GNL - Earnings call transcript Q2 2020

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Operator

Good day, and welcome to the Global Net Lease, Inc.

Second Quarter 2020 Earnings Conference Call [Operator Instructions]. Please note, this event is being recorded. And I'd now like to turn the conference over to Louisa Quarto. Please go ahead.

Louisa Quarto

Operator. you, Thank and Second everyone, for us joining Good XXXX thank Earnings GNL's Quarter Call. for morning, you This call is of being webcast in the at GNL's Investor www.globalnetlease.com. website Relations section

you are forward-looking to Joining Chris and statements, Chief following the that the which today date XXXX, The SEC GNL's GNL's call including Officer. filed call. for a contains for are me as quarter's only provided Executive differ these the risk subject discussion statements. all on Masterson, XX-K XX, XX, Any implied differences. to uncertainties February the this materialize, results information Jim with Financial or of our these and to risks XXXX, the or of statements all made risks call Officer; year and refer more are expressed detailed of results during of We conference uncertainties. Form materially Nelson, on Chief discuss may other date Should by December those that one the could or cause filings, forward-looking this the more factors from actual after of ended filings the SEC forward-looking

over substitute or with a company's These accordance measures performance. as financial our we about information should to Jim? our prepared some a what turn intent in law. today's call, can Jim the these filings, tenants, I'll now investment-grade release term SEC considered stated our which refer evaluating our believe at is be disclaims the GAAP obligation to www.globalnetlease.com. discuss in non-GAAP in use more required A Please are GNL will revise we As we update posted to release measures isolation throughout call. useful we to comparable the these to website be financial Also, measure or of which available forward-looking earnings GAAP. any be will earnings not as our in our except supplement, in CEO, today's directly statements, for call or and by during for measures, financial also implied to reconciliation results Nelson. most consider

James Nelson

Good again for call. and Louisa. joining you, us today's morning, Thank on thanks everyone,

unlike think that experienced the I proud has performance. long presented, I've quarter my in challenges was say to of Despite quarter our career. that the any second it's COVID safe I'm solid

quality, the payable, we quarter, of historic over European the the XX% built a the that collected to have of cash large XXX% our from from tenants For our GNL U.S.-based our over relationships XX% due and rent our payable excellent assets. and in rate credit to other with XX cash including this assets, payable our tenants our cash we diligence were and On from geographic the rent of tenants. We that part rents U.K.-based underwriting collected top attribute from XX% years. collection on emphasis XX% basis,

last a the been equally significant fronts have in X at agreement we during I and a closed and refinancing second of excellent debt the the the of our million rent collecting European our over completed throughout rate EUR crisis, the step we as in interest same via swap with We France, successful on transactions July on in early other excited negotiated financing While time. about in of fixed was loan X.X%. the which quarter XX all achievements COVID am

million, million. all We almost bringing acquisitions U.S. year-to-date all in located by collateralized of excellent assets total interest also of loans Corporation the or aggregate office We our our completed X X.XX%, at new rate on an properties acquisitions, and $XX $XXX to the Whirlpool U.S. of total industrial closed for in million an $XX

have actively softened. engaged cap flow overall onset acquisitions years second of and has to a average acquired acquisition We were the the and the XX.X rate weighted of The term deal in at remain marketplace COVID, And quarter Since remaining lease average buyer, evaluate to of had many continue we pricing that an opportunities. X.XX%. a made we sellers In as similar establish see yet from will converge our have attractive potentially although believe not their and adjusted more historical expectations. normal. cap We rate changes asks to over current a cases, new, targets time, bids precedent.

fully property Our term up X,XXX,XXX,XXX X.X leased, nearly a years, of average year with a X XX.X% remaining portfolio is ago. occupied lease years at from weighted

expirations the lease annualized in Europe, leases. of in XX% embedded XXXX XX% no and respectively. Western revenue, is have representing rent XX and growth our and Canada over XXX of rent the U.K. are U.S. and and our of We properties are contractual in XX%

Our is Europe distribution bring from dispositions and pandemic, XX% in currently XX% our our X% assets retail and current XX% and affected XX% and to first advance the industrial focus by employees of office, straight-line by success of distribution comes XX% X% to businesses is property a back when were been distribution and work. tenant employers assets an Contributing years. continues make year our segment industrial year-over-year to mix industrial growing the measured in among significant straight-line industrial compared investment-grade the ago. to and This rent. the Across XX% to COVID-XX and the to Industrial fortuitous and investment-grade increasingly was implied retail retail some distribution and evolve office, where on of or up over acquisitions U.S. tenants. portfolio, rent have particularly the several portfolio, XX% credit, last of shift nearly our least of and

assets Metal the Other single-tenant, similar Whirlpool as properties industrial to industrial million to that year-to-date. transactions over with well we are to acquisitions $XX our and office be of totaling seeking distribution sale-leaseback the have CSTK, along acquisitions Our other investment-grade and Grupo NSA. office acquisitions These meet leased to that currently investment we tenants, industrial tenants include are properties and criteria, Technologies, of been Finnair, those such tenants focus as as Though with segment acquisitions in accretive included in Italy completed Industrial and this continue leased Auchan our U.S. portfolio. Antolin. and Corporation Klaussner the always populate has segment significant opportunistic will on our mission-critical

Turning to our highlights. financial

decreased year-over-year from revenue $XX.X portfolio million X.X% turn to year-over-year operating follow in previous operating the net quarter. $X.XX income in closing before with in the the results Total that, up tenants shareholders. quarter common million detail over AFFO $XX.X The more a increases share. and was $XX.X I'll call up in net grew and and Our On from $XX.X million million. through million walk company operating to per per basis, income. revenue I With XXXX share was $XX.X to Chris? to $XX.X dividends produced to million distributed the in to second X% some AFFO Chris from X.X% remarks.

Christopher Masterson

Thanks, year. Jim. prior We improved to posted the for financial results second quarter the compared

second compared adjusted $XX million of reported $XX.X the XXXX, we in EBITDA million For to XXXX. quarter

stock to share that last $X.XX The from and mentioned, to with million, FFO stockholders and Jim AFFO to paid income the we As common a per dividends quarter. respectively common of issued million additional the were of X.X% increased $XX.X or attributable expense for $XX.X interest year. $X.XX $X slightly reported $XX.X share over also and $XX.X shares to million. company due million, increase revenue net million per $X.XX in and decreased

measures release. a be can As reconciliation the to of our income net always, non-GAAP in found earnings GAAP

sheet, the net average balance quarter $X.X interest with On ended at the rate billion X.X%. we a of second debt of weighted

debt improvement term and the of debt mortgage the weighted credit $X.X net at second debt. approximately X.X the the billion coverage swaps. on from The was end company million which average debt in-place the rate maturity years, has debt with well-cushioned is interest Our an the XX% inclusive ratio on XXXX fixed of the the ratio quarter. facility, loan This of to at our of gross of $XXX.X XXXX include EBITDA X.X $XXX.X floating quarter The a quarter. million adjusted X.Xx of rate, X.Xx. interest Components was was at end multicurrency debt close revolving outstanding rate is years of which second

approximately was As million. $XXX.X of XXXX, June XX, liquidity

XX.X%, $XX.XX enterprise Series Series $X.X preferred based of shares enterprise debt price value for value $XX.XX an and net to June on with for closing Our share A $XX.XX shares, was common XX, XXXX billion of This call back the market starting took last that disruption across for the the preferred I'll place Jim that, was shares. in industry closing the turn ratio With to impacted remarks. by half B for some of February.

James Nelson

of our relationships cash XX% over collecting foundations encouraged based we through our million payable shareholders, AFFO with built great quarter, Chris. by quarter We very that $XX.X Thanks, the am to I common million despite generating on a and rent in had accomplished successfully tenants. dividends the challenging underwriting and in the have $XX.X the we've second distributing all circumstances. formed we of

built On our several emphasizing have to be these durable. been we last is over calls how the years, portfolio

our this given that results in potential out. that our recognize exposure. quarter this Our that stock, value an we was existing hope limited bear stockholders particularly very on I our still risk realized stockholders believe this present proof-of-concept Based potential and excellent the quarter is this,

hedging to focus these summer. financing an and half like maintaining hope all efforts business rest the enjoyable to to you arranging in our and look strategy. this success, of our plan We activities favorable ongoing second of executing our the on on will continue and that of continuing critical year while are We the forward have healthy

we operator, open As your line for can for support. that, the With always, thank questions. you continued

Operator

our Instructions]. [Operator B. Maher FBR. will come Bryan Riley today question first And from with

Bryan Maher

comments. Appreciate Two questions. those

nonpayers you're the you I tell are they period second deferrals question. the on being a Are that? what of of those? can rent, handling And First, And over how then time? what of have terms us offered

Christopher Masterson

I can take that. Sure.

deferred about the roughly what is portions tenants, been it's tenants we've of these we've doing only the and So a for rent. dozen

And course doing some we're back a couple amounts we rent other back it's going in the in X XX couple tenants paid a pay we're us of some in in months, been of the having the quarter. second and XXXX. abating it's not over cases, So third been cases, And what to cases, of we're quarter. a the months to months up those XXXX. just is And get where but are in in it's

Bryan Maher

to have Is correct? been that But Okay. no date, abated. rents

Christopher Masterson

Correct.

haven't [indiscernible] We rents

James Nelson

Absolutely. Absolutely.

Bryan Maher

you that of any second asset you asset on side. opportunities that it yet who's distress Is Is seeing the it the prepared are to say changes that asset? strictly type office Can comments some when that be not Okay. parter. your rates? made those owner two elaborate attractive but are the sellers and to itself, what for I maybe insinuated the mainly GNL's expectations have its in Jim, And And cap raise then But that capital trying of in to changes my distress, might not. you of or location you? And making? you're is kind a maybe question

James Nelson

actually we're see whereas greater deal looking number look -- with seeing We're sellers than we're at own, a for more now. we're lot very confident right secondary starting back to starting was products What past. little we higher took there to off months X, a what tenants. a think see with we've the Brian. asked the on last Thanks, in pulled some taking their the a market, properties I we're flow more properties, high-quality office off the thought buying for been of we we the for wanted still X properties. last gone prices And on the at see market because buying prices properties office at a We're tenants very was we're buying. of risk properties, just X.X pricewise, distribution and looking they confident select okay? in settled, there -- looking we've rates We're think our last that high-quality and same that and we're years. and And years, investment-grade that types we're we're what still that buying buying mostly the X where in industrial to because portfolio the deals more the cap have, in But I markets cases,

of quo, interest they all think as rates because down. continue I we'll the is in COVID. up Cap executing have. rates adjust get we'll normal, a Usually, it all, And go adjust. I we're and going forward. I status and things plan as still we type think So our back to similar and business But periodically will think process see to continue on of will

Operator

come the with question next Gorman And will Michael BTIG. from

Michael Gorman

Europe? in rates, wondering talk collection strong could -- wondering I the you I'm little I attributable about a that's just U.K. most legacy what you the could U.S. because across relatively of the where right? was is if So board. wonder U.S. the and driving bit versus if XX% the just number the that is in the retail I recall lower is just located, lower correctly, the -- obviously, very was that if the

James Nelson

the been I know the say It's I deferrals actually that spread could pretty across X no a on. sector that. we much have if little board. mean there's don't focused bit

say they're the U.S. with that hit things. have a I I still the it to expected, little So work. has and been the that. slower, France, Europe work. and they're expected wouldn't still but back to way that our than would harder are say U.K. I they The tenants U.S., government is think, just Germany, to well. is we back little opening in dealing a the seems U.K. doing than

I that's case. really from primarily say can don't we I don't think retail think that it's So just America. that in the

I the think it's across pretty much board. spread

retail but because, retail good. still retail you know, U.S. as pretty our that our been hard, in the define doing me has pretty hit is Let

Michael Gorman

your set? you're see competition industrial, looks start starting then little on in Obviously, just competitive come you start And be more there? the the seeing hear. to would and may can I like trends but What you're you see settle people across to imagine Good back bit what to competition talk just transaction as market about, Great. buyer opportunity side, out. to a the

James Nelson

is Well, strong, we our very as stated. sheet balance

We world. along. and the have that around to parameters we've all close things the ability set the still within on transactions are We're that seeing looking

think COVID-XX, types to of extremely I we're of to on to acquire. we're deals bid selective or being still but excellent try finding because

bit still and Good think, what better that's a things. changed But we're I much. focus buildings we now, and So on. price, have tenants little don't still finding command right prices that investment-grade

cap if think what you quarter, was -- second look we rate in at the I what The X.XX%. was there it -- bought a we Chris? was

good. so the term. XXXX, closed lease average darn I is far that's total Our pretty mean years X.XX% cap rate remaining XX.X in with

find good value I So out able to tenants. really still think great with we're there

Michael Gorman

X helpful. maybe X Chris. the in And X Great. X transactions, That's quarter, last Obviously, afterwards. two for favorable financing

a on balance about the talk You lot sheet. of liquidity

how the then the cost of guys want long are thinking versus And kind you balance Just you equity to line about the keep here? how of of credit? cash

Christopher Masterson

guess the I the question. of part first And Sure.

a sheet. of mentioned, the liquidity you As have we on balance ton

on it's what debt anything to equity, having what based to a just use to equity obviously, we or have have even to it's the looking at continuously use the line in on to tap So keep I to cash a cash this it. I of mean, evaluate of the case-by-case of on that cash, also. the the of sheet. a mean think mean, at, when we at kind But in be evaluating also the we terms that mean I progression, time. the point, going for pipeline being, keep and we have at that did thing to credit basis, think without mean some keep the end have just and smart of and we're we that we virus to lot of of and for current going we're then, to but March. whether state it's the able given prudent least economy it I to I the time but mean, still comes the we'll lot cash I We're balance draw evaluate be markets able to

Michael Gorman

Excellent.

Operator

come question Berenberg. next will Nate with from Crossett The

Unidentified Analyst

Nate. for on It's [ph] Keith

And you that, would pipeline then talk could today size? first, versus deal month So maybe the the on mind about of pre-COVID versus you touching of terms how flow in a on is ago? top

James Nelson

a earlier, we're deals. think, as more to I said see lot starting Well, I

to adjust I the current think starting to situation. sellers are

right and a knowing at vaccinate not it before how then say will long is which be still your second part a it the looking again? or viable prudent now. of very was will We're COVID be being to What more long are how will how considering selective, vaccine population. the deals it vaccine question, we So really take and

Unidentified Analyst

the But Is on maybe flow. size again? to was So pre-COVID? pipeline far close as as those it versus getting the deal can you today, the that touch levels

James Nelson

the disclosed pipeline. haven't we Well,

us, So we as if far send good, year on you'll much I -- pipeline. it see and been closed But too the what about will continue. this so out follow can't we really you we've you'll But yet. talk disclosures, has

Our assets buy plan and business to company great grow the high-quality to tenants. continue is with

certainly continue we So will doing that.

Unidentified Analyst

maybe for on more a home. mean portfolio shift working you there's Okay. you're I follow-up, your of aware bit? the can a touch And part office of of a from I'm little sure if kind

we'd portfolio within there be anything is monitoring? So the

James Nelson

all, U.S. look the the of take we first Well, let's particular. at that of in in type in a the portfolio have office

They work. well, They're I of crisis They're if driving we're all of so people tenant. a room in spread building many home transportation. feel not future many continue even -- XX% look properties. grade. be to the a buildings, important we more properties. the tenant very public investment or all little give because after -- to XX% concerned of we single headquarters proactive way really the over, just they're people And they're against have at not which from our more These to mean working We will are that is -- nature out it, and their taking are people of little COVID are them tenants issues. the times, these are the little a And

in buildings So not planning. we're tenants our have budget for concerned. very Also, really budgeted terms long their these

retail I'm office need to our provide U.S. the very do building, we're Europe and our and a about not they and confident happy matter. in retail, comfortable for very properties in or our sorry, properties headquarter so So very we're that --

Operator

with Massocca Ladenburg Thalmann. John question And will from the next come

John Massocca

all little receptionist Hopefully, choppy. been you a can My hear has right. me

you've the it on a a kind you of can't broadly take or more And the at or as close we know look I XH kind you of LOI, on couldn't, little did the not look 'XX? you are talked to know lot, pipeline. the purchase of does kind acquisition impact of under it what's size of I this maybe sale under things I about LOI if activity might of prior additional into cadence potentially point. if but on So acquisition quarter But maybe kind aren't quarters. at for guys last how that you pipeline Maybe touching apologies. and much agreement? quickly How that under comment as

James Nelson

Well, that tremendous and I of the the resources which have collections tenants. in because I with we doing think regard put at rent very adviser, our we're adviser. mean in lucky were reaching forward out

So the of a adviser has advisers' tremendous been really and width the the asset, breadth strength capabilities. and

we in-house As transactions, have far closing legal. as

have We underwriting. in-house

close we So transactions on can pretty quickly.

find the a and we as up, in the a of very as -- days very, in pipeline we paperwork the closed and capabilities builds have we diligence. norm. close pinch, as rapidly good probably due a So is concluded sort the assets side days, them we of But XX we can XX on to transaction

John Massocca

of on properties? And getting or or rent seen COVID? changes office potentially a office to that And if any Are your into you're return stands it Have own investment that request be of a portfolio you looking about? put maybe additional of in today. kind place that either even in lieu result for reverse buildings could then inquiries potentially how additional is kind these some that to be big And CapEx maybe of some at kind touching invest of potential of of opportunities? as the able Okay. need guys as is something to in you put permission

James Nelson

their us out In we've tenants interesting. reach number to it's are expand Europe, had a of Well, properties. that to looking

in into get by which people in beginning properties. make a existing U.S., could expirations, with expanding about the facilities. those And to few it still of certainly for where area use potential putting as good And the a So we closer investments away, are lease we of conversations. we an capital years the is are expirations, conversations we're number

So I think you're XXX% right.

going think see of a I forward. that more we'll lot

John Massocca

rent in you And -- on capital term on of the those from maybe potentially mean, lengthen providing say properties. terms specifically that any can but appetite your of what's out -- some end and I office additional without tenants

James Nelson

certainly look we It's as option. options And they all come an at these up. of

with conversations tenants. constant in are our We

consider. something do certainly it's that So we

John Massocca

on? Have relatively all couple has pre-COVID? Or those the conversations what's last accelerated of it months, given going of similar at kind been over to

James Nelson

been ongoing it's tenants, similar think constant very pre-COVID. have For like relatively our and but for us, an to to process, don't we said, because do us I I communication do COVID. I think of and We request, -- it's accelerated quickly we with respond it's

John Massocca

provide or then at fine. I But July guys this point, any just specifically? know last one. broadly Okay. you X maybe anything that's on can't perfectly And collection color

Christopher Masterson

I have Right. it.

would the published numbers but anything haven't say we're I we yet July, different. what not is for So seeing there materially

Operator

come Hecht from Aaron JMP And the next question with Securities. will

Aaron Hecht

And really So Where deals Wondering that low end you're office X% rates the split range in the terms the plus was of doing of cap and today? the range, the that industrial between is rates, the side. then at? end strong. the how high spread of cap

James Nelson

Go ahead, Chris.

one. that take can You

Christopher Masterson

Sure.

at looking distinct difference see there pipeline I'm I office a And So what could between and from isn't industrial. really the right now. the

So it's pretty consistent all board. the across

Aaron Hecht

you is noted acquisition biased the focus of is Are And industrial has office you at an in volume. incremental U.S. then be like Or right that towards now? over seems avoided? all Okay. also going to that it -- terms over guys Europe

James Nelson

way last couple that been it's of the years. Well, for

the I spiked we're distribution years. has in but -- right starting -- office think industrial has sorry, Europe high office, it's Europe, X/X a years, U.S., been X/X we price the time few last long in pre-COVID. In good pretty for really in to see some Europe I'm deals majority and And the now. -- few been last X/X the bought the for

to in now. Europe underwriting more things our a starting met that it criteria. difficult we're But see very right to was So find lot

tenant. a on certainly So as focused country find opportunistic really we're wouldn't where great we good investment-grade property a I either buyers we're say with

act. think we the as have have we to -- ability said, I I

are things we places, both like and there places. So we're in certainly looking both in

Aaron Hecht

collections push to have is and assistance you've where an the just of sorry had have But collection seen reflective time and pace tenants dead inbound increasing phone And one any income not ask hit or collections calls more the a to the hit tenants changed horse. on to for you Right. at back Or deferrals get volumes? the today? them from you to then really has on that

James Nelson

Well, I has changed. don't think much

I think our proactive COVID we were with this crisis. tenants during

put As I adviser said, we the out a of to and our put communicating lot tenants. reaching -- with attention

good that I conclusions think to help. we've come needed with the very people

So we have not collecting had -- working. we've And as done the deferral -- I haven't a mean good we've that it's had any as abated far they've rent, done the think really deferral discussion, and rents. we it's job the obvious, I

Aaron Hecht

on Yes, you. Got job quarter. the good

Operator

I'd And remarks. will our question-and-answer closing back James over conference the to Nelson session. for this conclude to like turn any

James Nelson

everybody to thank Bye-bye. joining healthy, your safe, do in. appreciate And and morning. And stay listening stay I certainly, everybody, operator. you, want you're this please, for you. asked. in, thank appreciate us calling the Thank We we questions

Operator

Thank now attending The you conference today's for concluded. has presentation.

this You disconnect may time. lines at now your

Global Net Lease (GNL) 5 Aug 202020 Q2 Earnings call transcript