Global Net Lease, Inc. Q4 FY2024 earnings call

• Achieved all 2024 financial objectives, including exceeding the $650 million to $800 million disposition guidance by $235 million, reducing net debt by $734 million, and achieving $85 million in cost synergies (exceeding the initial $75 million target).
• Increased portfolio occupancy from 93% to 97% through new leasing and attractive renewals.
• Successfully managed debt maturities, with no debt maturities until August 2025 and reducing the 2025 debt maturity balance to $465 million.
• Entered into a binding agreement to sell 100 non-core multi-tenant properties to RCG Ventures Holdings for $1.8 billion, expected to accelerate debt reduction and improve financial metrics (post-transaction, net debt to adjusted EBITDA expected to be 6.5-7.1 times).
• Board plans to reduce quarterly dividend from 27.5 cents to 19 cents per share starting in April 2025.
• Approved a $300 million share repurchase program.

In 2024, Global Net Lease completed $835 million in dispositions with a cash cap rate of 7.1% on occupied assets and a weighted average remaining lease term of 4.9 years. AFFO per share totaled $1.32, remaining within the original guidance range of $1.30 to $1.40. Occupancy increased from 93% at the end of Q1 2024 to 97% at the end of Q4 2024. The single-tenant segment had a 6.5% renewal spread, and the multi-tenant segment had a 7.1% renewal spread. The proposed sale of 100 non-core multi-tenant properties to RCG Ventures Holdings for $1.8 billion would transform GNL into a pure-play single-tenant net lease company, reducing G&A by $6.5 million annually, boosting occupancy to 98%, and extending weighted average lease term (WALT) to 6.4 years.

• 2025 AFFO per share guidance range: $0.90 to $0.96.
• Net debt to adjusted EBITDA guidance range: 6.5 times to 7.1 times.
• Quarterly dividend per share reduced from 27.5 cents to 19 cents, starting in April 2025.

Q: On the pricing of the multi-tenant portfolio sale, Michael Weil responded it's a good price and RCG is a capable buyer with a nonrefundable deposit.

A: Sure. You know, I think that the way we thought about it was this is a hundred property portfolio. There's a great portfolio of shopping centers. We engaged with Bank of America and, you know, really look for the best buyer, and RCG brought to the table factor, but not the only important factor. We felt that their ability to execute 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. But I am saying this accelerates the deleveraging in a way that has so many benefits, not only from the G&A side of things, but just importantly, this singular focus on single-tenant assets. So we feel that it's a good price. You know, there aren't a lot of, we'll call it, a $1.8 billion transaction in the market to evaluate against. So we were very satisfied appreciated their timing, their speed, their ability to underwrite and this is gonna be a great transaction long term for our shareholders. So we made the decision to go ahead.

Q: Eric Borton asked about write-downs on the portfolio sale, Chris Masterson responded there was no write-down and expected a realized gain.

A: Trish, you wanna take it? Mike, would you like Yes. I like to take it. So just to first, the $2.7 billion that goes back to gross asset values that were previously on the RTL book. As opposed to what came over on GNL and where they stood on our books. And at this point, we 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.

Q: Eric Borton asked about use of proceeds, Michael Weil stated acquisitions are least priority, with leverage reduction and stock buyback as priorities.

A: 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 million 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, know, 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 a little over $400 million of CMBS. So it's just gonna 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 underwhelmed with what's in the market from an acquisition standpoint, I 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. This is very interesting and fortunate timing for us because we're able to reshape the company at a time where being out of the acquisition market for, you know, the near term, is actually a benefit. And we're really gonna take advantage of that. And be positioned when markets present opportunities that are worth acquiring and seeing the accretion, we'll be in a good position to participate in that but I don't think that's near term.

Q: Mitch Germain asked about office exit and bidding process for the multi-tenant sale, Michael Weil discussed the bidding process involved multiple parties and RCG's suitability.

A: So I am gonna be careful because, you know, I'll only talk to what we've disclosed publicly. But we did engage Bank of America to run the process. It was a multiparty 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 RCG's interest in the full portfolio, their timing and ability to execute, you know, 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.

Q: Mitch Germain asked about the $4.5 million past due rent collection, Chris Masterson confirmed it's a one-time item.

A: Correct.