424B3 1 gcear2-supplementno4dated2.htm 424B3 424B3
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-194280


 
 
 
 
PROSPECTUS
 SUPPLEMENT NO. 4
FEBRUARY 10, 2016
GRIFFIN CAPITAL ESSENTIAL ASSET REIT II
SUPPLEMENT NO. 4 DATED FEBRUARY 10, 2016
TO THE PROSPECTUS DATED NOVEMBER 2, 2015
This document supplements, and should be read in conjunction with, the prospectus of Griffin Capital Essential Asset REIT II, Inc. dated November 2, 2015, Supplement No. 1 dated November 9, 2015, Supplement No. 2 dated November 13, 2015, and Supplement No. 3 dated December 17, 2015. Unless otherwise defined in this supplement, capitalized terms used in this supplement shall have the same meanings as set forth in the prospectus.
This supplement includes the following information:
status of our offering;
acquisition of a property in Durham, North Carolina;
update regarding certain fees paid to our advisor;
update regarding our dealer manager;
revision to the "Investment by Tax-Exempt Entities and ERISA Considerations" section of our prospectus;
revision to the "Plan of Distribution" section of our prospectus;
revision to "Prospectus Summary" to include additional information regarding shares of our Class T common stock; and
inclusion of a multi-product subscription agreement.
Status of Our Offering
We commenced the initial public offering of $2.2 billion (including $200 million pursuant to our distribution reinvestment plan) in shares of our common stock on July 31, 2014. On September 23, 2014, we reached the minimum offering amount of $2.0 million in sales of Class A common stock as a result of a $2.0 million investment by an affiliate of our sponsor, and commenced operations. On October 9, 2015, we announced that we would cease offering shares of our Class A common stock in our primary offering, effective October 30, 2015, and effective November 2, 2015, we reallocated all shares being offered, such that we are currently offering up to approximately $1.8 billion in shares of Class T common stock in our primary offering. We reserve the right to reallocate the shares of common stock we are offering between the primary offering and the distribution reinvestment plan, and among classes of stock, if we elect to offer additional classes in the future.
As of February 1, 2016, we had received gross offering proceeds of approximately $311 million from the sale of 31,232,880 Class A shares and Class T shares in connection with our offering, including proceeds raised and shares issued under our distribution reinvestment plan. As of February 1, 2016, approximately $1.9 billion in shares of common stock remained available for sale to the public under our initial public offering, including shares available under our distribution reinvestment plan.
Property Acquisition
The following is hereby added to the end of the "Real Estate Investments - Our Properties" section of our prospectus:
Toshiba TEC Property
On January 21, 2016, we 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, we 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 our 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 our advisory agreement, as amended (the "Advisory Agreement"), our advisor earned approximately $0.7 million in acquisition fees in connection with the acquisition of the Toshiba TEC property. As of the closing date, we 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 our advisor and approximately $0.1 million of which were paid to unaffiliated third parties. The acquisition fees and acquisition expenses to be paid to our 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 we have 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. We believe 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 our 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%.
Management of the Toshiba TEC Property    
Toshiba TEC will be responsible for managing the Toshiba TEC property. Our property manager will be paid an oversight fee in an amount of 1.0% of the gross monthly revenues collected from the Toshiba TEC property.
Update Regarding Certain Fees to be Paid to our Advisor
The description of the acquisition fee contained in the "Prospectus Summary - Compensation to Our Advisor and its Affiliates" section on page 15 of our prospectus and the "Management Compensation" section on page 102 of our prospectus is hereby removed and replaced with the following:
Beginning on November 2, 2015, our advisor will be entitled to fees of up to 3.85% of the contract purchase price of each property or other real estate investments we acquire. The 3.85% of fees consists of the





previous 2.0% base acquisition fee and up to an additional 1.85% contingent advisor payment (the "Contingent Advisor Payment"); provided, however, that the first $5.0 million of amounts paid by the Advisor for dealer manager fees and organizational and offering expenses (the "Contingent Advisor Payment Holdback") will be retained by us until the later of (a) the termination of this 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 may increase, based upon the maximum offering amount in such follow-on offering and the amount sold in 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 described above. For these purposes, the amounts paid by the advisor and considered as "outstanding" will be reduced by the amount of the Contingent Advisor Payment previously paid. Our advisor may waive or defer all or a portion of the acquisition fee or the Contingent Advisor Payment at any time and from time to time, in our advisor's sole discretion.
Update Regarding our Dealer Manager
Through a series of transactions in connection with our sponsor's recent corporate reorganization, effective December 30, 2015, our dealer manager is now known as Griffin Capital Securities, LLC, and is a Delaware limited liability company. Our dealer manager is owned by a wholly-owned subsidiary of our sponsor. All references to our dealer manager contained in our prospectus are hereby updated accordingly.
Revision to "Investment by Tax-Exempt Entities and ERISA Considerations"
The third paragraph in the "Investment by Tax-Exempt Entities and ERISA Considerations - Annual Valuation Requirement" section of our prospectus is hereby removed and replaced with the following:
We expect to provide the first estimated valuation no more than 45 days following the earlier of (i) the date we commence a follow-on public offering, if any, or (ii) the earlier of (a) the end of the calendar quarter in which our initial offering terminates, or (b) September 30, 2016. Following our first determination of our estimated per share value based upon a valuation, we will publish an updated estimated per share value on at least an annual basis thereafter and will provide this information to stockholders in our annual report, but this estimated value is subject to significant limitations. There are currently no SEC, federal, and state rules that establish requirements specifying the methodology to employ in determining an estimated value per share; provided, however, that the determination of the estimated value per share must be conducted by, or with the material assistance or confirmation of, a third-party valuation expert or service and must be derived from a methodology that conforms to standard industry practice. We expect that our board of directors, with the assistance of a third party valuation expert that the board chooses for that purpose, will establish an estimated value per share of our common stock based on an appraisal of our assets and operations and other factors deemed relevant. The estimated value per share will be based upon the fair value of our assets less liabilities under market conditions existing at the time of the valuation. We will obtain independent third-party appraisals for real estate and real estate related investments and will value our other assets in a manner we deem most suitable under the circumstances, which will include an independent appraisal or valuation. Our independent directors will be responsible for the oversight process including approval of engagement of one or more third-party valuation experts to assist in the valuation of assets, liabilities, and unconsolidated investments, as applicable. The appraiser will be a member of the Appraisal institute with an MAI designation. The estimated value per share should not necessarily be viewed as an accurate reflection of net proceeds that would result from an immediate sale of our assets.
Revision to "Plan of Distribution"
The following is hereby added as a new subsection at the end of the "Plan of Distribution" section of our prospectus:





Ameriprise Selected Dealer Agreement
On December 22, 2015, we entered into an amended and restated amendment to our selected dealer agreement dated May 5, 2015, among Ameriprise Financial Services, Inc. ("Ameriprise"), our dealer manager, our advisor, and our sponsor (the "Ameriprise Amendment"), pursuant to which Ameriprise will act as a participating dealer and will offer and sell, on a best efforts basis, shares of our Class T common stock pursuant to our offering.
Pursuant to the terms of the Ameriprise Amendment, Ameriprise generally will be (i) paid a selling commission of up to 3.0% of the price of each share (except shares sold pursuant to the DRP) sold by Ameriprise; provided, however, that such selling commission shall be reduced with respect to sales to certain categories of purchasers, as described in the Ameriprise Amendment and elsewhere in this prospectus, (ii) re-allowed by our dealer manager an annual stockholder servicing fee of 1.0% of the purchase price per Class T share (or, once reported, the amount of our estimated NAV), provided, however, that the amount of the stockholder servicing fee to be re-allowed to Ameriprise will not exceed a total of 4.0% of the purchase price per Class T share (or, once reported, the amount of our estimated NAV) (iii) re-allowed by our dealer manager a marketing support fee of up to 1.5% of the gross proceeds from each share (except shares sold pursuant to the DRP) sold by Ameriprise subject to limitations on underwriting compensation prescribed by FINRA, (iv) reimbursed for its bona fide, separately invoiced due diligence investigation expenses consistent with the language contained elsewhere in this prospectus for our offering and applicable FINRA regulations and rules, and (v) subject to applicable FINRA limitations, paid for its mutually agreed upon technology costs associated with our offering, related costs and expenses, and other costs and expenses related to the facilitation of the marketing of the shares and the ownership of such shares by Ameriprise's customers, including fees to attend conferences sponsored by us.
Pursuant to the terms of the Ameriprise Amendment, we are required to adopt and disclose a valuation policy consistent with FINRA requirements, and disclose an estimated net asset value per share based upon a valuation determined by an independent valuation firm no more than 45 days following the earlier of (i) the date we commence a follow-on public offering, if any, or (ii) the earlier of (a) the end of the calendar quarter in which our initial offering terminates, or (b) September 30, 2016.
Revision to "Prospectus Summary"
The following is hereby added as a new subsection within the "Prospectus Summary - Description of Shares" section beginning on page 19 of our prospectus:
Additional Information Regarding Shares of our Class T Common Stock
We commenced offering shares of our Class T common stock on November 2, 2015. As a result of recent regulatory developments, beginning in May 2016, the customer account statement for Class T stockholders will show up as $9.60 per share until we declare a net asset value per share. If not for the amounts paid by our advisor for dealer manager fees and organizational and offering expenses ("Advisor Up Front Funding"), the customer account statement for Class T shares would show up as $9.30 per share during this same period. Because we will include leverage in the calculation of the Contingent Advisor Payment, a higher use of leverage may allow our advisor to recoup the Advisor Up Front Funding more quickly than if we used less leverage. If our advisor recoups the full amount of the Advisor Up Front Funding, our net asset value may be negatively impacted by the payment of the Contingent Advisor Payment. Until the date that we declare a net asset value per share, any such potential negative impact will not be reflected on customer account statements, and will not be reflected in our calculation of modified funds from operations, or MFFO. While other factors (such as the deployment of the Advisor Up Front Funding in the acquisition of one or more revenue-generating properties) may outweigh such potential negative impact, the net effect of the Advisor Up Front Funding relative to the returns generated to our stockholders from the deployment of the Advisor Up Front Funding may not be known until we declare a net asset value per share. Please see the description of the acquisition fee contained in the "Management Compensation" section and "Estimated Use of Proceeds" section of this prospectus for additional detail regarding Class T shares.






Subscription Agreement

Attached hereto as Appendix A is a multi-product subscription agreement for investors who wish to invest in our offering and in the offering of Griffin-Benefit Street Partners BDC Corp., a non-diversified, closed-end management investment company sponsored by our sponsor. The multi-product subscription agreement is for use only through participating dealers that have signed a participating dealer agreement with our dealer manager for each respective company's offering, and are subject to certain other restrictions outlined further in the document itself.







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