credit risk and the legal enforceability of hedging contracts.
As of December 31, 2021, our debt consisted of approximately $1.8 billion in fixed rate debt (including the interest rate swaps) and approximately $773.5 million in variable rate debt (excluding unamortized deferred financing cost and discounts, net, of approximately $9.1 million). As of December 31, 2020, our debt consisted of approximately $1.8 billion in fixed rate debt (including the effect of interest rate swaps) and approximately $373.5 million in variable rate debt (excluding unamortized deferred financing cost and discounts, net, of approximately $12.2 million). Changes in interest rates have different impacts on the fixed and variable rate debt. A change in interest rates on fixed rate debt impacts its fair value but has no effect on interest incurred or cash flows. A change in interest rates on variable rate debt could affect the interest incurred and cash flows and its fair value.
Our future earnings and fair values relating to variable rate financial instruments are primarily dependent upon prevalent market rates of interest, such as LIBOR. However, our interest rate swap agreements are intended to reduce the effects of interest rate changes. The effect of an increase of 100 basis points in interest rates, assuming a LIBOR floor of 0%, on our variable-rate debt, including our KeyBank loans, after considering the effect of our interest rate swap agreements, would decrease our future earnings and cash flows by approximately $7.9 million annually.
Interest rate risk amounts were determined by considering the impact of hypothetical interest rates on our financial instruments. These analyses do not consider the effect of any change in overall economic activity that could occur. Further, in the event of a change of that magnitude, we may take actions to further mitigate our exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, these analyses assume no changes in our financial structure.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data filed as part of this Annual Report on Form 10-K are set forth beginning on page of this Annual Report on Form 10-K.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of the end of the period covered by this Annual Report on Form 10-K, management, with the participation of our principal executive and principal financial officers, including our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based upon, and as of the date of the evaluation, our chief executive officer and chief financial officer concluded that the disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and
communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for us. Our management, including our chief executive officer and chief financial officer, evaluated, as of December 31, 2021, the effectiveness of our internal control over financial reporting using the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2021.
There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item is incorporated by reference to the 2022 Proxy Statement to be filed within 120 days after the end of the year ended December 31, 2021.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the 2022 Proxy Statement to be filed with the SEC within 120 days after the end of the year ended December 31, 2021.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated by reference to the 2022 Proxy Statement to be filed with the SEC within 120 days after the end of the year ended December 31, 2021.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference to the 2022 Proxy Statement to be filed with the SEC within 120 days after the end of the year ended December 31, 2021.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is incorporated by reference to the 2022 Proxy Statement to be filed with the SEC within 120 days after the end of the year ended December 31, 2021.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) List of Documents Filed.
1. The list of the financial statements contained herein is set forth on page hereof.
2. Schedule III - Real Estate and Accumulated Depreciation is set forth beginning on page S-1 hereof. All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are not applicable and therefore have been omitted.
3. The Exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index below.
(b) See (a) 3 above.
(c) See (a) 2 above.
EXHIBIT INDEX
The following exhibits are included in this Annual Report on Form 10-K for the year ended December 31, 2021 (and are numbered in accordance with Item 601 of Regulation S-K).
Exhibit No. Description
2.1
Agreement and Plan of Merger, dated as of October 29, 2020, by and among Griffin Capital Essential Asset REIT, Inc., GRT (Cardinal REIT Merger Sub), LLC, Griffin Capital Essential Asset Operating Partnership, L.P., GRT OP (Cardinal New GP Sub), LLC, GRT OP (Cardinal LP Merger Sub), LLC, GRT OP (Cardinal OP Merger Sub), LLC, Cole Office & Industrial REIT (CCIT II), Inc., Cole Corporate Income Operating Partnership II, LP and CRI CCIT II LLC (incorporated by reference to Annex A to the Proxy Statement/Prospectus that is part of the Registration Statement on Form S-4, filed on November 25, 2020, SEC File No. 333-250962)
2.2
Agreement and Plan of Merger, dated as of December 14, 2018, by and among Griffin Capital Essential Asset REIT II, Inc., Griffin Capital Essential Asset Operating Partnership II, L.P., Globe Merger Sub, LLC, Griffin Capital Essential Asset REIT, Inc. and Griffin Capital Essential Asset Operating Partnership, L.P., incorporated by reference to Exhibit 2.1 to the Registrant's Current on Form 8-K, filed on December 20, 2018, SEC File No. 000-55605
3.1
First Articles of Amendment and Restatement, as amended, incorporated by reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q, filed on August 6, 2021, SEC File No. 000-55605
3.2
Amended and Restated Bylaws, incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K, filed on July 6, 2021, SEC File No. 000-55605
3.3
Articles Supplementary to First Articles of Amendment and Restatement of Griffin Capital Essential Asset REIT II, Inc., incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on April 29, 2016, SEC File No. 000-55605
3.4
Articles Supplementary of Griffin Capital Essential Asset REIT II, Inc., incorporated by reference to Exhibit 3.5 to Pre-Effective Amendment No. 3 to the Registrant’s Registration Statement on Form S-11, filed on September 18, 2017, SEC File No. 333-217223
3.5
Articles Supplementary to First Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on April 19, 2019, SEC File No. 000-55605
3.6
Articles Supplementary to First Articles of Amendment and Restatement, incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K, filed on May 1, 2019, SEC File No. 000-55605
3.7
Articles Supplementary to First Articles of Amendment and Restatement, as amended, incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K, filed November 10, 2020, SEC File No. 000-55605
4.1
Form of Subscription Agreement and Subscription Agreement Signature Page, incorporated by reference to Appendix A of the Registrant’s final prospectus filed pursuant to Rule 424(b)(3), filed on June 18, 2019, SEC File No. 333-217223
4.2
Form of Additional Investment Subscription Agreement, incorporated by reference to Appendix B of the Registrant’s final prospectus filed pursuant to Rule 424(b)(3), filed on June 18, 2019, SEC File No. 333-217223
4.3
Amended and Restated Distribution Reinvestment Plan of Griffin Capital Essential Asset REIT, Inc., incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed on July 17, 2020, SEC File No. 000-55605
4.4
Account Update Form, incorporated by reference to Appendix A to the prospectus included in the Registrant's Registration Statement on Form S-3D, file on July 17, 2020, SEC File No. 333-239924
4.5
Amended and Restated Share Redemption Program effective as of December 12, 2019, incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K, filed on November 12, 2019, SEC File No. 000-55605
4.6
Description of Securities, incorporated by reference to Exhibit 4.1 to the Registrant's Annual Report on Form 10-K, filed on February 26, 2021, SEC File No. 000-55605
10.1+
Employee and Director Long-Term Incentive Plan, incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q, filed on August 21, 2014, SEC File No. 333-194280
10.2+
Griffin Realty Trust, Inc. Amended and Restated Employee and Director Long-Term Incentive Plan, incorporated by reference to Appendix B included in the Registrant's Definitive Proxy Statement on Schedule 14A filed on April 15, 2020, SEC File No. 000-55605
10.2+*
Amendment No. 1 to the Griffin Realty Trust, Inc. Amended and Restated Employee and Director Long-Term Incentive Plan
10.3+
Griffin Capital Essential Asset REIT II, Inc.’s Employee and Director Long-Term Incentive Plan Form of Restricted Share Award for Directors, incorporated by reference to Exhibit 10.3 to the Registrant’s Annual Report on Form 10-K, filed on March 15, 2017, SEC File No. 000-55605
10.4+
Director Compensation Plan, incorporated by reference to Exhibit 10.4 to the Registrant’s Annual Report on Form 10-K, filed on March 15, 2017, SEC File No. 000-55605
10.5
Master Property Management, Leasing, and Construction Management Agreement, dated March 17, 2015, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on March 23, 2015, SEC File No. 333-194280
10.6
Fifth Amended and Restated Limited Partnership Agreement of the Current Operating Partnership dated April 30, 2019, incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on May 1, 2019, SEC File No. 000-55605
10.7
Amendment No. 1 to Fifth Amended and Restated Limited Partnership Agreement of GRT OP, L.P., dated as of July 1, 2021, incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q, filed on November 4, 2021, SEC File No. 000-55605
10.8
Promissory Note dated February 27, 2013 issued to Midland National Life Insurance Company, incorporated by reference to Exhibit 10.1 to EA-1’s Current Report on Form 8-K, filed on March 5, 2013, SEC File No. 000-54377
10.9
NUF Note for the Schlumberger Property, incorporated by reference to Exhibit 10.1 to EA-1’s Current Report on Form 8-K, filed on January 30, 2014, SEC File No. 000-54377
10.10
VALIC Note for the Schlumberger Property, incorporated by reference to Exhibit 10.2 to EA-1’s Current Report on Form 8-K, filed on January 30, 2014, SEC File No. 000-54377
10.11
First Deed of Trust for the Schlumberger Property, incorporated by reference to Exhibit 10.3 to EA-1’s Current Report on Form 8-K, filed on January 30, 2014, SEC File No. 000-54377
10.12
Second Deed of Trust for the Schlumberger Property, incorporated by reference to Exhibit 10.4 to EA-1’s Current Report on Form 8-K, filed on January 30, 2014, SEC File No. 000-54377
10.13
First Mortgage for the Verizon Property, incorporated by reference to Exhibit 10.5 to EA-1’s Current Report on Form 8-K, filed on January 30, 2014, SEC File No. 000-54377
10.14
Second Mortgage for the Verizon Property, incorporated by reference to Exhibit 10.6 to EA-1’s Current Report on Form 8-K, filed on January 30, 2014, SEC File No. 000-54377
10.15
Recourse Carve-Out Guaranty Agreement, incorporated by reference to Exhibit 10.7 to EA-1’s Current Report on Form 8-K, filed on January 30, 2014, SEC File No. 000-54377
10.16
VALIC Note for Owens Corning Sales, LLC Property, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on October 28, 2015, SEC File No. 333-194280
10.17
AGL Note for Owens Corning Sales, LLC Property, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed on October 28, 2015, SEC File No. 333-194280
10.18
USL Note for Owens Corning Sales, LLC Property, incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, filed on October 28, 2015, SEC File No. 333-194280
10.19
First Deed of Trust for Owens Corning Sales, LLC Property, incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K, filed on October 28, 2015, SEC File No. 333-194280
10.20
Second Deed of Trust for Owens Corning Sales, LLC Property, incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K, filed on October 28, 2015, SEC File No. 333-194280
10.21
Recourse Carve-Out Guaranty Agreement, incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K, filed on October 28, 2015, SEC File No. 333-194280
10.22
Schedule of Omitted Documents, incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K, filed on October 28, 2015, SEC File No. 333-194280
10.23
Loan Agreement with Bank of America, N.A. dated September 29, 2017, incorporated by reference to Exhibit 10.1 to EA-1’s Current Report on Form 8-K, filed on October 5, 2017, SEC File No. 000-54377
10.24
Guaranty Agreement, dated September 29, 2017, incorporated by reference to Exhibit 10.2 to EA-1’s Current Report on Form 8-K, filed on October 5, 2017, SEC File No. 000-54377
10.25
Promissory Note A-1-1, incorporated by reference to Exhibit 10.3 to EA-1’s Current Report on Form 8-K, filed on October 5, 2017, SEC File No. 000-54377
10.26
Mortgage, Assignment of Leases and Rents, Security Agreement, and Fixture Filing, incorporated by reference to Exhibit 10.4 to EA-1’s Current Report on Form 8-K, filed on October 5, 2017, SEC File No. 000-54377
10.27
Schedule of Omitted Documents for Bank of America Loan, incorporated by reference to Exhibit 10.5 to EA-1’s Current Report on Form 8-K, filed on October 5, 2017, SEC File No. 000-54377
10.28
Loan Agreement with Bank of America, N.A. and KeyBank N.A. dated April 27, 2018, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on May 3, 2018, SEC File No. 000-55605
10.29
Guaranty Agreement dated April 27, 2018, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K, filed on May 3, 2018, SEC File No. 000-55605
10.30
Promissory Note A-1-1 dated April 27, 2018, incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K, filed on May 3, 2018, SEC File No. 000-55605
10.31
Mortgage, Assignment of Leases and Rents, Security Agreement, and Fixture Filing for the Southern Company Services, Inc. Property dated April 27, 2018, incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K, filed on May 3, 2018, SEC File No. 000-55605
10.32
Schedule of Omitted Documents, incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K, filed on May 3, 2018, SEC File No. 000-55605
10.33
Second Amended and Restated Credit Agreement dated April 30, 2019, incorporated by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K, filed on May 2019, SEC File No. 000-55605
10.34
First Amendment to Second Amended and Restated Credit Agreement dated October 1, 2020, by and among Griffin Capital Essential Asset Operating Partnership, L.P., the lending institutions party thereto as lenders and KeyBank, National Association, as administrative agent, incorporated by reference to Exhibit 10.1 the Registrant’s Quarterly Report on Form 10-Q, filed on November 9, 2020, SEC File No. 000-55605
10.35
Second Amendment to Second Amended and Restated Credit Agreement dated December 18, 2020, by and among Griffin Capital Essential Asset Operating Partnership, L.P., the lending institutions party thereto as lenders and KeyBank, National Association, as administrative agent, incorporated by reference to Exhibit10.1 the Registrant’s Current Report on Form 8-K, filed on December 23, 2020, SEC File No. 000-55605
10.36
Third Amendment to Second Amendment and Restated Credit Agreement dated July 14, 2021, by and among Griffin Realty Trust, Inc., GRT OP, L.P., and the subsidiary guarantors party thereto, the lending institutions party thereto as lenders and KeyBank National Association, as administrative agent, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed on July 16, 2021, SEC File No. 000-555605
10.37
Guaranty Agreement with KeyBank dated April 30, 2019, incorporated by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K, filed on May 1, 2019, SEC File No. 000-55605
10.38
Amended and Restated 2023 Term Note payable to KeyBank dated April 30, 2019, incorporated by reference to Exhibit 10.5 to the Registrant's Current Report on Form 8-K, filed on May 1, 2019, SEC File No. 000-55605
10.39
2024 Term Note payable to KeyBank dated April 30, 2019, incorporated by reference to Exhibit 10.6 to the Registrant's Current Report on Form 8-K, filed on May 1, 2019, SEC File No. 000-55605
10.40
2026 Term Note payable to KeyBank dated April 30, 2019, incorporated by reference to Exhibit 10.7 to the Registrant's Current Report on Form 8-K, filed on May 1, 2019, SEC File No. 000-55605
10.41
Second Amended and Restated Revolving Note payable to KeyBank dated April 30, 2019, incorporated by reference to Exhibit 10.8 to the Registrant's Current Report on Form 8-K, filed on May 1, 2019, SEC File No. 000-55605
10.42
Swingline Note with KeyBank dated April 30, 2019, incorporated by reference to Exhibit 10.9 to the Registrant's Current Report on Form 8-K, filed on May 1, 2019, SEC File No. 000-55605
10.43
Schedule of Omitted Documents for KeyBank Loan, incorporated by reference to Exhibit 10.10 to the Registrant's Current Report on Form 8-K, filed on May 1, 2019, SEC File No. 000-55605
10.44
2025 Term Note payable to KeyBank, National Association dated December 18, 2020, incorporated by reference to Exhibit 10.2 the Registrant’s Current Report on Form 8-K, filed on December 23, 2020, SEC File No. 000-55605
10.45
Schedule of Omitted Documents for New $400M 5-Year Term Loan, incorporated by reference to Exhibit 10.3 the Registrant’s Current Report on Form 8-K, filed on December 23, 2020, SEC File No. 000-55605
10.46
Registration Rights Agreement dated December 14, 2018, incorporated by reference to Exhibit 10.4 to EA-1's Current Report on Form 8-K, filed on December 20, 2018, SEC File No. 000-54377
10.47
Contribution Agreement dated December 14, 2018, incorporated by reference to Exhibit 2.2 to EA-1's Current Report on Form 8-K, filed on December 20, 2018, SEC File No. 000-54377
10.48
Form of Master Property Management, Leasing and Construction Management Agreement, incorporated by reference to Exhibit 10.6 to EA-1's Quarterly Report on Form 10-Q, filed on December 10, 2009, SEC File No. 333-159167
10.49
Series A Cumulative Perpetual Convertible Preferred Stock Purchase Agreement dated August 8, 2018, incorporated by reference to Exhibit 10.1 to EA-1's Quarterly Report on Form 10-Q, filed on August 13, 2018, SEC File No. 000-54377
10.50
Administrative Services Agreement dated December 14, 2018, by and among EA-1, the EA-1 Operating Partnership, Griffin Capital Company, LLC, Griffin Capital, LLC, Griffin Capital Essential Asset TRS, Inc., and Griffin Capital Real Estate Company, LLC, incorporated by reference to Exhibit 10.35 to EA-1's Annual Report on Form 10-K, filed on March 15, 2019, SEC File No. 000-54377
10.51
Form of Indemnification Agreement dated December 14, 2018, incorporated by reference to Exhibit 10.5 to EA-1’s Current Report on Form 8-K, filed on December 20, 2018, SEC File No. 000-54377
10.52+
Escalante Employment Agreement dated December 14, 2018, incorporated by reference to Exhibit 10.6 to EA-1’s Current Report on Form 8-K, filed on December 20, 2018, SEC File No. 000-54377
10.53+
Form of Employment Agreement for Other Officers dated December 14, 2018, incorporated by reference to Exhibit 10.7 to EA-1’s Current Report on Form 8-K, filed on December 20, 2018, SEC File No. 000-54377
10.54+
Employment Agreement with Nina Momtazee Sitzer effective June 10, 2019, incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed on August 14, 2019, SEC File No. 000-55605
10.55+
Form of Time-Based Restricted Stock Unit Agreement (NEOs), incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q, filed on May 12, 2020, SEC File No. 000- 55605
10.56+
Form of Time-Based Restricted Stock Unit Agreement (Employees), incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 12, 2020, SEC File No. 000-55605
10.57+
Form of Restricted Share Award for Directors, incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed on August 7, 2020, SEC File No. 000- 55605
10.58+
Form of Time-Based Restricted Stock Unit Agreement (NEOs) dated January 22, 2021 incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 7, 2021, SEC File No. 000-55605
10.59+
Form of Time-Based Restricted Stock-Unit Agreement (Employees) dated January 22, 2021, incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 7, 2021, SEC File No. 000-55605
10.60+
Form of Initial Restricted Stock Agreement (New Directors) dated March 1, 2021, incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 7, 2021, SEC File No. 000-55605
10.61+
Form of One-Time Restricted Stock Unit (NEOs) dated March 25, 2021, incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 7, 2021, SEC File No. 000-55605
10.62+
Form of One-Time Restricted Stock Unit Agreement (Employees) dated March 25, 2021, incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 7, 2021, SEC File No. 000-55605
10.63+
Form of One-Time Restricted Stock Unit Agreement (Director) dated March 25, 2021, incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q, filed on May 7, 2021, SEC File No. 000-55605
10.64
Manager Agreement and Participating Dealer Agreement dated September 18, 2017, incorporated by reference to Exhibit 1.1 to Pre-Effective Amendment No. 3 to the Registrant’s Registration Statement on Form S-11, filed on September 18, 2017, SEC File No. 333-217223
10.65
Amendment No. 1 to Dealer Manager Agreement and Participating Dealer Agreement dated June 24, 2019, incorporated by reference to Exhibit 1.1 to the Registrant’s Quarterly Report on Form 10-Q, filed on August 14, 2019, SEC File No. 000-55605
21.1*
Subsidiaries of Griffin Realty Trust, Inc.
23.1*
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
31.1*
Certification of Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**
Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
32.2**
Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
101* The following Griffin Realty Trust, Inc. financial information for the period ended
December 31, 2021 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated
Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of
Comprehensive (Loss) Income, (iv) Consolidated Statements of Equity, (v) Consolidated Statements of Cash Flows and (vi)Notes to Consolidated Financial Statements.
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
*
Filed herewith.
**
Furnished herewith.
+
Management contract, compensatory plan or arrangement filed in response to Item 15(a)(3) of Form 10-K.