Global Net Lease Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2025

There are 8 speakers on the call.

Operator

Ladies and gentlemen, greetings, and welcome to Global Net Lease, Inc. First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

Operator

It is now my pleasure to introduce your host, Jordan Schonfeld, Senior Vice President of Investor Relations. Please go ahead.

Speaker 1

Thank you. Good morning, everyone, and thank you for joining us for GNL's first quarter twenty twenty five earnings call. Joining me today on the call is Michael Weil, GNL's Chief Executive Officer and Chris Mattresson, GNL's Chief Financial Officer. The following information contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please review the forward looking and cautionary statements section at the end of our first quarter twenty twenty five earnings release for various factors that could cause actual results to differ materially from forward looking statements made during our call today.

Speaker 1

As stated in SEC filings, GNL disclaims any intent or obligation to update or revise these forward looking statements except as required by law. Also, during today's call, we will discuss certain non GAAP financial measures, which we believe can be useful in evaluating the company's financial performance. Descriptions of those non GAAP financial measures that we use, such as AFFO and adjusted EBITDA, and reconciliations of these measures to our results as reported in accordance with GAAP are detailed in our earnings release and supplemental materials. I'll now turn the call over to our Chief Executive Officer, Michael Weil. Mike?

Speaker 2

Thanks, Jordan. Good morning, and thank you all for joining us today. Since completing our merger and internalization in September of twenty twenty three, we've made significant strides to elevate GNL across multiple industry benchmarks. On the governance front, we've strengthened oversight by broadening and diversifying our Board, enhancing transparency and putting in place practices that reflect our overall commitment to corporate governance. Operationally and financially, we launched an ambitious and disciplined initiative to materially reduce leverage, driven by our belief that a stronger balance sheet is essential to lowering our cost of capital, positioning the company for sustained growth and ensuring we have the agility to navigate periods of heightened uncertainty and market volatility.

Speaker 2

We believe these actions reflected clear strategic vision and a deep commitment to building a more resilient and well positioned company. We've been closely monitoring the tariffs that have introduced heightened uncertainty and volatility into the market. Our strategy has always revolved around building a net lease portfolio anchored by high credit quality tenants that are generally more resilient in uncertain economic environments, and we've been successful in this regard with 60% of our portfolio comprised of investment grade tenants. We believe our leases with a weighted average lease term of six point three years and 1.5% average annual rent increases tend to be less impacted by macroeconomic events relative to other asset classes. We also have a disciplined hedging strategy that addresses both interest rate and foreign currency volatility in order to mitigate risk and maintain consistent cash flows.

Speaker 2

Turning to the first quarter of twenty twenty five, we achieved a key milestone in GNL's strategic transformation with the signing of a definitive agreement for the sale of our multi tenant portfolio to RCG Ventures, the first phase of which has now been completed. This phase included 59 unencumbered properties, generating $1,100,000,000 in gross proceeds, and was completed on schedule reinforcing our ability to deliver on stated objectives within our long term strategy. Net proceeds were used to materially reduce leverage through a paydown of $850,000,000 on GNL's revolving credit facility, further strengthening our balance sheet and enhancing financial flexibility for future initiatives. We remain on schedule to complete the sale of the 41 encumbered properties by the end of the second quarter of twenty twenty five, which is expected to generate another $700,000,000 of gross proceeds. We believe one of the major benefits of this transaction is that it moves us closer to our goal of securing an investment grade credit rating, a central objective of our strategy to reduce our cost of capital and increase financial stability.

Speaker 2

We're encouraged by the growing recognition of our progress from the rating agencies, with both Fitch and S and P placing GNL on credit watch positive. These upgrades reflect the tangible steps we've taken to reduce leverage, enhance liquidity, and improve overall credit quality. We view this as another critical step in reinforcing financial strength and advancing GNL's strategic objectives. We're also making continued progress on a robust pipeline of non core dispositions beyond the multi tenant portfolio sale, which will also contribute to our deleveraging and further reduce net debt to adjusted EBITDA. As of May 1, we have a closed plus disposition pipeline totaling $2,100,000,000 Combined with the full multi tenant portfolio sale and our twenty twenty four dispositions of non core and vacant properties, we expect total asset sales to reach nearly $3,000,000,000 by the end of twenty twenty five.

Speaker 2

Assuming the successful completion of all pipeline dispositions on the expected terms, of which there can be no assurance, the streamlined portfolio would simplify and strengthen GNL, with notable improvements in key metrics such as investment grade tenancy, weighted average remaining lease term, and occupancy. Following these sales, GNL would own a high quality portfolio of net lease properties valued at approximately $5,500,000,000 providing meaningful scale and operating efficiency with a sharp pure play focus before the end of the second quarter of twenty twenty five. At the same time, we continue to take other deliberate steps to further strengthen our capital structure and mitigate risk. We've reduced our 2025 debt maturity balance from approximately $715,000,000 at original issuance to $459,000,000 as of the end of the first quarter twenty twenty five. We intend to pay off the maturing debt in the second quarter of twenty twenty five and warehouse the balance on our revolving credit facility, which now offers significantly greater availability and flexibility following the substantial paydown we recently completed.

Speaker 2

We believe these actions position GNL to effectively navigate upcoming maturities from a position of strength while maintaining ample liquidity for strategic initiatives. Along with our multi tenant portfolio sale, we announced that the Board approved a $300,000,000 share repurchase program, allowing the company to accretively buy back its outstanding common stock. Through 05/02/2025, we've repurchased 7,900,000.0 shares at a weighted average price of $7.5 totaling $59,000,000 of share repurchases. Repurchasing shares at a significant discount to NAV reflects our strategic approach to capitalize on the opportunity presented by our undervalued stock price in an accretive way. We intend to continue share repurchases, taking advantage of the compelling opportunity to buy back shares at an AFFO yield of approximately 12%.

Speaker 2

At the same time, we're continuing our disciplined approach to non core asset sales and overall leverage reduction as we further strengthen our balance sheet. Turning to our portfolio. At the end of the first quarter, we owned over 1,000 properties spanning over 51,000,000 rentable square feet. The portfolio's occupancy currently stands at 95% with a weighted average remaining lease term of six point three years. Occupancy was temporarily impacted by the vacancy of Contractor Steel, a privately owned and operated full service steel supplier that occupied nearly 1,400,000 square feet.

Speaker 2

Despite the sizable footprint, this tenant represented just 1% of total straight line rent. Contractor Steel encountered financial difficulties and vacated in the first quarter of twenty twenty five. Following their departure and subsequent to Q1 twenty twenty five, we sold all five vacant properties for a combined $60,000,000 having proactively marketed the assets early upon learning of their financial distress, which helped minimize vacancy downtime. Including the sale of these properties, our pro form a first quarter of twenty twenty five occupancy would be 98%. We view this as a favorable outcome as it immediately reduced vacancy with minimal impact on the broader portfolio.

Speaker 2

Geographically, 76% of our straight line rent is earned in North America and 24% in Europe. Unlike many net lease peers, our exposure to Europe differentiates us by providing diversification across economic cycles and the ability to capitalize on unique market opportunities not typically available in The U. S. The portfolio features a stable tenant base and a high quality of earnings with an industry leading 60% of tenants receiving an investment grade or implied investment grade rating. The portfolio features an average annual contractual rental increase of 1.5, which excludes the impact of 18.7% of the portfolio with CPI linked leases that have historically experienced significantly higher rental increases.

Speaker 2

On the leasing front, we achieved positive leasing spreads encompassing over 826,000 square feet with attractive renewal spreads that were 8.2% higher than expiring rents. New leases that were completed in the first quarter of twenty twenty five have a weighted average lease term of five years, while renewals that were completed during this period have a weighted average lease term of six point six years. We have some additional updates regarding our portfolio. In April, we received written notice from the General Services Administration revoking its previous intent to exercise termination rights related to its lease at our Class A office building in Franklin, Tennessee. As a result, the existing lease agreement with the GSA remains in full force and effect, and we look forward to continuing our strong relationship with the GSA for many years to come.

Speaker 2

In addition, we've taken proactive steps to reduce our exposure to the gas and convenience store sector, an industry undergoing structural shifts in consumer behavior, fuel demand, and evolving transportation trends. As part of this effort, we started to strategically scale back our concentration to certain tenants within the segment. This decision reflects our disciplined approach to portfolio management and our ongoing focus on reallocating capital toward higher growth sectors that better align with our long term strategic vision. 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 4.3% of total straight line rent, and our top 10 tenants collectively contribute only 26% of total straight line rent.

Speaker 2

We carefully monitor all tenants in our portfolio and their business operations on a regular basis. I encourage everyone to look at the details of each segment of our portfolio, which can be found in our Q1 twenty twenty five investor presentation on our website. We're encouraged by the meaningful progress made on the sale of our multi tenant portfolio, which is a pivotal step in GNL's strategic transformation. We believe this transaction unlocks key levers to support long term growth while allowing us to sharpen our focus as a pure play net lease REIT. We also believe the considerable uncertainty in the current market environment makes this a particularly opportune moment to bolster our liquidity position.

Speaker 2

With incremental cash on hand and enhanced capacity on our revolving credit facility, we'll remain disciplined and deliberate as we navigate the current market. I'll turn the call over to Chris to walk through the financial results and balance sheet matters in more detail. Chris?

Speaker 3

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. We also want to emphasize that first quarter twenty twenty five earnings and leverage metrics reflect the full benefit of NOI from the unencumbered assets sold as part of the multi tenant portfolio sale, consistent with what we anticipated on establishing full year guidance. For the first quarter of twenty twenty five, we recorded revenue of $132,400,000 and a net loss attributable to common stockholders of $200,300,000 which we anticipate will significantly improve upon closing the remainder of the multi tenant portfolio sale. AFFO was 66,200,000 or $0.29 per share.

Speaker 3

Looking at our balance sheet, the gross outstanding debt balance was $3,900,000,000 at the end of the first quarter of twenty twenty five, down by $1,300,000,000 from the end of the first quarter of twenty twenty four. Our debt is comprised of $1,000,000,000 in senior notes, $547,000,000 on the multi currency revolving credit facility, and $2,300,000,000 of outstanding gross mortgage debt. As of the end of the first quarter of twenty twenty five, '90 '1 percent of our debt is fixed, reflecting debt tied to fixed rates or debt that is swapped to fixed rates. Our weighted average interest rate stood at 4.4% and our interest coverage ratio was 2.5 times. At the end of the first quarter of twenty twenty five, our net debt to adjusted EBITDA ratio was 6.7 times based on net debt of $3,700,000,000 As a reminder, our net debt to adjusted EBITDA was 8.4 times at the end of the first quarter of twenty twenty four.

Speaker 3

As of 03/31/2025, we have liquidity of approximately $499,000,000 and $1,400,000,000 of capacity on our revolving credit facility. Additionally, we had approximately $229,000,000 shares of common stock outstanding and approximately two thirty million shares outstanding on a weighted average basis for the first quarter of twenty twenty five. As of 05/02/2025, we repurchased 7,900,000.0 shares at a weighted average price of $7.5 per share under our share repurchase program, resulting in approximately $223,000,000 shares outstanding. As Mike mentioned, given the potential for additional turbulence in the market, we've continued to take proactive steps to strengthen GNL's balance sheet and overall financial position, which we believe is the most prudent action we can take. In addition, we continue to implement our hedging strategy using FX forwards to lock in foreign exchange rates for three to four years out.

Speaker 3

This approach is designed to mitigate risk and reduce cash flow uncertainty during periods of market volatility. We remain focused on enhancing liquidity and maintaining financial flexibility, leaving us well positioned to navigate any market conditions. Turning to our outlook for the remainder of 2025. Based on progress to date, we are reaffirming our AFFO per share guidance range of $0.90 to $0.96 and our net debt to adjusted EBITDA range of 6.5 times to 7.1 times. I'll now turn the call back to Mike for some closing remarks.

Speaker 2

Thanks, Chris. Looking ahead, we're encouraged by the meaningful progress we've made in executing on our strategic priorities. The first quarter of twenty twenty five was a significant turning point as we took deliberate steps to simplify our portfolio, strengthen our balance sheet and enhance financial flexibility. We have a clear focus on creating long term value, reflected by the successful execution of the first phase of the multi tenant portfolio sale, combined with our additional disposition pipeline and proactive debt reduction efforts. We remain on track to close the other two tranches of the multi tenant portfolio sale in the second quarter of twenty twenty five, marking another important milestone in our transformation.

Speaker 2

With a simplified asset base, reduced leverage and increased liquidity, we believe GNL is better positioned to operate efficiently and pursue opportunities that align with our strategic vision. We believe the actions we've taken have significantly improved our ability to navigate today's market environment while setting the stage for durable growth. Disciplined execution and the strategic deployment of capital towards initiatives that enhance long term value remain at the core of our approach. These are foundational decisions designed not just to improve short term metrics, but to drive long term resilience and performance. We're excited about the future and confident in our path forward.

Speaker 2

We're available to answer any questions you may have after the call. Operator, please open the line for questions.

Operator

Thank You may press and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. The first question comes from the line of John Kim from BMO Capital Markets. Please go ahead.

Speaker 2

Good morning, John.

Speaker 4

Good morning. On the disposition pipeline of $2,100,000,000 can you break down the remaining $300,000,000 that's not part of the multi tenant portfolio sale by either sector or geography?

Speaker 2

In our filed materials and pipeline report, we have done that. A lot of that is disposition pipeline that has been underway since the end of 'twenty four into 'twenty five. It's more of what you saw in 2024 of what we have identified in the portfolio as non core. And it's just a continuing part of how we're looking at the further deleveraging.

Speaker 4

Michael, you alluded to the volatility in the financial markets since the tariffs were introduced. How much do you think that will impact your ability to sell or pricing that you're looking to achieve?

Speaker 2

I I think we're gonna continue to see opportunity to sell the assets, in market typically to either local private buyer or ten thirty one buyer for the most part. We've also seen opportunities and have taken advantage of certain markets where, repositioning of an asset through a developer sale has has continued to be strong. So we're not seeing a a big change from what we experienced in in 2024, as it relates to the disposition strategy. Again, it's, I think, really enhanced by the relationships that we have with the brokers in community. You know, we've never set out to to just have one large national brokerage firm handle all dispositions.

Speaker 2

And the the relationship with brokers, I'm always, grateful for how well they know their markets, how hard they work. And, their interests are aligned with ours. We want to sell the property. They want to earn a commission. So they do great work for us.

Speaker 4

On the share repurchases, you you mentioned you you achieved a 12% AFFO yield. Is that the hurdle rate that you're looking for on future, future buybacks?

Speaker 2

You know, we we are certainly very pleased with where we've been executing on the buyback. It is very opportunistic for us to be at this level. It's kind of a blessing and a curse, John. There's nothing I'd like more than, you know, to be approaching double digit stock price. But while this work that we're doing is taking hold, and we've talked about the improved liquidity, the lower leverage, the great leasing that we had in the quarter, the continued dispositions, it's very rewarding for us to see the opportunity to buy back shares to the long term benefit, the accretion.

Speaker 2

There's no real estate that a company could buy right now that's equal to the value of what we're doing. Not only are we reducing the outstanding share count, as you know, but we're we're buying shares that we feel are materially undervalued and and trading at too big of a discount to NAV. So I was very pleased when the board approved our buyback, and we were able to announce it. And to to buy back nearly $60,000,000 of stock this quickly was probably faster than I had anticipated. But the opportunity being what it was, we jumped in.

Speaker 2

We'll continue to monitor the AFFO accretion, the hurdle as you put it. We still think there's opportunity here. But again, I'd like nothing more than to see this to be, the combination of the results of the second quarter, what really gets the stock moving and and closes that gap that that we see to value. So it's it's a great way to add to what we're doing.

Speaker 4

Great. Thank you.

Speaker 2

Thanks, John.

Operator

Thank you. We take the next question from the line of Upl Rana from KeyBanc Capital Markets. Please go ahead. Hi, Upl.

Speaker 5

Great. Thanks. Hey, good morning out there. So, just on the buyback, I was wondering if you share your strategy on the capital allocation in this pecking order where you see buying more shares or paying down more debt or potentially buying assets again in the future?

Speaker 2

Well, we would love to have the the market come to us in a way that that makes buying assets accretive and interesting, but we're not there right now. And we don't see the market being very interesting as well. What is coming to market, I don't I don't really see as, interesting or long term valuable. We're very focused, as you know, on reduction of leverage and opportunistic buyback of shares. It is something that we talk about internally, look at with the board.

Speaker 2

And as we confirmed in our earlier comments, we are reaffirming guidance. And in our 2025 guidance, we gave our leverage metrics of 6.5 to 7.1 times. They're just the ongoing execution of the business model, which includes dispositions, it includes leasing. So leverage and buyback are not the only two levers that will have a direct impact on our overall net debt to EBITDA. So, we're mindful.

Speaker 2

We're very mindful of leverage, because we think, the continued lowering of leverage is going to have a a meaningful impact on our cost of capital. And it's gonna open some doors for the company. We've talked about our you know, one of our mid to we'll call it a midterm goal is achieving investment grade rating. We know that that's going to occur, through the continued execution of our plan to lower leverage. So I'm actually really proud of the work we're doing because we're we're addressing a number of important things.

Speaker 2

It's a lot of focus. It's a lot of great execution, you know, between the the asset management teams and the dispositions, the overall capital desk and how we're handling the stock buyback, great work, Chris and his team managing the credit facility and just the increased liquidity that the company has at the end of the the first quarter, is really meaningful. So, you know, a a lot of really good things to focus on for GNL. And, you know, I I I think that, we're starting to get some recognition for the direction that we're taking the company. And, you know, I I always like to talk about sticking to your knitting.

Speaker 2

I feel like we're really sticking to our knitting. And we're not getting distracted, and we're just doing the things that are gonna create long term value. You know, it's funny. In one quarter, it's almost like, you know, the the the announcement of the sale of the multi tenant portfolio was a huge announcement because of what it does long term for GNL, simplifying the story. We closed that big first tranche.

Speaker 2

We're on track to to execute in the second quarter the remaining pieces of that transaction. So, the word transformative gets used too often, I feel. But I think the first half of twenty twenty five has really been transformative for us. And we're looking forward to second quarter results and moving on from here.

Speaker 5

Okay, great. That was helpful. And then just on the credit rating upgrade, maybe you can share some of the conversations you've had with some of the credit agencies and potential timing there. And maybe you can share, if you were to get an upgrade, what this potential savings could look like.

Speaker 2

Yeah. I'm I'm gonna be a little close to the chest on that one because, you know, the the conversations, of course, are confidential between the agencies and the company. But you saw from their announcement that we were credit watch positive, that they are following the company. And they see the value in lowering leverage and and what it does for us. You know, I I think from our longer term view, eventually being able to access what I'll just call investment grade debt opportunities, you know the the value of that for the company.

Speaker 2

And right now, we've given 2025 guidance. We we've got AFFO guidance of 90 to 96¢ per share. That takes into account how we're thinking of everything inclusive of debt costs in 2025. So I think that that would probably be something that we're more looking at from a guidance standpoint for 2026.

Speaker 5

Okay. All right. Thank you. And then just last one for me. Just on the strategy of the kinds of disposition you're targeting moving forward.

Speaker 5

With the multi tenant portfolio, obviously, it's a big announcement, but just given that's mostly out of the way and you have mentioned in the past, the office portfolio will likely be sort of one off. What else is there to do in your portfolio to recycle?

Speaker 2

Well, we're looking at some of the retail opportunities in the portfolio from a disposition standpoint. We are, as you mentioned, there are opportunities for dispositions in the office as well. We're a large portfolio. After the multi tenant disposition, we'll be just over a thousand properties. So we can really take a very granular review of the portfolio, and and kind of look at our long term goals.

Speaker 2

And I've I've spoke about that last quarter. You know, obviously, we we see continued value industrial and retail for long term growth. We've got good value and a lot of investment grade tenants in our office portfolio, but it's not something that I'd like to see grow. So we will opportunistically, sell at value from from that portfolio. But, you know, the there as I said earlier, we're we're pleased to see the the level of buyers.

Speaker 2

We've been able to continue our our velocity of dispositions, And it'll help us achieve the goals that we've already stated.

Speaker 5

Okay, great. Thank you.

Operator

Thanks. Thank you. The next question comes from the line of Mitch Germain from Citizens JMP. Please go ahead.

Speaker 2

Hi, Mitch.

Speaker 6

Hey, good morning. Congrats on the quarter.

Operator

Thank you.

Speaker 6

When looking at the I can just look at the amount. Obviously, I don't have a lot of the details of your disposition pipeline. But if I look at that amount, what was either agreed under contract or closed from last quarter to this quarter, since fairly static. Again, some of the assets might have gone in and out. I'm just I'm curious though, like you've got a pretty big amount of sales plan for this it looks like this upcoming quarter.

Speaker 6

What's next? I mean, you continue to remain aggressive from an asset sale perspective as long as there is something to do with those proceeds?

Speaker 2

So Mitch, you always ask good questions that have a it's a tough direct answer to give because there's a balance in how we look at dispositions. Obviously, we want to see dispositions and use of proceeds related to leverage, which we've done and will continue to do. But at the same time, it's very important to us to monitor and understand our NOI and earnings side of the business as well. So it's not just an absolute open the door, sell it all down. Because we think what we're doing is intentional and will create the the type of value that we're looking for.

Speaker 2

We think that it will be what closes the gap, the trading gap, to share price to NAV. We also have the benefit, as you know, of the buyback in in doing that. So we're regularly evaluating where we are, regularly evaluating leverage, and also, you know, what the what the market opportunity is for disposition. I you know, between calendar year '24 and calendar year '25, we'll have sold a a a pretty material amount of of assets at a meaningful price. So I I believe what we projected for 2025 in our guidance, a, will achieve, and b, will move us to achieve the goals that we've stated.

Speaker 2

Okay. At 3,000,000,000, by

Speaker 6

the way, is what you're selling, which is pretty impressive.

Speaker 2

Yeah. Yeah.

Speaker 6

How should I think about some of your commentary regarding C stores? I mean, are some of those properties in your disposition slide in your presentation? Or is that something that could be considered going forward as potential sale candidates, as you mentioned, retail, in addition to office?

Speaker 2

Well, it was one of our larger sectors in the portfolio. So, yes, we did think as as we've looked at different things, the the the macro view on fuel prices are are well, the the refiners are are under some pressure. The convenience store with labor rates going up are under pressure. So we try to take a a a longer, earlier view of what is changing or, you know, sometimes it's changing for good, sometimes it it gives us concern. So we have, been lightening our exposure to gas and convenience and that I expect you'll see will continue.

Speaker 6

Gotcha. Last for me. I guess you had that you talked about a situation with a tenant Contractors Steel, sorry.

Operator

Yes.

Speaker 6

I hate asking about watch list, but you talked about C store and trying to get ahead of potential headwinds there. Is it rather than say what's happening with your watch list, is there anything that you're looking in your sector that might be a candidate for sale just because looking out how the trends or your view on the sector trends are materializing may create an opportunity to get ahead of headwinds. Is that kinda anything that come to mind, other than c stores?

Speaker 2

Yeah. I'm gonna be a little bit coy because sometimes as we're looking to dispose of things, it that's not the type of commentary we'd like out in the market. But, yes, it is it is absolutely part of the strategic review that Ori and his team do on a on a regular basis. You know, sometimes it's easier to talk about it after the sale, and I can explain our logic of of how we are looking at at a certain sector, etcetera. But, you know, the First of all, the real estate is really good real estate.

Speaker 2

It's well located. Whether it's gonna continue its existing tenant and and operation, or whether because it's located at a main and main location somewhere in a market in America where people live and work. There's a lot that can be done with these types of properties. It's always what we've liked about single tenant net lease. So I I think the important thing to to really focus on is the the the watch list is important, but the asset management review that we're constantly doing, we we know the opportunities.

Speaker 2

You know, sometimes it's because a developer reaches out to us and all of a sudden is very interested in the property. We're able to to get out to that market, see what's going on, figure out what the highest and best use is. You know, sometimes the great offer isn't great enough. And other times, you you kind of start to see that, okay, things are long term, a little bit different than when we bought the property five or six years ago. So we wanna we wanna get ahead of it.

Speaker 2

But it all goes hand in hand. Great real estate, understanding the financials, understanding the sector, and then making decisions, hopefully, you know, while there's still great value in the property.

Speaker 6

Thank you.

Speaker 2

Thanks, Mitch.

Operator

Thank you. The next question comes from the line of Michael Gorman from BTG Batchel. Please go ahead. Hi, Michael.

Speaker 7

Hi, good morning. Just a quick one. Sorry if I missed it, but did contractors pay any rent in the first quarter?

Speaker 2

I'm looking at Ori. Sorry,

Speaker 3

Michael. They did not.

Speaker 2

Thanks, Chris.

Speaker 7

They do that. Okay, good. That's helpful. Thank you. And then just obviously appreciate the affirmed guidance.

Speaker 7

I wonder if you could just help us think through just given the number of moving parts, right? You had the solid first quarter. It implies kind of 21 the midpoint of the guidance implies kind of like $0.21 a share pro rata over the balance of the year. But given the timing of the sale in the second quarter, I doubt it's going to be pro form a. So can you help us maybe think through in a little bit more detail kind of what the run rate looks like or maybe just what the back half of the year looks like once the second and third tranches of the multi tenant deal are closed from an AFFO perspective?

Speaker 3

I guess, Mike, I can just quickly jump in because I think I could probably help Yeah, go ahead. Point something out here. Michael, so if you take a look at the income statement, the way that it's broken out, we had to disclose discontinued operations, which is effectively the entire multi tenant portfolio and everything that will be sold. So the income statement itself already strips out the multi tenant. And then in terms of a go forward, I just do want to bring up again, we disclosed it last quarter, that the G and A is expected on an annualized basis to decrease by about $6,400,000 a year due to this multi tenant sale.

Speaker 7

Got it. That's helpful. And then maybe just last one from a transaction perspective. Obviously, think it makes a lot of sense strategically and from the capital structure to sell down the vacant assets and use that to reduce the debt load and repurchase shares. I'm just curious kind between last year and then what's in the pipeline for this year, it's about 140 vacant assets.

Speaker 7

I'm just curious, Michael, is that basically the preponderance of the vacant assets that are in the portfolio? Is there still a sleeve there that would be potentially a source of future proceeds? Or how should we think about that?

Speaker 2

Michael, I'm sorry. I I was trying to look through some information as you were asking the question.

Speaker 3

Will you ask

Speaker 2

me that one more time? Yeah.

Speaker 7

Sure. Of course. So between last year and kind of what's in the pipeline, it's about 140 vacant assets that are either closed or set to be closed. Is that the bulk of the vacant assets in the portfolio? Or are there more potential vacant sales available to you to be able to pay down

Speaker 2

you. Well, no. Because as you saw from our release, we're going to be about 98% occupied in the second quarter after the completion of the multi tenant sale. We see that going up a little bit from there, just from leasing, etcetera. So, no.

Speaker 2

There's not a lot of vacancy left in this portfolio. You're you're really gonna get used to seeing us reporting in what's typical for a single tenant net lease REIT.

Speaker 7

Great. Thanks for the time.

Speaker 2

All right. Thank you, Michael.

Operator

Thank you. Ladies and gentlemen, as there are no further questions, I would now hand the conference over to Mike Weil for his closing remarks.

Speaker 2

Mike? Well, you, everybody. We always appreciate you taking the time to to catch up with us and to see the progress that GNL's making. As I said a little bit earlier, really proud of this work that we're doing. It is we're all very focused and starting to see the benefits of these conclusions.

Speaker 2

So thanks again. If you have any questions, we look forward to following up. We'll talk to everybody soon. And I guess we'll see most of you at NAREIT in a couple of weeks. So, talk to to everybody then.

Speaker 2

Thank you.

Operator

Thank you. Ladies and gentlemen, the conference of Global Net Lease has now concluded. Thank you for your participation. You may now disconnect your lines.

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Key Takeaways

  • GNL completed the first phase of its multi-tenant portfolio sale, monetizing $1.1 billion in unencumbered properties and using net proceeds to pay down $850 million of revolving credit debt, with a second phase of $700 million in encumbered assets due by end-Q2.
  • Net debt to adjusted EBITDA fell to 6.7× from 8.4× a year ago, prompting Fitch and S&P to place GNL on credit watch positive as the company pursues an investment grade rating.
  • The Board authorized a $300 million share repurchase program and has repurchased 7.9 million shares at $7.50 apiece (~12 percent AFFO yield), aiming to capitalize on undervaluation and boost per-share metrics.
  • Core portfolio remained resilient, finishing Q1 at 95 percent occupancy (pro forma 98 percent), with 60 percent of rent from investment grade tenants, a 6.3-year weighted average lease term, and 1.5 percent annual rent escalations.
  • GNL reaffirmed full-year 2025 AFFO guidance of $0.90–$0.96 per share and net debt to adjusted EBITDA target of 6.5×–7.1×, reflecting confidence in its deleveraging and disposal initiatives.
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Earnings Conference Call
Global Net Lease Q1 2025
00:00 / 00:00