Exhibit 99.3
GRIFFIN REALTY TRUST, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On August 26, 2022 (the “Effective Date”), various subsidiaries (the “GRT Sellers”) of Griffin Realty Trust, Inc. (“GRT”) and various subsidiaries (the “Office Buyers”) of Galaxy REIT LLC, a newly formed Delaware limited liability company that is expected to qualify as a real estate investment trust, entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”), pursuant to which, on the Effective Date, the GRT Sellers sold a 41-property office portfolio (the "Office Portfolio") to the Office Buyers (the “Office Portfolio Sale”). The purchase price for the Office Portfolio Sale was $1.132 billion in cash, subject to customary prorations and credits as set forth in the Purchase and Sale Agreement. GRT will retain a 49% interest in the Office Portfolio as described below.
The Office Portfolio is comprised of 53 buildings and one land parcel and includes properties with shorter weighted average lease terms and higher estimated future capital expenses in relation to the balance of GRT’s other assets. The assets in the Office Portfolio are located in various markets across the United States and are generally leased to single tenants.
GRT intends to utilize the net proceeds from the Office Portfolio Sale primarily to pay off debt to best position GRT to facilitate subsequent steps in GRT’s strategic monetization process.
GRT, through a subsidiary, will hold its remaining 49 percent interest in the Office Portfolio through a newly-formed joint venture (the “Office Joint Venture”). As of the Effective Date, GRT's interest in the Office Joint Venture will be deconsolidated and will be accounted for using the equity method.
The pro forma information should be read in conjunction with the historical consolidated financial statements and notes thereto of GRT included in its Annual Report on Form 10-K for the year ended December 31, 2021 and its Quarterly Report on Form 10-Q for the period ended June 30, 2022.
The following unaudited pro forma financial statements are based on our historical consolidated financial statements as adjusted to give effect to the Office Portfolio Sale and the repayment of debt with the net proceeds of the Office Portfolio Sale and associated debt breakage costs. The unaudited pro forma consolidated balance sheet as of June 30, 2022 gives effect to the transactions as if they had occurred on June 30, 2022. The unaudited pro forma consolidated statements of operations for the six months ended June 30, 2022 and twelve months ended December 31, 2021 give effect to the disposition as it if had occurred on January 1, 2021. The pro forma adjustments include transaction accounting adjustments to reflect the accounting for the Office Portfolio Sale, joint venture formation, and related debt repayment in accordance with US GAAP. The assumptions used and the pro forma adjustments derived from such assumptions are based on currently available information, and we believe such assumptions are reasonable under the circumstances.
The unaudited consolidated pro forma financial information is being presented for informational purposes and does not purport to represent what our actual financial condition or results of operations would have been had the Office Portfolio Sale and the repayment of debt with the net proceeds of the Office Portfolio Sale and associated debt breakage costs and other adjustments described herein occurred as of June 30, 2022 in the case of the unaudited pro forma consolidated balance sheet or on January 1, 2021 in the case of the unaudited pro forma consolidated statements of operations, nor does it purport to represent GRT's results of operations or financial position for any future period.
GRIFFIN REALTY TRUST, INC.
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
June 30, 2022
(in thousands, except unit amounts)
| | | ` | | | Disposition of | | | | | | Repayment of | | | | | | Pro Forma | |
| | | GRT (1) | | | Office Portfolio | | | | | | Debt | | | | | | GRT | |
| ASSETS | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 202,655 | | | $ | 889,424 | | | | (2 | ) | | $ | (856,598 | ) | | | (6 | ) | | $ | 235,481 | |
| Restricted cash | | | 19,638 | | | | — | | | | | | | | — | | | | | | | | 19,638 | |
| Real estate: | | | | | | | | | | | | | | | | | | | | | | | | |
| Land | | | 573,306 | | | | (179,721 | ) | | | (3 | ) | | | — | | | | | | | | 393,585 | |
| Building and improvements | | | 4,029,828 | | | | (1,091,217 | ) | | | (3 | ) | | | — | | | | | | | | 2,938,611 | |
| Tenant origination and absorption cost | | | 853,542 | | | | (237,763 | ) | | | (3 | ) | | | — | | | | | | | | 615,779 | |
| Construction in progress | | | 4,581 | | | | (767 | ) | | | (3 | ) | | | — | | | | | | | | 3,814 | |
| Total real estate | | | 5,461,257 | | | | (1,509,468 | ) | | | | | | | — | | | | | | | | 3,951,789 | |
| Less: accumulated depreciation and amortization | | | (1,066,176 | ) | | | 401,533 | | | | (3 | ) | | | — | | | | | | | | (664,643 | ) |
| Total real estate, net | | | 4,395,081 | | | | (1,107,935 | ) | | | | | | | — | | | | | | | | 3,287,146 | |
| Intangible assets, net | | | 40,179 | | | | (3,823 | ) | | | (3 | ) | | | — | | | | | | | | 36,356 | |
| Deferred rent receivable | | | 111,507 | | | | (34,446 | ) | | | (3 | ) | | | — | | | | | | | | 77,061 | |
| Deferred leasing costs, net | | | 48,835 | | | | (20,852 | ) | | | (3 | ) | | | — | | | | | | | | 27,983 | |
| Goodwill | | | 229,948 | | | | — | | | | | | | | — | | | | | | | | 229,948 | |
| Due from affiliates | | | 226 | | | | — | | | | | | | | — | | | | | | | | 226 | |
| Right of use asset | | | 39,997 | | | | (3,661 | ) | | | (3 | ) | | | — | | | | | | | | 36,336 | |
| Investment in unconsolidated entities | | | — | | | | 159,906 | | | | (4 | ) | | | — | | | | | | | | 159,906 | |
| Interest rate swap asset | | | 21,905 | | | | — | | | | | | | | — | | | | | | | | 21,905 | |
| Other assets | | | 39,045 | | | | (3,773 | ) | | | (3 | ) | | | — | | | | | | | | 35,272 | |
| Total assets | | $ | 5,149,016 | | | $ | (125,160 | ) | | | | | | $ | (856,598 | ) | | | | | | $ | 4,167,258 | |
| LIABILITIES AND EQUITY | | | | | | | | | | | | | | | | | | | | | | | | |
| Debt, net | | $ | 2,529,228 | | | $ | — | | | | | | | $ | (841,223 | ) | | | (6 | ) | | $ | 1,688,005 | |
| Restricted reserves | | | 8,417 | | | | (1,157 | ) | | | (3 | ) | | | — | | | | | | | | 7,260 | |
| Distributions payable | | | 12,078 | | | | — | | | | | | | | — | | | | | | | | 12,078 | |
| Due to affiliates | | | 1,690 | | | | — | | | | | | | | — | | | | | | | | 1,690 | |
| Intangible liabilities, net | | | 27,420 | | | | (3,299 | ) | | | (3 | ) | | | — | | | | | | | | 24,121 | |
| Lease liability | | | 52,244 | | | | (5,673 | ) | | | (3 | ) | | | — | | | | | | | | 46,571 | |
| Accrued expenses and other liabilities | | | 110,815 | | | | (20,964 | ) | | | (3 | ) | | | — | | | | | | | | 89,851 | |
| Total liabilities | | | 2,741,892 | | | | (31,093 | ) | | | | | | | (841,223 | ) | | | | | | | 1,869,576 | |
| Commitments and contingencies | | | | | | | | | | | | | | | | | | | | | | | | |
| Perpetual convertible preferred shares | | | 125,000 | | | | — | | | | | | | | — | | | | | | | | 125,000 | |
| Noncontrolling interests subject to redemption; 556,099 units as of June 30, 2022 | | | 4,671 | | | | — | | | | | | | | — | | | | | | | | 4,671 | |
| Stockholders’ equity: | | | | | | | | | | | | | | | | | | | | | | | | |
| Common stock, $0.001 par value; 800,000,000 shares authorized; 324,740,552 shares outstanding in the aggregate as of June 30, 2022 | | | 325 | | | | — | | | | | | | | — | | | | | | | | 325 | |
| Additional paid-in capital | | | 2,954,932 | | | | — | | | | | | | | — | | | | | | | | 2,954,932 | |
| Cumulative distributions | | | (979,028 | ) | | | — | | | | | | | | — | | | | | | | | (979,028 | ) |
| Accumulated earnings | | | 69,927 | | | | (94,067 | ) | | | (5 | ) | | | (15,375 | ) | | | (7 | ) | | | (39,515 | ) |
| Accumulated other comprehensive loss | | | 21,078 | | | | — | | | | | | | | — | | | | | | | | 21,078 | |
| Total stockholders’ equity | | | 2,067,234 | | | | (94,067 | ) | | | | | | | (15,375 | ) | | | | | | | 1,957,792 | |
| Noncontrolling interests | | | 210,219 | | | | — | | | | | | | | — | | | | | | | | 210,219 | |
| Total equity | | | 2,277,453 | | | | (94,067 | ) | | | | | | | (15,375 | ) | | | | | | | 2,168,011 | |
| Total liabilities and equity | | $ | 5,149,016 | | | $ | (125,160 | ) | | | | | | $ | (856,598 | ) | | | | | | $ | 4,167,258 | |
GRIFFIN REALTY TRUST, INC.
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
June 30, 2022
(in thousands, except unit amounts)
| I. | Adjustments to Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2022 |
| (1) | Represents GRT's unaudited consolidated balance sheet as of June 30, 2022. |
| (2) | Represents the estimated net proceeds for the Office Portfolio Sale, calculated below, inclusive of estimated transaction costs for the Office Portfolio Sale. |
| (3) | Represents the elimination of assets and liabilities associated with the Office Portfolio Sale. |
| (4) | Represents our estimated initial equity investment in the Office Joint Venture. |
| (5) | Represents the estimated loss on sale of real estate for the Office Portfolio Sale. See detail below. |
| | | Office Portfolio Sale | |
| Estimated proceeds | | $ | 1,132,372 | |
| Capital expenditure reserve | | | (67,680 | ) |
| Office joint venture contribution | | | (159,906 | ) |
| Net proceeds (exclusive of transaction costs) | | | 904,786 | |
| Transaction costs | | | (15,362 | ) |
| Net proceeds (inclusive of transaction costs) | | | 889,424 | |
| Historical GAAP cost basis | | | (1,143,397 | ) |
| Office joint venture contribution | | | 159,906 | |
| Estimated loss on real estate: | | $ | (94,067 | ) |
| (6) | Represents the repayment of debt and related debt breakage costs as shown below: |
| Loan | | Contractual Interest Rate | | | Loan Balance at 6/30/2022 | | | Repayment of Debt | | | Debt Breakage Costs | | | Total Debt Repayment and Debt Breakage Costs
| |
| Midland Mortgage Loan | | | 3.94 | % | | $ | 94,856 | | | $ | 94,856 | | | $ | 945 | | | $ | 95,801 | |
| BOA Loan | | | 3.77 | % | | | 375,000 | | | | 375,000 | | | | 12,297 | | | | 387,297 | |
| Total Mortgage Debt | | | | | | | 469,856 | | | | 469,856 | | | | 13,242 | | | | 483,098 | |
| | | | | | | | | | | | | | | | | | | | | |
| Revolving Credit Facility | | LIBO Rate + 1.45% | | | | 373,500 | | | | 373,500 | | | | — | | | | 373,500 | |
| Total | | | | | | | 843,356 | | | | 843,356 | | | $ | 13,242 | | | $ | 856,598 | |
| Unamortized Deferred Financing Costs and Discounts, net | | | | | | | (7,682 | ) | | | (2,133 | ) | | | | | | | | |
| Debt, Net | | | | | | $ | 835,674 | | | $ | 841,223 | | | | | | | | | |
| (7) | Represents debt breakage costs of approximately $13.3 million and approximately $2.1 million of write-offs in deferred financing costs and debt premiums, net. |
GRIFFIN REALTY TRUST, INC.
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
Six Months Ended June 30, 2022
(in thousands, except share and per share amounts)
| | | Historical GRT | | | Disposition of Office Portfolio | | | | | | Office Joint Venture | | | | | | Repayment of Debt | | | | | | Pro Forma GRT | |
| Revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
| Rental income | | $ | 239,262 | | | $ | (77,902 | ) | | | (1 | ) | | $ | — | | | | | | $ | — | | | | | | $ | 161,360 | |
| Expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property operating expense | | | 29,378 | | | | (13,928 | ) | | | (1 | ) | | | — | | | | | | | — | | | | | | | 15,450 | |
| Property tax expense | | | 21,515 | | | | (9,803 | ) | | | (1 | ) | | | — | | | | | | | — | | | | | | | 11,712 | |
| Property management fees to non-affiliates | | | 2,084 | | | | (872 | ) | | | (1 | ) | | | — | | | | | | | — | | | | | | | 1,212 | |
| General and administrative expenses | | | 18,415 | | | | — | | | | | | | | — | | | | | | | — | | | | | | | 18,415 | |
| Corporate operating expenses to affiliates | | | 925 | | | | — | | | | | | | | — | | | | | | | — | | | | | | | 925 | |
| Depreciation and amortization | | | 112,842 | | | | (30,154 | ) | | | (1 | ) | | | — | | | | | | | — | | | | | | | 82,688 | |
| Impairment provision | | | 75,557 | | | | — | | | | | | | | — | | | | | | | — | | | | | | | 75,557 | |
| Total expenses | | | 260,716 | | | | (54,757 | ) | | | | | | | — | | | | | | | — | | | | | | | 205,959 | |
| Income (loss) from operations | | | (21,454 | ) | | | (23,145 | ) | | | | | | | — | | | | | | | — | | | | | | | (44,599 | ) |
| Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest expense | | | (44,033 | ) | | | — | | | | | | | | — | | | | | | | 13,744 | | | | (3 | ) | | | (30,289 | ) |
| Other income (loss), net | | | 47 | | | | (22 | ) | | | (1 | ) | | | — | | | | | | | — | | | | | | | | 25 | |
| Loss from investment in unconsolidated entities | | | — | | | | — | | | | | | | | (6,765 | ) | | | (2 | ) | | | — | | | | | | | | (6,765 | ) |
| Transaction expense | | | (8,428 | ) | | | — | | | | | | | | — | | | | | | | | — | | | | | | | | (8,428 | ) |
| Net income (loss) | | | (73,868 | ) | | | (23,167 | ) | | | | | | | (6,765 | ) | | | | | | | 13,744 | | | | | | | | (90,056 | ) |
| Distributions to redeemable preferred shareholders | | | (5,031 | ) | | | — | | | | | | | | — | | | | | | | | — | | | | | | | | (5,031 | ) |
| Less: Net (income) loss attributable to noncontrolling interests | | | 6,933 | | | | — | | | | | | | | — | | | | | | | | 982 | | | | (4 | ) | | | 7,915 | |
| Net income (loss) attributable to controlling interest | | $ | (71,966 | ) | | $ | (23,167 | ) | | | | | | $ | (6,765 | ) | | | | | | $ | 14,726 | | | | | | | $ | (87,172 | ) |
| Distributions to redeemable noncontrolling interests attributable to common stockholders | | | (88 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | (88 | ) |
| Net income (loss) attributable to common stockholders | | $ | (72,054 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | $ | (87,260 | ) |
| Net income (loss) per share, basic and diluted | | $ | (0.22 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | $ | (0.27 | ) |
| Weighted average number of common shares outstanding: basic and dilutive | | | 324,681,375 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 324,681,375 | |
GRIFFIN REALTY TRUST, INC.
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
Six Months Ended June 30, 2022
(in thousands, except share and per share amounts)
II. Adjustments to the Unaudited Pro Forma Consolidated Statement of Operations for the Six Months Ended June 30, 2022
| (1) | Represents the elimination of income and expenses associated with the Office Portfolio Sale. |
| (2) | Represents the expected Pro forma adjustment to record our percentage of the joint ventures net income assuming the Office Portfolio Sale occurred on January 1, 2021. This is composed of the following: (1) straight-line rental income assuming the JV formation occurred on January 1, 2021; (2) depreciation and amortization expense using the relative fair values from our preliminary purchase price allocation that was calculated based on an estimated useful life of 40 years for building and improvements and the weighted average lease term for lease intangibles; (3) asset management fee expense that will be owed to the asset manager of the Office JV; and (4) interest expense and amortization of deferred financing costs relating to the $930.8 million Office Joint Venture term loan that has an interest rate of Secured Overnight Financing Rate (“SOFR”) + 4.25% with a 3% cap. Deferred financing costs are being amortized over three years.
|
| (3) | Represents the elimination of interest expense related to the debt pay down of approximately $843.4 million, which was repaid at closing of the Office Portfolio Sale. |
| (4) | Represents the estimated loss attributed to noncontrolling interest based on pro forma adjustments. |
GRIFFIN REALTY TRUST, INC.
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 2021
(in thousands, except share and per share amounts)
| | | Historical GRT | | | Disposition of Office Portfolio | | | | | | Office Joint Venture | | | | | | Repayment of Debt | | | | | | Pro Forma GRT | |
| Revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
| Rental income | | $ | 459,872 | | | $ | (163,456 | ) | | | (1 | ) | | $ | — | | | | | | $ | — | | | | | | $ | 296,416 | |
| Expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property operating expense | | | 61,259 | | | | (29,772 | ) | | | (1 | ) | | | — | | | | | | | — | | | | | | | 31,487 | |
| Property tax expense | | | 41,248 | | | | (18,959 | ) | | | (1 | ) | | | — | | | | | | | — | | | | | | | 22,289 | |
| Property management fees to non-affiliates | | | 4,066 | | | | (1,698 | ) | | | (1 | ) | | | — | | | | | | | — | | | | | | | 2,368 | |
| General and administrative expenses | | | 40,479 | | | | — | | | | | | | | — | | | | | | | — | | | | | | | 40,479 | |
| Corporate operating expenses to affiliates | | | 2,520 | | | | — | | | | | | | | — | | | | | | | — | | | | | | | 2,520 | |
| Impairment provision | | | 4,242 | | | | | | | | | | | | — | | | | | | | — | | | | | | | 4,242 | |
| Depreciation and amortization | | | 209,638 | | | | (64,347 | ) | | | (1 | ) | | | — | | | | | | | — | | | | | | | 145,291 | |
| Total expenses | | | 363,452 | | | | (114,776 | ) | | | | | | | — | | | | | | | — | | | | | | | 248,676 | |
| Income (loss) from operations | | | 96,420 | | | | (48,680 | ) | | | | | | | — | | | | | | | — | | | | | | | 47,740 | |
| Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest expense | | | (85,087 | ) | | | — | | | | | | | | — | | | | | | | 26,280
|
| | | (4 | ) | | | (58,807
| ) |
| Loss from extinguishment of debt | | | — | | | | — | | | | | | | | — | | | | | | | (13,242 | )
| | | (5 | ) | | | (13,242
| )
|
| Other income (loss), net | | | 1,521 | | | | — | | | | | | | | — | | | | | | | — | | | | | | | | 1,521 | |
| Loss from investment in unconsolidated entities | | | 8 | | | | — | | | | | | | | (15,401 | ) | | | (3 | ) | | | — | | | | | | | | (15,393 | ) |
| Loss from disposition of assets | | | (326 | ) | | | (94,067 | ) | | | (2 | ) | | | | | | | | | | | — | | | | | | | | (94,393 | ) |
| Transaction expense | | | (966 | ) | | | — | | | | | | | | — | | | | | | | | — | | | | | | | | (966 | ) |
| Net income (loss) | | | 11,570 | | | | (142,747 | ) | | | | | | | (15,401 | ) | | | | | | | 13,038 | | | | | | | | (133,540 | ) |
| Distributions to redeemable preferred shareholders | | | (9,698 | ) | | | — | | | | | | | | — | | | | | | | | — | | | | | | | | (9,698 | ) |
| Less: Net (income) loss attributable to noncontrolling interests | | | (66 | ) | | | — | | | | | | | | — | | | | | | | | 12,334 | | | | (6 | ) | | | 12,268 | |
| Net income (loss) attributable to controlling interest | | $ | 1,806 | | | $ | (142,747
| )
| | | | | | $ | (15,401 | ) | | | | | | $ | 25,372 | | | | | | | $ | (130,970 | ) |
| Distributions to redeemable noncontrolling interests attributable to common stockholders | | | (177 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | (177 | ) |
| Net income (loss) attributable to common stockholders | | $ | 1,629 | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | (131,147 | ) |
| Net income (loss) per share, basic and diluted | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | | | $ | (0.42 | ) |
| Weighted average number of common shares outstanding: basic and dilutive | | | 309,250,873 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 309,250,873 | |
GRIFFIN REALTY TRUST, INC.
UNAUDITED PRO FORMA
CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 2021
(in thousands, except share and per share amounts)
III. Adjustments to Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2021
| (1) | Represents the elimination of income and expenses associated with the Office Portfolio Sale. |
| (2) | Represents the expected loss on the Office Portfolio Sale. |
| (3) | Represents the expected pro forma adjustment to record our percentage of the joint ventures net income assuming the Office Portfolio Sale occurred on January 1, 2021. This is composed of the following: (1) straight-line rental income assuming the JV formation occurred on January 1, 2021; (2) depreciation and amortization expense using the relative fair values from our preliminary purchase price allocation that was calculated based on an estimated useful life of 40 years for building and improvements and the weighted average lease term for lease intangibles; (3) asset management fee expense that will be owed to the asset manager of the Office JV; and (4) interest expense and amortization of deferred financing costs relating to the $930.8 million Office Joint Venture term loan that has an interest rate of SOFR + 4.25% with a 3% cap. Deferred financing costs are being amortized over three years.
|
| (4) | Represents the elimination of interest expense related to the debt pay down of approximately $843.4 million, which was repaid at closing of the Office Portfolio Sale. |
| (5) | Represents the debt breakage costs associated with the repayment of the debt. |
| (6) | Represents the estimated loss attributed to noncontrolling interest based on pro forma adjustments. |
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