The renewal for 280,000 square feet was with the tenant who pre-leased a new building that Griffin constructed in the Lehigh Valley approximately five years ago. In connection with the original lease, the tenant required above standard improvements which Griffin provided as a turn-key service. The cost of these improvements was reflected in the base rental rate for the initial term of the original lease, resulting in that lease’s initial base rental rate being approximately 17% above market at the time it was signed. The Lehigh Valley industrial market has experienced strong rental growth over the last five years, however, due to the comparison of the renewal rate to the higher initial rent that was set in the original lease, Griffin’s weighted average rent growth on a cash basis only shows modest growth.
As of November 30, 2020, Griffin’s thirty industrial/warehouse buildings aggregated approximately 4,206,000 square feet and represented 91.5% of Griffin’s total real estate portfolio. Subsequent to the end of the 2020 fourth quarter, Griffin signed a one-year extension for a tenant in the Lehigh Valley whose lease was originally set to expire on September 30, 2021, leaving only two leases of industrial/warehouse space scheduled to expire next year. Those two leases aggregate approximately 166,000 square feet, and if not renewed, are scheduled to expire in the 2021 fourth quarter.
For Griffin’s office/flex portfolio, one vacant building of approximately 40,000 square feet was sold during the quarter for gross proceeds of $1.4 million. No new office/flex leasing was completed during the quarter. Griffin’s remaining eleven office/flex buildings, which aggregate approximately 393,000 square feet and represent 8.5% of Griffin’s total real estate portfolio, were 71.3% leased as of November 30, 2020, as compared to 64.7% leased for the twelve office/flex properties that were in the portfolio as of August 31, 2020.
Griffin’s total real estate portfolio of approximately 4,598,000 square feet was 92.3% leased as of November 30, 2020 (93.3% leased for the stabilized, in-service portfolio4) as compared to a portfolio of 4,639,000 square feet that was 91.5% leased as of August 31, 2020.
Rent Collections/COVID-19 Impact
COVID-19 has not had a material impact on the Company’s rent collection during the 2020 fourth quarter and as of the date of this press release. Griffin collected 99.8% of rent in each of September, October and November, accounting for both rent relief and deferrals. As previously disclosed, since the onset of COVID-19, Griffin entered into a total of two agreements with tenants that granted rent relief aggregating approximately 0.5% of Griffin’s anticipated total annual rental revenue for fiscal year 2020. The much larger of these two tenants is a subsidiary of a Fortune 500 company who completed an early 5-year renewal, as mentioned above. This early 5-year renewal is counted in the renewal leasing statistics for the 2020 fourth quarter and the amount of rent relief that was given to the tenant is included in the calculation of weighted average lease costs per square foot per year. The only other deferral agreement in place is with a 20,000 square foot tenant for a three month deferral that took place during the second quarter of fiscal 2020. This tenant is currently meeting its obligations and Griffin did not receive any new requests for rent relief during the quarter and no previous requests remain outstanding.
