Global Net Lease, Inc. Price & Performance (GNL)

Descriptions of those non GAAP financial measures that we use such as AFFO and adjusted EBITDA, reconciliations of these measures to our results as reported in accordance with GAAP are detailed in our earnings release and in our annual report on Form 10 ks for the year ended December 31, 2024, which was filed on 02/27/2025. I'll now turn the call over to our Chief Executive Officer, Michael Weil. Mike, Thanks, Jordan.

Good morning and thank you all for joining us today. 2024 was a remarkable year for GNL. Marked by the achievement of all of the financial objectives and at the start of the year. One of the most exciting highlights was meeting and exceeding full year guidance completing $835,000,000 in dispositions during the year, at a cash cap rate of 7.1% on occupied assets. A weighted average remaining lease term of only four point nine years. This total surpassed the high end of our revised guidance range of $650,000,000 to $800,000,000 and exceeded the original high end projection by $235,000,000 The proceeds from these transactions were used to reduce outstanding net debt by $734,000,000 lowering our net debt to adjusted EBITDA ratio from 8.4x at the start of the year to seven seven point six times at the end of the year. We believe these strategic sales enhance the overall quality of our portfolio and position GNL for long term growth. Reinforcing our commitment to delivering value to our shareholders. Despite the significant volume of dispositions, including selling $63,000,000 in annual base rent our twenty twenty four AFFO per share totaled $1.32 remaining within our original guidance range of $1.3 to $1.4 highlighting the strength of our strategy and disciplined An additional highlight was delivering $85,000,000 in annual recurring savings as of third quarter of twenty twenty four, as a result of the merger and internalization with the Necessity Retail REIT.

Exceeding our initial target of $75,000,000 of cost synergies. This accomplishment underscores the strength of our integration efforts and our ability to unlock value from strategic initiatives. Another area of focus in 2024 was increasing portfolio occupancy, particularly through new leasing activity and attractive renewals. We raised occupancy rates from 93% as of the end of the first quarter of twenty twenty four to 97% as of the end of the fourth quarter twenty twenty four. Reflecting the strength and efficiency of our in house asset management team. This achievement not only enhances our revenue base, but also solidifies the resilience of our portfolio. Positioning us for sustained growth as we continue to meet tenant demand. On the leasing front, we achieved positive leasing spreads and comp with attractive renewal spreads that were 6.8% higher than the expiring rents, New leases that were completed in the fourth quarter of twenty twenty four have a weighted average lease term of nine point seven years while renewals that were completed during this period have a weighted average lease term of six point five years. Notably, the single tenant segment completed 14 new lease and renewals highlighted by a 6.5% renewal spread. And the multi tenant segment completed 58 new leases and renewals, resulting in a 7.1% renewal spread.

Last, our 2024 maturities. We successfully paid off all of the debt that was scheduled to mature in 2024 through dispositions or refinancing onto our revolving credit facility. We have no debt maturities until August 2025 and have proactively reduced our 2025 debt maturity balance from the $715,000,000 at original issuance to $465,000,000 We believe we'll have several strategic options to address that balance. Including refinancing through the revolving credit facility, an ABS transaction or an unsecured bond offering. We're excited about our recently announced transaction that we believe is in the best long term interest of GNL shareholders. And continues the momentum we achieved in 2024. We have entered into a binding agreement to sell 100 non core multi tenant properties to RCG Ventures Holdings. For approximately $1,800,000,000 at a cash cap rate of 8.4% This cap rate is based on the trailing twelve months of cash NOI as of Q3 twenty four. The RCG transaction would represent the most significant step in our strategic disposition initiative. And is expected to deliver a wide range of benefits from a clear focus on long term value. We believe the transaction is a disciplined and prudent approach to accelerating our debt reduction efforts and would result in a substantial decrease in net debt to adjusted EBITDA.

Which post transaction we expect to be in the range 6.5x to 7.1x. This meaningful improvement would enhance our ability to which we expect will lower our cost of capital and provide financial flexibility to fuel long term growth.

The buyer agreed to assume the two multi tenant mortgage loans and we expect to use the net proceeds to repay most of the outstanding balance leaving it largely undrawn and enhancing financial flexibility. The resulting lower leverage is expected to increase the potential multiple expansion close the valuation gap with our net lease peers and generate additional interest from institutional investors. Pure play single tenant net lease company without the operational complexities G and A expenses, and capital expenditures associated with multi tenant retail properties. We expect that it will enhance key portfolio and financial metrics, by reducing G and A by $6,500,000 annually, boosting occupancy to 98% and extending Walt to six point four years. Please refer to our investor presentation we recently filed for additional in As mentioned, we're taking this important step because we believe its long term benefits far exceed some of the near term effects.

Given that the transaction would impact earnings, the Board plans to reduce our quarterly dividend per share of common stock from $0.275 to $0.19 per share. Beginning with the dividend expected to be declared in April of twenty twenty five. We believe the dividend reset aligns well with our long term strategy of reducing leverage and increasing liquidity as it will generate $78,000,000 in incremental cash flow. Also pleased to announce that in addition to the RCG transaction, the Board has also approved a share repurchase program authorizing the company to opportunistically repurchase up to $300,000,000 of its outstanding common stock As I mentioned, this transaction has enabled us to deleverage at an accelerated pace creating the flexibility to consider share repurchases. An option that while possible without a sale would be impractical given our previous leverage levels. Our Board of Directors believes the stock buyback presents a more compelling and accretive opportunity for GNL compared to the real estate assets currently available in the market. In addition to the RCG transaction, during 2025, we expect to sell several non core properties in our single tenant portfolio.

Through 02/25/2025, this pipeline which includes transactions that are closed, under PSA and under LOI totals $2,100,000,000 at a cash cap rate of 8.5% on occupied assets and a weighted average remaining lease term of 5.6 Including both 2024 dispositions and the 2020 pipeline [indiscernible] anticipate completing nearly $3,000,000,000 in dispositions, by the end of the year while still retaining appropriate scale to operate efficiently. With approximately $6,000,000,000 of real estate assets. Turning to our portfolio. At the end of the fourth quarter, we owned over 1,100 properties spanning over $60,000,000 rentable square feet and a weighted average remaining lease term of six point two years. Our continued ability to limit exposure to high risk geography asset types, tenants and industries, is a testament to our portfolio's impressive diversification and credit underwriting. No single tenant accounts for more than 3.5% of total straight line rent and our top 10 tenants collectively contribute only 21% of total straight line rent. We carefully monitor all tenants in our portfolio and their business operations on a regular basis. Geographically, 80% of our straight line rent is earned in North America and 20% in Europe. Which we expect to shift to 7228% respectively, upon completing the multi tenant portfolio sale.

The portfolio features a stable tenant base and a high quality of earnings, with an industry leading 61% of tenants receiving an investment grade or implied investment grade rating. The portfolio features an average annual contractual rental increase of 1.3% which excludes the impact of 14.8% of the portfolio with CPI linked leases that have historically experienced significantly higher rental increases. I encourage everyone to look at the details of each segment of our portfolio which can be found in our Q4 twenty twenty four investor presentation on our website. We're pleased to have delivered on all the financial objectives we set for 2024. Reflecting a year of strong performance and disciplined execution.

Looking ahead, we're excited about GNL's future and the opportunities that lie ahead. In particular, the sale of our multi tenant portfolio would represent a pivotal step forward unlocking key levers to drive long term growth, while enabling us to sharpen our focus as a pure pure play net lease company. I'll turn the call over to Chris to walk through the financial results and balance sheet matters in more detail. [indiscernible] Thanks, Mike. Please note that as always, a reconciliation of GAAP net income to non GAAP measures can be found in our earnings release which is posted on our website. For the fourth quarter twenty twenty four, we recorded revenue of $199,100,000 dollars and a net loss attributable to common stockholders of 17,500,000.0 compared to $206,700,000 and $59,500,000 respectively in the fourth quarter of twenty twenty three.

AFFO $78,300,000 or $0.34 per share in the fourth quarter of twenty twenty four. Includes funds collected from Children of America a tenant that had not paid rent for the past two years leading to a switch to cash basis accounting in 2023. Through persistent negotiations and the unwavering dedication of our team, we successfully collected 4,500,000.0 in past due rent positively impacting AFFO adjusted EBITDA in the quarter. Shortly after the start of the New Year, we completed the disposition of Children of America office asset as part of our strategy to reduce exposure to office properties. Looking at our balance sheet, the gross outstanding debt balance was $4,700,000,000 at the end of the fourth quarter of twenty twenty four. Down by $256,400,000 from the end of the third quarter. Our debt is comprised of 1,000,000,000 in senior notes dollars 1,400,000,000.0 on the multicurrency revolving credit facility, and $2,300,000,000 of outstanding gross mortgage debt. As of the end of the fourth quarter of twenty twenty four, 91% of our debt is fixed, up from 80% as of December 31, 2023. Reflecting debt tied to fixed rates or debt that is swapped to fixed rates. Our weighted average interest rate stood at 4.8% and our interest coverage ratio was 2.5 times.

At the end of the fourth quarter twenty twenty four, our net debt to adjusted EBITDA ratio was 7.6 times, based on net debt of $4,600,000,000 As a reminder, our net debt to adjusted EBITDA was 8.4 times at the start of 2024. As of 12/31/2024, we have liquidity of approximately 492,200,000.0 and $460,000,000 of capacity on our revolving credit facility. Additionally, we had approximately $231,100,000.0 shares of common stock outstanding. And approximately 230,600,000.0 shares out We are pleased to introduce initial 2025 guidance which is contingent on the sale of our multi tenant portfolio. We project an AFFO per share guidance range of $0.9 and a net debt to adjusted EBITDA range of 6.5x to 7.1x. Additionally, as Mike mentioned, we expect the Board will reduce our quarterly dividends per share of common stock [indiscernible] $0.275 per share to $0.19 beginning with the dividend expected to be cleared in April 2025. I'll now turn the call back to Mike for some closing remarks. Thanks, Chris. Fiscal year twenty twenty four was a highly productive period for GNL. As we successfully executed our key financial objectives we laid out at the start of the We exceeded the high end of our disposition target with $835,000,000 in closed sales.

Further reduced net debt by $734,000,000 and surpassed our $75,000,000 cost synergy goal by achieving $85,000,000 $10,000,000 above our original estimate. Demonstrating the resilience and quality of our portfolio, we maintained strong leasing momentum throughout the year increasing occupancy from 93% as of the end of the first quarter of twenty twenty four to 97% by year end complemented by a positive renewal spread of 6.8% across the portfolio. Lastly, we proactively managed near term debt maturities. Successfully reducing the 2025 maturity balance by $250,000,000 since the original issuance strengthening our flexibility with multiple refinancing options. The sale of the multi tenant portfolio with Mark allowing us to accelerate our deleveraging plan and clear a path for sustained growth. By reducing leverage and strengthening our financial foundation, we believe we'll position ourselves to potentially a milestone that would significantly lower our cost of capital and borrowing costs while enhancing financial flexibility. Beyond the financial benefits, this proposed transaction would simplify and refine our portfolio. Aligning it with our strategic vision of becoming a pure play net lease owner and operator. The transaction is not merely a tactical move, but a strategic one. And we expect would reset the company to thrive over the long term.

It would strengthen portfolio metrics, bolster our balance sheet, and increase GNL's overall financial stability and flexibility. We view this transaction as a deliberate forward looking decision that prioritizes what is best for GNL over the long term. This comprehensive perspective is integral to our strategy and underscores our commitment to delivering sustainable growth and value for shareholders. We're available to answer any questions you may have after the call. Operator, please open the line for questions.

Thank you.

Now we can open the question and answer session.

Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star Our next question is from the line of Paul first question is from Upland Rao with KeyBanc Capital Markets. Please proceed with your question.

Right. Thanks for taking my question.

Good morning, Michael.

Good morning. Congrats on the deal. I'm just curious on the pricing the portfolio.

This where you expected to shake out or any other color there would be helpful? Thank you.

Sure. I think that the way we thought about it was This is a 100 property portfolio There's a great portfolio of shopping centers. We engaged with Bank of America and really look for the best buyer and our brought to the table a lot of different things that price is one important factor, but not the only important factor. Felt that their ability to execute [indiscernible] the way they approached the asset underwriting And what it accomplished for us, remember, we really had talked about a multiyear deleveraging strategy and I'm not saying we're finished deleveraging, the deleveraging in a way that has so many benefits not only from the G and A side of things, importantly, this singular focus on single tenant assets. So we feel that it's a good price. There aren't a lot of we'll call it, a $1,800,000,000 transaction in the market to evaluate against. So we were very satisfied We appreciated their timing, their speed, their ability to underwrite and this is going to be a great transaction long term for our shareholders. So we made the decision to go ahead.

Okay, great. That was helpful. And then just on RCG, you talked about a little bit about them already, but you have no reservations on them potentially making a to the finish line and closing the deal, correct?

No, we don't. We've known our RCG for a number of years in a much smaller relationship than this. But we certainly know them as professionals very capable of performing and frankly they may be a little bit on the unknown side of things, but very sophisticated backing and we have no reservations coupled with the fact that we have a $25,000,000 non refundable deposit and I know how motivated they are [indiscernible] We're making great progress for the first closing.

Okay, great. And just last one for me would be, you've raised the dividend again which certainly makes sense. But you are eyeing further dispositions, especially the office portfolio. Should we assume there could be more rightsizing the dividend again in the future once the office portfolio is addressed? [indiscernible] Never want to speculate far into the future, but I have to say we took a very fulsome approach to how we were going to issue guidance for 2025. We looked at everything. We looked at where we were. We looked at the pipeline and we looked at our goals for further leverage reduction. And we feel that this is a appropriate and prudent reduction in dividend one that gives us the safety of a strong payout ratio.

So we're very comfortable and confident where we are today. And I just would add on to that without kind of over answering. If you can all just think about between 2024 and when we close this deal with RCG, The company will have sold about $3,000,000,000 of assets in that period And that is over $200,000,000 of NOI So I think it's reasonable to understand. Nobody likes a dividend discuss it and approach it with the Board in any kind of casual way and the casually. But this is an appropriate reset of the dividend based on the fact that we're now a single focused single tenant portfolio where we will be upon closing That's about $6,000,000,000 of assets down from roughly 9,000,000,000 So I do think that it the logic of the reduction is there. And frankly, something that a number of analysts and investors have asked us about And I'll just end it by saying, I do think it's appropriate and I think we're well positioned for go forward.

Okay, great. That was helpful. That's it for me. Thank you.

And Upla, I'm also going to just ask you to remember, the fact that this is about $80,000,000 recurring free cash flow which is just again another important and strong thing for the company.

Great. Thank you. Our next question is from Eric Bordon with BMO Capital Markets.

Good morning, Eric.

Hi, good morning.

I just have a question on the portfolio sale. Was there a write down associated with that sale? Just correct me if I'm wrong, I'm I remember it was valued around $2,700,000,000 versus the $1,700,000,000 dollars of proceeds expected today. So just curious if you could provide any color there and what the delta is. I know there was some asset sales last year that may contribute to it, but if there's anything else that you could provide that would be helpful?

Trish, you want to take it? Mike, would you like Yes, I'd like to take it. So just a first the $2,700,000,000 that goes back to gross asset values that were previously on the RTL books. As opposed to what came over on GNL and where they stood on our books. And at this point, did not take a write down. We actually do expect when the transaction fully closes that we'll be in a position where we have a realized gain.

Okay, that's helpful. And then on the annual CapEx side, the reduction from $44,000,000 to 10 is definitely helpful in terms of the bottom line. [indiscernible] would have thought it would have been just a little bit lower given your net lease business model. So just anything Incremental there would be helpful. [indiscernible] Like just about every net lease REIT, there's a mix of triple net and double net. And as a proactive landlord, there's just certain works that need to be done that we budgeted for.

Okay.

And then how should we think about the use of proceeds in terms of a pecking order what is most what isn't your number one priority today? In terms of potential share repurchase, continuing to delever and acquisitions.

I will without hesitation tell you acquisitions is number three.

Least important.

I can't prioritize definitively leverage reduction with stock buyback because stock buyback the Board approved a $300,000,000 stock buyback and we will use it opportunistically and strategically But in the overall scheme of things, of course, the majority of the proceeds will be used for leverage reduction Chris and Ori and I are very excited about seeing our balance on our credit facility essentially taken to zero. The RCG transaction, they're assuming little over $400,000,000 of CMBS So it's just going to change our leverage profile of the company And just as important, it's also going to change our liquidity profile. So I would look very much forward to the time that acquisitions are interesting to us, But frankly, I'm a little under underwhelmed with what's in the market from an acquisition standpoint. [indiscernible] see cap rates and cost of debt and I don't see the same opportunities that I would have said existed probably five years ago, three years ago.

Fortunate timing for us because we're able to reshape the company at a time where being out of the acquisition market for the near term is actually a benefit. And we're really going to take advantage of that and be positioned when [indiscernible] present opportunities that are worth acquiring and seeing the accretion, I don't think that's near term.

Well, thank you very much. I will leave it there. Thanks, Eric. [indiscernible] Thank you. Our final question will come from Mitch Germain with Citizens JMP. Good morning, Michael.

Michael, please don't share the word acquisitions again. I'm just kidding.

Can You did so much, right, dollars 3,000,000,000 ish give or take. And while you probably want to at least rest a little, you have to get to ask the question what's net? Right. So obviously, you've mentioned an office exit is certainly something that you are potentially going to pursue Are there any barriers Because of you've got some debt outside The U. S. Are there any barriers or covenants that prevent you from doing something similar transaction in the office sector? Well, first of all, we've known each other a long time, Mitch. [indiscernible] there's no time for rest.

We're ready to go. We work very hard to get the RCG deal to a point where we felt that it should be announced and had the deposit nonrefundable. And then we turned right obviously to today.

I want to point out that The RCG transaction closing in three tranches. The first at the end of the first quarter, the March, the next two towards the June.

So we're going to be very busy making sure that everything is moving along Global assumptions, transfers, etcetera. I would like to point out post closing of the RCG transaction, G and L, 75% of our straight line rent is going to come from single tenant net lease, retail, industrial and distribution. Prior, that was only 55%. So we will be predominantly retail, industrial and distribution, which I think is a very valuable mix and have already spoken about opportunistic disposition that we will continue to look at. We have certain office properties that Our long term leases with great tenants that we feel very good about And we have others that we feel might be categorized or are categorized as non core that we will look to continue doing what I think we've shown the market we do really well.

Which is strategic disposition. Of non core assets. [indiscernible] we've put out full year guidance for 2025.

And we've taken into account some additional non core asset dispositions, [indiscernible] I think 2025 is pretty clearly designated.

We're looking forward to the execution. Again, something that I think we've shown the market we can do well We do execute just like we we exceeded our $75,000,000 of deal synergies. We dollars dollars We're going to just the pins are set up. We're going to knock them down. We're going to enjoy the deleveraging Getting in that sub-7x this quickly, you and I have talked about it, If we hadn't announced the RCG deal, I think we were probably one point five years to two years to achieve what we announced 2025 guidance. [indiscernible] great team. We worked really hard but there's still a lot that we're excited to see be a '25.

So is there any other sales over The $2,100,000 give or take billion dollars that you have on a slide deck in your investor presentation, is there anything else assumed on top of that? Or is that what's in your guidance today? I have a slide in the deck that I want to reference that talks about our pipelines. And Successfully executing disposition plan is the slide, Mitch. We can talk about it later today.

Yes. No, it's it's $2,000,000,000 and almost 2,100,000,000.0 And it's got stuff that's under PSA LOI I guess and I recognize some of it's closed also.

I recognize all that is what right now is under contemplation. I'm curious, does guidance assume anything on top of that right?

Because I would assume the bulk of this will be done by the end of the second quarter. So we still have six months after that less than the year So should we be thinking about other dispositions on top of the referenced on the slide right now?

I think that you should rely on the guidance that we put out for 2025 AFFO per share and the net debt to EBITDA takes into account what we're looking at for full year 2025 as far as additional opportunistic dispositions.

Okay, that's helpful.

Can you just talk a little bit about the the bidding process? I mean, I recognize I think you mentioned Bank of America helping out. Some relationship with RCG, but I mean, was this How many parties? I know that you may want to be careful what you share, but I'm just curious more or less kind of what how the process played out?

So I am going to be careful because I'll only talk to what we've disclosed publicly. But we did engage Bank of America to run the process It was a multi party process There were several bidders that were full portfolio bidders There were a number of bidders that were looking at breaking up the portfolio. But when we took into account RCGs interest in the full portfolio, their timing and ability to execute There were a lot of factors that went into the evaluation. They were clearly the best buyer for this portfolio and that's how the decisioning came to be.

Great.

Last one for me. I just circling back to that $4,500,000 So that's just a one timer, right, Chris? We should remove that from the run rate and it's sitting in operating rents right now?

Correct.

Okay, great. Thank you, guys.

Thank you.

Thank you. There are no further questions at this time. I'd like to hand the floor back over to management for Great. Well, thanks everybody. As always, we appreciate you giving us some time time to discuss what we think is really important We continue to be available. We look forward to talking to anybody that has questions. And we will continue to update you on the progress and success And this is a great way for us to finish up 2024 and kick off 2025.

So This concludes today's conference. You may disconnect your lines at this time.