UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 8-K
 
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):  February 9, 2016
 

Griffin Capital Essential Asset REIT II, Inc.
(Exact name of registrant as specified in its charter)
 


Commission File Number:  333-194280
 
MD
  
46-4654479

(State or other jurisdiction of   incorporation)
  
(IRS Employer   Identification No.)
 
Griffin Capital Plaza, 1520 E. Grand Avenue, El Segundo, CA 90245
(Address of principal executive offices, including zip code)
 
(310) 469-6100
(Registrant's telephone number, including area code)
 

None
(Former name or former address, if changed since last report)


 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[  ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[  ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))










Item 1.01    Entry into a Material Definitive Agreement
Amendment No. 4 to Advisory Agreement
On February 9, 2016, Griffin Capital Essential Asset REIT II, Inc. (the "Registrant") entered into Amendment No. 4 to Advisory Agreement (the "Amendment") between the Registrant and Griffin Capital Essential Asset Advisor II, LLC (the "Advisor") to clarify the definition of the Contingent Advisor Payment Holdback, which consists of the first $5.0 million of amounts paid by the Advisor for dealer manager fees and organizational and offering expenses.
The foregoing description of the Amendment is qualified in its entirety by reference to the terms of the Amendment, which is attached as Exhibit 10.1 hereto.
Item 7.01    Regulation FD Disclosure
On February 10, 2016, Griffin Capital Corporation, the sponsor of the Registrant, issued a press release on behalf of the Registrant, disclosing the acquisition of the Toshiba TEC property, described below in Item 8.01. A copy of the press release is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein solely for purposes of this Item 7.01 disclosure.
Pursuant to the rules and regulations of the Securities and Exchange Commission, the information in this Item 7.01 disclosure, including Exhibit 99.1 and information set forth therein, is deemed to have been furnished and shall not be deemed to be "filed" under the Securities Exchange Act of 1934.
Item 8.01.      Other Events
Acquisition of Toshiba TEC property
On January 21, 2016, the Registrant acquired a four-story, Class 'A' office property consisting of approximately 200,850 square feet located in Durham, North Carolina (the "Toshiba TEC property"). The Toshiba TEC property is leased in its entirety to the Toshiba TEC Corporation ("Toshiba TEC"), which in turn subleased its interest to Toshiba Global Commerce Solutions, Inc. ("TGCS"). The purchase price for the Toshiba TEC property was approximately $35.8 million, plus closing costs. In addition, the Registrant received an approximately $0.6 million credit from the seller to cover a rent abatement period from the closing date through April 30, 2016. The purchase price plus closing costs and certain acquisition expenses to third parties (reduced by certain adjustments, credits, and previous deposits) were funded with a draw of $17.9 million pursuant to the Registrant's revolving credit facility with a syndicate of lenders under which KeyBank, N.A. serves as administrative agent and JPMorgan Chase Bank, N.A. serves as syndication agent. In accordance with the terms of the Registrant's advisory agreement, as amended (the "Advisory Agreement"), the Advisor earned approximately $0.7 million in acquisition fees in connection with the acquisition of the Toshiba TEC property. As of the closing date, the Registrant incurred acquisition expenses of approximately $0.3 million in connection with the acquisition of the Toshiba TEC property, approximately $0.2 million of which will be reimbursed or paid to the Advisor and approximately $0.1 million of which were paid to unaffiliated third parties. The acquisition fees and acquisition expenses to be paid to the Advisor were deferred and will be paid at a future date. Pursuant to the terms of the Advisory Agreement, no Contingent Advisor Payment was paid, as the Registrant has not reached the full Contingent Advisor Payment Holdback (as such terms are defined in the Advisory Agreement).
The Toshiba TEC property serves as the corporate headquarters for TGCS. TGCS, a subsidiary of Toshiba TEC, is a provider of integrated in-store solutions for retailers globally. Toshiba Corporation ("Toshiba") owns 50% of Toshiba TEC. Toshiba TEC is a global leader in the retail solutions, printing solutions, original designing manufacturer (ODM) solutions, and inkjet printing business in Japan and internationally. Toshiba TEC (Tokyo Stock Exchange: 6588) maintains an investment grade credit rating of IG-10 from Bloomberg ('BBB-' S&P equivalent rating) and Toshiba (Tokyo Stock Exchange: 6502) maintains a credit rating of 'BB+' from S&P and is ranked #157 on the 2015 Fortune Global 500 List.
The Toshiba TEC property is located within the Raleigh/Durham/Chapel Hill region and is immediately adjacent to the Research Triangle Park, the largest dedicated scientific research park in the United States. The Toshiba TEC property was originally constructed in 1999 as a build-to-suit for IBM Corporation ("IBM"), which




sold its Retail Store Solutions business to Toshiba TEC. Toshiba TEC immediately subleased the Toshiba TEC property to TGCS, which relocated its operations housed within IBM's campus to the property. As the headquarters for TGCS, the Toshiba TEC property houses the executive team and is a critical facility for the growth of Toshiba TEC's global retail technology business. The Toshiba TEC property features a number of employee amenities and contains a raised-floor lab space, which is essential to TGCS's research, development, and testing of product software. The Registrant believes the Toshiba TEC property is a business essential facility to Toshiba TEC's and TGCS's overall operations due to its significant locational benefits immediately adjacent to the Research Triangle Park, the capital invested to create a mission-critical, showcase facility for TGCS, and Toshiba TEC's long-term commitment to the Raleigh-Durham market evidenced by its 154-month lease term.
The Toshiba TEC lease, as amended, is an absolute-net lease with a remaining term of 12.3 years upon the Registrant's acquisition, expiring in April 2028. Toshiba TEC subleased the property to TGCS and the current annual base rent is approximately $2.2 million commencing on May 1, 2016, with 2.8% average annual increases for the remaining duration of the lease. The Toshiba TEC lease also includes two five-year fixed rate base rent renewal options, no termination option, and a right of first refusal on any sale of the property, subject to certain conditions.
The going-in capitalization rate for the Toshiba TEC property is approximately 6.11%. The going-in capitalization rate is determined by dividing the projected net operating income for the first fiscal year the Registrant owns the property by the acquisition price (exclusive of closing and offering costs). The net operating income is calculated by totaling the sum of all the revenues from Toshiba TEC and TGCS, as subtenant, including base rental revenue, parking revenue, and expense reimbursement revenue then deducting the total of all the property expenses including utilities, insurance, real estate taxes, repairs and maintenance, and all property operating expenses. The projected net operating income includes assumptions that may not be indicative of the actual future performance of a property, including the assumption that Toshiba TEC and TGCS will perform their obligations under the lease agreement during the next 12 months.
Toshiba TEC will be responsible for managing the Toshiba TEC property. Griffin Capital Essential Asset Property Management II, LLC will be paid an oversight fee in an amount of 1.0% of the gross monthly revenues collected from the Toshiba TEC property.
Item 9.01.      Exhibits
(d)    Exhibits.
10.1
Amendment No. 4 to Advisory Agreement
99.1
Press Release regarding the Toshiba TEC property dated February 10, 2016





Signature(s)
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
Griffin Capital Essential Asset REIT II, Inc.
 
 
 
Date: February 10, 2016
By:
/s/ Howard S. Hirsch
 
 
Howard S. Hirsch
 
 
Vice President and Secretary



EXHIBIT 10.1

AMENDMENT NO. 4 TO ADVISORY AGREEMENT
    
THIS AMENDMENT NO. 4 TO ADVISORY AGREEMENT, dated as of February 9, 2016 is entered into among Griffin Capital Essential Asset REIT II, Inc., a Maryland corporation (the “Company”), GRIFFIN CAPITAL ESSENTIAL ASSET OPERATING PARTNERSHIP II, L.P., a Delaware limited partnership (the “Operating Partnership”) and Griffin Capital Essential Asset Advisor II, LLC, a Delaware limited liability company (the “Advisor”).

RECITALS

WHEREAS, the Company, the Operating Partnership and the Advisor are parties to an Advisory Agreement dated July 31, 2014, as amended by that certain Amendment No. 1 to Advisory Agreement dated March 18, 2015, Amendment No. 2 to Advisory Agreement dated November 2, 2015, and Amendment No. 3 to Advisory Agreement dated December 16, 2015 (collectively, the “Advisory Agreement”), pursuant to which the Advisor agreed to provide certain services to the Company and the Operating Partnership, and the Company agreed to provide certain compensation to the Advisor in exchange for such services; and

WHEREAS, the Company, the Operating Partnership and the Advisor desire to amend the Advisory Agreement in order to clarify expenses incurred by the Company and Advisor and fees paid to the Advisor.

NOW THEREFORE, the Company, the Operating Partnership and the Advisor hereby modify and amend the Advisory Agreement as follows:

1.
Defined Terms. Capitalized terms used herein and not defined herein shall have the meanings set forth in the Advisory Agreement.

2.
Amendment to Advisory Agreement.

Section 9.1 is hereby removed and replaced with the following :

9.1      Acquisition Fees . The Company will pay the Advisor, as compensation for the services described in Section 4.2, Acquisition Fees in an amount up to 3.85% of the Contract Purchase Price of each Property at the time and in respect of funds expended for the acquisition or development of a Property. The Acquisition Fees consist of a 2.0% base acquisition fee and up to an additional 1.85% contingent advisor payment (the “Contingent Advisor Payment”); provided, however, that the first Five Million Dollars ($5,000,000.00) of amounts paid by the Advisor for Dealer Manager fees and Organizational and Offering Expenses (“Contingent Advisor Payment Holdback”) will be retained by us until the later of (a) the termination of the Initial Public Offering, including any Follow-On Offerings, or (b) July 31, 2017, at which time such amount shall be paid to the Advisor. In connection with a Follow-On Offering, the Contingent Advisor Payment Holdback will be calculated as 0.25% of the sum of (i) the primary offering portion of such Follow-On Offering, plus (ii) the dollar amount sold in the Company’s prior offerings. The amount of the Contingent Advisor Payment paid upon the closing of an acquisition will be reviewed on an acquisition by acquisition basis and such payment shall not exceed the then outstanding amounts paid by the Advisor for Dealer Manager fees and Organizational and Offering Expenses at the time of such closing after taking into account the amount of the Contingent Advisor Payment Holdback. For these purposes, the amounts paid by the Advisor and considered “outstanding” will be reduced by the amount of the Contingent Advisor Payment previously paid. The Advisor may waive or defer all or a portion of the Acquisition Fee at any time and from time to time, in the Advisor’s sole discretion. The purchase price allocable for a Property held through a Joint Venture shall equal the product of (y) the Contract Purchase Price of the Property and (z) the direct or indirect ownership percentage in the Joint Venture held directly or indirectly by the Company or the Operating Partnership. For purposes of this Section 9.1, “ownership percentage” shall be the percentage of capital stock, membership interests, partnership interests or other equity interests held by the Company or the Operating Partnership, without regard to classification of such interests. The total of all Acquisition Fees and Acquisition Expenses shall be limited in accordance with the Charter.





3.
Amendment. This Amendment may not be amended or modified except in writing signed by all parties.

4.
Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of California.

5.
Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute a single instrument.

    
[Signatures appear on next page]




IN WITNESS WHEREOF, the parties have executed this Amendment No. 4 to Advisory Agreement to be effective for all purposes as of the date first above written.

THE COMPANY:
 
 
GRIFFIN CAPITAL ESSENTIAL ASSET REIT II, INC.
 
 
By:
/s/ Kevin A. Shields
 
Kevin A. Shields
 
Chief Executive Officer
 
 
THE OPERATING PARTNERSHIP:
 
 
GRIFFIN CAPITAL ESSENTIAL ASSET OPERATING PARTNERSHIP II, L.P.
 
 
By:
GRIFFIN CAPITAL ESSENTIAL ASSET REIT II, INC., ITS GENERAL PARTNER
 
 
 
 
By:
/s/ Kevin A. Shields
 
Kevin A. Shields
 
Chief Executive Officer
 
 
THE ADVISOR:
 
 
GRIFFIN CAPITAL ESSENTIAL ASSET ADVISOR II, LLC
 
 
By:
/s/ Kevin A. Shields
 
Kevin A. Shields
 
Chief Executive Officer
 
 





EXHIBIT 99.1



For Immediate Release: February 10, 2016
Jennifer Nahas
Vice President, Marketing
Griffin Capital Corporation
jnahas@griffincapital.com
Office Phone: 949-270-9332
Cell Phone: 949-433-6860


Griffin Capital Essential Asset REIT II Acquires
Toshiba Global Commerce Solutions Corporate Headquarters in Durham, North Carolina


El Segundo, Calif. (February 10, 2016) - Griffin Capital Corporation ("Griffin Capital") announced today, on behalf of Griffin Capital Essential Asset REIT II, Inc. (the "REIT"), the acquisition of the 200,846-square-foot Toshiba Global Commerce Solutions Corporate Headquarters (the "Property") located in Durham, North Carolina. The four-story, Class A office building is leased in its entirety to Toshiba TEC Corporation (the "Tenant" or "Toshiba TEC") through April 2028, and is subleased to Toshiba Global Commerce Solutions, Inc., a subsidiary of the Tenant. The Property serves as the corporate headquarters for Toshiba Global Commerce Solutions, which was created when Toshiba TEC acquired IBM’s Retail Store Solutions business for $850 million in 2012. Toshiba Global Commerce Solutions is a leading supplier of retail point-of-sale systems and integrated in-store solutions for retailers globally.
Commenting on the acquisition, Robert Corry, Griffin Capital’s Managing Director of Acquisitions, said, "We are excited to add another business-essential, high-quality, corporate headquarters to the REIT. Given the Tenant’s recent capital investment to transform the building into a world-class headquarters, coupled with the building’s raised-floor lab space which is critical for research, development, and testing functions, we believe the Tenant will continue to find the Property attractive as a headquarters and critical operating facility for many years to come."




Michael Escalante, President of the REIT, added, "This acquisition pushes the total capitalization in the REIT over $500 million, and marks the REIT’s first acquisition in the Research Triangle. Given the strong market fundamentals in the Research Triangle, the investment-grade credit quality of the Tenant, and the long-term lease with annual rental rate increases, this acquisition is an excellent addition to the REIT’s portfolio."
The seller, International Business Machines Corporation, was represented by Brian Scott and Ben Kilgore of CBRE.
About Griffin Capital Essential Asset REIT II and Griffin Capital Corporation
Griffin Capital Essential Asset REIT II, Inc. is a publicly registered non-traded REIT with a portfolio that currently includes 16 office and industrial buildings totaling approximately 3.45 million rentable square feet and total acquisition value of $515 million. The REIT’s sponsor is Griffin Capital Corporation ("Griffin Capital"), a privately-owned real estate company headquartered in Los Angeles. Led by senior executives with more than two decades of real estate experience collectively encompassing over $22 billion of transaction value and more than 650 transactions, Griffin Capital and its affiliates have acquired or constructed approximately 53.5 million square feet of space since 1995. Griffin Capital and its affiliates own, manage, sponsor and/or co-sponsor a portfolio consisting of approximately 36.6* million square feet of space, located in 29 states, and 0.1 million square feet in the United Kingdom, representing approximately $6.3* billion in asset value, based on purchase price. Additional information about Griffin Capital is available at www.griffincapital.com.

*Includes the property information related to a joint venture with affiliates of Digital Realty Trust, L.P. and a joint venture in which Griffin-American Healthcare REIT III holds a majority interest.

This press release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as "may," "will," "expect," "intend," "anticipate," "estimate," "believe," "continue," or other similar words. Because such statements include risks, uncertainties and contingencies, actual results may differ materially from the expectations, intentions, beliefs, plans or predictions of the future expressed or implied by such forward-looking statements. These risks, uncertainties and contingencies include, but are not limited to: uncertainties relating to changes in general economic and real estate conditions; uncertainties relating to the implementation of our real estate investment strategy; uncertainties relating to financing availability and capital proceeds; uncertainties relating to the closing of property acquisitions; uncertainties relating to the public offering of our common stock; uncertainties related to the timing and availability of distributions; and other risk factors as outlined in the REIT’s prospectus, as amended from time to time. This is neither an offer nor a solicitation to purchase securities.


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